Thursday, November 1, 2007

Charts on the BKX, the SOX, EBAY, Garmin

The Philly banking index ($BKX above) is an ominous chart. As my notes indicate I cannot stress strongly enough the bad news this chart portends for the economy and the markets. The financials must lead in a healthy market To ignore it is folly of the first order. Mark my words, the market WILL follow the financials. A healthy economy needs a healthy banking system and this system has a bad form of cancer. Is it curable, of course it is but the medicine tastes awful, has numerous extremely painful side effects, but in the end survival is the result. T

he street, the Fed and Washington have no interest in curing this, only masking the symptoms with rate cuts, ill conceived legislation, and dollar destruction. We had all the answers for the Japanese in the late 80's in the aftermath of their real estate/stock market bubble.(which they ignored, stupid gajin) Now the shoe is on the proverbial 'other foot'. Will we take and execute the same advice we offered the Japanese, don't count on it. Therefore the banks and brokers will continue to play hide and switch, using make believe values. Bernanke can lower rates to zero and it will make no difference. LOOK AT JAPAN FOR PROOF. Economic malaise for 17 years with rates now at 0.7%.

The Philly Semiconductor index ($SOX above) is supposedly recession-proof according to CNBC pundits. Tech is no place to hide and the chart above proves it. Tech is going nowhere with semiconductors and they are in rough shape. If you are looking for a place to hide you can forget tech and think cash or if aggressive think short sell.

Ebay above is for my friend Jeremy(notes on chart big guy!) who has been long and strong this stock. Good call on his part.

So what happened with Garmin. Lets have a closer look. Went short at 113.25 Oct 22. The stock gaps up the next day so I was stopped out the next day at 117.75 for a 4.45 loss on 1 unit. The gap then held for 3 days which should have been a very good sign for the bulls, only to fail 6 days later with a gap down(yesterday) which now can be considered an island reversal. All the longs who bought the gap up Oct 23 thru 26 are now trapped. Yes I realize there was news but as you all know I consider news irrelevant as all news conforms to the tape. I originally thought this recent thrust up was a rising wedge. Was this last gap up Oct23-31 an overthrow only to do what we originally thought? Notice where yesterdays(Oct 31) rally stopped, right at the lower portion of the rising wedge. The daily chart (above) now shows a possible double top. $95-96 is now the line in the sand. Angry I missed it, you bet but getting whipped is part of the landscape.
Random Thoughts.
Crude is a very crowded trade. Must take precautions here so I am selling half (1unit) at the open tomorrow. Just as no one could envision $90 oil when it was $50 no one now can envision $65-70. Just what the doctor ordered to shake out the ill capitalised late longs who buy only when it hits the magazine covers and CNBC incessantly shouting its merits.
Gold is also a very crowded trade so be very careful selling half would be prudent here also. I continue to watch for an entry on it.
Good trading to you all.

No comments: