Monday, June 30, 2008

GE, Crude and Louise Yamada

You have to realize that technicians (like myself) tend to get used more often in bear markets than in bull simply because nobody seems to know what the heck is going on. The fundamentalists keep telling the public stocks are cheap, yet the market continues to fall. A few weeks back I remarked at the panic on pom pom TV and the ‘what do we do, what do we do’ mentality setting in on the cheerleading network as it fell and warned of more of this as the market condition worsened. Well , it was on full display on Thursday and Friday of this week .
On Friday CNBC had Louise Yamada on for a guest appearance, gotta go to the technicians when nothing makes sense right? Regular readers know I am a big fan of Louise and you must pay heed to her calls, whether they concur or diverge from your own.

That being said she is calling for the following targets on the major indices.
Dow – 10000
S&P – 1175
Naz – 2000
Rus – 600

USO- I pointed out that once $113 was taken out it would be off to the races for this one. Well it did and congrats to those that traded this one. I passed as it is definitely not for the faint of heart and I have a lot of positions which demand my time. I am also long UGA , KOL and now MCF so I do have some exposure there but then again as Jesse Livermore would say, when something is running you can never have a big enough position. To the energy skeptics who remark how sharply crude and USO sold off late Friday, I remind you that it closed at a new high.

Neflix – thar she blows as NFLX has broken loose. All we can do is sit back and let our winners run. For those still buying “the story” I would suggest 2 options; sell now at the $26.75 level (Friday close) or sell later around $18 or worse! Can’t happen you say, sure just like Crocs (CROX), just like Chipotle (CMG), just like Garmin (GRMN) sorry but the cavalier, laissez faire attitude of so many bulls is frightening and needs to be addressed sharply and candidly.

GE – regular readers remember my post on Jun 3 GE- Govern yourself accordingly in which I warned of the implications of GE breaking $31 on the monthly chart. My comments on the chart that day read like this,

“Do you really believe the cheerleaders on pom pom TV, which is owned by GE, would dare tell you anything negative on GE? Try this one on, the next stop for this bus is the 19 level and lord forbid that level gets broken.”

The post gendered some, shall I say, colorful email disagreeing with my assessment. That should have been clue enough to get heavily short but given my large short position in most of the major indices I did not. Well, I can tell you that the colorful GE mail has slowed to less than a tricle. I am not picking on those that emailed me to disagree just pointing out that we should fall in love with a spouse, a sporting team, a pet but never an investment vehicle. Clouds the judgement.

I am back harping on GE because the month of June has come to a close and GE has closed at $26.26 so we not only have a monthly violation but a close there. Now pom pom TV can bring out all sorts of shameless pundits like Vince Farrell who can argue about GE’s yield compared to 10yr treasuries but it all matters not a whit. I cannot stress strongly enough how negative this technical development bodes for the stock and more importantly the Dow as GE is a major component and institutional darling. Yes those same institutions who are loaded to the gill with CDO’s /CLO’s and RMBS paper own GE. Real speculating mavericks aren’t they those hedge and pension fund valets.

One final note on GE, as my notes on the chart indicate it is a possibility that the formation is a massive measured bear move. Something to keep in mind next time Mr. Farrell and the other GE devotees tell you how cheap GE is... it could get much much cheaper !

Prophet still has not corrected the issue with the DB chart so I am using one from Big Charts.

Deutsche Bank - the issue with the DB chart from Prophet is still erroneous so I am posting the Big Charts version with jives with other sites.

Hopefully the 'credit crisis is over’ crowd has been thoroughly discredited but just in case they haven’t I suggest you take a peek at the following charts, the XLF, $BKX, KBE, KRE as all are making new lows. Some may say AHA !! you purposely omitted the $XBD on the list. Well yes it hasn’t made a new low, but given that the Wall St. firms are simply hedge funds in disguise and the investing public just hasn’t caught on yet. They soon will. They soon will.

On June 11 when DB was trading for about $95 and I, while short the stock, I posted that DB was headed for $44 based on a massive head and shoulders formation. The tape was and is telling me that the credit crisis is no where near being over. The news seems to be now coming out to justify that conclusion. Once again the news conforms to the tape. Please stop trading the news as it will lead you astray. The tape rarely does and only for temporary bouts if ever!

Tesoro – I haven’t posted on TSO on the blog, but tend to watch it as I am fond of watching many stocks in any sector I am fond of. In this case, liking the refiners, I watch VLO, HOC, TSO, SUN and of course longtime associate FTO. That being said, regular readers know that I have been bullish on FTO yet cognizant of the head and shoulders looming above on it's chart. Turning my attention to TSO A similar double top existed, the mid point low was broken and its target was attained. My antennae are raised on this one as it may be ahead in the cycle.

For those who don't know Herb Sandler and his wife built Golden West from the ground up and sold it to Wachovia. He had the following to say in the WSJ recently regarding Wachovia and their issues;

"Forget whether you didn't like the Golden West deal. You have a serious list of problems," Sandler told the Journal. Sandler pointed to litany of other bad business decisions at Wachovia, including a telemarketing snafu that saw the bank hurt its reputation by selling customer names to telemarketing firms, as more pertinent factors behind the bank's recent decision to oust CEO Ken Thompson. He also pointed to the fact that the Golden West portfolio is performing well in comparison to peers, with charge-offs at just 0.79 percent by the end of the first quarter.He also suggested that Wachovia was "over-reserving for losses that will never come."

You truly cannot make this stuff up. I had to read it twice as well to make sure I read it correctly. Yup, telemarketing snafu that releases customers names is much more detrimental to financial existence than the 7 foot monster Dr. Frankenstein created being at the door. Fascinating the psychology of it all. Listen, the Sandler's saw the sucker at the poker, (Ken Thompson) and took advantage of him and Wachovia shareholders. I suggest Mr Sandler and his wife leave well enough alone as few east of Nevada know their names and should now just sail off into the sunset with their billions and just leave it at that. Leave the pleading for mercy and attempts to repair public image to the more professional grovelers like Maestro Greenspan.

Good speculating to you all and always remember that "an investor is a speculator who made a mistake and will not admit it".

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