Taking off more long exposure, adding to shorts

Pretty clear bounce off resistance. Took off another 1/3rd of index longs near the close yesterday. Adding to index short exposure as the S&P bounces of 960. Not enough in the way of divergences for me to go fangs out here, just adding a bit of index shorts.

Taking something down here

Selling 1/3rd of the SSO right here. Put on with a basis of 24.75. Nice move, no need to be greedy.

Unbelievable the hate I got over this on some of the doomer boards. I got my buy points within 2 - 3% on a whole slug of individual stocks, caught absolutely nothing but crap over it. For the record, here's what we got. I wanted you in:

S&P at 890. Intraday low was 880, now at 951.

T at 23.75. It went to 23.19, now at 24.42
WMT at 48. Intraday low was 47.35, now at 48.82
RTH at 76. Intraday low was 74.24, now at 80.52.
AAWW at 21. Intraday low was 19.84, now at 23.47.


All I got for myself was the S&P. Cha-ching, doomer fuckheads. Things go up and down within the context of a bull or bear market. I happen to believe 5% is worth playing for.

Nothing anyone will ever be able to prove, but this whole market move over the last 4 months has felt like a massive pump job. I would hate to have been short it, which I suspect is exactly the point the PTB are trying to make.

Looking at the long side

Well, let's take a look at the general markets. The S&P and Dow charts, to me, are in conflict.

On the bull side, both show a Golden Cross right here, where the 50 and 200 SMAs crossed. Also, there was a good bounce off the high 890s area in the S&P and that 8250 area in the Dow, from an oversold condition.

On the bear side, it's still a broken trendline that measures to a top around 950 S&P, 8800 Dow. Also, index put/call ratio comes just below 100, starting to get a little more bearish despite the oversold. Quarter-end games tend to end early rather than late.

Still I'd say the next 5% is up. I took some SSO on that bounce off support. Also covered the PM short, need to get a little long here.

Strong groups this past week were transports (rails have been on fire – can’t find an entry point though), telecomm.

I am not enthusiastic, but I guess I could take:

- T as close to 23.75 as you can get
- WMT looks good to enter as close to 48 as you can get.
- If you want an ETF, RTH as close to 76 as you can get.

One real flier among the transports. I probably won't do this:

- AAWW, as close to 21 as you can get him.

Some physical silver around 13.50, if he comes back.

Covering a little something

Both silver and gold continuous contracts at the 50DMA right here, about a 50% retrace of the last move, at support.

Let's declare victory and cover a third of each of them. Tried, but failed to get long some silver at the 13.50 level on the physical metal.

S&P did a credible bounce off support in the 890s. Taking 800 SSO at 24.75 on the long side.

Bucky taking a buckwheat up the green chute as well, Euroland making tightening noises. Why am I continuously thinking '1931' ?

Trendline breaks

All three indices seeing multimonth trendline breaks today.

Looking like a trendline break in the VIX as well.

I think you want to hold off until later in the afternoon to see what the invisible hand of JPM will do for a stick-save.

Good entry on the short side right here.

I already lost my energy and PM longs to trendline breaks over the last several days, leaving me with shorts on the S&P, gold and a REIT.

I'm trying to add on the short side with about 7% of the account, being stubborn waiting for my price. I think you'll get another chance over the next several days as it tries to flirt with the trendline.

Got short some silver via ZSL, but that was it.

Charts I'm watching

Mostly on the long side...

Purely anecdotal on my part, $USD is a crowded short. I would look for a bounce, with concomitant commodity weakness. I don't know that I'd extend that to say "and treasury strength" since the two have been decoupling for a few days.

However, a stronger dollar would tend to mitigate against the export/heavy industries on this list:

Insurers: HIG, making a pennant, stochastic just crossed, MACD turned up from down low.

Aerospace: BA, like to see him fill that gap at 50, since he's overbought here. Not buyable right now, just a watcher.

Midstream pipelines: APL, inside day after a breakout. Overbought here but, in my ideal world, he'd make a pennant right here.

Tires: CTB on a breakout above 12.

Industrial metals: AA

Personal care products: ACV.


On the short side, taking a shot at a little gold short, playing for 4 - 5%.

Update: Got no longs at all, got some gold short via DGP.

Lots of trailing stops hit

Lost all the golds, all the energies and part of the treasury short to stops today. Every one of them was very profitable. Too many positions to detail right now. I could see the confirmations streaming in starting in over the mojo wire around mid-morning. End of the week, I'll detail what's *left*.

Bigtime in cash, with maybe 25% of the account committed, mostly on the short side now.

For as many weeks as I can recall, though, exercising good trading discipline has been an exercise in futility, as the market seems to have no memory from one day to the next.

Rate issues come to the fore

I took a look at the TLT chart, where it looked like 90 was powerful 2-year support. I wasn't willing to stand in front of a steamroller to pick up a few nickels, so I covered 1/3rd of the bond short on Wednesday afternoon late.

Debt issues back on the table

I came into the week net short, which, of course, was painful on Monday. I think we hit an inflection point with the crushing Cali referendums, then the Japan sovreign downgrade and Britain being place on negative watch. Of course, the killer was that the language in all those S&P analyses applied directly to the US's situation. It's hard to see a scenario that's bullish for treasuries in all this.

The ultimate outcome in California's situation might be a reverse-Okie phenomenon. Given the shabby treatment bondholders have received lately, it wouldn't shock me to see muni debtholders get crammed down. So, of course, Cali muni debt is up over 1% today.

I was up to 60% cash from the trailing stops that were all hit last week. I put some of that back to work in some golds. I picked up the second half of a position in BVN at 24.50. So now I have on 800 BVN with a basis of 24.73.

I picked up another microcap I'd traded in the past - AGT. It did a bull wedge back to support at 0.40. I put in a bid at 0.39 and got hit for 12K shares. That .50 level is really important, going back a couple of years.

Longer-term, I do like the way MEE is forming up here again - pennant with a base at 18. Many coals and coal-related stocks have a similar pattern - CNX, BTU, ANR - but MEE is the most prominent. But at the same time, natural gas can't get out of its own way and it's diverging wildly with oil. So, at best, we're getting some mixed signals in the energy space.

Pretty good week

Lost a lot of things to trailing stops.

MEE, out at 22.10.

BHI, the last half of that's gone now at 38.25.

SU, the last half of that's gone at 31.40.

HL was setting up some negative divergences and got turned away at its 200DMA, so that tiny speculative position is now gone.

Where I sit right now is long some PMs (DGP, BVN, GBG), short real estate (SRS) and treasuries (TBT), short indices (SDS). 57% short, 43% long, but around 60% cash after everything I sold last week. I'm in the hole on the index short, but up 6.1% for the year right now.

Major indices are getting into slightly oversold territory. S&P should find some good support 850-ish. Nasdaq getting pretty oversold, but still overextended. The rule has been that the upside and downside have both gone on further than I've expected, every time. Still, some weakness on Monday would be a good place to start unwinding shorts.

I don't know if you'll see it, though. LOW earnings Monday are probably going to be interpreted as more green shoots to smoke.

In a quick chart review, the the defensives played well this week, but the only real long-side setup I see is MO's nice ascending triangle with a base around 17.45.

On the short side, one that I missed last week... utes getting killed here. I don't know if it's the same bond rollover issues that got them last year, or some political nonsense about cap & trade. SDP did a nice double-bottom at 40.

Lots of retail looking tasty on the short side. Of the trendline breaks, I guess I like JWN best on the short side. AN and CHS are also like this.

Trendline breaks

Looking at the markets simplistically, every index has broken a multimonth trendline. Naz, you could really have gone short it on Monday. It fiddled with the trendline resistance for a couple of days; now it's decisively broken.

A caution, though... In thinking about this last night, I re-read Magee's chapter on channel lines and discovered an interesting observation. The amount (of points) by which the chart fails to reach the top of the channel by (in Nasdaq's case it's about 40 points) is usually the amount by which it falls from the lower trendline before having its first snap-back rally.

In the present case, we broke the channel at 1700 and closed last night at 1664 so at 1660 we'd be pretty close to that 40 point target.

Expiry week, so be careful of the snapback. I'd still be a seller of the snapback rally.

I lost all my remaining (small) energy positions to trailing stops the last two days.

Still have on the gold... played in the microcaps GBG, NXG. Lost NXG to a stop yesterday. GBG still hanging in there. The ETF DGP is still hanging in there.

I got a half-position of 400 BVN on at 24.96 the other day. Still have him with a stop at 24. Some foreign golds (South Africa) are the best charts I see on the long side - not saying much.

What I'm watching - a couple of bad days from now, could get a primo entry short TLT around that 100 resistance.

This jibes with my intermediate-term theory about municipal debt guarantees. Short story, Cali (and a number of other states) are about to have a funding crisis. I suspect the FDIC will wind up guaranteeing its debt, as it did for banks and financials. If one state's debt is guaranteed, then all states must be, else there will be capital flight. So you might as well go long the junkiest muni debt from Inland Empire GO bonds or Detroit Sewer bonds over short the long end of treasuries and reap the coupon. This could be a double-digit trade for years.

Weak CRE stocks

Noting the weakness in a number of the REITs after their big (possibly artificial) runup over the last 6 weeks.

One that jumps out is the trendline violation on big volume in CLI. Other REITs - SPG, AKR, HOT, BXP - confirm the same pattern.

I put on a position in SRS starting from the 22.50 range last week. This thing trades like nuclear waste, so stops are in at 24.

On the long side, the coal group generally looks strong. Still like MEE best in this group, have some on, put some more on Friday to bring me up to 2K shares with a basis around 11.45.

Also on the long side, I want to put a bid in on gold around 850, playing for something in the mid-900s.

Yay for stops!

Got nearly all the juice out of that SKF trade before it tanked.

The Geithner speech really juiced things.

Today, looking like the financials will give something back on the horrible COF numbers. YHOO inline, Bartz doing a good spin-job.

Oscillators *way, way* overbought here. S&P oscillator at +9, I would be a seller at +5. No new longs here, peel 'em off if you have 'em.

Looking at SRS just below the all-time low, around 25.50. Again, these instruments are to be held no longer than green bananas.

But the market has a distinct squeeze-y feel. Keep those stops tighter than a fist and positions small.

Wedgie in the indices

I took off half the SKF yesterday and moved stops. Because (repeat after me) We Never, Ever Let a 25% Weekend Move Get Away. Plus, the double-short products are just a pure shit ripoff. They're intraday-only.

All three indices look to me to be at the bottom trendline of a wedge. A break of that downtrend line could mean a lot of downside for the markets. A bounce could be a big move up.

I went back to the bible, Edwards & Magee's "Technical Analysis of Stock Trends," and looked up the pattern of a wedge.

Tell me how well their comments have held up:

Rising wedges are common in bear market rallies. Magee says that it is so typical that frequent appearances of wedges after an extensive decline bring about questions as to whether a new bull trend is in place. Does that sound familiar?

Another item of note is that it normally takes more than three weeks to complete. We've got that. And once prices break out of the wedge to the downside they usually waste little time before declining in earnest.

We're still somewhat overbought, not as bad as it was a week ago.

I would lean to the short side here, with the caveat that it's hard to make money during earnings season either way.

Geithner speaks, or rather obfuscates, late morning. Last time, it was worth a 100 point Dow bounce. The plan is to stay neutral until he speaks. If you want to be long, some oil might be good on a reversal.

Fading the rally

Rally looks artificial and long in the tooth by every measure I look at.

Got hit at 56.75 on 400 SKF for a green banana trade. Want to stress, there's no technical reason within the framework of my methods to do this here.

Turned loose half the SU at 25.75, basis was around 18 off that double-bottom. That was a pretty clearly an intraday triple top at 25.90. You really want to be shedding longs here.

Also, half the BHI, again, bought off that double-bottom weeks ago. This has been a very disappointing position.

It's basically been the overlevered junk leading this rally off the bottom.

Actually, I am thinking this will be a buyable pullback. You see this kind of move frequently on the Monday after expiry.

Builders look good on a pullback... XHB at that 12 support, I think, is where you want to enter. I like the composite ETF chart better than any of the individual charts.

As a rough guide, I'm thinking in terms of a 50% retracement of the whole move since early March. This would be, very roughly, S&P 750/Dow 7250. Some reasonable support there as well.

I think very precise technical levels are nonsense to try to trade by. Stocks in the real world come up a little short, or go over just enough to rape you. I think in terms of scaling in, in 2, 3, 4 trades, then put a stop on the whole basis.

Couple of moves in the last few weeks

OK, a quick update... the strategy here is short the S&P, long oil, short treasuries on the long end.

Got some oil... full position each in SU and BHI. The former has done fine, the latter is sitting still.

I'd sold gold on that spike above 1000. Bought it back last week as it came down to the bottom of the channel. You could argue it's making a bull flag here. I'd be a buyer close to 850, playing for 10% or so.

Pull out the chart on XLU to any duration you like. Last year, I caught that H&S on the short side, covered it late last year. Now, it's back at resistance, having barely participated in this rally. Bigger resistance at 30.

Nobody's going to bail out ute debt.

Chart work for the weekend

Oil stuff I've been buying over the last few weeks has played pretty well. I'm thinking we're in a mode where you want to buy weakness in these and trade around a core.

General market and most stocks I see are very overbought. Wouldn’t commit much money in on the long side here. But there's the potential for new Treasury scam this week, so I think it's important to have some long exposure, even if it's token.

Metals and materials charts look good to me right here, but stochastics are uniformly in the overbought range. Some charts I like on a pullback, and the (loose) entry points I'm looking at:

HL, around 1.90.

AWC around 2.75. The whole aluminum group looks pretty good.

TCK, around 4.50.

For a consumer staple, CL around 55. From some work I did a couple of years ago, this stock has the best inverse correlation to the $USD of any S&P component.

On the short side, the whole insurance group has come back to resistance. TWGP on the short side.

Once you get away from the major indices, I think the double ETFs are a total scam and a thorough bitch to trade. That said, take a look at EEV a little closer to that 43-and-change low.

Canada

Suddenly liking everything Canadian I see.

ECA, CNQ, SU, MUR.

The Canada ETF itself, EWC.

Oil should've fallen off a cliff after the OPEC no-call this weekend.

Watching some OIX components

Some of the oil services index look pretty good here from a risk/reward.

Liking BHI, 9 days down at support.

DO maybe has the best divergences.

RIG looks OK here too.

Didn't get hit on any of these.

The rest of the DGP is gone to a stop. Gold is increasingly looking like a big double-top, with the trendline down around the 850 level.

Noting that there's been call-buying in the VIX, all the way up to the 90 strike. This should push treasury yields back down.

So, right now, for the longer term, I'm kicking around the idea of a paired trade... long munis over short treasuries, reap the coupon. Later in the year as tax revenues fall off a cliff, the states will encounter funding problems and their debt will blow up. It will wind up being backed by FDIC/treasury.

It will be immaterial which debt quality you own. If you fail to back one, there will be capital flight. So you may as well own the worst of it, stuff from the sand states. I'm thinking something like long PCQ over short TLT. You don't want to use TBT for long-term trade because the Greeks get involved in the double-shorts. If these two classes of debt return to historical parity, you'll be looking at a 60 - 70% gain.

A good day to sell some gold

or at least move up the stops. No excuse for letting a 50% move get away.

Doing some selling into this morning's spike. Got hit on half my remaining DGP position. Pulled up stops on the rest so a good move doesn't get away.

Got blown out of the tentative little long-side trade I made Wednesday - lost the other 250 DDM right away. Terrible call on my part. Well, you have to take a shot at something that looks like it could be a double bottom.

C, BAC trading today as though they're in FDIC hands on Monday. I can't decide if something's leaked, if their "stress test" (what total bullshit!) isn't going well (GS being up supports this thesis) or if it's just Geithner's disappearing act.

Tough call for policymakers. Keep feeding the zombies, it'll be a black hole for otherwise useful capital for a decade. Let them die, it's like 10 Lehmans, an ELE (extinction-level event).

I think you have no choice but to let it go, try to think in terms of shaping the society for the post-mortem of Western finance.