This market is starting to show a lot of longer term breakdowns. If you take a step back from daily charts sometimes and also view the weeklies, you can start to see technical damage. You can see the damage on the daily chart, and it shows the psychological damage above where the stock has beens old off.

 

Let's look at both daily and weekly charts of ADBE to show an example.

 

 

 

If we can get a rally in this market and some of the retail names get a head on them into the early fall school run. I would be encouraged by some names that look broken that would set up nicely on the short side. If WSM can rally back towards 40, it would set up nicely on the short end.

 

The metals gap up today, X, STLD, PD, NUE, and a nice local steelie OS. This one is a classic retrace chart setup that is giving a nice sell opportunity. 

 

Here are a couple financial names that have benefited greatly from the explosion of growth here in Central Oregon. I feel that these names provide some nice selling opportunities as the economy projects downward in the near future. These are thinly traded/owned names so wait for a solid break of the uptrend and sell the rallies after that moment on UMPQ and CACB. The CACB offers safer entries today with stops over the all time highs that were set in the last 60 days. UMPQ is also settling into a topping program and looks as tired as the local real estate market in Central Oregon. These are just simple ideas of how you can play your local market's and knowledge. I am sure if you live in Detroit you know more about the local industry then someone in Houston who knows more about oil or the movies from someone in LA. Use your local knowledge in your trading and investing ideas. Peter Lynch was as always onto a simple yet effective plan.

 

In Barron's again this weekend, the local Central Oregon housing market shows just how hot it is. Just like the Black Crows sang, "hey  little thing, let me light your candle cause, mama, I'm too hot to handle". No doubt that this local housing market has peaked short term as the rampid speculation and RE talk has gotten flat out silly in this local area. I know it won't end pretty here as the higher interest rates creep into the exotic note holders hands and their flipping ways are exposed by over margined. I wish the new housing futures market had options to buy for little ole Bend, but I will sugges a couple local financial names that may be time for selling here into the future as the froth has built like a triple no fat latte from SBUX. 

 

Here is a chart of the DJ Housing index that although oversold and looking to bounce here near 700 as a high from Feb 04, shows some support here. I think that housing stocks will have another 20% decline over the next few years and will at least trade down to 560 area on thiis index as this is the next logical support longer term on this chart.  Just see the lines, not if just when.

 

Another Goldman Exec gets to the treasury chair. Another point to how government goes back to the same formulas regardless of the party in charge of the white house. Rubin was Clinton's pal, now Paulson is W's hope. Just another reason to be blurred between either republicans or democrats, they are both so similar in the overall picture, I am not sure how anyone can tell their policies apart any longer.  GS stock hit as is expected on such news and the dollar is smashed down another 1.5% this am.  VIX Is up 15% but the market's feel awfully muted on this post holiday trade to this trader.

Pistons taking on the Heat again tonite. I have to say the Heat look tough, and although I am not a fan of Shaq, he played great on Saturday and if plays like that Wallace won't be able to handle the diesel.  On a side note the Wolverines played into the College Baseball 64 with a fine big ten tourney win today with a big win over perennial power Minnesota at Ray Fisher stadium. Side note MIchigan hasn't been to the college world series since 1984, that was back when the team was stacked with Hal Morris at 1B, Barry Larkin @ SS, Chris Sabo @ 3b and Jim Abbott on the mound. 22 years is too long for UM not to have a shot @ the World Series. Let's get it done next weekend boys.  UM softball failed to repeat down in Knoxville this weekend, although hanging tough and taking the Vols to game 3 before succumbing 1-0 in a fine pitchers duel. Great try girls, another Valiant year for the lady wolverines!!

 

 

Big deal happening over the weekend with KMI and its executives wanted to take the company private for about 100 a share. Nice work if you can get it. Energy should continue to see more upside when you see deal like this coming down the pike.  Should see some upside in the energy stocks tomorrow with this deal putting the premium to work.  http://biz.yahoo.com/rb/060529/energy_kindermorgan.html?.v=1

 

Here's a chart I like on the sell side. I think you will see more of these charts especially if we can get the rally continuing into the end of next week. With the consumer seemingly stretched many consumer names like WHR should start to cycle out and start seeing new lows. Looks like a good sell up to the old highs.

 

The market did its usualy rally before the holiday weekend. The numbers I have seen show seasonality before long weekend holidays as 80% into the long weekend. While the cat's away the mice will play. That's generally a great buy wednesday before the holiday weekend as the players leave markets earlier and earlier and all boats rise together.  Enjoy it and let's see if they can continue running the SPX up to 1285-1300 next week, which would be a great sell spot in our minds. 

Today we had another nice open and the market did it's requisite sell off, but we have proceeded strongly with the day now half over. The volatility is stale compared to the past few weeks, but we all the have holiday weekend upon us and I expect things to get brutally quiet over the next 24 hours. So much so, that golf may be in the mid am cards tomorrow.  Why not, when the flickers stick get away I always say.  Market reacted positively to the Lay and Skilling announcements. I didn't follow the case much, but it appears it went as most expected. They are the fall guys for the biggest fraud of our time.  Not a lot of news left out there and no fed meetings until late June, so we may drift upward for a while, would be my guess.

Here's a chart of a stock that has bounced nicely back to its 200dma and the 50dma is still falling under the 200dma showing bear tendencies. This entire sector has fallen along with UNH, AET, WLP, and this looks like a nice sell/short bounce candidate as HUM has bounce right up to resistance over the past few weeks as folks have sought out safety names since the market sell off the past few weeks. Now that we are somewhat oversold on the broader markets it may be time to ring the register and short some shares of HUM as it has bounced right to resistance.

 

I had read a piece about 3 weeks ago talking about how one stock could take down the market in the future. I thought it was an interesting concept at the time, and now it seems more relevant. The stock the writer discussed at the time was UNH. Obviously, this stock has been smashed over the past quarter due to its leader possibly backdating expenses to favorable prices that he then could go to open market and profit.  Now that the market has come off nearly 5% in the US and world markets which reflated together are all coming in together, this issue seems to be rising to the top. There was a paper by a couple professors that recently shed light on just how big of a problem backdating has been. Now almost daily there are reports of more companies backdating expenses. This is not a new issue. As a matter of fact in the stock bubble hey days of 97-2001, this was a very serious issue by all the big and new tech companies that never went away. The market just corrected and it kind of was swept under the carpet. Now that we have been back in the reflation bubble, the back dating issue has now become a real issue again. This should be watched carefully as there is some serious derivative issues that could seriously roil the markets in the future if the heels are dug in against this age old practice of favorable options pricings by company insiders is truly exposed for the potential fraud it just may be.  There is even more front page news about JNPR,OPWV, FFIV, BRCM, and BRKS today in the NYTIMES.  http://www.nytimes.com/2006/05/23/business/23options.

Let's look at the test of the 200 dma on this intraday chart, they ran em right down to it, then ramped em, retested the low and took off for the mid day run. They then took em down in last hour only to recover just above yesterdays closing range.  AT the end of the day however, they took the markets right back to the breakdown from Thursday pm. The Bears are still in favor for now, the bulls should have a day or two in the sun next week, now that expiration is over and the put sellers have capitulated their positions by selling access stock this week that they normally wouldn't have had to. 

They flushed the SPX right to the 200 dma today down to 1257 and then we got the requisite beta bounce. We are way oversold short term and a rally would be expected here. We got off the mat on the SPX and some high beta names today. They tried to shake em out towards the end of the day and they held the early am lows, so the next move seems to be up. Let's see where they can take em  and rest well this weekend, because volatility is here to stay.  Trading could be more exciting this summer and into the fall then usual.  The kids are doing the Pole, Pedal, Paddle event this weekend. Should be fun.  Wrapped around a baseball game and hopefully a round of golf!!

 

Until Memorial Week . . .

 

 

Anybody else think that between the Fed crew, Tres. Snow, and W talking about the economy incessantly?  Sure seems like the spin crew has been working overtime to tell everyone that everything is just fine and the Bush admin and their tax cuts have just driven this economy. The truth is, liquidity spigots in fiscal and monetary policies allowed the consumer to go into further debt and finance out their purchases thru their "ownership".  No wonder I don't like watching CNBC as it feels like propaganda more than ever just as if I were watching Fox news.  Sea of Change is upon us and the W admin feels the fear, rightfully so.

 

 

Not advice, but I would think as the consumer runs out of cash in their home equity line and gas continues to crimp the consumer, less cars will be continued to be purchased. So . . GPI seemingly nearing a top and insiders seem to be in agreement as they have been dumping en masse. http://finance.yahoo.com/q/it?s=GPI

Why not join em

The jig is up on the ethanol complex. I am not saying these stocks won't see reaction rallies moving forward, however, the right side of these names including PEIX, ANDE, ADM, etc, is to sell the rallies.  ANDE has been slaughtered dropping almost 30 points. I would love to see ANDE rally back to the former support near 100 and this one is on its way to 71. This is the momentum game, easy come easy go. Just take a peak @ ERS, same thing here, IBD specials go splat and give good shorting opps after they begin their descent.

 

I thought everyone knew that Dell was going to start using the AMD chip line as this was the reason for the run up in the stock up to the 42 range this winter. I think this name is setting up for one nice short as it trades up near 36 after hours tonite. I will be selling AMD all the way up to 40 starting tomorrow.  This one is just too obvious of a short squeeze as it was pushed down hard with the market of late and the johnny come lately shorts get squeezed out today. Take advantage of the ramp and sell the stock with some back spreaded call exposure, buy the calls vs the short stock.

 

So the market and participants tried to game the oversold rally this am, with a gap up, test low and then trade higher, that was until the last 45 minutes, when the sellers came back and flat out pounded the market's into the close.  There are many many oversold extremes in here, but it appears to me that a sea of change is upon us. I can see this market easily taking 10% of the fever highs of 1326, which would project down to 1220-1200 ultimately.  I think now rallies up to 1295 on the SPX is now a great place to sell all lagging longs and short up to any closes under 1300 over any future rallies. A true sea of change for the first time in over 4 years. 

The dollar was strong today as the market picked up were it left off last Thursday/Friday. The buy the dip crowd couldn't pick em up Monday/Tuesday of this week and the selling continued in earnest today.  I suspect that a near term washout is near. I would be a buyer of some select beta names tomorrow on a flat to lower open. Let's see where the first hour takes us and be patient, but some rental longs may be in order as is evidenced by the dollar chart today. TLT and Dollar were strong in the afternoon today.  We took out the last two days highs on the dollar today, which suggest further strength over the near term. RSI was very washed out the past week and the MACD is curling up for the up leg coming.

Volatility broke out on the daily charts and is attempting to push the upper envelope on the weeklyl charts. If we can close above 15.86 here and then run a bit more we should get back to more volatile days in equities. Daily already confirms this when we broke out over 11.4 or so. WE could pull back and volatility looks like a buy from here on out.

 

We had two successful down days last week Thursday and Friday, since then we have just drifted to the sideways. Can the dip buyers that have had great success the past 3.5 years save the day and come in, or will the reality of inflation and higher interest rates finally catch up to the liquidity wave?  That's where we stand. I think any good rallies at this point need to be sold. America is waking up to the CPI/PPI complex ex all things that are rising.  More to come . . ..

We fire up the monitors for another exciting week. It sill appears to us that Volatility has broken out for the broader US markets and this should be a good thing for traders in the near future.  The chart also iindicates a short term over sold area and I would expect a near term trading bottom to be put in by Tuesday at the latest.  There is solid support on the SPX here but any weakness could take us down tot the 1260 area.

Some serious selling going on with Nasties leading the way down 2.26% so far with 50 mins till close. How about some follow thru as we haven't had two big down days in over 3.5 years since the liquidity spigots opened. Inflation concerns finally came to Wall Street today. Gold hits 728 which coincidentally may be near term top, but the concern is in their eyes. Any follow thru tomorrow would be a market first for the first time in a long time.  We are now thru the 1313 break out line on the SPX cash. 1305 as I type and the strong part of the day coming and the AD line @ -4100 doesn't get much more negative.

 

So the broker/dealer index when you step back from a monthly perspective is flat out unbelievable. We have now had 13 straigt months where this index has not given us one red/down candle.  Even though the fed has taken away the M3 measurement you can clearly see that money has flooded and sloshed into all brokers over the past 3 years and have gone parabolic over the past year. This index is up over 300% since the 02 lows we saw.  RSI shows greatly overbought on the monthly chart along with what looks like a final spike up on the MACD.  Reversion to the mean will happen, just a matter of when, not if.

 

Volatility since the war in Iraq, in the Spring of 03, and the mass rush of liquidity in credit has allowed the housing markets to froth up and money to rush into all assets and pump up the prices. With this credit/easy money and chasing of performance, in our opinion, risk has grown with every passing day in the over 3.5 year rally.  The VIX chart shows just how the liquidity has flattened out the volatility in the broader markets. Less and less stocks are truly breaking out as the narrowness of stocks rising is in our eyes limited to financials, commodities, and heavy industiral plays.  The VIX chart however shows some signs of a basing area for the past 2 years with a very solid bottom in the 10's being formed. Our work suggest that sometime in early to mid June we may see a breakup or down of the volatility. More than likely this type of wedge formation of lower highs and flattening lows suggests a probably breakout of volatility to the upside. With the earnings cycle nearing the peak moments this would also suggest that a topping process continues to develop and risk is broadening in the markets.

 

Now if we break down the long term Weekly chart to a daily view, you can see more clearly a breakout may be devloping in the VIX action as it holds the breakout line fairly strongly the past 4 weeks or so. Something to watch closely here as we approach June.

 

Let's take a look at the main indices tonite and see if we can make some sense. The INDU 30 stocks continue to be pumped up by big media as they get close to all time highs. Just depends on if you measure in today's dollars or 2000 dollars if you are really green with your investments in the Dow 30.   The dollar as we can see by this chart is down about 30% from its prices in 2000.  The dow is getting back to Jan 2000 prices but in today's dollars it costs you 30% more dollars to by those same prices. So are you really better off with inflationary pressures?

EMN has had a huge run. It is showing parabolic tendencies with RSI very overbought, but this name could run higher to the 60-62 range. I would like to see some weakness in the MACD rolling a bit and another bounce after the first roll should then be sold, but no doubt about it this name needs to revert to a lower mean over the next few months.

 

Even the clapper can't help Cigna get off the floor. Where do you buy this one, someone wants out at any cost. No hurry to buy this one, let it reverse and retest a low before you take a stab at this one. Same story with UNH. Just bludgeoned.

 

As the SPX makes new highs, the percentage of bulls continues to fall away, meaning selective names and fewer of them are keeping this weak bull going.  Just too many of these, along with gold flying, interest rates rising, with or without Bernake, and higher commodities and costs just piling up, the lengthening of the profit cycle for companies,are just a few of the things that keep me up at nite. What can hurt the most people? That is a question I always ask myself when investing or trading. That is usually what does happen. In the current big picture market, I see SPX going higher shaking out all the bears that may remain, then the market will tire of exhaustion and cause maximum pain for all the late buyers of this market.

 

Another very odd day with the Dow closing again @ six year highs and getting all those folks back to square that bought the dow back in March of 00.  Gold just keeps on trucking with the Dow and the Transportation index which are all moving in concert together. The much largers SPX and Nasdaq continued to lag the smaller Dow.  Oil got a little back and looks like it may be finding its neg leg up which may take oil as high as 88 a barrel by PnF projections on the charts.

 

At some point, MDT becomes attractive to us. You can see deep support in the 40-45 range, but if the stock were to finally reverse off this monthly sell off it has been locked in, a good entry would be shown.  This is one to watch, but generally when this name gets this oversold you can start buying. I would be careful as more downside still looks probable, but maybe some select call buying may be a cheap way to be involved on the long side.

 

 

 

 

KO is finally showing some life after a long time battling 40-42. With the dollar flailing and greatly oversold, this could be a great way to be long the dollar for a bounce. A strong dollar is good for KO outside of the USA.  If KO can close somewhere above 43.5 this week, it will break out of a year long slide the name has been living.  If it doesn't break out, the potential along with further deterioration of the dollar would be to drift back to the bottom end of this wedge. With the dollar deeply oversold, this looks like a solid breakout is forming however. See how it plays out as there could be upside opportunity for the best drink ever soon.

 

Here is another chart that is flat out parabolic. This name is Group One Automotive (GPI). These guys have had one heck of a run.  Group 1 Automotive, Inc. operates in the automotive retailing industry. The company sells new and used cars, light trucks, and vehicle replacement parts; arranges related financing, vehicle service, and insurance contracts; and provides maintenance and repair services. So, in my eyes, a tired future consumer will bring on a world of hurt for this auto retailer. The chart also screams parabolic destruction coming and warning Will Robinson.  Charts like this sure can go on longer than one can ever imagine. The company had recent "great earnings" but most good news has been bought up over the past few months. Not sure how much run is left on this puppy, but, as you can see it just doesn't correct, until it does. A conservative way to play the inevitable fall to earth would be to calender out some puts over the next 6 months. I would think buying some July 50/October 50 puts would be a cheap stab at catching a fall over the next few earnings periods. Shorting this stock without upside protection is potentially damning as you can see it hasn't fallen in months. 

 

 

 

Gold is starting to gain alot of attention finally.  This means to me, that we could be nearing a short term top in the yellow currency between 680-720. I would suspect that if the metal can close under 675 over the next few days, that may provide a nice entry on the short side for a correction down to at least 645 or so.  I like the risk/reward there, but only if we get a closing price below that level.

 

RMBS looks as if it has broken down after winning its lawsuit recently. There will be more lawsuits and battles, but when you get right down to it, that is about all this company has ever offered is the potential lawsuits it brings in Chip land. I would be selling all bounces on RMBS up to 42 at this point. The Shorts have been taking out of the name after the most recent run up due to the litigation. Now may be the time to size up into this position as the future is not that bright in my eyes for RMBS.

 

A couple charts here of IBD momo specials that had just run crazy, hitting all time highs last week on nothing more than IBD and momo mentions in the IBD sections and all across Cramerica.  The thing about these thin float names, is when the plug is pulled you will be down the drain like a hairball hit by draino. Here are the three names, commonalities, razor thin floats, less than 4.3 mm each, and really cruddy fundamentals. Overshorted and hyped by daytraders galore. There was no catalyst to break them this week, rather the rats bailed at like times and tried to book their profits, if you were playing the breakout game this one could have taken off two hands with one rusty hatchet.

 

 

 

 

 

 

 

RIMM filled its gap @ 72.6 early last week and turned around nicely. I see a decent log stab here as we continue the bullish front and the test was made for a close back to 75.5. Buy the dips from close down to 72 and stop here below 70, or buy some put protection @ 70 strikes. Nice set up here.  Pure technicals. 

Big weekend of house work has past. Glad to have it behind us. The kids had us hopping with the usual barrage of bday parties, sleepovers, and baseball games.  Lacrosse back on schedule tomorrow and Wednesday as is a trip to Eugene for some biz.  Let's see if this market can make its run up to 1340-80 and how quickly it gets there. Fed meets on wednesday. Every one expects another .25 and which language. Will Maria break another great story? Or is one and done rally continuing on.  Shall see what plays out. Metals seem tired and I think this 680-700 area for Gold may be pause for a rest.  Inflation is in my mind well hidden by BLS numbers. Its real, just open your energy, food, and education bills. Let's see how high we can reflate or die.

 

 

 

This says a mouthful. How's the supply looking, fricking brilliant all in a 3x5 cartoon. Great mind!!

10 Year Yield, 30 year chart 

Pretty amazing picture here. This one has a long way to go on the upside.  I think this is an idea most every day Americans haven't thought about in a generation.  I don't think folks of my generation have ever had interest rates like we have seen in the near history. Wake up, they are going to revert to the mean in this case somewhere in the 7-10 % range.

Source: Natexis Bleichroeder

This market is truly confusing, up one day down the next and at the end of nearly 6 weeks we have bumped up against the top end break out 3 times and equal strikes at the trough end.  I still think this market wants to hurt the most people as possible. As the market in my opinion, always does.  So with that in mind, what would hurt the most people? Well, in our book it still seems that one more push higher on the SPX say our target of 1340-1380 that we have been calling for 9 months or so would be a big hurt on the remaining shorts. Then once those folks have thrown in the towel and the bulls are full rip snorting bronco billy's, the bear will then return with her vicious snarl into the fall 06 period and into the 07 year. That would be maximum pain the way we see it. There is really no way to avoid the inflation in all markets. Commodities, Interest Rates, Reflation in Stocks, Housing already starting to soften, which could just flat out kill the consumer. Jobs aren't paying more so where else can the consumer go to tap the equity in the future. The gig will be up at some point, now if only I could tap that crystal ball to that exogenous event that no one can foresee that will take the bear back dancing. 

Another gorgeous central oregon spring day, seems like we have been blessed with a string of what seems like 10 straight days with no clouds and perfect sunny weather.  The kids had lax practice this pm and it was greeted with some nice stick checking skills that seemed to be lacking in their first game Monday. It's pretty cool to see 7-8 year olds smack each other on the sticks with their key sweet lacrosse helmets, gloves, and pads.  I really love the game. May need to fire up an over 30 league for the boys and girls in my age bracket on Sundays.

On a weekly chart the HGX, we have finally broke the long 3.5 year uptrend on the chart. Game is definitely over with sellers in control of the buyers. Just like the RE game in general very soon.

I have said since last july when Time had the cover of the Housing Boom on their cover, that was the top. If you look at all the big box makers and their charts, this is even more evident that all the highs were put in last July, with many failed lower high rallies. Today with HOV and JOE providing the impetus for the next leg down in the HGX, looks like we are heading to test the fall lows of 232 on the index. Today, we closed @ 250, with some minor support @ 248, but once again all rallies should be sold on the hommies, especially with higher interest rates and inventories piling up along with lower mortgage applications. The writing is all over the place for me, and next will be significant price drops as that has yet to occur. As inventories build and buyers are reduced by the over inventory and higher rates, prices will come in. No doubts in my mind. Just when, not if!

I was saying that this summer could be very slow for market participants to Jon in my office today. He asked why. This market is just flat out tired, tired of going up, tired of going down. It doesn't do a heck of a lot but when the Fed Heads speak.  Dollar continues to get spanked as Gold climbs to new highs. Gold up over 20% for the year and 10 year Interest rates up over 10%, but there is clearly no inflation out there if you listen to the Fed Heads.  Another slow day in paradise.  Risk feels stronger and heavier of late, I just can't put my finger on it, but there are many indications of topping behavior with all the many divergences I have regurgitated over the past year.  The oldest son had his 5th baseball game today  and these 6-7 year olds are actually starting to pick up the game. They are catching and throwing so well, and the hitting, well it is innate for these boys and girls. Yes, I would say the coed thing at this age is super. The girls tend to be more coordinated at these young ages and whether it is Lacrosse, Baseball, or Soccer I have noticed that the girls outshine the boys with athletic prowess.  Girl Power!! I figure the new sports like Lacrosse and Crew will provide ample scholarship opportunities for the kids with the passions for these games. 

Pretty ugly out there in Moneyville.  Flat out smoked em. This on top of last weeks bludgeoning in these names. This is the first time in about 6 months most of these names find themselves on the bottom of the bollinger bands of their respective charts. Generally not a long term bullish indicator, matter of fact, they are now screaming sell all rallies. 

Duke admin recommends the boys be back on the field for next season. I didn't like the way the admin at Duke shut down the season before the facts had been laid out.  Too much lynching going on in this country without the trials.  Anyways, my kids had their innagural Lacrosse match tonite and emerged victorious with my eldest son scoring for the Rattlers right off the face off after a pass from his sister. Doesn't get any sweeter than that.  I am thinking kids have lots of shots at scholarships via sports like Lacrosse and Crew in the near future. By the time my kids are college bound, University of Michigan will finally field a varsity Lax program so hunker down kids. At least, they are having fun out there and as always, that's all that matters.

So once again, we have the cross current, karate chop market run by the Fed heads and Maria on CNBC. She says while bedding down Heli Ben this weekend, that the market misconstrued his remarks that he may be near down, then Fed Head Moskow  live in the pits of the CME with the money honey says "I can talk double talk with the best of them . . . . " . Seriously folks, this is getting ridiculous, those in the know  must have something big up their sleeves as this chop suey on rice market has nothing but trouble written all over it. Are we going up higher or is this the end of a 3 year bull market within the larger scope bear? Time to continues to march on and the Fed Head paegent continues to roil all players.