When you consider how low the Fed took interest rates, I think you can clearly see what the easy money fed policies did to the consumer and their post 9/11 economic expansion. The areas that had the biggest impact were housing and the things that come with the newer and bigger houses. The fixings if you will were the companies that rose with the aggressive lowering of interest rates. Let's take a look @ three monthly views, 1st, of house, 2nd of WSM or Williams Sonoma and of course luxury good maker COH. This is where the easy money and credit was spent by the consumer and these are the areas that have the biggest reversions to the mean to give back. Just open your eyes and see the potential damage that will be delivered.

 

 

The semi sector continues to get hammered with MRVL the latest victim this week on the acquistion of some INTC components and just a weakening of business. AMD is greatly oversold and approaching support that extends from late 04 to mid 05, however the recent breakdown coupled with a PE still in the 30's, suggests that more downside is coming in AMD and the chip sector in general.  I could see AMD on a snap back rally running to the 27-30 range which would set up the mother of all sell opportunities. If $23 can't hold in the near term you could see AMD rush right on down to the 14-16 area. 

The intersting thing is if you look back to 2000 you can see that AMD collapsed at the top of the bubble much like it is doing here in 2006. Amazing how the run took it back near the 2k highs, but did not overcome, and now the failure is evident again.

AAPL has been beaten down nearly 40% from its early Jan 06 highs.  However, if the stock could get a weekly closing back over the 62 area, it may have a shot to run back to the low 70-74 range, but if it continues to break down the next obvious level of support appears to be down near the $45 range from early to mid 05.  This is one that may be worth selling some in the money calls and puts with that range in mind. Looking at the Jan 07 60's you could sell the puts and the calls for about $14.6 credit today, which would mean as long as the stock closed on january options expiration below 74.6 or above 45.4 you would collect the premium. The Danger of course is if the stock were to blow through those price levels by that date. Of course the position could be managed with the trading around of stock vs the options as time went buy, but would offer a fairly neutral position over the next 6 months with that range fairly defined.

 

 

 

Let's take a look at the chart of XLE the Energy ETF. On the Daily glance you can see that yesterday we broke out of downward channel  that had been forming over the last 7 weeks. Although this chart is bullish as long as 54 holds on the downward side, if we slice back to a weekly view of the XLE. We see a little bit different picture. YOu can see very clearly the longer term uptrend was broken initially the week of 5/14 only to rally back two weeks later, then failed again to go to new lows. I would bet that when combining the two looks on both the daily and weekly, we have had a nice snapper back on this rally but the downside still looks to be in control unless the weekly chart can get back into a close over say the 58.5 range. I always find it very important to see if different time frames can give concurrent or differing views when defining my risk and my time frames on trades. 

 

 

As we have baselined since the June 15th upwards stab, it has been very futile to do much in this market until the Fed is done again with their June 28-29th meeting.  I know that most people are quite frankly sick and tired of a FOMC that wields the power it does. Whether or not their is a plunge protection team (ppt) or not, is moot. FOMC is clearly a intermingling group that controls the short term swings of the market with or without their covert actions. Again, .5 is what needs to be done and probably a couple .5's in a row would do the trick. I think the Fed overcut the interest rates and now are behind the curve of where the real rates should be. I would be content with a fed funds near 7%. I know that is aggressive but one that a free market could live with and allow good companies to exist and poor ones to fail. Why is it that this nation is one of such entitlement over the past few decades. Whatever happened to good ideas and hard work and persistance? We have built a nation of mediocrity of late and that is influenced greatly by huge levels of government intervention.  I am a propoent of true market forces vs government intervention.  I would rather see a fixed interest rate that floats vs other currencies based on free market activity, vs. a world full of central bankers who thinks they know better than true free markets. I know this is a bit of a rant, but I know that others feel similarily and sometimes it just is good to put it out there.  Tomorow will be the 10th day in a row since the June 15th upward stab that we have been locked within the tight 1244 and 1270 range on the SPX. Remember the first move post fed meetings tends to be a misdirection of the next movement.  With a long weekend around the corner post fed, I'd say markets will be farily quiet up to the 2:15 announcement then a bit of volatility then back to the grind early friday as we slow into a mostly long 4th holiday. 

This market has such heavy bearish feeling that even this long term bear is feeling more bullish than I have been in a long time. With that being said and reversion to the mean the style I so prefer. QCOM is getting interesting looking to me on a long term chart. I  like it down to the 37's to buy right now.

 

Once again, we get a market that is led by the commodities, which pulls up the equities, and everything moves in concert. Oil is up 1.3% Equities are up 2 to 2.5% index wise IWM and QQQQ, dow is up a cool 1.4%. The only thing I see down on my sheets is Volatility, so no suprises here. This market is entirely driven together, there are no relationships, just up and down together all the time. Let's see if the SPX @ 1258 can run up to 1260 into the close then attack the next level up after that. One step at a time.

 

This one comes from the folks at elliotwave.com. What a beauty. Shows all the easy credit bubbles that were created and some of the aftermaths the enveloped the easy money. I flat out love this one, what is around the corner for this easy money creation this time? Will be exciting throughout the rest of the year no doubt about it.

 

I was just revisiting the QQQQ chart which I hadn't really looked at on the weekly time frame in a bit of time. I knew it had broke down, but I didn't realize how much technical damage had been done. It looks to me like the snapper rally should be here soon and possibly run up to the 40-41 level.  So if the rally comes hard and fast this will be a super level again to sell, this is what I mean by great technical damage, so if the QQQQ was to rally nearly 2 pts which is a substantial move, we would then be right at overhead resistance and the sellers would be all over that in force. Just one of many thoughts . ..

How about the Volatility since we broke out May 10th, which was about a month earlier than our work thought it would come, but who said this is a perfect game. The chart did say volatility was tired of bounding along a bottom it just so happened to coincide with the top of the market on May 10th.  We have no held solidly above the breakout line which creates a traders market now, not one that is favorable to buy and hold. Keep this in mind with your portfolios going ahead.

 

Well another slow options expiration as most of them are, happy to have the US open on all day again. I think most of America's players would love to challenge this course from the Tips with the pros, I would guess that most single handicappers couldn't even break 90 on this track either the way this course is layed out. Any one want to play please give me the call I would love to challenge that monster 640 yard par 5 these guys are playing. 

With housing complex over, my guess is retail slowdown should be following. The RTH has staged a nice rally the past few days and may be entering sell territory. Another name that is showing a nice sell setup is CC. Three lower highs and continuous lower lows are showing their heads as this name looks like it has a lot of work to the downside . Considering its up on BBY quarterly success but CC is no BBY so I like the confluences coming together here as a sell prospect.

 

As a volatility trader I loved yesterday's action, Wednesday they hated em and Thursday they were falling over each other to buy em. The Nasdaq 100 only had 4 negative stocks, the SP 500 had only 7 negative stocks and The Dow 30 had no negative issues. You could just feel the running of the bulls yesterday along with the late to the party shorts who were piling on to cover.  We got quad option witching today which I am sure was one of the big reasons for the big whipsaws lately.  I still don't see any correlations that would be of normal behavior, all asset classes are moving together, stocks, bonds, gold, oil, etc.  Just silly action really, alpha is being chased everywhere, and still doesn't cause any disruptions if people are truly wiped out. I still don't sense fear, so the SP 500 is back to up slightly for the year, but I don't see fear from this sell off, and I think that will come later in the year.  Let's see if they can hold the green line today . . with the futes pointing down for the open, SP down 5, and ND down 10.

 

US Open kicks off this am and the greens are already 14 on the stemp and the rough is over the lower shins. No one is under par after half the day and we have some of the world's best going at it. Trading has come to a holt after the first rally off the open and stick that we have seen in months. Volatility has gotten crushed today as we discussed we were likely to see as we had become overextended on the sell side over the past 10 days.  Rally time but how far will we go and will the real buyers not just short covering keep us going?  Once again all asset classes stocks, bonds, interest rates, oil, gold, commodities in general all moving together. This is such a fast money market, many renters no real owners. I sure would love to see at least a 50% retracment of the SPX back to the 1278-1290 range over the next few weeks. So rally on and respect the oversold conditions and the overall technical damage that lies in front of us as resistance levels are numerous and quadruple witching closes tomorrow along withi 2nd quarter close in 15 days.  Let's see if there are more fireworks coming into the 4th of July seasonal slowdown!!

 

 

Finally a break from the 9 days of sucessive selling. . . I would love to see the rally take us back to the 1260 range which is the first level of serious resistance or former support.  From there if they can really get a summer rally going, 1300 may be a possibility. I doubt we go any further from there as the technical damage is done and I think the bear is back in power with the might claws. That means from a low of 1219 today we are down 116 pts so a 50% move would take us back up 58 pts to 1278 or so.  Let's see how far they can take em... Rally on.

 

Well the Gold bugs had their first big days in the sun, but those that were late to the party and on margin are really taking it on the chin now, but the warnings were sounded when gold broke down under 700 an oz and the MACD rolled over. That was your sign to sell your longs and go short.  It appears that the first level of support was cut thru like a knife in hot butter @ 575 and 540 may be the first real support. As long as Gold maintains 480 support Gold, remains in a longer term bullish picture. 

 

 

Very similar chart showing its face on the SPX. Let's take a look, it also appears to be putting in 2nd leg down here and projecting to 1200. 

 

 

This market finished 23 days into the most recent sell off. We are extremely overold and although this market continues to have no buyers in sight, I believe we will be seeing a reaction rally by the end of next week. We may not get it before June options expiration but the rally is coming and I think if we can get a close over 1240 on the cash basis, I would begin to think on the longer side. We still have some work to do, but things are very bearish.  The dow has now fallen nearly 1k points in the 23 days and appears to be coming up on some serious resistance @ 10700.  I would suspect a bounce soon at this level or we may be going to 9700 if we can't get the bounce by the end of next week. 

 

Another key point here is the action on the dollar, it appears that a short term bottom may have been placed on the dollar in the highs 83's. We have rallied this am back to 86.29 and it looks like the dollar wants back in the range it has been in for 3 years between 86-92.  That would also bode well for a rally in the equity markets. 

 

 

Oil also along with Gold starting to show technical breakdown potential. If you take a look at oil on a weekly basis you see a bearish wedge forming and lower lows and lower highs continuing to be the most recent action. If Oil continues with the pattern we may see 60 dollar oil sometime this summer not withstanding any hurricane destruction in the future. With Gold and Oil breaking down and interest rates actually trading back down to breakout levels, along with a deeply oversold market. I would suspect we are near a trading bottom at least withinn the next week. We could touch 1225 on SPX and that may be the near term bottom, but ultimately looks like market wants to test that 1170-1180 range again, will we bounce first or smoothly run down to the very low test range? Time will tell.  Oversold begets more selling but respect rallies and volatility at this point.

 

 

 

 

Best Buy just comes and beats numbers stock is trading up $1.5 or so quickly but what are they saying about the future? Big day tout TV tells us with CPI coming. Market trading down again this am on the futes as Spoos down about 5 or so early on.  Gold is flat out getting crushed down to 591's down a smooth 3%. Gold is now down about %19 for the past 4.5 weeks, putting the yellow dog back into possible bear moves.  Looks to me like Gold wants 550 to 575 now to really scare the yellow metal bulls. 

 

 

I have written how the russell 2k was making its top back in March and the below chart seems to confirm this view. I find that indices and stocks like to move in mirrored moves. As far as size of the move and/or duration of the time of the moves.  I think it moves match human fear and greed and when you get right down to it, all asset classes/markets just "mirror" the human behavior. Whether that be fear or greed the market likes to extract the most pain out of the masses at the most inopportune times.  The biggest profits on the flip side are made when expectations for profits are their most dire in aggregate views.  Now is not the time for markets to continue their drives up as their is too much overhead resistance on the psychological point where to many are leaning for good times. Its hard to seperate the masses from their confirmation bias and that is why it is so painful. Once humans have a set price in their mind for the worth of their assets it takes a long time for them to lower their expectations and capitulation comes near the bottoms or tops as that is when the masses are extracted from their asset classes.  We are no where near a bottom as there is no real crisis or fear to the US markets and we are clearly closer to a top still as we are off only 5-10% on most asset classes.  The volatilty and fun is just beginning.

 

Spoos breaking down over nite as they trade down to 1250.  Are we finally going to start the next leg down since everyone has said we are "due" for a bounce?  If we break 1245 convincingly and stays there for the first hour tomorrow, we may be ready to make that next mirrored move down to about 1190 over the next few weeks. It sure feels like the bids are all but gone and the buyers have no reason to step in at this point. So we either bounce again or we slice thru the 1245 range tomorrow and drive us into options expiration next week. Market if forward looking and there is clearly some things the market doesn't like looking into the crystal ball. These should not be new areas since I have hammered them home for the past year plus change.  The older kids finished the lacrosse season tonite, putting to rest their 2nd full season. I love watching the kids grow into the game as they begin to understand the techniques and strategies furhter.  Can't wait for Thursday summer practices out at the Dolan's Lacrosse/swimming ranch. Should be a great time for all. 

 

The NDX has broken down on the weekly level which to me will be difficult to overcome on the upside. We could rally up to 100 pts from here and still be in a long term down trend now.  As I have discussed, there is no way the broader markets can go up longer term without technology joining in the fun, so until that line is take back, you must be selling into rallies as we go forward any rallies on the NDX upwards to 100 pts must be sold.  Tidal Wave of change is real now.

Everyone's a technician in this market and everyone hinges on the Fed's words daily. So we remain locked in the new range of 1250 to 1325. Until this range is resolved, I consider the recent sell off in SPX a garden variety one. However, as soon as new lows are made this market should fall another 5%. Until then the renewed volatility should provide some nice opportunities to trade around the new range both long and short so go get em and have fun out there. We are in the slow period and I would expect a decent rally coming if we can't take out the 200dma as everyone waits for the late June Fed meeting and earnings season is about 6 weeks out a good vaccum for a rally if the 1250 area holds.

 

 

Following up on the newsletter's Trader Joe's market theme, I closed out my QQQQ short this a.m. at $36.65 with another nice gain.  The early market action suggested a bounce as the Trin moved back towards 1.

 

I will watch carefully for more short term openings to scale into another short position but will be content in cash for now.

 

This is a very dangerous time for buy and hold longers.

Another huge Negative AD day with the AD finishing at the lows today -4061 about as extreme as we usually get. Tout tv told us all day it was nothing but a buyers strike. Why is when we sell off its buyers strikes or profit taking?  How about everyone was selling today and it was flat out ugly and there were no bids. That's more like reality when you have AD days like this. The damage was about 75-85% even before Benny dropped his nervous chatter on the markets. Does the guy look scared to tears every time he speaks? I can just here the quiver in his voice, I don't know him from Adam, but I would be curious if his voice inflection is always so wavering? Anybody know?  Does Benny want to the markets to take the pain now or later?  I wish he would just get it over with one way or another and get back to business. SPX is not oversold now even after a good whacking today. 1250 becomes big support area again with the market breaking that solidly would lead me to believe 1175 may be the next leg of this down move. If we don't break this week, I think you have to lean long this market for the next leg up.  1250 to 1300 is the current range that must be respected. We are locked between the 50dma and the 200dma averages 1260-1295 so let's see how they play em out.

 

 

Copper down its max for the day as the penny metal taking it on the chin so the NYMEX shuts it for the day. Limit down baby.

Gold is taking it on the chin this am, and is down a cool 3.33% in early trading. The Dollar is rocking up on lower productivity numbers. Retracement numbers show low 600's on Gold per oz, possibly high 580's is the next area of support. As long as we stay above those levels on the longer term Weekly charts, gold remains in its uptrends.  Many of the gold and silver names are taking it on the chin today.

 EZM -6.4%, SLV -5%, NXG -4.8%, GFI -4.6%, CDE -4.4%, AUY -4.1%, AU -3.7%, GG -3.5%, NTO -3.5%, RTP -3.4%, AAUK -3.3%, GLD -2.9%, BGO -2.6%, PAAS -2.3%, PD -2%.