Friday Follies
Greetings from downtown Palo Alto, heart of all things technical and headquarters of the world's wildest bear blog. Your host: Tim Knight.
Since July 18, the markets have been on a tear. A bullish tear. The kind we don't like. The Dow is up over 8%, as is the S&P 500. The NASDAQ Composite is up even more, over 13%. Not a pretty picture, people. And, except for the recent softness in gold & oil, it's been a really nasty market for us ursine types.
The $VIX has ground down to almost never-before seen levels of complacency. I'm just waiting for Wired to publish another "40 Years of Prosperity" cover stories again.
If you look at the VIX relative to the SPX, there's a pretty strong inverse relation. Not foolproof, certainly, but it's clearly there.
The Dow is within spitting distance of its lifetime high. Astonishing. The bulls have shown amazing strength.
If you look at the $OEX, and many other indices today, you'll see that it formed a shooting star candlestick. It's not an amazing one, and option antics probably had a lot to do with today's volatility. Hey, at least it didn't close at the highs! I'll take what I can get!
Oil, which has been very kind to us the past couple of weeks, paused for a rest today. The H&S pattern is complete, and it's in a position to get really clobbered. But it's resting right now, deciding whether to recover some of its losses or resume the swoon.
Looking at the $SPX, we are right at the median channel line. In the past (circled red areas) it has been able to cross above this and push higher. If it can't manage to do it this time, they could provide us some much-needed relief.
Even more exhausted than the OIH is the $XAU (gold/silver index), which has beautifully come back to its Fibonacci retracement. This could be a reversal area. On the other hand, a massive H&S pattern has formed. I am steering clear of this at this time, although there might be some fireworks here next week.
The $XMI, like several other indices, also formed a shooting star. This has, however, broken out of a nice dish pattern (which is good for the bulls).
Let's look at some of my favorite short positions right now. Allegan (AGN):
Apache (APA):
Carnival Cruise (CCL):
Express Scripts (ESRX):
Lehman (LEH):
NutriSystem (NTRI):
Sears (SHLD) which, I know, is a gorgeous cup with handle pattern - - but I've just got a hunch.....
UPL:
That's it for me. This week was pretty much a wash. Someday the market's going to get whacked. When it does, I'm well positioned. In the meantime, I'm playing a defensive game. Have a good weekend, and best of luck in your trading next week!