Firing Short Barrels

We gapped-up a little higher than I was comfortable with, but I did go ahead and stick my neck out somewhat and started scaling back into some shorts. This follows a small re-entry of QID just ahead of the close yesterday.

I'm now long Ultrashorts QID (average of 39.17) and SKF (average of 85.90). In other words, I'm short the NDX and the Financials. The SKF was a great entry, as it turns out. The QID is a little suspect, since the NDX is out-performing the other averages today. If that continues, I will unload it rather quickly and either wait it out a bit, or swap for the TWM (Russell 2000 Ultrashort).

I also re-entered retailer COH short today, at an average of 36.58. I am looking to enter JCG (shorting the turtlenecks), but nothing yet there.

While shorting the up-open was a bit scary today, the tone of Maria Bartiromo's voice lingering in my head from the close of trading yesterday gave me the confidence I needed to fire. Sure, the market made an impressive 1-day showing, but CNBC enthusiasm was far too high for the situation. At one point she blurted that even if the US is in a pinch, the GLOBAL ECONOMY is still very, very strong.

I keep hearing this, that the US weakness doesn't matter so much since we have a global economy, which will underpin prices.

I'm in a mild mood, so no tirades here (sorry), but good luck on that one Maria.

Breadth on the Nasdaq is already negative today and volume was notably lighter on the bounce yesterday than the declining days earlier.

It's still early, but nothing leads me to believe yet that yesterday was not indeed a 1-day hurrah.

Good trading.

A Day in the Sun

The bulls are in command for today. I've been Ripped, Torn and left for left dead in the baking sun; honey strewn about my stripped, flesh-eaten limbs; 1000 degree temperatures...and not a friend left in Miami.

Nah...just taking a day off here while we get this out of the system.

I covered in the opening 20 minutes today - everything short I never owned. I waited that long only in case this would be a case where we gap-up and open at the day's highs, only to drop, drop and drop from the first bell. Once it was clear the bull was really awake, I played run-and-hide.

Actually, I prefer it this way. If we have to see a bounce so soon (yeah, yeah, we were SO oversold, oversold, oversold - well, keep telling yourself that while I wipe the still-fresh blood from the 14,000 foot heights of my nose), I prefer we get it all out of the way in one day.

That's right, that's all you get- one lousy day.

But hey, don't complain. That day is still young, the sun is still high and the prices are likely to close at or near their highs.

That last part isn't guaranteed, but that is how the 1-Day Wonder routine plays out. Shorts cover, sideline cash afraid of missing the next move higher piles in, widows and orphans, who had became widows and orphans again only recently, hop right back on that bull. Volume runs high and broken stocks see rediculuos bounces. Icarus flies toward the Sun - it's a venerable buy panic!

Enjoy it while you can. In this zig-zag market world, you can play the zag all you want. I would too if I had the gumption. But hey, that was 20 years ago. Now I'm just an old toad, satisfied to wait for the next zig-entry. The next chance to short in this case.

If we close at the highs of the day, which I suspect, I'm re-shorting in the final minutes of trading. If we close off of that level, I may scale in some, but mostly in that case I will look to short an up-open tomorrow, somewhere not quite as high as today's highs.

New blood is the safest, until we can see the re-trend lower. That would be the NDX in this case and so I am looking to pile back onto the double-short NDX - QID. Once it is clear we had nothing more than a 1-Day Wonder here, I will look to fire again back into double-shorts TWM and SKF.

If I'm wrong and we blow right to higher highs tomorrow, well, I'll lose a little. I don't see going long then in that case either, but I won't stay in the ring for too much damage if I can help it. The main point is to look for the entry and bail out quickly if things do not transpire my direction.

But I won't be wrong (my opinion). This is not how markets bottom (this so-far, so-fast routine). This is how markets bounce.

Rotation Tanks

The new theme is continuing out there again today - leadership names are correcting further while the broken stocks are showing some strength. The financials are higher a second day today and now retailers, airlines and the broad market indices (Russell 2000 and NYSE) are either rising or showing resilience to the selling as well.

Up along the other side of the tracks, however, the market continues eating its children. Leading, higher relative-strength energy groups, solars, steels, fertilizers, metals and indeed the NDX Being-Supremes are getting woodsheded again.

What's going on then?

Well, volume is lower on both the Nasdaq and the NYSE, market breadth is relatively flat and new 52-week lows are not expanding from Friday's level. This suggests we are not going to see anything too severe just now (from here at least). Instead we are seeing a rotation of selling out of the depression stocks and into where gains are still to be had. Buy the C and sell the G; something like that.

This isn't particularly bearish, but it's not that bullish either. It's a kind of gut-check pause. Higher-up names and groups are selling-down towards the rest of the market, perhaps while we prepare for a test the August lows.

Once everything is more or less down to that level we should be ready to mark either an intermediate-term bottom or else break-down and start what would likely become a much more serious wave of selling.

Did that make sense?

In a nutshell, anything well-above the August lows is in the fast-lane headed down the last few sessions and those doghouse names and groups near the August lows already (or well below in some instances) have stopped hemorrhaging.

The Dollar is bouncing, Crude is selling, Europe was holding, while Asia saw further significant selling. I've been hot-dogging out-and-back-in-again my index shorts all day and I'm keyed mostly on the NDX still for now.

Overall though, I am backing off and taking profits short for the moment (the foot has been less and less on the accelerator as the day has progressed).

I'm not sure a bounce here would be particularly strong (if we bounce) and I would be happy to sell into whatever it can manage. Also, if we can't bounce in this condition I will sell it again later in the session today or early tomorrow. I don't mind selling lower if the internals justify it.

The NDX is down 1.23% and the Dow is higher by .44% at this writing.

Bye Bye Miss American Pie...Charts

It was rough and tumble for the US markets this past week - virtually nothing was spared.

Highlights included:

A further break-down in the broad market.
Increasing panic within the financials.
A further weakening of the US Dollar.
Expanding new 52-week lows in listed equities.
A break-down in the Nasdaq and NDX indices; no longer bucking (and bucking!) the trend.
Nasdaq Volatility surged to the levels achieved in August.

If you're thinking this is going to be another routine correction for the US markets and that the rewards for buying-the-dip will be plentiful as always, then I envy your courage. But you sir, are no Joe Kennedy.

And there's really no need to rent any scary movies this weekend. These three charts will do the trick - though not exactly nicely...


Dow Jones Industrial Average - 1900 - 2007:

US Dollar Index since 1971:


NYSE Margin Debt since 1968:

*Credit StockCharts.com and Historical Charts for the above charts.

**The DJIA chart is as of 19 October, 2007; the alltime closing high, 14,164.53, came 9 October, 2007. The Dow closed Friday at 13,042.74.

...I'll talk to you Monday; where if we are down more than .75% in the pre-market futures I am adding aggressively to index shorts before the normal trading session opens. Good luck out there.

A Frailty of Heroes

While the broad market has been in the doghouse for some time, this week marks the (welcomed) entrance of the NDX to the Street's anti-party.

Let's hear it for high-heeled boots! That venerable Flotsam of Jetsetters.

The hot-money, permanently-cheap-on-a-valuation-basis GoGo-growth names are now leading on the downside.

We're talking sucking sound here. A sinking, rainy-day-feeling-again cauldron of distress - A Costco of Canned Worms - A Chicken of Doubt...

And Google ain't even hit 1000 yet.

You could argue this is bullish. I mean, hey - the Financials are hardly falling any more, even in the face of further and unrelenting horror. That's gotta be a good sign Mr. Kurtz, right?

Indeed, the Financials are turning up-on-the-day as I write this - Woot! We're going up in the face of negative news. If that ain't the light at the end of the tunnel then I don't know what is. We have got to see a bounce in this market soon.

Or, selling has simply rotated and the weakest areas in the market are in a sort of dead-zone; too washed-out to sell much more and too god-awful to begin any sizeable recovery.

FWIW, here is my 2 cents: We could in fact be ready to bounce here, but if we do it is merely going to set-up for lower-high failure; even in the NDX. Otherwise, we will see a further, accelerating decline (accelerating in the Nasdaq and NDX at least) straight away.

The latter scenario is more of a lancing blow, which is probably more bullish as far as prospects for recovery in the intermediate term.

The former, set-up for failure scenario, I would argue is the scariest potential action for the near-term. I suspect it will amount to a Pied Pipering of individual investors who have so knowingly and lovingly learned to forever buy-the-dips, since they lead to ever-higher highs; and usually sooner rather than later.

In the old days, a lower-high failure after an initial break in the market (where some old index like the DJIA had made new all-time highs while the Nasdaq had...not) was a common kick-off to a genuine bear market.

I don't want to sound alarmist (Ha!)...but decent people should be very careful at this time.

...the rest of us should just be short.

Good weekend!

GoGo Catch-down

Ok, Bernanke is off the air and the index declines have not abated. Actually, we're knifing-down in the NDX right now.

Cisco's Chambers mentioned a slow-down in business coming from financial institutions. That's provocative. Could it be the depression in the financial sector could actually cause problems elsewhere?

Unlike yesterday, however, the underlying internals remain firm relative to these index declines. This is likely temporary, but at the moment it suggests you cannot jump in whole-hog short right now. It is really only the best and the worst that are getting seriously clocked today.

Financials and hommies (the worst) are driving to lower lows and the go-go NDX branch is finally getting pelted. Apparently the widows and orphans are letting go of some of their GOOG, AAPL, RIMM, BIDU, etc., etc...

I'm feeling left out and lonely at the moment, having let go of the QID about 2 hours ago, but the time-of-day, combined with the lack of underlying carnage, means I have to stay on my hands at the moment. If there is no sizeable bounce in the NDX, I will fire again for the last 90 minutes of trading. I suspect it will be well-off the lows by that point however.

Time-of-day is a great trading tool. I'm not at all saying to buy any GoGo here (momentum is under a clear SELL). But freefall is better preserved late in the session.

Heya, CNBC talking about the possibility of $200 crude oil in a year. I guess sentiment is beggining to get negative out there.

New highs in all accounts here today.

Luke Warm?

Just a quick note. It ain't pretty out there and CSCO definitely helped to make my week, but...

Breadth is positive today on NYSE
S&P500 is hardly lower at moment
NYSE and Russell (broad mkt) are actually higher early today
Nasdaq breadth is merely flat, while hot-money NDX stocks correct

This is not the kind of action you like to see if a market is really breaking down and you are short. I just let go of QID, TWM and new DXD (from yesterday); for the time being. I will fire right back with these if we can eliminate these positives today. Not going long anything US in the meantime either.

Too bad, I was hopeful things might be severe today. Volume is very strong though, thus far, so keeping ready in case things worsen.

I did go long mainland China just now, on the pullback there (long small amnt of CAF; ave. 52.45).

That last part is ironic since today is the day that Ultrashort FXP is (finally) open for trading and I can't wait to get double-short Shanghai! ...for the moment I am long that world instead, but I am about zero-committed to holding if there is further weakness there; Shanghai was down almost another 5% today. Note: FXP will be very illiquid for at least some time.

Oh, the time stamps are all b.s. on this site at the moment; both the stamp on the webpage and especially the stamp posted on the email delivery are out of whack. Anyway, we are 70 minutes into today's trading at this writing and the indices are re-testing their day-lows. Email readers are getting this message in about 14 hours I think - which is pretty funny.