October 2009

Lots of charts to go with today's touts, but the one I want you to look at most closely is the DXY chart, since it would seem to contradict a growing, bullish consensus among forecasters, including a few I greatly respect. I'll leave it to Harry to steer the discussion in the chat room, since he is the expert's expert when it comes to the "burning up" of prior peaks.

Hold the applause, you dollar fans, since DXY has failed on two  consecutive days to turn its presumptive dead-cat bounce into a genuine impulse leg on the daily chart. I've labeled the two peaks that the dollar should have exceeded if there is more than hot air driving it. We won't write it off yet, but the evidence is mounting that the bullish action, deep down, is gutless. Major trend reversals do NOT often begin with this kind of fumbling around.

Going strictly by-the-book, the futures would need to pull back to at least 1040.00 to be recharged for another blistering leg up. Thereafter, it would take a booster rally of 5.40 points to put the December contract on course for a shot to as high as 1061.50. Prospectively, and camouflage aside, the most attractive buying opportunity I could see over the next few days would arise from a pattern that traces out a path similar to the one shown in the chart.

The rally may have looked impressive, but from a Hidden Pivot perspective it only just qualified as an impulse leg on the hourly chart, having exceeded the requisite one internal peak and one external.  The short k-A segment means the shallow pullback off the intraday high is a legit B-C leg, at least in theory, but there's limited value in projecting a target that would be based on a continuation of yesterday's probably unsustainable trajectory. Anyone looking to get long yesterday needn't have looked for camouflage, since, on the 15-minute chart, there were no false entry signals the entire way up. That's typical for all strongly trending days, and if you simply take every 'X' entry on the way up, it's hard to lose..

After exiting half of our remaining position  at 22.45, we hold a round lot whose costs basis has been reduced by profit-taking to 11.01. Let's continue to have fun with this one, shorting one November 24 call (UMUKZ) for 1.05 or better, good-till-canceled. The offer is based on a 24.47 rally target being reached by Monday or Tuesday. I've included a snapshot of an option calculator that shows how fair value for the calls was determined. ______ UPDATE:  Cancel the order for now, since AKAM hasn't shown enough moxie lately to reach the target.

The most you could say about yesterday's rally was that it came off a low that fell a tad shy of a 170.37 target shown in the chart. But to confirm this as a bullish sign, the stock would need to create a bullish impulse leg on the hourly chart -- a relatively modest feat that will require a print today or tomorrow above 182.45.

The Guvvamint plastered a 3.5 percent GDP growth rate on the marquee yesterday, and traders acted as though the information had come from Walter Cronkite himself. We always expect the stock market to wet its pants when these dog-and-pony shows turn up the wow factor with “Sabre Dance” and a laser show. But did the bond markets have to go nuts as well?  We would have thought they had better sense. It’s one thing for whacky speculators to drive share prices higher, but T-Bonds yields are supposed to surge only when it is really and truly believed that the economy is strengthening.      The rally felt like it was about 99.99% short-squeeze, with Abbe Cohen’s plump, grain-fed flock making up the other 0.01%. But that still begs the question of why Mr. Market should have been so nice to us, providing a fabulous opportunity to unload stocks even though “everyone” knows that the bear rally begun on March 9 is over, finito, kaput. There are only two possibilities: Mr. Market is planning to drown all the believers on Friday by providing no follow-through whatsoever; or, he aims to savage bears, just for the hell of it, with one final, gratuitous push back up toward the highs.  Banks Up, Households Down We’re skeptical about the latter scenario, since the bank stocks that have led the market higher have exhausted their credibility, at least with sentient observers. How high can they go, really, when the recovery story has begun to stink worse then Limburger cheese? Lotto winners aside, have the prospects of any household in America improved as much as J.P. Morgan’s prospects? Regarding the Guvvamint’s numbers, we’d like to share with you an illuminating post from our friend Rich Cash in the Rick’s Picks forum that puts the GDP numbers in proper perspective. He attributed the

The resignation of Matthew Hoh, a key U.S. official  in Afghanistan, is a body blow to U.S. foreign policy. Click here to read his resignation letter, which questions our mission at the deepest possible level.

Sell half of the Akamai position now, around 22.45. Officially we hold 200 shares with an adjusted cost basis of 16.73.  A sale at 22.45 would give us an an adjusted cost basis of 11.01 for the remaining round lot.