Month: August 2005

Follow Through Day – Almost / Maybe

Nasdaq_83105

This last day of August flashed some eye-catching excitement as the major indexes made relatively big percentage moves on relatively big volume.  Many stocks made multi-percentage-point moves on volume as well.  If this action had come any day from tomorrow through Friday of next week it would have been called by most a follow-through day and would have confirmed the rally that began on Monday.  However,

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Still Alive — But

Qqqq_83005_2

This is a 2-day chart, with each candle representing 15 minutes of trading.  You can see that Tuesday gapped down, tried to rally in the 10:30 AM timeframe, failed and set a new low 30 minutes later, then got it up again for a rally attempt in the early afternoon, failed after 30 minutes, then managed to rally into the close to close near the highs of the day.  What’s it mean?

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First — Maybe-Credible — Rally Attempt

Qqqq_82905

This morning, in textbook fashion, while the newscasters where doing their “Cat 5 Katrina” dance and singing the “doomsday scenario” song, with oil spiking over $70 and the Superdome roof peeling back, the market and many stocks stood their ground and turned into the wind to begin marching upward from the first 15 minutes of trading.  In the face of such action, many a trader, myself included, saw fit to cover some shorts and place bids on the long side (I covered my KBH, ANF, and QQQQ shorts in the morning then bought back the QQQQ puts at the close for 43% less than I sold them for in the morning).  By the end of the day the newscasters had changed their tune and…

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OptionsXpress Holdings Inc.

Oxps_82605 This chart shows the entire trading history of OptionsXpress (OXPS), the top-rated online broker by Barron’s, Smart Money, and Forbes.  Option trading is one of the fastest growing areas of online trading and OptionsXpress has some of the best tools, order entry, execution, and prices available.  Besides options trading, OptionsXpress offers all the usual trading that people are used to, such as stocks, bonds, mutual funds, ETFs, etc.  I opened an account with them for a test drive and have been quite pleased so far.  Okay, back to the chart, notice the past three weeks action of extremely tight closes (within $0.10 for three weeks straight) and low volume?  That is a sign of support.  In this situation it’s actually a sign of outperformance since it comes at a time when many/most other stocks and indexes have given ground.  Check it out.  Cheers!

Alan’s Bubble — The Rinse Cycle

Greenspan The following is “Greenspan Speak” for “Oh shit, I’ve created the mother of all asset bubbles and when the rinse cycle comes it ain’t gonna be pretty… and I’m gonna be remembered as the man who made it all possible… They might even call it ‘Alan’s Bubble!’”

In Alan’s own words:

 

“History has not dealt kindly with the aftermath of protracted periods of low risk premiums.”

 

“What they perceive as newly abundant liquidity can readily disappear,” Greenspan said.

 

“Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices.”

 

“If we can maintain an adequate degree of flexibility, some of America’s economic imbalances, most notably the large current-account deficit and the housing boom, can be rectified by adjustments in prices, interest rates, and exchange rates rather than through more-wrenching changes in output, incomes, and employment.”

That last bit means this:

Asset prices ==> down

U.S. interest rates ==> up

U.S. dollar ==> down.

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