The bulls might need to start humming to this "There's no easy way out" ( after a 400 point drop) "Theres no short cut home"



"Thinking about how it used to be"

Lets see what the last 2 hrs bring. Will the Dow close above 100 ,will we see 50-80 or will we see a sell off ? I put stops on some DXD, MZZ, QID and SDS positions in case the market runs up and continues the momentum tomorrow. I added into NYX judging the strength throughout the day. Pullbacks on NYX have been on lighter volume which is a factor to note. Right now I am trying to balance my longs and shorts to see what direction the markets take. I do not want to get caught leaning too much in one direction lest I get burned. The key is too find stocks showing relative strength and go long and to 'hedge' by finding relative weakness and shorting those.

Good to see the markets are flying. This allows me to sell some of my longs and short some more RIMM and AAPL among others. Good to see BWLD is up after a serious decline this morning . There is some serious big money buying in NYX per this WSJ money flow indicator . I'm loading up here on SNDK and MU because I believe the chip sector is bottoming and will lead the way once we recover, in 3 to 6 months or so. I do think the market will recover over the coming weeks but, I also believe yesterdays drop was a warning that this bull market is coming to an end. Serious declines like the one we had yesterday usually signal a change in trend and since the preceding trend was bullish I do believe the coming month will be bearish.

UNEXPECTED ?

Funny how so many are calling this decline unexpected. We have had eight straight months of gains. The S&P 500 hasn't dropped 2% in the longest time ever and yet people are astonished by the decline yesterday. I blame it on complacency. Everyone else seems to be blaming it on the computers. When all else fails just blame the damn machines. The market didn't fall..it was just a glitch in the system. LOL

MARKET MELT DOWN ?

What a truely disgusting day in China. Disgusting if you were long that is which thankfully I am not. Imagine if the S&P, Nasdaq and Dow all fell 9% in a single session. We'd probably see people jumping out of windows. Depending on how we close today I might take a dip in some QLD, SSO, DDM and MVV for a bounce tomorrow. Sold a small part of my QLD, DXD , MZZ and SDS today. Thinking of adding more to NYX, WFMI, PNRA and BWLD longs. My GS short has made my day. Down (up for me) over 4% on heavy volume. If Goldman breaks 200, the next stop is 180. I am looking for a bounce to 210 and maybe I will short some more.

AAII sentiment index is at 71% Time to hit the short button. yawn.

Lets see if the Nasdaq can close below 2500 and the S&P 500 below 1450. This might give some strength to the bears. But as usual the bears tend to over play their hand , get burned and run for cover pushing the indices to record highs. Will it play out again or will we get a meaningful retreat ? I guess the days ahead will tell.

Did you know Morgan Stanley owns $102 Billion in real estate assets worldwide ? I had no idea.

We have some dangerous airports nationwide .

How is Google v Microsoft going to play out ?

Buffett betting on housing .

Are Russian banks a winning bet ?

The breaking of the diamond cartel .

Breaking down the carry trade.

Inside the mind of a corporate raider.

Thank you Paulson

And the shit continues to hit the fan .

"The high end of the market is still very weak" . If the high end of housing is weak, the low end can only be worse.

Will rising oil prices hurt consumers pockets ?

An unexpected increase in inflation sends gold prices soaring .

So much for a WFMI pullback. Stock is flying after hours on news Whole Foods is buying out fellow organic producer Wild Oats. I don't usually average up into my positions during an extended bull market so I will likely sell WFMI when it reaches the overbought level and wait to buy it during weakness, in a bear market.

NYSE Group Inc (NYX) is a momentum stock which I am glad I got into last Friday. I felt the pullback was overdone and it looks to continue its upward momentum atleast temporarily.I don't like chasing momentum but will buy during pullbacks when I feel the previous trend is ready to resume and NYX fit the bill nicely. Look at the large volume on Friday which suggested the current turnaround. I expect resistance at the 50 day moving average around $98 and I will be keeping a close eye on this level.

Chipotle Mexican Grill

Here is a chart of CMG from around last May till the end of July. Notice the incredible upward surge in the days leading to earnings with a huge gap up from 59 to 66 on earnings day. CMG tops at 67.77 which has to date not been bettered and than fade's down to 48 by the middle of July. Now look at this chart . Again a nice upward surge in the days leading up to earnings followed by a big gap up and than a fade . The worrying point to note is the failure to break above the previous peak at 67.77. Could CMG be a good short here ?

Whole Foods Market

I took a miniscule position in WFMI a few weeks back on a breakout from its downtrend line. Earnings are expected this evening and I expect a gap down open tomorrow where I will add to my position. I am trying to get WFMI to a position equal to 5% of the entire fund. Currently I hold a position of close to 1/2% of the fund. When trying to build a position I follow a 10-20-30-40 where I buy 10% of my intended position and follow up by adding 20% next, usually at lower levels and so on. If you do your homework correctly and a stock approaches your buy price, any level below that price is a steal.

Gold breakout

Gold and GLD are breaking out . I would expect a test of $730 and more. $1000 gold is a distinct possibility this year.

Things to Ponder

Is the carry trade good for now ?

HP beats yet again. Can it continue to beat ?

Will central bank governor's testimony hinting at rate tightning have an affect on the Australian market ?

Huge drop in earnings. No forward guidance. New CEO . Could there be trouble brewing in Home Depot ?

Is Jetblue 'dead money' for now or do I smell opportunity ?

NEWS AND VIEWS

A quiet day today. US markets are closed. A whole lotta green arrows in Europe . Asia is green too except for our friends in Singapore who don't seem to be 'getting' with the program. The FTSE and Nikkei among others, are at fresh 6 year highs and did I mention that the Shanghai Composite has doubled, in the last 8 months ? Things could not be rosier or so it seems.

What do we have here ? Goodness its Sirius and XM trying to merge. Is this a merger of idiots or are these two collusus of negative cash flow, actually going to accomplish something positive ? Either way I do not see satellite radio as something that is sustainable in the future. To me the future is digitally imported internet radio. SiriXM or XMius or whatever they call this behemoth is going to be history in a decade. Kaput.

REAL ESTATE MARKET RECOVERY ?????

I read this article pertaining to a potential recovery in real estate by mid year. With the excess inventory - market has 400,000 homes more than it can handle according to one economist,I seriously doubt we will see a bottom in real estate till atleast 2008 and more like 2009. Many regions such as Florida, Arizona and California have inventories of homes exceeding a 10 month supply, with 4 months constituting a normal market. And that 10 month supply is in the face of declining home buying activity. So with slower buying, the supply is probably closer to 12-14 months. Not to mention the fact that builders are still building homes and this additional supply, will only further depress the markets. According to research from the past 100 + years, the average real estate decline from peak to bottom lasts close to 3 years. By all accounts we peaked in late 2005. Based on this analysis, we will probably bottom out in late 2008. Than again, it could take longer considering the amazing run we had between 2001-2005.