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John Ward
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Equities trader. I currently live in California. Email: john.authorego@gmail.com Twitter: JWard_73
  • June 22, 2010 3 comments
    Jun 23, 2010 12:04 AM | about stocks: AKAM, FFIV, AMZN, PCLN, AFL, BUCY, GS, V, GMCR, SPXU, SQQQ, TZA, DXD, VXX

    We presently have a market (and more than a few stocks) forming the ever dreaded “Head and Shoulders” topping pattern.  Everyone sees this, of course, though I would warn against concluding that it is then too obvious, as I heard much the same thing back in 2008.  Not that this market is anything like that one.  Still, the point remains: Ignore what others are doing and just focus on the market itself.  This is an unsophisticated-sounding tenet but one that, if followed, affords one a focus that the opinions of others tends to corrode.     

     

    Now when it comes to the Dow, 25 of the last 40 sessions have been triple digit moves.  10 have been triple digit gains; 15 triple digit losses.  10 sessions have seen the Dow up or down over 200 points. Now that’s some volatility.  And a great way to churn one’s account if you’re not careful.

     

    To my mind, however, the two most probable paths for the market are 1) Chop and slop (snapback rallies and selloffs that occur without rhyme or reason, frustrating bull and bear alike), or 2) Lower prices.  And if we’re in fact heading lower, then I imagine that the highs of 6/15-18 would be a ceiling.  Just keep in mind that stocks often form multiple shoulders before finally breaking down in earnest.  So being nimble, flexible and persistent is a must.

     

    We could always continue to rally, of course, so that has to be considered as well.  It could even be a powerful move; if so, one should know just what they want to own.  Focusing on stocks like AKAM and FFIV, given their fundamentals and the fact that the entire group is full of strong stocks, would certainly be the way to go.  Otherwise, stocks like AMZN, PCLN, AFL, BUCY, GS, V and GMCR should be your short targets, if not the many inverse ETFs out there.    

     

    Just take nothing for granted and, as always, be ready for anything….      


    Disclosure: Long: SPXU, TZA, SQQQ; Short: V
    Stocks: AKAM, FFIV, AMZN, PCLN, AFL, BUCY, GS, V, GMCR, SPXU, SQQQ, TZA, DXD, VXX
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  •  
    We, too, have a historical factor from a few different angles: June rallies often fail, no big uptrend have begun in June, and after a historical run since March 2009 it is highly unlikely new highs will be hit again until a few years from now.

    1907-1915
    1938-1945
    1974-1982

    But, as you suggest anything can happen here especially with the Federal Reserve keeping the flood gates wide open.

    research.stlouisfed.or...

    The continued pumping of cash into the system ultimately will float into the stock market and bonds.
    23 Jun 2010, 06:08 AM Reply Like
  •  
    Thanks, MST. That is one amazing chart!
    24 Jun 2010, 02:56 PM Reply Like
  •  
    I know "amazing" was said with heavy sarcasm! If money supply was stable supply/demand picture would be much more clear! but, come on, continue to devalue a currency and you screw with price in turn screwing with supply and demand.
    28 Jun 2010, 01:59 PM Reply Like
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