(click on picture to enlarge)
CHART AU COURANT: These are pictures of the daily Russell 2000 Index (top chart) back to the November'07 high, and the weekly Russell 2000 Index back to the low after the September 11 Terror Attacks. There appears to be a completed rally into the 2007 peak (bottom chart), and a series of wave 1s and 2s down since then. If the recent June peak is surpassed, the '2 pattern would be more complex than originally marked. If unbroken, and the July low is broken under, then wave '3 (the panic wave) would be in force. You can see the weekly stochastics are approaching overbought (shown in bottom window), and the daily stochastics have already crossed down, giving a sell signal. In addition, the decline from the June high to the July low shows a clean 5 wave Elliott Wave decline (better seen on the daily chart), with the rally since then taking on a classic, corrective pattern. This sets up a dramatic selling cycle for the remainder of the year +/- a month. Bottom Line: I'm going to show an aggressive play that takes advantage of the downside. It has 2:1 negative leverage built in. That is, if the Russell 2000 declines 10%, this trade will show a profit of +20%, and so on. I'd buy the TWM at 68.50 or better, adding if it dropped ten dollars from whatever entry I got. I'd initially target 93.50, but would evaluate that along the way. If the Russell 2000 gets to 600 (currently 740), that would be a decline of 19% in the index, but a profit of approximately 38% in this TWM play. This is a high risk play, but the reward appears to justify it.
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POPULAR STOCKS TO LIGHTEN UP ON OR SHORT SELL (this list is about to get very large): IBM above 130 or below 126 (entered 125.99 on 8/11), GE above 30 or below 27 (entered 30.18 on August 11), AMGN above 55 (entered 62.08 on July 28), GS above 211 or below 170 (entered 169.99 on 8/12, exited 160.18 on 8/18, +5.8%) , RIMM above 130 or below 114 (entered 132 on August 11), AMZN above 90 (entered 90.18 on August 11), AAPL above 174 (entered 174.18 on August 11), CSCO above 24 or below 21 (entered 24.18 on August 11), INTC above 26 or below 24.19. As suggested above, "buy TWM at 68.50 or better" (entered 63.90 on 8/14) is a negative bet, or short side play, on the Russell. As the Russell falls, TWM's price will increase. Therefore, I'll track it here in the "sell or short" section.
INTERESTING STOCKS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, EBAY under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), SCHN under 67 (entered 66.95 on August 11 and entered breakeven stop on Aug 13, and exited on breakeven stop Aug 13). Per last post, entered crude under $113 at $112.99 on Aug. 12, adding into $98 (we exited on a stop at 120.99 after crude spiked to $122 on Aug.21, +$8, or 7%). We'll buy again on move above 122 or back below 114 (re-entered 113.99 on 8/24 and stop raised to 117.99 on 8/27, exited 117.99 same day +$4, 3.5%). If stopped out, we'll buy again on a break above 122 for a Gustav pop toward 130. Our exit last week was precient, and we remain out. With Gustav over, and several more lined up, it's going to be wild for the rest of the year. We will buy any test of 100 +/-2 or a break above 112 now. Again, this bounce is a relief rally, and we see a certain test in the 80's coming in the coming 3-8 months. OPEC is warning that they'll cut production, so the rhetoric begins. Last issue we showed a long Euro "gamble" at 1.4680 or better. We'll took a fill at 1.4650 while using a stop at 1.4550. Any print above 1.5050 will cause us to cash out, perhaps lower, depending on the pattern. Exited 8/28 at 1.4784, +1.34 handles. Will re-enter on break above 1.4800 or under 1.4500, whichever comes first (entered 9/2 1.4499 and will exit above 1.5100 or on 1.4100 stop. Will add to today's fill if under 1.4200).
For what it's worth,
Ken
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