FED and FDIC not designed to operate in CHAOS, which is what we have NOW!

Update on last post: This weekend, Lehman Brothers, a 150 year old investment bank declared bankruptsy, BofA bought Merrill Lynch out of the abyss, AIG, a trillion dollar balance sheet company, is in full blown panic to save themselves, and Washington Mutual teeters closer to closure.

IT IS NOT OVER, SO DON'T ACT LIKE IT IS. CAUTION IS IMPERATIVE! Guard what you have.


For what it's worth,

Ken

WAMU...Live or Die?

(click on chart to enlarge)

CHART AU COURANT: This is it, with WAMU trading under $2 for the first time ever. Will they fail this weekend and be taken over, or will the Hail Mary firing of Kerry Killinger bounce the stock and bank out of likely doom? There is a reasonable chance that they will fail, and completely exhaust the FDIC insurance fund (Wamu's insured deposits of $200 billion are three times the size of the total FDIC fund), leaving all other bank deposits at risk. I'll be at the door of my local branch as they open today asking for most of my cash, just in case. It's your money, so take the action that you need to and sleep and live well.
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INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions. But, stay tuned. We took amazing profits last week into the Freddie/Fannie volatility.

INTERESTING PLAYS 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, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10), GRMN under 30 or above 36, DELL under 17 and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 and adding twice this amount at 7.75. GS under 118 (entered 117.48 on 9/16 6:09 am) or above 130 and adding under 95. GE under 23, MS under 24 or above 28, WGO under 9 or above 13, JEF under 14 or above 19, SBUX under 13 or above 17, UWM under 43 or above 46, RIMM under 95 or above 100, AAPL under 135 or above 140, INTC under 19 or above 21,

In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10) adding near $90 (added $90.98 on 9/16 @4:30am PST). Again, this bounce is a relief rally, and we see a certain test of the 80 area coming in the next 3-8 months. Re-entered the Euro at 1.4439 @ 8a on 9/3 and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at breakeven entered 11am PST), and I will exit above 1.5000. If stopped out on second, I'll add second back above 1.4439 or under 1.3999.

For what it's worth,

Ken

SILVER Lining? The time is right!

(click on chart to enlarge)

CHART AU COURANT: This chart of SLV, the silver tracking stock, shows several compelling reasons to buy it in this price range. 1) stochastics are extremely oversold on this daily chart, as well as equally oversold on the weekly chart (not shown). 2) there is an elliott wave labeling that can count the entire decline from the $21 peak in March as complete or nearly so. And 3) the price is plunging under the 3 standard deviation band, which last happened in Aug 07 and launched a doubling in price in 8 months. I'm taking a buying long position here at 10.75 and adding at 7.75, which will require further plunge under the 4 standard deviation band, which is very, very rare. I'll look to sell between 14 and 16 in the next 6 months, which would result in a gain of 25%-45%. If 7.75 is reached, I'll triple my position. So, if I buy 100 shares now, I'd buy 200 additional at the lower price. That is how rare this situation is.

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MARKETS: The government takeover of Freddie and Fannie is the latest attempt to act "too little, too late", and will NOT bottom the economy or the market as is hoped. By definition, the government NEVER enters into a bailout trade at the low. If you check the last 100 years, they have been early each time. Therefore, there is NO reason to think they got it right this time, especially considering their mistakes of the past 5-25 years are what got us into this mess. Expect lower stock, housing, crude, and euro prices eventually, even if each of these has a very temporary bounce.

INTERESTING PLAYS 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, exited 115.40 9/10, +8.4%), GE above 30 or below 27 (entered 30.18 on August 11, exited 27.98 9/10, +7.2%), AMGN above 55 (entered 62.08 on July 28, exited 59.64 on 9/9, +3.8%), RIMM above 130 or below 114 (entered 132 on August 11, exited 116.98 on Sept.2, +11.3%), AMZN above 90 (entered 90.18 on August 11, exited 76.70 on 9/10, + 16%), AAPL above 174 (entered 174.18 on August 11 exited 150.44 9/10, +13.6%), CSCO above 24 or below 21 (entered 24.18 on August 11, exited 22.18 on 9/4, +8.2%), INTC above 26 or below 24.19 (entered 24.18 on 8/18, exited 20.18 on 9/10, +16.5%). As suggested above, "buy TWM at 68.50 or better" (entered 63.90 on 8/14, using breakeven stop as of 9/10. Exited 72.50 on 9/11, +5.8%...didn't like pattern) 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 PLAYS 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, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400 (added 407.50 on 9/11, exited 437 on 9/12, +7.3% still adding under 400), EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using breakeven stop as of 9/10), GRMN under 30 or above 36, DELL under 13 and adding under 8.50. Entered crude 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%). Our exit last week was precient, and we remain out. We will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10). 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 issued a small production cut, so the battle is on. Last issue we showed a long Euro "gamble" at 1.4680 or better. I 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 or $1675. Re-entered 1.4439 @ 8a on 9/3 and will add between 1.4100 and 1.3700 (added second entry 1.3899 on 9/11, exited second entry only 1.4189 on 9/12, +2.9 handles or $3625 per contract). I'll add second entry back if under 1.4050, and I will exit above 1.5000. SMH (entered @ 25 on 9/15 at market open) adding under 21, using 43 as my initial exit.

For what it's worth,

Ken

WHEN IT RAINS, IT POURS...Drowning in Crude?

(click on picture to enlarge)
CHART AU COURANT: How can I not talk Crude, with the hype around the landing of Gustav? Think back several months ago when I forecast that the manic spike toward the $140 area was a classic blowoff, that historically has ALWAYS ended in a dramatic, unexplained (except we did it in advance) reversal. Further, I said that gas prices would likely peak for the year by July 4th. In fact, that spike DID mark the top, so far, in price, and gas prices peaked a week or two after July 4th. In fact, AAA reported that gas prices fell EVERY day for the 40 days prior to Labor Day. I'll take that as a bullseye, thank you very much! Even better than using our system to make these forecasts, is being able to take advantage of these movements as I've narrated in these comments. I'm showing the weekly bar chart of Crude, with a now fully oversold stochastic analysis at the bottom of the window, meaning crude is as oversold, basis the stochastics, as its been since late September 2006. This alone doesn't guarantee a rally, in fact nothing every does, but it does tell us that selling has reached an extreme, which is usually hard to maintain without a period of relief. From its high to today's low, crude fell $43, or 29%, in two months. As I said then, when the hedgies and banks that were too leveraged "needed" so sell, due to capital calls on their assets that "have no liquid market", the price would plunge. Although a bounce is needed, the ultimate low has not likely been seen. I'm still targeting a much better low surrounding the $80 area. That said, I'll take and track a new trade here, buying on a break above $114 (adjusted to $108 on 9/3 at 8aPST, entered $108.01 at 8:16a PST. Placed trailing stop at breakeven on 9/8 when spiked to $110. Exited 108.01 on 9/8), will re-enter long on break above $105 (lowered from $110 on 9/10 at 8a PST) or on a break below $101. If the higher entry is filled, the $101 will be cancelled and visa versa, but a second entry will be taken around $88 no matter what. I expect to see a rally back up into the $122 to $132 range, where I'll exit and reverse directions with a short. The chart also shows Fibonacci support at $95 and again at $79, each in the vicinity of my entries. Isn't is interesting that the car companies are closing and selling product lines like Hummer "after" crude/gas prices peaked and have declined? The fact that the price of crude and gasoline are falling with a string of hurricanes lined up from Florida to Africa, tells us that the world is awash with oil, and the hedgies and banks are on the wrong side of the trade, and want OUT.
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MARKETS: First, like crude, our system has been very good at forecasting the movements of the Euro. Again, reviewing the blog in the past few months reveals several uncanny predictions, as well as trades that took advantage of the moves, with plenty of time in advance to take the positions. Per the last entry, we are looking for a long after a break of 1.4500, which we got today. However, the pattern doesn't quite look complete. I will enter a buy once the price moves back above 1.4550 (adjusted to above 1.4475 or below 1.4440 on 9/3 at 6a PST...entered 1.4439 @ 8a on 9/3 and will add between 1.4100 and 1.3700) I will exit above 1.5000. The weekly chart of the Euro (not shown) has a stochastic extreme similar to crude, but the Euro hasn't been this extremely oversold since October 2005. With price quickly approaching the lower standard deviation band at 1.4260, a bounce is imminent, but the final low has NOT been recorded. After an relief rally for a few weeks, probing the 1.30's is highly likely.

Stocks opened dramatically higher Tuesday on the relief of little damage from Gustav, but within hours, reversed into a steep slide, after the crowd realized that "things are amiss" with or without hurricane damage. I usually discuss the market in terms of the S&P 500 Index, but like recently, use others if their pattern appears more clear. CLARITY IS EVERYTHING in this business. In fact, I put on a bearish trade in the Russell 2000 inverse 200% tracking stock called TWM at 68.50. If the market falls, this stock will increase in value twice the percentage of the Index's decline. Yes, if wrong, it'll hurt twice as much.

Anyway, the S&P 500 is poised to begin the largest decline since the Dec/Jan slide of late last year. This one should be twice as nasty, so closer to 400 points, rather than 250 during the slide just mentioned. This would target the 850 area, give of take a few percent. Get ready. If wrong, the rally of the last week will extend and peak in mid September, then cascade into late Fall. Either way, there is serious potential for portfolio pain during the remaining months of 2008.

Hide in Gold and Silver you say? Well, again, if you check the past blog entries, when Gold topped 1000, I said in these pages that the 800 level was the target for the next 'major' move, with 600 being the better longer term terminus of the imminent decline. If you didn't see, gold closed at 801 today! 700 should be seen in short order, and I'm saving some shekels for 600.

No sector will be untouched by the upcoming selling wave, but some are much closer to their final lows than others. Housing stocks are NOT one of the good sectors, with another round of serious liquidation by the end of the year. The semiconductors actually are shaping up for a serious rally in the next 3-18 months. You can place individual bets, or take them all by betting on the sector tracking stock, symbol SMH. More soon as this sector could still decline 20-30% by year end. If SMH rises above 26.5 (lowered from 28 on 9/10 at 7a PST) or falls under 25, I'll buy it and add under 21, using 43 as my initial exit.

Rates on the 30 year Treasury Bond have likely bottomed, so mortgages are unlikely to decline in rate anytime soon. Lock in those ARM's N O W under 6%, cause they could go much higher than you or your biased mortgage professional (and I use "professional" generously) can imagine. If you are looking for a house to buy to live in, there is still NO hurry, as the prices around the country are decline as the supply increases, and most sales are foreclosures, so under market.

Cash remains king, and t-bills or treasury-only money markets are the ONLY safe place (safe means without risk) to wait out the perfect storm that has just begun. The safest money market in the country remains the AMERICAN CENTURY CAPITAL PRESERVATION FUND 1 (http://www.americancentury.com/ or 800-345-2021). The expense ratio is extremely low at .48%, they don't use a custodial bank, which means they know where the money is at all times, and they ONLY buy treasuries! Remember, cash has outperformed stocks for the last eight years.

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), RIMM above 130 or below 114 (entered 132 on August 11, exited 116.98 on Sept.2, +11.3%), 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, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400, EBAY on break back above 25.50 or under 21 and adding under 18, SNDK under 12 or above 15 (entered 15.01 on 9/5), GRMN under 30 or above 36. 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. I 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 8am on 9/3 per updates at top of "markets" section at 1.4439 and will exit above 1.5100 or on 1.4100 stop.

For what it's worth,

Risk vs Reward in the RUSSELL 2000

(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

EURO...uh oh...CRUDE, too! Deja Vu, all over again? Time to exit bounce bets!

(click on picture to enlarge)
CHARTS AU COURANT: Here are the updated versions of two markets I have been on top of for months. With crude, I gave several warnings of a blowoff building, targeted peak possibilties, and have been updating you as the decline develops. With euro, I did one better, giving you entries and exits, with stop levels and position management ideas. I'll save Gold for next time, but it's in lock step with euro, and headed much lower. Recall from past posts, I like initial support of $800 (which could happen this week), but ultimately testing $600.

Euro: In my June 10 post, I said: "From my call of a Euro top a couple weeks ago near 1.58, it has fallen to 1.53, and is also short term over sold. If you have profits in your short from up there, take at least half off here at 1.53. Add this piece back around 1.56 or if 1.52 breaks. Take profit on half again at 1.5050. Then, again add it back short if 1.48 breaks, taking half off again near 1.44, and so on." And, in my July 2 post, I revised as follows: "The Euro has moved back up to the 1.58 level, nearing its 1.60 high. There is a chance it'll make new highs prior to another multi month decline, next time toward 1.40. My suggestion to short near 1.58, then to cover on June 10, near 1.53 worked out well. Conserative traders should stand aside now, awaiting a short on a new high in the 1.61-1.66 area, or on a break of 1.54 for the slide toward 1.44-1.48 initially, with lower levels possible toward 1.38-1.40. Aggressive traders would short here again at 1.58, adding into the range just mentioned." This resulted in a 5 handle gain from 1.58 to 1.53 if you exited completely or 2.5 handles if you took half off (or either $6250 or $3125 per contract) on the initial trade alone. Then, several opportunities for re-entry, depending upon your risk aversion. Any way you sliced it, it's been a wonderful strategy for the past 60 days! Currently, the Euro is as oversold as it has been since late '06, so we'll NOT short again on a break of 1.48, but await a bounce towards 1.5150 to consider a new short. We have to acknowledge that this decline COULD be a wave iv low, as it finds support near the lower yellow standard deviation line in the mid 1.42's, as well as the upward sloping trend line (pink line) currently in the mid 1.44's. Further, the weekly stochastic is in extreme oversold territory along with the daily stoch (not shown). 1.4680 would be an interesting gamble for a long side bet if any spike gets down there or below, with 1.42 as a stop. If filled, exit above 1.50 as we'll re-short into resistence just listed.

Crude: Following warnings for several months, crude has absolutely tanked, along with Nat. Gas, per our prior posts calling for imminent peaks. Crude barely bounced at initial support of $120 for a couple days. As of this writing, crude is testing $113, approaching the upper end of our "major support" range of $111 or $85-$100. Like the Euro, an oversold extreme is being pushed that hasn't been seen since late '06, when crude broke under $60. This time, however, rather than launching another 100%+ from that low, crude has LIKELY peaked for a long, long time. $135 should NOT be closed above to keep the bearish picture intact, but $125 to $133 is a very reasonable bounce target before the next wave lower, toward the lower end of our "major support" range of $80-$100. This is not the time to establish new short positions, and the most aggressive traders would consider a long bet under $113, adding into $98, and again into $85 for a quick (possibly Russia-Georgia war related, or Hurricane threat to Gulf Oil production?) bounce toward the $130 area.

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MARKETS: Last post, with the S&P at 1285, I said "Either the stock indices begin their decline within two hours of Thursday's (July 31) open, or will do so after a short, sharp extension rally into the 1300-1325 level in the S&P 500 Index (SPX). The difference will soon become moot, as the decline that follows both alternatives will be "a wonder to behold." Mid-day today, SPX reached 1313, then rolled over and closed at 1305. Resistance remains 1325, but there is a good chance that today was it. We should know this week. Even if prices make another push, and even if it reaches 1325-1350, this rally is built on memories of times gone by, and destined for disaster this Autum. As you'll see in the trades sections, we exited long again, and beefed up short positions, anticipating the ride lower. Don't stay at this party too long or you'll wind up in stock jail, unable to leave when you want.

POPULAR STOCKS TO LIGHTEN UP ON OR SHORT SELL (this list is about to get very large): IBM above 130 or below 126, 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, 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.

INTERESTING STOCKS TO ACCUMULATE OR BUY (if you have to in a dangerous environment. Notice how small this list is becoming! See July 23rd posting for profit taking on a lot of former trades): MSFT from 26.5 (entered 26.5 on July 1, exited 28.18 on August 11, +6.3%) and will re-enter under 23, adding under 18, EBAY under 28 (entered 24.62 on July 17, exited 26.82 on August 11, +8/9%) will re-enter under 18, and SNDK under 18 (entered 17.55 on July 1, added 13.25 on July 22, exited both at 17.50 August 11, +13.6%), NVDA under 13 (entered 12.78 on July 7) for bounce toward 23-25, adding into the 7-9 range, VMW under 38 (entered 37.95 on July 8, exited 36.95 on August 11, -2.6%), SBUX under 15 (entered 14.91 on July 8, exited 16.18 on August 11, +8.5%), and all home builders for bounce of 30-50% from their lows, but specifically, KBH under 16 (entered 15 on July 11, exited 20.89 on July 23, +39%), and will re-enter in the 15.5-17.5 area (re-entered 17.18 on August 7, exited 19.80 on August 12, +15.2%), HOV under 5 (entered 4.97 on July 7, exited 7.77 on July 23, +56%) and will re-enter 5.50-6.5 (re-entered 6.5 on August 4, exited 7.95 on August 12, +22.3%), TOL under 18 (entered 16.80 on July 11, exited 21.80 on July 23, +29%) and will re-enter 18-19.5 (re-entered 18.95 on August 4, exited 21.50 on August 12, +12.9%), YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), and finally GOOG under 480 (entered 473 on July 21, exited 505 on August 11, +6.7%), . SCHN under 67 (entered 66.95 on August 11). XLF from 18-19.5, using 16.75 as initial risk level (entered 19.50 on July 28, risk level raised to 19.50 on July 30, exited 22.44 on August 11, +15.1%).

For what it's worth,

Ken

SHOCK AND AWE SELLING IMMINENT...no stock will be spared!

(click on picture to enlarge)

This post began Wednesday night the 30th, but wasn't published until after the close Thursday the 31st.

CHART AU COURANT: Either the stock indices begin their decline within two hours of Thursday's open, or will do so after a short, sharp extension rally into the 1300-1325 level in the S&P 500 Index (SPX). The difference will soon become moot, as the decline that follows both alternatives will be "a wonder to behold", as Robert Prechter and A.J. Frost describe third wave declines, in their book The Elliott Wave Principle. Closing below 1220 will suggest the Tsunami of selling is unfolding; below 1200 guarantees it. Thereafter, 1150 becomes the immediate target, 1010-1080 becomes the intermediate target, and the 780 area becomes the final support to avoid melt down. That would translate to Dow numbers as follows: closing below 12,000 suggests Tsunami unfolding; below 11,800 guarantees it. Thereafter, 10,500 becomes the immediate target, 9,100-9,900 becomes the intermediate target, and the 7,300 area becomes the final support to avoid melt down. I'm just saying...

Bottom Line: The chart shows daily stochastics entering extreme overbought territory in the lower panel, meaning the upside is very limited from here. At the right, you can see that the green price bars touched the initial Fibonacci resistance at the 38% retracement level of the entire decline from the May peak, and turned down. Also, the lower 2 standard deviation band held prices on the downside, after having been penetrated at the declines worst, but the next penetration is likely not to hold.

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MARKETS: The media has been doing its best to "talk up" the economy, especially the housing disaster. CNBC's main talking point Thursday was that in the worst county in the worst state for housing (the county that houses Stockton, California), home sales have increased for each of the last 5 months. What they say in a quiet voice is that 8 out of 10 sales are foreclosures, and prices are not rising. How misleading and irresponsible. Who cares if the number of sales is rising if they are doing so at lower prices, due to more and more people going into foreclosure, bankruptsy, and financial collapse. Of course, most other cities and counties are NOT seeing increased sales numbers, as they aren't as far into the depression as Stockton is. THIS IS NOT A HEADLINE TO CELEBRATE. It's one to cry about.

During the final two hours of the day Thursday, Alan Greenspan told Maria Bartoromo on global television that he thinks Fannie Mae and Freddie Mac are "a major accident waiting to happen", and will need to be nationalized to fix their massive problems. Within minutes, the markets soured and fell across the board to close lower on the day. While many will blame Greenspan for turning the markets, we Elliotticians saw the wave form coming to its inevitable conclusion (detailed in the blue section above).

Crude has begun the bounce I talked about last post from the 120-122 targeted low, and Nat. Gas should follow. 130-133 is initial resistance, followed by 137-139. Crude has no business being above 144, and closing above this level would imply another high above 148. Closing under 120 now should suggest the next liquidation wave is in force, with 101-108 next support, and 86-91 unlikely to be broken for now. This time, falling crude should coincide with falling stocks, as the big boys bail on anything they have profits in to compensate for losses in others.

In addition to crude falling with stocks, expect gold (and even more violently, silver) and the euro to decline as well. Our government flooded the system in the last few years that floated all these boats higher. Now, as the liquidity flood dries up and becomes a drought, the past benefactors should simultaneously become the pariahs.

POPULAR STOCKS TO LIGHTEN UP ON OR SHORT SELL (this list is about to get very large): IBM above 130 or below 126, GE above 30 or below 27, AMGN above 55 (entered 62.08 on July 28), GS above 211 or below 170, RIMM above 130 or below 114, AMZN above 90, AAPL above 175, CSCO above 24 or below 21, INTC above 26 or below 22.

INTERESTING STOCKS TO ACCUMULATE OR BUY (if you have to in a dangerous environment. Notice how small this list is becoming! See July 23rd posting for profit taking on a lot of former trades): SBUX from 13-15 (entered at 15 on July 1) could test 23-25, MSFT from 26.5 (entered 26.5 on July 1) and will add under 18.5, EBAY under 28 (entered 24.62 on July 17) for bounce toward 38, adding in the 18-21 range, and SNDK under 18 (entered 17.55 on July 1, added 13.25 on July 22) for bounce toward 35, adding in the 10-12 range, NVDA under 13 (entered 12.78 on July 7) for bounce toward 23-25, adding into the 7-9 range, VMW under 38 (entered 37.95 on July 8) for bounce toward 55, adding into the 18-22 range SBUX under 15 (entered 14.91 on July 8) for bounce into 25, adding into the 8-10 range, and all home builders for bounce of 30-50% from their lows, but specifically, KBH under 16 (entered 15 on July 11, exited 20.89 on July 23, +39%) and will re-enter in the 15.5-17.5 area, HOV under 5 (entered 4.97 on July 7, exited 7.77 on July 23, +56%) and will re-enter 5.50-6.5, TOL under 18 (entered 16.80 on July 11, exited 21.80 on July 23, +29%) and will re-enter 18-19.5, YHOO under 20 or above 22 and adding under 13, and finally GOOG under 480 (entered 473 on July 21), adding at 393 and 293...could actually see 650 or higher while general market dives. SCHN under 67. XLF from 18-19.5, using 16.75 as initial risk level (entered 19.50 on July 28, risk level raised to 19.50 on July 30).

For what it's worth,

Ken