This One's Going To Hurt

Hurricane Gustav is now a Category 4 storm ripping its way across Cuba bound for Louisiana. The Times-Picayune newspaper is doing an excellent job covering the storm and evacuation activities. Mandatory evacuations are taking place in New Orleans in anticipation of a Tuesday night morning landfall.

UPDATE: If Gustav stays on its projected path, it will travel directly over the majority of oil and gas platforms in the gulf. So far, 77 percent of oil production, and about 37 percent of natural gas production, in the Gulf has been shut down. This article provides more details.

UPDATE 2: According to the National Hurricane Center's 5 p.m. advisory, Gustav now has maximum sustained winds of 150 mph, near the top end of Category 4 storms. Category 5 storms have maximum sustained winds greater than 155 mph. Gustav's storm surge is 18 to 23 feet high. Areas in the path of the storm are expected to receive 6 to 12 inches of rain, with isolated areas receiving as much as 20 inches.

UPDATE 3: The latest radar image shows the eye of the storm moving ashore in Cuba.

UPDATE 4: Senator John McCain and the GOP may turn the GOP convention into a hurricane relief operation. The New York Post has the story here. This would be an excellent humanitarian move and a brilliant PR move.

UPDATE 5: Latest forecast map shows Louisiana landfall at 1 p.m. Monday, which is 11 hours earlier than previous forecasts.

UPDATE 6: From the AP: Cuba's top meteorologist, Jose Rubiera, said the hurricane's massive center made landfall in mainland Cuba near the community of Los Palacios in Pinar del Rio — a region that produces much of Cuba's famed tobacco. Guess you better smoke 'em if ya got 'em.

UPDATE 7: Gustav's storm surge and waves could overtop levees in Houma. "The bottom line is that what Katrina and Rita didn't destroy in 2005, this storm has the potential to do." Full story here.

UPDATE 8: Mississippi orders mandatory evacuation of 5,000 families living in temporary FEMA housing due to Katrina.

Mississippi Department of Education deploying 100 school buses to evacuate three coastal counties. Mayor Nagin please take note.

Video of Mississippi National Guard members distributing evacuation orders.

Meanwhile, New Orleans Mayor Ray Nagin issues mandatory evacuation order effective at 8 a.m. Sunday.

UPDATE 9: "You need to be scared and you need to get your butts out of New Orleans right now." New Orleans Mayor Ray Nagin gets some old fashion religion on hurricane preparedness and evacuation.

Governor Bobby Jindal orders mandatory closure of schools in 30 Louisiana parishes for Tuesday and Wednesday.

Two Texas counties order mandatory evacuations in anticipation of severe flooding.

Valero Refining shutting down Louisiana refinery, Texas facilities running at reduced rate but decision to close could come Sunday.

UPDATE 10: Gustav has crossed over Cuba and is now in the southern part of the Gulf of Mexico. According to the Hurricane Center's 11 p.m. public advisory, the storm is still a Category 4 with sustained winds at 140 mph, down from 150 pre-Cuba. Gustav is expected to rapidly strengthen over next 24 hours as it moves over warm waters toward Louisiana.

Going Nowhere Fast

The Nasdaq 100 is still stuck in its triangle trading pattern, but at least the range is narrowing. Hopefully, we'll get a breakout, up or down, soon after Labor Day.

Daniel Lanois: Shine

Brett Dennen: Ain't No Reason

MA 50 Cross Over & Cross Under Update

Triple MA Cross Over Update

Here are the updates for the five-day and four-day versions of the Triple MA Cross Over trading system.

Webb Wilder: Just Had To Laugh

Biden Endorses McCain

YouTube sucks if you're a politician, but it is great fun for the rest of us.

Tag Clouding Uncle Ben

Paul Kedrosky puts Uncle Bernanke's speeches through the tag cloud machine to divine what Uncle Ben is really worried about. Very cool application of tag clouds, I must say.

Time to Stop The Trade

Raymond Lee discusses the importance of using time stops in your day and swing trading.

RSI(2) Buy Signals

Pick your poison, the markets are getting very oversold down here, including QLD, UWM and SAA. 

Original buy signals were issued three days ago, but there hasn't been enough volume to move the markets higher. I keep looking for a rally in the Nasdaq 100, and I'm still waiting.

On a positive note, I did find it interesting that QLD and SAA briefly tested their MA 50 today, so maybe they are getting ready to move.

Nasdaq 100 Review

The Nasdaq 100 is still rangebound. It needs to close above 1975 or below 1825 to start the next leg up or down.

Ghost

Just spent the last six hours reading cover-to-cover Ghost: Confessions of a Counterterrorism Agent by Fred Burton, who was one of the first counterterrorism agents with the Diplomatic Security Service of the Department of State.

It is a fascinating look behind the scenes of counterterrorism investigations and operations from the late 1980s to late 1990s, culminating with the capture of Ramzi Yousef, the mastermind behind the first attack on the World Trade Center.

Well worth your time if you're searching for new reading material.

Monopoly vs. Chess

Spengler in the Asia Times has an interesting column out today on the differences between U.S. & Russian foreign policy. Well worth a read on this excruciatingly slow market day.

Social Networking & Investing

This article on social networking and investing raises the logical question of which broker will be buying Covestor, and when will the purchase be consummated?

The Spiral, Part IV: Liquidation

Equity Private is on a roll with these videos.

Need A Mortgage, Just Wait for Fannie Mae To Call

Unbelievable.

I just received a telemarketing call from Fannie Mae offering me a mortgage, even if I have no credit or bad credit.

It just boggles the mind to think that a company currently losing billions of dollars due to subprime mortgages is actually trying to issue more such loans.

The Spiral, Part III

Everybody Out!

The Florida Keys are being evacuated ahead of Tropical Storm Fay's approach.

MA 50 Cross Over & Cross Under Update

Private Equity Blog

I have just spent the better part of two hours reading several very well written blog posts at Going Private, authored by an anonymous vice president of a middle market private equity firm in New York.

The blog has nothing to do with stock trading or system development, rather it is an irreverent peek into the world of private equity, plus whatever other issue strikes the author's interest.

The discovery of Going Private is a result of the following videos, which Barry at The Big Picture posted today.

Investools Advertising Again

Sitting here flipping through the few channels we have on the TV (don't have cable) and see that Investools is advertising again, so I guess this means the bull market is back on, huh!?

Or not.

The commercial needs to be updated, though, as they just mentioned the housing market and the excellent performance of housing stocks. Oops.

Anyway, the commercial inspired me to dust off the imitation Investools script I have at Wealth-Lab.com to see how well it has done over the last one, three and five-year periods. My original post on this script can be found here.

Without further ado, here are the results for the current Nasdaq 100 stocks with 10 percent of equity per trade and no stop loss. And before you mention survivorship bias, yes, the script works on other types of stocks, too.

One Year

Three Year

Five Year

Triple MA Cross Over Update

Here are the Triple MA system updates, five and four-day versions.

Your Friend, Global Domination

Nasdaq 100 at Downward Sloping Trend Line

As of 1:20 p.m. EDT, the Naz 100 is at its downward sloping trend line. It will be interesting to see if the bulls can push through and close above the line, which would be a very significant move. A close above 1975/80 would do it.

Why The Hockey Stick Debate Matters

Roger Pielke Jr. discusses why the debate over the hockey stick temperature recreation matters.

RSI(2) Trade: QID

I sold my QID at $40 as it pushed through the R1 pivot point today. I bought Monday at $38.76.

The market is still short-term overbought, but it is very difficult to get a substantial and sustained selloff in the Naz 100 with Apple, Google and RIMM putting in solid mid-day rallies. Those three stocks need to rollover and die, then the market-cap weighted Naz 100 will follow.

Thankfully, the strongest of the three, Apple, is extremely overbought and approaching overhead resistance in the form of a downtrend line starting with November's high.

And in case you missed it, today's decline in the NDX stopped at the MA 200 and the day printed an almost perfect doji candlestick.

Devo: Whip It!

The market was a bit whippy today, so here ya go. Oh and don't blame me for this musical selection, it is all Jack Ryan Bauer's fault.

Caspar & the Jesus Paper

Bishop Hill has put together a great post regarding one of the primary scientific battles in the global warming arena, the infamous Hockey Stick temperature graph.

Hill takes a lot of the higher math issues involved and boils them down to layman's language so the rest of us can understand the issues without going back to college for courses in advanced mathematics and statistics.

The post is well worth your time if you have any interest in the global warming issue and the behind the scenes politics that are masquerading as science.

Before He Trades: A Carrie Underwood Parody

This is funny...and all so true. Brought to you by John Carter and the good folks at Trade the Markets. 

Vacation Over, Back to Work

We made the three hour drive home from Michigan late this afternoon and just finished unpacking the car.

If our oldest daughter didn't start second grade on Wednesday, though, we would still be at the cottage enjoying lake life, although not the lake itself since water temperatures dived into the 50s courtesy of a north wind. Water temps were in the low 70s on Thursday.

Once we were settled down at home, I fired up the charting software to find NQ, the Nasdaq 100 futures contract, trading just under the daily pivot point for tomorrow. The pivot is 1942.75 and the current price is 1941.

It is entirely possible that we get some type of rally tomorrow, perhaps to R1 at 1966.75, which would test today's high, but I doubt it. Instead, we might see a short-lived pop above the pivot point, followed by a trend day down, especially since NQ gave up 25 points this afternoon, which does not inspire confidence.

The markets are overbought, indexes are bumping up against overhead resistance, and the Nasdaq today was rejected at the downtrend line that started at the highs of November 2007. The easy call at this point, I believe, is a test of the MA(50), which is just under 100 points below today's close. If that doesn't hold, then a retest of the March and July lows is not out of the question.

For my purposes, though, the short-term outlook is down to relieve some of the overbought pressure in the market, then it will be up to the bulls to resume the rally and prove they have what it takes to break higher.

Anything is possible, of course, but not everything is probable.

Good luck.

RSI(2) Buy: QID

I bought QID at $38.76 today as the Nasdaq 100 bounced off the R2 pivot point. The trade is up about a $1 per share as I type. I may add to the position tomorrow if the market tries to rally.

The indexes are getting overbought and running into overhead resistance, especially on the weekly charts, so I'm expecting a pullback soon.

Welcome To My World

Are The Bulls Back?

After last week's market performance, everyone is asking the same question: Are the bulls back?

No one knows the answer, of course, but using a weekly chart is a good way to gain some perspective on the market minus the noise inherent in daily price changes.

A quick glance at the NDX weekly chart shows the decline in the Nasdaq 100 index stopped just shy of the MA(200) before reversing to its present level at 1926. Major resistance is overhead at the 2000 level, which is the downtrend line and the original breakdown point from late December 2007.

Also, RSI(2) on the daily and weekly charts are both reaching overbought levels, so the rally may be running out of steam soon, although the market can stay overbought for awhile before succumbing to gravity.

In short, I wouldn't get too excited about the rally unless or until it breaks and closes above the 2050 level on the weekly chart.

Friday Night Photo Blogging

Went for a walk along the beach with the family tonight and shot a few pics of the Grand Haven lighthouse pier along the way.

Pier and lighthouse viewed from the beach

Pier and lighthouse viewed from beach level

Looking up at the lighthouse and clouds

The steelhead have arrived and so have the fishermen.
About two dozen fishermen were on the pier tonight.

One steelhead for dinner, please!

Sunset, time for ice cream.

Triple MA Cross Over Update

Here are the latest results for the five-day and four-day holding periods.

Trend Following System Picks: BIIB & INFY

Sell signals were issued for BIIB and INFY.

Bottom Call?

Did I call the bottom with this post?

Time will tell, my friends, time will tell.

Too funny.

Trend Following System Picks: SRCL & INTC

My trend following system issued buy signals for SRCL and INTC after Tuesday's close. It also issued sell signals for BBBY and BUCY.

Storm Video & Radar

Here is the video version of tonight's storm. The white noise type sound is actually the rain and wind, not static.



And here is what it looked like on radar:

Lions & Tigers & Bears, Oh My!

Not sure what everyone else is seeing in the markets, but my view is filled with a bunch of bear flags/pennants setting us up for the next leg down.

After June's drop in the indexes, none have recovered sufficiently to get reacquainted with their MA 50, although the Nasdaq Composite came close last week. Instead, the markets spent July chopping around while the moving averages rolled over to catch up with the price action.

Currently, the only sector that seems to have any legs left is biotech, especially now that commodities are all but dying. I'm not counting banks here because I believe their rally was nothing more than a dead cat bounce and all dead cats eventually get buried or consumed by scavengers (short sellers).

An optimist will look at these charts and note that each and every one is at the bottom of the trading range, which in theory should be setting us up quite nicely for a bounce higher. The bounce theory is helped a bit by the fact that each RSI(2) is close to oversold territory or heading in that direction.

Unfortunately, MACD and stochastics are rolling over with prices at the bottom of their trading ranges, and the RSI(2) readings are not in extreme territory yet, so big drops are still possible from here without the need for a snap back rally.

The bottom line is this: there are no reasons for stocks to head higher, but trillions of reasons for them to head lower, and I'm not sure the FOMC has enough ammunition left to override the latter.

I  think tonight would be a good time to put stops in place on any long positions in the portfolio because if the market doesn't like what it hears from the FOMC Tuesday afternoon, then it won't take much effort to drop through July's support/trend lines.

By nature, I am a permabull, but I'm just not seeing any reasons to be optimistic here. 

For example, a quick glance at the three year weekly chart of the Dow (bottom chart) shows price was rejected at the MA 200 two weeks ago, and the nearest level of support is 10,750 followed by 10,250, or roughly 500 and 1,000 points lower than today's close.

Personally, I think the Jim Cramer top is in, but I do so hope I'm wrong and that all of my readers will be able to rub my nose in this post for years to come.

Good News for Energy Supplies

Alaska's legislature has approved legislation that will allow TransCanada to build a natural gas pipeline from the Artic regions of the state to markets in the lower 48. The pipeline will be 1,700 miles long.

Bloomberg has the details.

Queen: Bohemian Rhapsody

Queen guitarist Brian May, Ph.D., has published his thesis in astrophysics, which is now available at Amazon.com.


H/T: Instapundit

Triple MA Cross Over Update

Here is an update for the Triple MA Cross Over system. 

The first set of results are for a five-day holding period, which is what I have been posting here for months. The second set of results is for a four-day holding period, which Woodshedder suggested I try, and which is the original setting used by Marlyn at Filtering Wall Street.

As you can see, results are dramatically improved with the four-day holding period.

I'm not really sure why I chose the five-day holding period, but it does appear to work better than the four-day period in some years, but not in others. I plan to explore this a little bit more to determine if one is better than the other over the long term. 

My initial impression, however, is that it may depend on the amount of chop in the market. If the markets are very choppy, as they have been this year, then the shorter holding period is the better way to go. That's my theory anyway, now I just have to prove it!

I'll let you know what I find, if anything.

Nasdaq 100 Review

Here is a quick snapshot of the Nasdaq 100 prior to today's release of economic data, which I believe may dramatically change the look of this chart.

For most of July, the Naz 100 traded in a range between 1800 and 1875, the lone major exception being the mid-July drop to 1761. Note the RSI(2), which has spent most of the past month bouncing between 30 and 70, especially the last two weeks.

As for other technicals, price is sitting on the MA 20 and MACD is pointing up, but the stochastic is heading into overbought territory after hanging around the 50 line for awhile, then again, stochs can stay overbought for quite awhile, so I'm not too concerned about them at this point.

Thursday's trading took price to the top of the trading channel twice, and both times it was beat down by sellers, including a late afternoon drubbing that left the index 25 points off the day's high.

At this point, short sellers are locked and loaded and waiting for worse than expected numbers in the nonfarm payroll and unemployment data, which will be released at 8:30 a.m. EDT.

For a possible preview of what's to come, note the long wick at the top of Thursday's candle, then look back a week at a similar candle. See it? The setup is exactly the same.

If the numbers are worse than forecast (minus 70,000 jobs/5.6 percent unemployed), then I believe the shorts double down and drive the index to the bottom of the channel, and possibly through support at 1800.

On the other hand, any upside surprise, and the shorts bail on their positions immediately, go net long, and the market rallies through resistance at 1875 and makes a beeline for the MA 50 at 1900.

And for the record, an upside surprise can be something as lame as minus 50,000 jobs instead of the minus 70,000 forecast. The market seems to be in a very fragile place right now, which makes perceptions about the economy much more important than reality. 

It doesn't matter that minus 50,000 jobs is bad, it is just less bad than minus 70,000, which means the economy isn't as bad as everyone thinks, which means everyone can buy stocks again! 

And if we get a double surprise, fewer jobs lost and a lower unemployment rate, then you should probably get a second mortgage and buy stock index futures with the proceeds.

Yes, that last part is a joke. Seriously, don't even think about it. Just forget I mentioned it.

Personally, I believe the market is looking for any excuse to head higher since everyone and their grandmother is leaning to the short side, but poor numbers later this morning could quickly dampen the bullish enthusiasm.