Next Technical Confirmation: Stocks breaking Monday’s lows

NOTE:  This Market Commentary alert was originally emailed to subscribers at Ritholtz Research & Analytics on FRI 12/1/2006 2:33 PM;

This is posted here not as investing advice, but
rather as an example of a trading call for potential subscribers. We
expect to post future advisories in a similar manner — after the call,
but in the correct chronological location on the blog.

>>>

Earlier this week, we noted that the Transports were telling us the time to look to short was growing closer.

Today, we got the 2nd piece of that puzzle:  The Nasdaq, the Transports, and Dow Industrials have all broken below Mondays low points. (The S&P500 and the Russell 2000 have not).

This is first set of lower lows on major indices – on strong volume – is a 2nd significant signal.

As of now, this is enough confirmation for us to suggest a TRADING SHORT. We would not go hog wild here; There are not enough indicators to get aggressively short – but you can begin to take small short positions in specific names:

Indeed, on the possibility that something untoward could happen on Monday morning, we want to establish small trading shorts – position holders – right here.

Given how far and fast the Nasdaq 100 has risen, that’s likely the best index tyo use as a short. We are establishing a modest trading position – short the Nasdaq 100 (QQQQs) between 43.25-43.75, with 44.35 as a stop loss.

A more speculative short is the Dow Jones Real Estate Index (IYR). It is a collection of REITS that has run up nearly 10 points since early November and may be forming a double top. This is a more aggressive short suitable only for fast traders.  Leg into shorts between 85-86; Use 86.35 as a tight stop.

Over the weekend, we will be running sector and individual company analyses looking for specific names and chart confirmations.

Depending upon what we find, we may swap the index shorts for specific names . . .

-Barry Ritholtz
December 1, 2006

Category: RR&A

Consume!

Category: Consumer Spending, Economy

Buh-Bye Goldilocks

Category: Data Analysis, Economy

Blog Spotlight: Mish’s Global Economic Trend Analysis

Another edition of our new series:  Blog Spotlight.

We put together a short list of excellent but somewhat overlooked
blog that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
around 7pm.

Second up in our Blogger Spotlight:  Michael Shedlock and Mish’s Global Economic Trend Analysis.
Mike is one of the editors of The Survival Report, covering stocks and
the economy. He also writes for the Daily Reckoning, and co-edits
Whiskey & Gunpowder. He also runs stock boards on the Motley Fool,
Silicon Investor, and TheMarketTraders. He is an avid photographer,
when not writing about stocks or the economy, with over 80 magazine and
book covers to his credit.

Mish_geta

 

A Mortgage Broker’s Synopsis

The following post is an email from Michael J. Dorff, a mortgage broker with Trans World Financial about the state of affairs in Orange County California. Monday evening I will have an update from Mike Morgan to share:

Read More

Category: Blog Spotlight

Retailers’ Massive Discounting

Category: Consumer Spending, Economy, Retail

Blaming Soft Retail on all the Wrong Things

Category: Consumer Spending, Data Analysis, Earnings, Retail

Oil!

Category: Commodities, Energy

Blogger’s Take: Holiday Retail Sales

Category: Blog Spotlight, Retail

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Econ Blog Traffic

Category: Weblogs