Jack In The Squawk Box
Another day,
another earnings shortfall or two from multi-national conglomerates
citing a weak U.S. economy, overseas economies and the
strength of the U.S. dollar. After Minnesota Mining and
Manufacturing
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PowerRating) launched its second quarter earnings Scud
missile early this morning, the nay-sayers bravely rallied the 392
million share behemoth $8 from its lows of the session. Tonight,
DuPont
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At this rate, bulls will consider any gap down a gift to go long
DD. We won’t discuss why this psychology just paves the way for
a more brutal collapse down the line–we’ll save that for another
day.Â
The newly emboldened bulls (see VIX levels for verification) took this
mornings NAPM and consumer spending numbers and massaged them into yet
more newly found evidence that the economy has bottomed and the worst
is over. In fact, for those of you who enjoy watching CNBC pre-market
to put together a good list of short-sell candidates for the day, Jack
Baroudjian of Commerce Futures is the new “everything is a buying
opportunity” go-to guy. Good old Jack just can’t control his
excitement when interviewed each trading day, particularly on days
when economic data is released and bubblevision goes live to the
futures trading pit for the “live trader’s reaction.”Â
In fact, Jack “Da Bull” Baroudjian today told us that the
“big news” that “all the traders were talking about
over the weekend” was the Microsoft ruling that would most
definitely provide the psychological lift to the market that the
Nasdaq so desperately has been waiting for. Jack went on to tell
us that the reason for the Nasdaq drop last year was the uncertainty
that the Microsoft trial held for the tech sector, and now that the
uncertainty was lifted, tech stocks were given the “all systems
go” for a re-launch. What ground-breaking analysis. What
brilliant logic. Fascinatingly, all this excitement and “talk
over the weekend by traders” resulted in a 3 1/2% or $2.40
decline in Microsoft stock today. Poor, poor Jack…I’m sure he had
the noblest intentions but just took leave of his senses for a
bit. But hey, he gives a great interview doesn’t he?
This evening I see some great trading opportunities shaping up in the
Nasdaq index. Let’s take a look at the chart:
As you can see from the chart above, the Nasdaq might be in for a nice
decline here, and thus you should consider some short-sells. As
internet security firms
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PowerRating),
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PowerRating),
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PowerRating) and
software company
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PowerRating) were all down aftermarket following a
catastrophic earnings warning from the aforementioned ISSX, we should
probably see some selling entering the Nasdaq for the rest of this
week, with the software sector leading the decline. Focus on software
firms and semiconductor companies that have recently run up and hold
exceedingly low put/call options ratios.Â
A review of an intraday S&P 500 cash chart reveals that we are
truly at a crossroads. The index has rallied very nicely from its
double bottom on 6/26 at the 1204 level but now has formed a double
top at the 1240 level. Where to now? Interestingly, it was
the Nasdaq that pulled the other two indexes up by their bootstraps
five sessions ago and it is that same Nasdaq that looked exceedingly
weak today, and sold off hard into the end of the session. Could the
index that provided leadership up to now provide an early signal of a
sell off in the broader market?
For fun, turn your charts on tonight and take a look at the
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PowerRating),
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PowerRating), and
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PowerRating). The VXN actually punctured its lower
Bollinger Band today and is ripe for a serious bounce up–which of
course would mean the Nasdaq index would encounter selling pressure.
These charts are unsustainable in their current trend and should
revert back to their trading range shortly. Be on the lookout
for this–and don’t buy what Jack Baroudjian is selling.
Have a great night.
Goran