Head and Shoulders, Part Two

This is 15, I think, head and shoulders patterns posted this week. They are in various stages of completion. EWC in particular is very incomplete. The idea is to test the efficacy of the pattern itself so I provided a number of different examples in a real time setting. (One my wonder why there are so many head and shoulders patterns at this moment in time...)

The pattern itself should not be traded before completion and you should expect several of these examples to fail altogether (going higher not lower). I view these patterns as major trend changes. Price target is 20% below the neckline.

I will be trading a number of these names and we'll check back in with them down the road. These charts posted are all weekly graphs and will take some time to complete.

What's Up Now, HUH!?

Yesterday afternoon I went through a list of probably 25 potential trades. I added to a couple existing short positions but only intiated one new position. I shorted HURN @ $58.70. Missed the open this morning but as soon as I walked in the door I covered @ $40.63. That's 30% overnight. What a gift.

Watching: Head and Shoulders

Hump Day

Seems like the more we rally the more the volume drys up. Hmm. It's a open secret that portfolio managers window dress and paint the tape at month-end and especially quarter-end. Can the buyers sustain the averages for a few more days?

The default position still works despite bumps in the road. Long precious metals, short financials and consumer services. Own metals as long as Bernanke is around. Period. That bearded skank bitch-whore is making this shit up as he goes. He's Greenspan 2.0. As I've said repeatedly YOU MUST have an insurance-sized position in precious metals at all times. It's a hedge. Just own it, just in case.

Financials are starting to look ripe again although it's somewhat demoralizing that we no longer allow institutions to fail. You have to clear the dead wood, not prop it up. Really, shorting anything here is difficult simply due to all the bailouts. As a short you go to sleep (or try) every night knowing tomorrow could bring the next bailout. There will be big money made on the short side but it's tricky as hell.

Waiting

Market went nuts to the upside again yesterday. I limited my short exposure early and saved myself a lot of pain. Then I took a nap and went kayaking.

For now, market participants are back to believing in Goldilocks and the Easter bunny. As to how long such fantasies prevail, it's hard to say. On one hand we have retail and housing stocks breaking out. Financials have stopped falling, for now. On the other hand I see a lot of juicy short set-ups. Lots of head and shoulders tops. The bear is not over.

I still think our problems are too big to bail. Is the Fed is going to monetize trillions of dollars of bad paper?

Rally Sustainable It Seems

Sifting through the entirety of my watchlist this weekend gives me the impression that this current rally has legs. It would have served me better to have come to that conclusion sooner as my bearish bias worked against me last week. Such is life. Retail in particular looks set for a potentially substantive bounce. My top market tell, the financials, have also stopped falling.

Sometimes it's hard to admit your wrong. It's taken me longer than it should to admit I'm now swimming against the tide. Having now acknowledged my poor positioning I will act decisively to preserve capital. Live to fight another day. It's important to keep in mind that my best trades are ahead of me and the number one priority is to stay in the game.

Having said all that I'm not really looking to get long. More than likely I will scale back and wait. This bear market is not going to end anytime soon.