TODAY'S BREAKOUTS & BREAKDOWNS

You know what pisses me off the most? People who do the exact opposite of my time-consuming analysis. For example, someone who called me had the nerve to go long the material stocks today. What an idiot, and I’m not afraid to say it either. That was stupid beyond belief. He is now a “long-term” holder. I should have just hung up the phone.

When I highly not recommend something, it’s for a very good reason. Today is one of those days that make that reason reality. Who else gets on my nerves? People still hoping for that huge explosive rally. I guess they can blame it on human nature, but still, people get to a point where they have to see the reality of what’s going on right now and what the market is telling them…right now. We might get a major rally if (when) the House clears the vote, but the market just sold off after the Senate vote. It’s good to stay in all cash once things clear up. If I don’t have prior experience with an experience, then I’m not trading it. It’s like an IPO…I’ll never trade it when it first comes out.

We hit 4 new highs today and 778 new lows. The imbalance between the new highs and new lows is getting larger and larger. To confirm any type of rally, I have to see some type of improvement in the new highs-new lows indices for the NYSE and the NASDAQ. When I say there is an imbalance, this is what I mean:

So my question to the people who are hoping for that major rally is, “How on Earth are we going to rally if the NH-NL lines look like this? The Advance-Decline charts look just as bad. No trend lines needed; these chats remind me of my ski trip at Park City, Utah, more specifically, riding down the double black diamonds with some messed up looking moguls.

We had 3 breakouts today: Atmel (ATML), TreeHouse Foods (THS), and Diamond Foods (DMND). Interestingly, 2 out of three are food stocks, just like my favorite – CPB. I have no clue why they’re doing well, and I don’t care. All I need to know is if they’re the best performing stocks in the entire market. So if you want to go long, don’t do what my friend did, but rather, go for these very, very few stocks that make new 52-week highs. Stocks that are up on days like today exhibit unusual and maybe even supernatural strength. Kidding, but consider these stocks for possible long positions if you need defensive positions.

ATML is a type of swing trade; notice the wide ups and downs. ATML formed a breakaway gap to the upside today and finally has a chance of not hitting $3.20 again in the short-term.

THS formed an ascending triangle and broke out today. These are the types of stocks I would put my money in. I don’t care what the media says what some “guru” is recommending on TV or anything else. There’s only one criterion – the chart must support my decision to go long, and they do.

A similar pattern as THS above, DMND breakout to the upside while almost everything else liquefied into a huge mess. Don’t forget about CPB!

We had many, many breakdowns today. Most of these stocks lost 20% or more of its value. Even with a nice sized rally, some of these stocks are so deep in the hole, they don’t have a chance. It’ll take these stocks below a very long time to stabilize. In the meantime, feel free to short the ones that pullback to resistance, but don’t even think about going long. Here are today’s biggest losers:

TODAY'S BREAKOUTS & BREAKDOWNS

We are truly living in interesting times. We are living in the days where financial history makes big history almost every day. Take today for example. The U.S. Dollar fell 2.6%, its largest loss in seven years. Oil spiked as high as $130 a barrel, settling at $120.92 up 15.7%. And then we have our crazy equity markets that seem to move 3-5% on a daily basis. I’m surprised the VIX closed up only 5.5% today and we’re still waiting for that $700 bailout plan. The SEC added 30 more stocks on its short list, expanding its market manipulative powers. The fact that Congress and the Treasury are fighting over whether or not homeowners deserve a bailout is outrageous. Get on with it, I say!

Now that I got my rant out of the way, the metals commodities such as gold and silver were up big today (I would suspect some hedge fund(s) got squeezed to literal death). Gold closed at $904.60, up 4.6%. Overall, the commodities group saw its biggest one-day gain in commodities trading history. As I scanned the breakouts in the market, the majority came from the metals and mining industries. Here are a few:

All four gold stocks are either within a range between the 50-day MA and the 200-day MA or, in the case of Randgold Resources (GOLD), closed above both on its third gap up. I suspect that gold stocks will continue to form gaps up in the next few days until they hit their respective resistance points.

A non-metal stock that broke out today was Secure Computing (SCUR). McAfee announced that they will buy SCUR for $413 million in cash, paying $5.75 per share. If you look on the chart, the reason why the candle is so small is because the day’s range was only two cents. This is a very tight doji formation and usually in this case, the stock drifts in or around this range for quite some time. Watch for any potential breakout, signaling that the stock will surely go higher.

Fairfax Financial Holdings (FFH) was added to the short-selling ban by Canada over the weekend, so that’s one reason for the spike. The second possible driver is FFH’s announcement to make a Normal Course Issue Bid for up to 1.19 million subordinate voting shares. The maximum number of shares able to be purchased represents 10% of the float. I think the short squeeze had to do with the majority of today’s move.

We had a lot of financials fall about 10-30% today, but they did not meet my breakdown rule. Many of these financials look like they might meet my rule tomorrow. Here’s one more for today:

Federal Agricultural Mortgage (AGM) dropped 59% today after they revealed in a filing that it owned $60 million in senior debt issued by Lehman Brothers. Um…isn’t it kind of late for this announcement? Are you looking for a support level? You won’t find one here. Try a chart from 1999.

General Growth Properties (GGP) dropped 24.9% on news that the company is considering selling its properties to raise capital to meet debt obligations. As a commercial real estate investor, I can say that typically in a real estate downturn, residential real estate is the first to go and while that goes on, commercial, multi-family, office space, strip malls, and storage are next in line. Since commercial property has only begun to crack, this stock is toast. Didn’t they see this coming?

There are a lot of housing reports coming out this week including the House Price index tomorrow, Existing Home Sales and Weekly MBA Mortgage Applications on Wednesday, and New Homes Sales on Thursday. Keep an eye out for Lennar (LEN) which reports tomorrow and KB Home (KBH) which reports on Friday. Whatever the cause of the decline, Beazer Homes (BZH) broke its trend and has failed the 50-day and closed below it. It looks like BZH has a good chance of going down from here.