Back from the Islands

Just back from a week in Aruba! It's been a long time since I took an entire week off (I think about 4 years), and I'm amazed at how recharged I feel after not thinking about work (or any of my side projects) for an entire week.

On to the money... I hit one of my target stops on AAPL today. I had thought about upping the target from 199.00 to something higher, but didn't bother with it since I was still in vacation mode. None the less, it ended up being quite a good trade.

I am very bearish on the equities market right now. Here are two charts of the SPY and my the reasoning for my hesitation.

10 Year - Weekly

and 2 Year Daily





Since the peak in the SPY on October 11th, we've hit two lower peaks (highs)which can be seen on both charts Oct 30th, December 11th. From a chartist perspective, not a good thing. On the bright side we haven't testing the November 26th low since the last peak on December 11th. Also on the bright side looking at the long term we still haven't gone much above March 2000 levels for the S&P 500

However, I am holding some credence to all of the doom and gloom in the media over the last 6 months. The housing market is terrible and there is a liquidity problem. In many of the stocks that I follow growth seems to have slowed, and many are projecting weaker growth projections in 08. The weakening US dollar, while making the US more competitive overseas, is also weakening the demand US dollar securities. I don't think we have seen the end of the housing market troubles or the end of the US dollar declines yet. On top of that the US debt is over 9 Trillion dollars, and with all that outstanding debt, then who would want to borrow from the US Treasury, so the Treasury has to raise rates which leads to less economic growth. However this is not what is happening, the Fed has been lowering rates...potentially just stalling an eventual economic collapse or at the very least some very serious inflationary problems.

Okay, so maybe my macro analysis isn't the greatest, but I think there is feeling by investors, traders, and the media that we are already in (or soon to be in) a recession. So with that knowledge in hand, I see two potential patterns developing on the chart.

Looking at the daily chart a triangle pattern is developing over the last month. If this pattern continues, we will hit a price convergence around 148 and then we will breakout to either the positive or negative. My vote would be to the negative down to the 137-138 level.

The other possibility I see through my bearish binoculars is a holding pattern where we bounce between 141-142 level and the 153-154 levels. That is a very large range so we may see something that looks like a downward trend in that range maybe going lower.

The equity markets have been in quite a bit of volatility since this summer, and I see it continuing at least into Feb-Mar of 08. I think my next trade may be to short the SPY around the 151 level (and then again at the 153 level if it gets there), while holding some tight stops in case I'm wrong.