$FB – run amok and tumbling down…

Facebook (FB) has been able to run on its own since being founded and going public.

So what, as it turns, does the company do? It runs amok.

As the NEW YORK TIMES INVESTIGATIVE REPORT revealed this week the company has been reckless and irresponsible and instrumental in the Russian invasion of the US 2016 elections, and its executives have “delayed, denied, and deflected” criticism through the entire controversy.

We’re talking sheer greed here, capitalism as its ugliest.

But it appears its time of running unfettered is up as Congress focuses on bringing regulations to finally make it responsible for the harm it has done and to insure that it does not do it again. In the end Facebook will be better off for it…or it will be dead (hard to believe? remember MySpace?).

As a result the FB stock (see chart below) has proved once again in financial markets’ store there all always both escalators up and escalators down,

Regardless, to state the obvious, while investors may see profits evaporate in fleeting time, traders can make money on both the ups and and the downs.

(click on the chart for a larger view)

UPDATING $RACE – Ferrari heading to the pits

This is a look back.

In August there was this post:

It’s been a great run for Ferrari but its $RACE is run

In which it was said:

If this race was hill climb, RACE obviously finished in the money.

Nothing like stair-steps in an uptrend.

But, a couple of observations: 1) the stock has not had a breakdown from a boxed consolidation until recently; 2) there’s also a small head-and-shoulder top formation inside the box; 3) when leader flag it’s a warning for the general market too.

So what now? It’s short the bounces until it makes a new high, and as long as it continues breaking to the downside.

And keep in mind this could be a warning in a possible transition from bull market to bear market.

Simply put, no stock goes up forever. At least not in a trader’s world. I’m sure Warren Buffet might disagree but then he’s been investing in a century time frame.

Since August, RACE has a rally back up to 140 and has rolled over as expected. That failing rally was the opportunity for long-term investors to take profits and get out.

See the chart below which has been updated from the chart in the link.

Obviously the trend has changed to a downtrend. RACE, step by step, is now building a down staircase.

Its race run Ferrari is pulling into the pits.

(click on chart for a larger view)

#MarginDebt – the divergence that kills the bull

I been taking note of margin debt, now recorded monthly by FINRA, since last spring with the warning that it was at astronomical levels in relation to itself in 2000 and 2007.

One early post solely on margin debt this spring noted that the market was likely to make new highs while margin debt failed to the do the same (see the charts below). It is difficult to time precisely when this distribution is going to matter since it is always reported a month late. During lag, one can only speculate what it going on it with behind the scenes, so to speak.

Linked here,I called that:

Declining Margin Debt – the bullish scenario

And linked here more recently on October 1, it was suggested this may be the month when debt takes its toll:

Margin Debt – a sign of quiet desperation?

It’s been noted in posts here that even as the market moved up to new highs it appeared during the day that there was selling going on. I guessed that was big players were trying to edge off margin debt. Behind the scenes the advancing stocks were narrowing, the new lows at the bottom of the market were beginning to outpace the new highs at the top. Everywhere there were signs – wackiness was going on all over the place., marijuana stocks became the leading sector, some low priced stocks, like YECO, would go up 500 percent (in a day!); one by one bellwether stocks, FB, NFLX, TSLA, AMZN and finally even AAPL took hits; the housing stocks have been declining all year and finally banking stock have joined them.

In that October post above, I called this late stage the “most bearish bull market” I’ve seen.

But now margin debt is finally the revealed rub.

Each time the levels of margin debt in 2000 and 2007 became unsustainable, the subsequent decline led to bear markets in which the S&P 500 index declined 40% to 50% (see the charts below), and now when it drops it will be dropping from an even higher height.

Can a 40-50% bear market happen again? You can bet half your portfolio on it.

Once margin debt begins to unravel, it will feed on itself — when the margin calls come, it is either put up more money or sell the stock. Selling the stock drives it lower and brings more margin calls. Nothing else will matter, not fundamentals, not news, not hopes, not dreams.

Why is this important? Depends on one’s age. When it happens, it will take years and years – five years? eight years? 13 years? – to recover the prices the indexes are at right now.

It appears, now that we can see the new high in the market and the fact the margin debt did not follow, that process has begun behind the scenes, so to speak.

Of course big bull markets can fool (see 2016 in this one on the charts below), and might try soon since the market is currently deeply oversold and the Christmas season is traditionally bullish, but it can’t fool history forever. History is the best indicator of the fear-greed-time market psychology there is since it repeats and rhymes all through time. In the end history will tell.

(click on the charts for a larger view)

$LVS $WYNN – “No one knows how to bankrupt casinos like I do.”

I made up the quote in the headline on this post but I’d bet the first thought of everyone — EVERYONE — who read it was Donald Trump said that?!

He might as well have (maybe he has sometime in his daily incoherence). Before he got into the money laundering business with the Russian Oligarchs, he owned casinos in Atlantic City. They all went broke.

He doesn’t own any gambling palaces anymore but it appears as President he’d like to help bankrupt those of his friends as well, like a hobby on the side. Both Sheldon Adelson and Steve Wynn are big Trump supports. Or at least they have been. Looking at what’s happening to the shares of their companies, one wonders if they still are. If they are, what’s the matter with them?

This probably has to do with the way Trump has managed to get the Chinese to quit playing games of chance but who knows? Maybe it’s just his “golden touch” in casinos is contagious? Or maybe, a more obviously, it might be, as much as fools wants to tout the supposed merits of a businessman in the White House, every fool needs to remember the last one was Herbert Hoover.

The worst is likely not over for LVS and WYNN, and the down staircases like these here (see the charts below) are likely going to get built soon in a lot of other stocks, and a lot of market sectors (even now take a glance at housing stocks and bank stocks and place bets).

(click on the charts for a larger view)

$LVS and $WYNN – winning on the losing gambling stocks

The big tumble in the gambling stocks is probably another fall out (fall down?) from the Trump trade war with China.

Who woulda thunk the Chinese would quit the gaming tables in Macao, where both LVS and WYNN have major casinos, over a little tariff tiff?

Then again, this might be Steve Wynn, at WYNN, shuffling off the world stage in a Me-Too shadow, or maybe Sheldon Adelson, at LVS and one of Trump’s biggest campaign contributors, getting a mega-dose of whatever…

As they say, you never know how the chips are going to fall.

Actually, you can know.

Take those rectangles on the LVS and WYNN at the top of the charts below…Those are Darvas Boxes, pioneered by Nicolas Darvas years ago. Play with those enough by drawing boxes around price consolidations and taking the trade as it either comes out of the top or in the cast of these two out of the bottom of the box, and then add in a moving average to mark the path of least resistance and one can be up 23% since summer in LVS and 35% in WYNN by being short the downs in those stocks.

There is also a lot of simplicity in the gamble that is the stock-market game.

Also, take note these leaders in the gaming sector also show even in a raging bull market, there’s always a bear market somewhere.

So what now? More to come. There are no signs these two stocks are finished with their fall, and they will have to base, going sideways, for a long time across some bottom before they can recovers and have any chance of racking up winnings on the long side again.

(click on the chart for a larger view)

Bitcoin and its buddies on the blockchain

If ever there was a bubble that was obvious it was Bitcoin and its buddies – the other cryptocurrencies and finally the blockchain stock mania that lasted what…a week or so?

Every time someone would pump Bitcoin or whatever other Oreocoin someone dreamed up the night before last, I’d ask “Can you buy a snickers bar with that?” I suppose you can somewhere but I’ve yet to find anyone who has.

I thought this pseudo money would crash when it was reported that New Orleans lap dancers were having bar codes tattooed onto their breasts to be able to accept crypto-scans as tips.

Then along came the blockchain stocks (see the wild charts below), which is to say companies like Kodak (KODK) changing its name and tripling overnight, or Riot Blockchain (RIOT) which looked as if it was the brain child of two or three guys smoking weed in Colorado who became multi-millionaires almost as a drugged-out joke. Everyone tells me cryptos may go bye-bye but blockchain technology, stringing together each and every financial transaction, is here to stay. Of course, a million computers all over world grabbing and archiving when someone (say, in Latvia) finally gets to buy a snickers with a Bitcoin.

How much electricity goes into that single candy bar?

And of course, as history would have it (always), the obvious became utterly obvious when it all finally crashed.

These is just a nutty time, typical end-of-a-bull-market craziness. Keep that “end-of” in mind. It takes a while and it’s virtually impossible to pick a market top of significance but bit by bit the history of how it happens keeps showing up. AAPL hit a $1trillon market cap probably because the company has enough cash on hand to buy that prize for itself. Then AMZN hit $1trillion too – for one day.

One of these bellwether stocks — AAPL, AMZN, FB, good heavens GS –is going to take a tumble that matters and actually follow through to the downside while no one is really paying attention.

When that happens a bear will be here. Maybe tomorrow. Or maybe today.

(click on the chart panel for a larger view)

An $AMZN trade that was a coulda, shoulda, but not a woulda…

Shared the chart below of AMZN around the internet after the close last night with the suggestion that this was an obvious setup to buy puts or sell calls.

It was prompted by this post here yesterday:

$AMZN – a leader stumbles?

The idea was that the stock would continue its stumble today (and maybe for a week or so). See the blue boxes marking the spots on the chart when that has happened before as it comes off overbought (the yellow color coding on the chart).

Since long-term breadth had just turned down after a long run up and everything in the market was pretty much overbought, it was likely there would also be market pressure on the stock besides it being overextended on its own. Then there was that history thing in play again – the best indicator of all since it repeats or rhymes or whatever but it mostly whispers what’s going to happen next again and again.

It was a trade for today’s open. The most aggressive and least expensive entry would be an in-or-at-or-just-out-of-the-money put expiring Friday.

I coulda and probably shouda but I did not trade this. In general I don’t like stock options, don’t like the spreads, don’t like the lack of liquidity when it’s time to close it out, don’t like the complications (all those Greeks and spread strategies). I like my options trading plain and simple – it either goes up or it goes down, it is either a call or a put. I trade SPY options.

I threw this out there last night for entertainment purposes primarily, and, as it turned out, it turned out to be quite instructive for anyone who does like stock options. To each his or her own way to play these money games…

AMZN had a big move down (as history whispered it would). The 1995 Put, expiring Friday, from the open peaked during the day up 260% and ended the day up 161% (see the companion chart below). That’s somewhere between $26,000 and $16,000 on a small $$10K capital commitment. Not bad for a day trade? This could drop more tomorrow making that put even more profitable but come on…it’s a home run with no need to risk an overnight reversal.

And besides, moves like this happen again and again, nearly everyday, somewhere in the market.

I didn’t even notice TWTR. Market-timing, options-trading bears must have made some serious money there today.

(click on the charts for a larger view)

$BID And $TIF – What do the rich folk do?

They buy stocks, and spend money on all sorts of luxuries – second, third, fourth houses, paintings, baubles, antiquities… Just about anything that can be had at auction or in blue boxes.

And when they quit… Let’s just say they pull the BID (see charts below).

As bellwethers of the future market action BID (Sotheby’s) and TIF (Tiffany’s) are always worth watching. The timing is not precise but when they are long and strong the bull market is strong also but when they fall they tend to fall ahead of time. BID particularly.

Just bringing this up since I happened to notice BID seems to have had quite a sell-off lately, and it appears TIF could follow with a lot of downside space to drop into.

Just a cautionary note to remind anyone used to bull-market stock moves that whatever goes up can also go down.

(click on the charts for a larger view)

The SEC spies a $RIOT

I look at stock of Riot Blockchain (symbol: RIOT) everyday since it somehow sorted itself into the number-one spot on my nifty-50 stock list. In the entry from December below I was mystified:

MY LAST COMMENT ON RIOT IN DECEMBER

This is the company that was in veterinary products until it changed its name from Bioptix to Riot Blockchain, not only to accidentally vault to number one on my list but also to grab onto the latest cryptocurrency/blockchain craze for itself. On the name change alone it went from from $4 to $40 in no time at all. Since then it has done nothing but decline, decline, decline. Needless to say, everything here was dicey from the start.

So it is no surprise that it was announced today that the SEC is picking up the dice and taking a look. The stock, once the leader in this shenanigan sector, is down 37% today.

In the meantime the other stocks in the sector, although following the same pattern as RIOT from the beginning, don’t seem to have noticed RIOT’s drop today (see charts below). Maybe the story is different with each of them (OSTK, formerly Overstock.Com, recently picked up an investment from none other than George Soros), or maybe they just have not focused on the implications of the SEC opening their barn doors.

Good luck, fellows. Cash in your bitcoins…if you can.

(click on the chart for a larger view)

#STOCKS – Gonna huff and puff and blow your house down…

It’s never advisable to short a sector making a straight up move in a bull market. So let’s just call this a heads-up on a sector where sometime soon heads are going to roll.

Housing stocks and housing prices have gone crazy again. Just like in…uh, 2007. History repeats here and I suppose there are those out there in major cities bidding up asking prices on the belief that it’s different this time and even if is isn’t ten years or so from now they will break even on the house they overpay for today.

But it must be noted Toll Brothers (TOL), always the leading stock in the sector, took 6.4% hit today on its earning miss and gave a blow to the rest of the sector at the same time (see the chart panel below). From a charting point of view, today left a lot of uncertainty, if not downright fright, in the sector as measured by all those bearish candle patterns in the stocks. HOV, at less than $3 a share, always get weakest fastest, but consider the doji in the sector ETF, XHB, and in the builder,DHI…

Now is this a just shot across the bow or a direct hit on the housing sector ship?

Either way, heads up! Especially investors.

And P.S. if this sector starts to sink, put a spyglass on the banks.

(click on the chart panel for a larger view)