August12011

Real Estate REITs … A double dip will crush them

I made a list of the ones that look the best to me from the short side: all REITs

 

This is based on:

Large market cap (options available),

High forward price/earnings ratio; the higher the better, but over 30 min

Elevated debt/equity ratio, preferably > 1.25

Reasonable short float right now – I don’t want to short something that’s already heavily shorted (8% of short is my cutoff)

Charts that look questionable (either they are sky high in need of breather or they are breaking down)

 IYR - Real Estate ETF: IYR

These are the ones I think look the best from my scans:

 

1.       SPG – Simon Property (already short, commercial retail) $35.4B, forward P/E 41, Debt/Equity: 3.59; low cash; short float  4.5% (con: super strong though..great relative strength on the weekly chart, bearish rising wedge on daily chart)

2.       EQR – Equity Residential Props (residential) $18.6B, P/E 62; D/E: 1.83; short float 4.6% // good relative strength lately

3.       BXP – Boston Properties (office); $15.6B, P/E 48; D/E: 1.69; short float kind of high 7.4% // con: good relative strength on weekly

4.       ESS – Essex Property Trust (residential) $4.6B, P/E:95, D/E: 2.0, Short 6.8% // con: good relative strength on weekly

5.       HST – Host Hotels & Resorts (hotel) $11B, P/E: 396, D/E 0.89; Short float: 6.4% // weak relative strength

6.       CPT – Camden Property (residential) $4.7B, P/E: 80, D/E: 1.48, short 2.5% // new all time recent highs

7.       HR – Healthcare Realty (heatlh) $1.4B, P/E 89; D/E: 1.43, short 5.9% // serious dog

8.       OFC – Corporate Office Props (office) $2.2B, P/E: 36; D/E: 2.0, short 4.8% // rolling over, looks bad

9.       KRC – Kilroy Realty (office) $2.3B, P/E: 104, D/E: 1.36, short 7.4% // dog

10.   O – Realty Income (retail) $4.2B, P/E: 27, D/E: 0.76, short 6.7% // supper strong since crash, weak lately

 

Click on the hyperlinks above to see the chart. So maybe you have some feedback on these but these are the ones that look good to me – ordered by what looks most lucrative if the economy goes into a double dip.  My top #4 ideas are really strong on the weekly charts, which could be bad, but they are also considerably overbought right now. 

July172011

Gold stocks were a leading indicator of disinflationary forces that culminated in the 2008 commodities/stock market crash.  Gold stocks badly underperformed gold itself before the financial/banking collapse.  A large bearish head and shoulders appeared with the right shoulder peaking in July 2008. It was a foreshadow of the carnage to come in the broader market and commodities in particular.  Again, we have a h&s that is developing here in 2011. At the same time, gold stocks are poorly underperforming gold itself and now are at one of the lowest levels relative to their underlying in decades — not withstanding the shock lows in late 2008.  This is a bearish development for the risk on trading strategies and should be pause for concern.  Gold stocks are either badly mispriced or they are indicating some serious trouble in world markets ahead. 
March12011

3 differt looks at WTIC + and its price in Yen.
December282010
Sabre’s Gold Market Reflections A couple of conclusions I have drawn for the year. Look at the attached chart.  We have Rydex fund flows fairly up to date for the past several years. Here’s something I think is worth mentioning. 11% of The Rydex PM fund is FCX. That has skewed assets in the fund dramatically. So, here is what we can conclude. Based on Charles Bidermann over at Trim Tabs the US Government is the only buyer of US stocks. We have known this to be true for some time but Charles details it all quite well in his latest interview by effectively telling his critics “I was right a year ago when I concluded the government was the buyer.” Insider selling is unprecedented, outflows will reach 100B now in a 33 week time period. Hedge funds have seen outflows as well. so a rising stock market is impossible without government sponsored bank interference. That means that based on government buying of US stocks and Rydex, there is exactly zero buying of precious metal stocks. I would conclude the only way these stocks have remained bid at all throughout this is two fold, Canadian buying or SPX future arbitrage. (Eliminate FCX from Rydex and fund assets would be near historical lows). It is very clear based on the chart of FCX that the US government is buying it, while not a dime has gone into Newmont. Stocks do not inexorably rise on 45 degree angles with zero corrections in sectors like HG, but FCX has and continues to do so(the picture is being painted that copper is showing a recovery). This is further augmented by the fact that gold stocks have dramatic corrections every few weeks while there is virtually no volatility in the general market. The general market is well bid, gold stocks are not (9 corrections of 8% or more this year). I would explain the rise in silver stocks quite differently. I believe that silver stocks are a very small asset class but that the silver market is completely cornered. The action in stocks like HL bears no resemblance to that of the gold stocks. They are rocks up here and not just because they are making lots of money, so are the golds, but they are never well bid. The silver metal market is in all likelihood gone for a very long time and they only way to garner supply is thru the stocks themselves.  So how will the gold stocks rally? I do not believe you will see a large rise in gold stocks until the gold market is ostensibly cornered. For example, I have not seen anyone discuss supply at all. The IMF supplied 400tonnes last year, now what? The Washington Agreement 400 tonnes before that every year for a decade. Now what? There probably aren’t 1000 people on planet earth that can tell you what the gold market is today. These are some serious state secrets that will eventually fall like dominoes. So, when the market becomes tighter, it is then I believe you will see the shares rise but it will not be retail in our lifetimes, as retail has no money. Either large banks or a sovereign will IMO step up and outright acquire a miner and then we will get a glimpse into reality. Lastly, for whatever reason, gold stock CEOs are either oblivious or have gag orders. It is inexplicable the lack of information coming out of these people and much like the US Congress, they simply do not react well to criticism. So what to do? Can it go on forever? Until the tightly controlled GDX:GLD ratio breaks out the answer is yes, but like all massive manipulations, sooner or later they blow up. Inevitably someone breaks ranks and the game will be afoot. That is what I am looking for in 2011. Merry Xmas and Happy New Year Editor’s Note: Here is a long term chart of the $XAU/$GOLD ratio overlayed with long term interest rates: Gold Stock / Gold Ratio - Monthly

Sabre’s Gold Market Reflections

A couple of conclusions I have drawn for the year.

Look at the attached chart.  We have Rydex fund flows fairly up to date for the past several years. Here’s something I think is worth mentioning.

11% of The Rydex PM fund is FCX. That has skewed assets in the fund dramatically. So, here is what we can conclude. Based on Charles Bidermann over at Trim Tabs the US Government is the only buyer of US stocks. We have known this to be true for some time but Charles details it all quite well in his latest interview by effectively telling his critics “I was right a year ago when I concluded the government was the buyer.” Insider selling is unprecedented, outflows will reach 100B now in a 33 week time period. Hedge funds have seen outflows as well. so a rising stock market is impossible without government sponsored bank interference.

That means that based on government buying of US stocks and Rydex, there is exactly zero buying of precious metal stocks. I would conclude the only way these stocks have remained bid at all throughout this is two fold, Canadian buying or SPX future arbitrage. (Eliminate FCX from Rydex and fund assets would be near historical lows).

It is very clear based on the chart of FCX that the US government is buying it, while not a dime has gone into Newmont. Stocks do not inexorably rise on 45 degree angles with zero corrections in sectors like HG, but FCX has and continues to do so(the picture is being painted that copper is showing a recovery). This is further augmented by the fact that gold stocks have dramatic corrections every few weeks while there is virtually no volatility in the general market. The general market is well bid, gold stocks are not (9 corrections of 8% or more this year).

I would explain the rise in silver stocks quite differently. I believe that silver stocks are a very small asset class but that the silver market is completely cornered. The action in stocks like HL bears no resemblance to that of the gold stocks. They are rocks up here and not just because they are making lots of money, so are the golds, but they are never well bid. The silver metal market is in all likelihood gone for a very long time and they only way to garner supply is thru the stocks themselves. 

So how will the gold stocks rally? I do not believe you will see a large rise in gold stocks until the gold market is ostensibly cornered. For example, I have not seen anyone discuss supply at all. The IMF supplied 400tonnes last year, now what? The Washington Agreement 400 tonnes before that every year for a decade. Now what? There probably aren’t 1000 people on planet earth that can tell you what the gold market is today. These are some serious state secrets that will eventually fall like dominoes. So, when the market becomes tighter, it is then I believe you will see the shares rise but it will not be retail in our lifetimes, as retail has no money. Either large banks or a sovereign will IMO step up and outright acquire a miner and then we will get a glimpse into reality.

Lastly, for whatever reason, gold stock CEOs are either oblivious or have gag orders. It is inexplicable the lack of information coming out of these people and much like the US Congress, they simply do not react well to criticism.

So what to do? Can it go on forever? Until the tightly controlled GDX:GLD ratio breaks out the answer is yes, but like all massive manipulations, sooner or later they blow up. Inevitably someone breaks ranks and the game will be afoot. That is what I am looking for in 2011.

Merry Xmas and Happy New Year

Editor’s Note: Here is a long term chart of the $XAU/$GOLD ratio overlayed with long term interest rates: Gold Stock / Gold Ratio - Monthly
November222010

Interactive Brokers OX - It’s Just How the System Works

Today I was clipped approximately $30K between two equities which I was assigned large, in the money, call positions which I didn’t have the available cash on hand to cover the new positions. Close to $2,000,000 of stock was assigned to me which I was forced to liquidate both positions within 10 minutes of the open. I even called IBKR 30min prior to the open to make sure I was really in the Twilight Zone.  It’s hard for me to understand how an $880 market value option position at the close on Friday could be parlayed into $1,900,000 stock liability which I could not meet. This happened on EGO and you can see my 110K share position liquidated today at 11 min after the open. 

I wasn’t aware this could happen in a non-marginable account. I have been down this road with two other brokers [OX potential assignment] more than 50 times and such a scenario in their risk management systems would never be possible, but this is “just how the system works” according to Interactive Brokers representatives whom I spoke to today.  Other brokers would have forced the postions closed before OX on friday’s close and my account would have been credited for $880 in cash.

So, if this is “how the system works”, I’ve come up with a potential earnings play which, to the best of my knowledge, is totally possible that I would like to share for demonstration purposes with readers since this is just “how the system works.”

Lets take a stock that releases earnings Monday morning the first trading day after options expiration (OX). For example, Citi Trends (CTRN) reported earnings today and really popped: http://bit.ly/hsbgWK

For discussion purposes, let’s assume that CTRN was pinned near the 20 strike on OX last Friday.  Let’s also assume it closed, like my situation, just a few pennies in the money at the close on Friday at $20.04.

So, near the close last Friday, it’s theoretically possible that we could have bought many thousand CTRN 20 call options for just pennies. The following day on Saturday, the stock would have been assigned to me — even though my non-marginable account didn’t have enough cash on hand to cover this purchase.

So let’s assume we had $10,000 (all cash) in the account. We decided to buy 150 CTRN 20 Nov call options for sake of discussion near the close on Friday for an average cost of $0.10/share- this would cost of $1,500 for the 150 CTRN Nov 20 calls [$0.10 x 100 sh/contract x 150].  1 contract represents an option to purchase 100 shares of CTRN for $20/share.

Theoretically we could purchase 100,000 call options at this strike expiring Saturday with the $10K, but IB supposedly does have controls in place to make sure this doesn’t get totally out of hand. Specifically, your account deficit can not run more then 30x the liquidation value of the account ($10,000 x 30 = $300,000).  It doesn’t really matter if we had bought 150 calls or 100,000 - either way the leverage is mind boggling, but we’ll go with the 150 calls for $1,500.

After OX on Saturday we would be assigned 150 calls x 100 shares/contract = 15,000 shares of Citi for a cost of $20/share or $300,000 in our non-marginable account with available cash on hand of $8,500.  So the account would run a whopping margin deficit of $291,500!! [still under the 30x threshold & remember this is a non-margin account]

What this means is Interactive Brokers (IB) would force you to liquidate your new position within the first 10 mins on Monday.  Monday, CTRN reports earnings and blows it out!  The stock gaps up 12.5% to $22.50 from its closing price of $20.04 on Friday. We liquidate our position on the open and capture approximately $2.50/share or a nice $37,500 on our $1,500 position.  Not bad!

The flip side of this is what happens if the stock is totally illiquid and you are forced to liquidate into a vacuum of no buyers.  Or worse yet, CTRN blows it and the stock gaps down 10% on the open.  What happens then?  If CTRN had opened at $18/share (down 10%), the non-marginable account would have a loss of $30,000 on the $1,500 assigned call position.  So you would need to come up with another $20,000 to cover your losses.  This is how the system works as best as I can tell.  Bear in mind I am NOT writing options — I purchased calls and should be limited to my principle outlay for the calls - in other words, the most you should be able to lose is $1500.

The example of was done using an IB account with modest balance of $10K. If you’re playing with a larger pot — let’s say $1M and you’re caught up in situation like this, you could stand to lose or gain an enormous amount of money. It may even bankrupt you for not knowing the “functionality” of their system. Bottom line is that I think this is TOTAL BULLSHIT and I’m pissed that it cost me nearly $30K to figure out how this functionality “works” as per two IB representatives so I’m exposing it in hopes others won’t fall unknowingly into this trap which should have never been allowed to happen in the first place.

Xiphos

October202010

The Curiosity that is the Gold Stock Sector

For the past several years, the biggest mystery for followers of gold is and continues to be the abject performance of those companies that mine the metal. Mid-October 2010 sees gold at an all-time high and silver at a 30 year high. Yet, how many of the large and mid-tier precious metal miners are hitting record highs? Almost none!

So, this week we started making some calls to the miners themselves to search for explanations. The answers we received were useless. Investor relations personnel are not traders. They have no idea how the market trades today and that’s too bad. The share price is their currency and unless you’re a Central Banker, most CEOs want their share price higher. Nevertheless, we remained undeterred and started to search for answers.

Let’s go to analyst estimates:

Earnings Estimates Table (click on link)

As the table above shows, Wall St is no fan of this sector. There is simply no way that “analysts” can possibly be this stupid. The price of gold (POG) and the price of silver (POS) have had massive moves the past 90 days but the analysts have remained silent. This is undeniably deliberate on their part. Why?  I have no idea but if you look at FCX, which is now primarily copper, they have had a huge run up in estimates.

In discussing this with management of a few companies listed above, there is never a logical explanation given.  Also, why exactly have these companies remained silent during this quarter?  How about raising guidance?  I have begged them to do so but can find not a solitary example of a miner raising estimates this quarter.

What is happening here in this sector is completely unacceptable. One is left to wonder whose side management is on, that of the banks or their shareholders.

Sabregold

====================================================

Xiphos Note: I’m tired of this BULLSHIT. The CEOs of these companies are either some of the most incompetent rock heads or they are bought off.  I say CEOs should HALT THE TRADING in these stocks and examine who owns what and all the trades over the last 30 days made completely public for all to analyze. I will dig through this tape and tell you WTF is going on and I suspect several illegal manipulations are there begging for class action lawsuits.  Where do I sign up?  Hands down the most manipulated sector on the planet as we’ve said time and again. We need to organize something against these clowns. 

October162010

Google Earnings: Bagging the Big Trophy Buck [1040% Return]

Google reported blow out earnings after the bell Thursday.  This, coupled with Friday’s monthly options expiration, was the perfect catalyst for an explosion in Google’s call premiums expiring on Friday’s close.  No one has a crystal ball - myself included.  Lately, as you can imagine, I’ve received questions surrounding what compelled me to get long out of the money Google calls [GOOG 570 Oct strike] in front of earnings.

Twitter is a great community for finding like-minded individuals. We’ve made lots of friends in this new community based upon sharing and have had the opportunity to look over the shoulders of some excellent professional traders - learning from them.  Twitter is full of great trading ideas, opinions and also some pretty lousy or confusing ones too. What’s most important is who you follow - who you choose to listen to.  Often, less stream information, I find, is many degrees more useful.

I can’t take credit for hatching this Google trade.  It came to me via Robert Lang (http://twitter.com/aztecs99) who reached out to me privately Sunday to share this potential Google setup in front of earnings.  We discussed it at length and decided it had great potential (and great risk too).  Many props go to Bob for his repeated astute insight…these are the trades that, as an option trader, we dream about and relish years later.  Bob said it best in email last weekend:

“Ok, we know how legends are made, right?  Stepping out on the edge and making the call and putting $$$ on the line…getting it right.  Ok, I have had my share of these and many BAD calls, too.  However, when I find something very compelling I go for it.  I don’t know the future but I know when setups are there for a good payoff.  Thing is, the big payoffs need to be ‘prepared for’ you cannot get done if you’re late or hesitate.  So, I’m looking at Google this week.  Earnings on Thurs after the close, day before expiration.  I‘ll either hit it big or not…but I know precisely my risk”.

So the plan was ‘hatched’ and the hunt had begun.  What I hoped for was a big Google take down in front of earnings so that I could get long upside out of the money calls on weakness.  As I stalked Google all week, pullbacks were almost non-existent.  I could find this monster buck’s trail, but it remained elusive for days. I knew the NASDAQ 100 was close to taking out April’s highs and wanted in on the Google play.

I started off buying a few calls on weakness Tuesday to establish a position.  Then I waited patiently for more weakness.  It was not until Thursday afternoon that I started to add to the position [GOOG OCT 570 calls] on broad market weakness in front of Google’s earnings that afternoon. Time was running out and premiums were coming out of calls fast.

During the Thursday afternoon take down I posted that I was long the calls in front of earnings and provided its weekly chart:

http://twitter.com/Xiphos_Trading/status/27368646417 

I had shared this weekly chart with 3 trusted option professionals earlier in the week and oddly enough had received the same response from each one. Basically, I was asked why the Google weekly chart?  Who cares about it; what’s important with a few days left is how the daily chart looks.  Well, the daily chart was irrelevant to me. What mattered most was the bullish expanding wedge on the weekly chart and how we were parked just under this critical resistance.  I figured that if Google surprised to the upside, it would be just the catalyst to really pop the stock based upon the weekly technicals and OpEx on Friday.  The rest is history.

Below are the screen grabs for the 30 calls purchased in this particular account:

Tuesday’s initial position buy

Thursday’s buys into weakness

Of important note is the last purchase on Thursday with less then one minute until the close [see the Oct 14 13:59:11 time stamp]. You will see 5 calls were filled at 1.85/contract 50 seconds before close as Google was screaming much higher. I purposely put in low ball limit orders in 2 separate accounts just in case the big option fish decided to run the Google option stops right before the close to shake out the weak hands that use automated sell stops.  It worked perfectly for both of us!

So the total cash outlay for this 30 call position in this acount was $7,333 excluding trade commissions.  A considerable risk I took for a one day trade that could have easily gone completely bust. I could have just as easily lost the entire premium I had put up - but not more than that.  This was the risk that I was fully aware of.

So we know what happened, Google blew it out and opened gap up around 600 - a 60 point move up from the previous day’s close.  So, how did I decide to trade my position Friday? 

The first thing I attempted to do on the opening Friday morning was sell short an equal number of units of GOOG OCT 600 calls to take advantage of the premium spike (+1,500% when Google opened!) and lock in most of my profits. Unfortunately, I was prevented from doing this by my broker - Interactive Brokers - which rejected my market sell order 30 seconds after the open.  This happens more than you expect on trades like this and it cost me approximately 400% additional return, but that’s how the game is played.

Instead, I quickly realized that the only option I really had was to start liquidating my GOOG 570 call position.  When I started doing this manually around 07:32:43 (see below) the premiums were plummeting and I knew I had been had, but it was all good. After a few minutes of being shut out, IB mysteriously allowed me to begin selling the GOOG 590 call short to create a the other side of my call spread now that the premiums had dropped several hundred percent.  I started doing this to protect myself and try to lock in profits without having to liquidate the whole GOOG 570 position and possibly miss more upside later in the day.

You will see my trades were not close to perfect if you examine them below in detail. You’ll see me trading first out of some 570s, then into 590 hedge, then out of 590s as Google began to climb, then completely closed out the 570s before the bell.

Friday Google call trades are here.

Lastly there is the position squaring and P&L statement for all of the trades above that can be found here: GOOG 570 / 590 call spread profit.

So total capital outlay was $7,333 — total profit was $76,301 for a net return of 1,040% excluding trade commissions.  So this is the post mortem of how I - with the critical help of my close trading gang, bagged the big bucks.

We seldom provide this level of transparency into our trades. You will notice there were lots of trades made for these two option positions. Our book can and often does have 25-50 positional option trades at any one point in time (spreads, hedges, speculative positions, etc.). It’s simply not feasible to provide this level of transparency given the types of trades were are involved with. 

All the best to Everyone,

Xiphos Trading

October102010

Abbreviations We Commonly Use

WIP post… If you have any suggestions of terms that we use that should be included on this page please let us know at: XiphosInquiries@comcast.net

BO / BOG - Break Out, Break Out Gap

BT - Back Test

H&S - Head & Shoulders

IMO - In My Opinion

NL - Neck line (head & shoulders)

PO - Price Objective

S/R - Support and/or Resistance

ToH - Top of the Hour: As in programs kicking off at the top of the trading hour.

UST - US Treasuries

———————————

Futures Symbols:

GC - Gold, SI - Silver, DX - US Dollar, etc.

September92010

The Clairvoyant Precious Metal Stocks

Three days ago September 7 , 2010 we saw a massive transfer of Comex Silver. 2.3M oz were taken from customer inventory into the dealer inventory.

A very strange thing happened on that day. That strange thing that so many frustrated precious metal share owners have seen more times this past decade than they care to think about. The shares started to get sold in the face of resilient metal prices. 

It is very clear on the charts that stocks like NEM were being shorted aggressively in anticipation of leased metal being carpet bombed on the Comex. September 7th the attack started and it gathered more steam after a strong open on September 8th and then on September 9th, down the stocks went,in the midst of a very strong gap in the SPX.

Halfway through the attack, the metal hit the Comex and down the metals went, like so many times before.

I have stated more times than I can count these past ten years that it is a pure case of manipulation and theft that these shares are shorted with impunity and the sellers are always rewarded by the underlying which ultimately follows downward in a waterfall.

But, with all crimes in markets, there is a paper trail and the paper trail is clear. It is leased metal, that the big banks know will hit the market that are the culprits and if there is one thing we have learned the past several years. The authorities will do nothing about it…until it is too late.

Sabre

August262010

TECHNICAL REASONS FOR SPX 1010 SUPPORT

There are several compelling reasons why 1010 keeps popping up as an area of critical support. The first chart shows a simple H&S top pattern that broke out with a gap Tuesday August 24th. The bears are viewing this as the right shoulder of a much larger H&S topping pattern. That could very well be the case but there is other technical evidence that shows we are probably entering a very large trading range in my opinion. The first chart of the small H&S top pattern measures out to 1010 right where our previous low found support. Read further to find out why SPX 1010 comes into play on so many different levels.

$SPX Daily - Trading Range

The next chart is the weekly showing several more reasons why 1010 is such a critical support zone. First, lets look at the Fibonacci 38% retrace off the March 2009 crash low, (red arrows). Again, the 1010 level comes into play as the first line of support. Next is the 88 week moving average (wma) which works beautiful on the SPX for support and resistance. It has just recently turned up after the 2008 - 2009 crash low and started rising - suggesting strong underlying support. As of Tuesday Aug 24th it was at 1012 again very close to our 1010 support zone. As you can see it is still on a buy signal and will stay that way until the 30 wma crosses over the 88 wma to the downside.  There have only been a handful of these crosses since 2000 so this buy signal is very important to me.

$SPX Weekly Chart #1

 The next chart below may look a bit busy but its really not. It focuses on two sets of Fibonacci retracements. The black fib lines start with the bull market top in 2007 and measures down to the March crash lows, black arrows. As you can see the high off the March 2009 low was a 61.8% retrace giving us the top of our current trading range. This is where it gets interesting. The red arrows measures our current correction off the March 2009 low to the top in April of this year. The 38% retrace takes us down to the 1010 area where we have a double Fibonacci 61.8% retrace off the 2007 high and our April 38% retrace high both coming in at the 1010 area red and black arrows. I’m viewing this area as the bottom of the trading range. Now look up to the 1228 where the red and black arrows are. Again you can see a double fib rail that will act as resistance and the top of the trading range. So the bottom and top red and black arrows maps out our trading range for probably many months to come.

$SPX Weekly Chart #2

I would now like to go back to the previous chart ($SPX Weekly Chart #1) and show why I believe we are in a big trading range and the possible outcome of this trading range. First, this trading range is still immature yet as we are only working on the 2nd reversal point so far. In order for this trading range to be a consolidation pattern we will have to have at least 4 reversal points defined by the top resistance rail and bottom support. It is unknowable at this time if the trading range will be a rectangle or a triangle or some other type of consolidation pattern.

What I think we are forming is a halfway consolidation pattern within the 10 year flat top trading range. The red arrows on the chart measures our current trading range or consolidation pattern as a halfway pattern that will eventually take us back up to the old highs around 1565 or so. This is very similar action that happened  back in the 70’s secular bear market. After reaching the secular bear market low in 1974 the Dow rallied all the way back up to the 1000 area that was very stiff resistance for that secular bear market. I believe the Dow actually made a small new all time (nominal) high at 1051 if memory serves me and then meandered all the back down into the huge trading range never to go lower than the 1974 low that showed up right in the middle of the secular bear market. I believe our crash low in March 2009 marked the low and mid point for our current secular bear market - in time and price - similar to the 1974 low for the 1966 to 1982 secular bear market.

The next chart is a monthly chart that puts everything into perspective. It shows our secular bear market taking place within the big flat top triangle consolidation pattern. The little red rectangle on the far right shows our new trading range we have been discussing. Bottom line is we are just starting the consolidation process that will probably take quite sometime to complete. It looks like a traders market for those so inclined.
                        
$SPX Monthly Chart

One last chart to show how the 2002 to 2007 bull market unfolded using the Dow. The halfway pattern in that bull market took the shape of a bullish rising wedge formation that lasted 2 1/2 years before it broke out to the upside marking the high for that cyclical bull market.  To the far right you will see the proposed blue horizontal trading range.

$INDU - Weekly 2002-2007 cyclical bull market

All the best…..Rambus

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