Weekend musings

The power of the triangle

Dow daily, ending 10.21

On Thursday night, I posted this chart of the daily Dow along with a couple of lines drawn in, like so and wrote

"you'll see a symmetrical triangle developing.  And it's centered right around the 11,500 S/R line (blue line).  It's now squeezed about as far as it can go, so I'd expect it to pop either Friday or next Monday."

Well check out what indeed happened on Friday:  With all due modesty, this is probably my call of the year.  And it is about as classic a textbook example of the symmetrical triangle chart pattern as you're ever going to see.

Dow daily, ending 10/22

For five straight days the spring kept on coiling tighter and tighter as the Dow oscillated about its S/R line at 11,500 until Thursday when we ended the day with a tiny 37 point gain.  And then, right on cue, on Friday the market went boiiing!  Just look at that last green candle.  The spring let go and we got a 267 point pop.  I find this chart to be most instructive.

In fact, this one move may be the most significant thing we've seen in quite a while.  It not only finally took us above the 11,700 resistance line going back to August but did it on the highest volume since October 4th, the day of the giant hammer that marked the low of the year so far.  We'll go into the short term implications of this tomorrow night.

My ES long play was also nicely rewarded, details to follow in tomorrow night's regular post.

CNBC-gate

Also on Friday, I got an email about the CNBC Million Dollar Portfolio Challenge, which I've been playing, along with what must be half the rest of the world.  Anyway, they said

"It came to our attention that there was a technical glitch in the current equity trading system, which a handful of players found and exploited to jump to the top of the leaderboard."

Um well yeah.  Jump, or more like ICBM rocket to the top.  Check out the top guy here:

	1	David King	Winter Park, FLORIDA	$10,167,705.49

Up by 10 x?  In five weeks?  Starting with $1 million?  I don't think so.  And then out came some pretty smarmy details came out on Suitably Flip, here about just how it was done.  It includes allegations of team playing as well as exploiting the particular paper trading algorithm CNBC used to execute trades in order to gain an advantage.

But the kicker was that apparently the favorite trading vehicle for those wanting to rocket to the top by hook or by crook was none other than EK, Eastman Kodak, the company whose slow-motion suicide I've been chronicling in my post "The Rise and Fall of Eastman Kodak".  Now it was my understanding that penny stocks were supposed to be excluded from the contest, and EK certainly qualified for a couple of days there at the end of last month.  Even their current price of 1.32 should raise more than a few eyebrows.

And I'm not accusing anyone of anything, but it sure seems like it would be real easy to help out your CNBC contest trades by simultaneously pumping EK with real trades.  When a stock trades at a buck, that's not all that hard to do.  There are many many 5 minutes bars of EK between 9/30 and last Friday where the stock moved on volumes of under 200K shares for no apparent technical reason.  The SEC might want to take a look at Mr. King's trade logs.  Just saying.

Well anyway, CNBC pulled the plug on the contest halfway through and is apparently restarting the race from scratch next week.  Hey, that's fine with me, since I made a few trades that went bad while I keep thinking the market was going lower last week, so I get a free redo.  But honestly, I have neither the time nor the inclination to sit in front of my screen continuously from 9:30 AM to 4 PM putting on 500 trades (which is what was going on) every day for 10 weeks, not even for a million bucks.  Which isn't even a million after you throw in taxes and inflation (it's an annuity, not a lump sum).

It will be interesting to see how this all plays out.