Running on Empty? Who Cares? (Updated with KO Chart)

My call last November before Ben Bernank announced QE2 that Dow would reach 16,000 someday may not be far-fetched, and my target for S&P500 of 1,340 is just around the corner. My left-for-dead AMZN March call is coming back to life (AMZN is jumping over $6 today). All thanks to Ben Bernank, who only has our welfare in mind.

My latest purchase today is KO. Has a very peculiar chart formation, but I'm just looking at the buy signal in Slow Stochastic set at 60. MACD histogram shows positive divergence. Oh uh, tomorrow is their earnings report. Will it matter? Maybe. Maybe not. Here's the chart of KO, 9-month daily.



I also set up a call backspread on MTL, using April calls. It may be ready for a bounce here, after steadily losing all the gain from Feb 1, but it is at the support around $32.50. If I'm wrong, then I will lose out-of-pocket cost, which is about 30 cents (x100).

Do your own DD, but for me, I've sort of given up. If S&P500 can remain above 1,320, it could go up to 1,380 or so, then 1,440 (May 2008 top).

And of course I may be the perfect contrarian. If I am, I still have VXX....

Silicon Valley vs the Rest of the US

Or tech vs traditional. Or companies that continue to innovate vs companies that don't. I don't know how exactly to define it, but take a look at the comparison charts below. (They are 5-year charts.)


The first four are the tech companies, three in the Valley, one up in Washington. Netflix (NFLX) broke to all-time high today. Intuitive Surgical (ISRG), Apple (AAPL), and Amazon (AMZN) continue to break out from the high. Their charts say it all: Recession? What recession? Also notice that, except for ISRG, their recent bottom was NOT March 2009. They bottomed sooner than the rest of the market, and off to the races ever since...

Compare them to the rest. First two of "the rest" are tech companies, Google (GOOG) and Microsoft (MSFT). Even though they have recovered from their lows, they don't compare at all with the first four. (That tells me, unfortunately, GOOG has already become MSFT...) Rather, they resemble big, traditional businesses that are listed in New York Stock Exchange, rather than on Nasdaq. Their charts look more like J.P. Morgan Chase (JPM) or Coca Cola (KO). The last one is Freeport McMoran (FCX), a copper and gold company. Although it has recovered a lot, it is still far from recapturing the all-time high.

They (NFLX, ISRG, AAPL, AMZN, etc) are clearly in a bull market, disregarding the rest. In a bull market, you buy a breakout from the high. That's what I learned in the book by William O'Neil (How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition).

I am not advocating anything, going long or short, here. Do your own DD, but I sure wish I bought every single breakout from the high for these stocks.