Breakdown

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It's too early to be sure yet, but it looks like the Dow has broken down. We need a close below the trendline and a down day tomorrow. At that point, the recent short term rally will be over... typical bear market action.

The Dow

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This is the only chart you need right now. If the Dow decisively breaks and closes below the support line drawn above, load up on DXD and just have patience. The closer it gets to the 200dma, the more likely it is to break down on its next test of support.

Bottom line... the 200dma for the Dow is at 12470. Still too lofty considering the economic mess we're in. We'll break the 200dma and launch a new bull market once the 200dma comes down to a reasonable level (high 11,000?). In the meantime, the closer we get to it, the greater the potential energy for a breakdown. Just watch the line and don't be afraid to bet against the market if it breaks.

Where's Snot?

We haven't gone anywhere, just been busy. We aren't going to bail on this blog ever. We're in the market for the long haul. Anyway, now with a week or so of hindsight, since breaking support, the fert sector has been a wasteland. So were we right to sell them all, or wrong to have been in them in the first place? Fact is, we were right the first 3 times and wrong the last time. But that's the best we can do. All we know is that despite solid fundamentals and yada yada yada, there is a good chance that the fert stocks all start heading to zero. That's just what stocks do.
Our approach to the market is to buy the leading stocks in the leading sectors in a strong market. Right now, the market is too weak to be putting capital at risk. This next "sit-n-wait" period could take a long time to play out. The next place to invest your money will be the next big thing, and will likely be something you learn about outside of the investment world. When the internet was new, someone asked us "what is owl?" That was their way of pronunciating "AOL". We weren't sure ourselves at the time, but we kept hearing the letters over and over. A few weeks later, we had done enough research to convince ourselves that AOL was where we wanted to put our money. We're sitting on the sidelines until the next bull market. It will be driven by the next "owl"... whatever that may be. Tinkering around with the latest passing stock fad between now and then is a sure way to lose money. We would be interested in hearing others opinions about what the next revolution may be. Perhaps a new automobile company will spring up and produce nothing but water-powered cars, taking all other auto makers out of business. The Japanese have created a car that runs entirely on water. There's hydrogen in water, and hydrogen is a fuel. Whatever it is that makes the next bull market start running is not important right now. All that matters now is that people understand that we're in a bear, and it's too dangerous to put money at risk while the bear is still alive. The Dow could advance another 1,000 points to its 200dma and we'd still be in a bear. After seeing 12,500, we wouldn't be in the least bit suprised if the next stop is 10,000. This reminds of of 2000, when we sold everything and just waited it out. The market fell for the next few years. The wait was worthwhile, but very long. We invested in real estate instead, buying raw land because the tax burden on raw land is next to nothing.
Sorry to sound so depressing, but we have to call it like we see it. This whole Cramer notion of "stay in the game" is simply not good advice. Sometimes you have to recognize when the party is over.

Fertilizer rally?

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Of CF, POT, MOS, MON and AGU, only CF has broken through its resistance line. The others look like the chart of POT above. The indecision plaguing the fertilizer stocks will come to an end very soon. Considering their resistance lines are quickly converging on their support lines (typical triangle or wedge pattern), either support or resistance must be broken soon.

Our guess is that the break will be dramatic, and very noticable on the charts. MOS has already broken support, although without the conviction of the others, it has not been able to drop sharply. MON is on the verge of breaking support, but has also managed to keep its head above water. On the other hand, CF has broken resistance and TRA just made new highs, so both the bulls and the bears can make a case for the direction of the next fertilizer move.

We aren't willing to guess, we're happy just letting the market tell us where they're going. In the meantime, we're going to juice up our stake in SMN and hold tight. If we ever get this rally, all this time in the waiting room will pay off. You only need 2 or 3 good trades a year to make close to a 50% return. With potential rewards that generous, waiting a month or two for a trade to mature is no reason to complain.

There's no telling exactly when the fertilizer move (up or down) will happen, but the converging lines on these charts suggest that a decisive move will occur by the third week of August.