Top Trade Ideas for the Week of July 16, 2012: The Rest

Written By: DragonFly Capital

Here are the Rest of the Top 10:

Biogen Idec, Ticker: $ BIIB

Biogen Idec, $ BIIB, is testing resistance at 145.67 in a consolidation channel. It has support for a move higher from a Relative Strength Index (RSI) that is bullish and holding over the mid line and a Moving Average Convergence Divergence indicator (MACD) that is negative but starting to trend higher. The Bollinger bands are squeezing for a move as well. The 3-box Reversal Point and Figure chart (PnF) has a bullish price objective of 185, and the Measured Move out of consolidation has a target of 164.50.

Dillards, Ticker: $ DDS

Dillards, $ DDS, is holding minor support at 62 over the major level at 61. It has been progressing lower from a shooting star top in early May in a series of thrusts lower. The RSI is bearish and trending lower with a MACD that is negative, both supporting further downside. Short interest at 9% may prop it up if it bounces but the PnF has a price objective of 54, near the gap up from February.

DaVita, Ticker: $ DVA

DaVita, $ DVA, may be moving higher from a bull flag after the break out over resistance in June. The RSI remains elevated but the MACD is turning back to the upside after a brief stint in negative territory. The PnF price objective is at least 138 and the Measured Move out of the flag tot he upside takes it to 120.

Phillips 66, Ticker: $ PSX

Phillips 66, $ PSX, was spun off from ConocoPhillips in April. Since then it immediately moved lower and created a double bottom at 29-29.50 before the recent move higher. Consolidating that move now, it is testing resistance with support for further upside from a rising RSI and a MACD that is turning positive. A push through higher has a Measured Move to 40.50 and the PnF price objective is to 46.

US Cellular, Ticker: $ USM

US Cellular, $ USM, is consolidating in a bull flag after making its own double bottom at 37. The break of the flag higher carries a Measured Move to 43. The RSI bullish and rising and positive MACD support that break higher. The PnF disagrees though with a price objective of 25. This would be reversed though on a move over 43.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Saturday which, heading into the new week sees a bit of a positive tone but with a diverging inter-market macro view. Gold and Crude Oil look to continue their trends lower but with consolidation or a short term rise. The US Dollar Index and Treasuries both look to continue higher. The Shanghai Composite looks to continue lower while Emerging Markets follow Equities drifting higher. The Volatility Index looks to remain subdued and may even move lower. This creates the mixed view with Treasuries and the Dollar support downside for Equities while Volatility allows for a further rise. The charts of the Equity Index ETF’s, SPY, IWM and QQQ, all look better to the upside in the short term within broad consolidation or bear flags. Use this information as you prepare for the coming week and trade’m well.

Dragonfly Capital

Contra Krugman II

I generally agree with Paul Krugman, so it is exiting that I am outraged by something he wrote (I’ve calmed down now).

Paul Krugman says that scratchpads are useful. They are sloppy easy models which are not taken seriously. Or maybe which shouldn’t be taken seriously, but it’s not a big problem that many powerful people take them literally. I lose my temper.

IS-LM isn’t the prime example of a scratchpad. What is?

The answer is, supply and demand.

It is not easy to derive supply and demand curves for an individual good from general equilibrium with rational consumers blah blah. And it’s definitely not easy to justify consumer and producer surplus as measures of welfare. And there have always been some purists who condemn any use of the S and D curves we all grew up with, the use of triangles to measure welfare loss, and all that.

But for the most part nobody pays attention. The supply-and-demand framework is so convenient, while pretty much getting at what you want to get at, that it’s what almost everyone uses to get a first-pass analysis of economic issues.

Which is perfectly fine as long as you keep the limitations of the scratchpad in mind.

No it isn’t !!! It is perfectly fine so long as you and all the people who read or skim what you right keep the limitations in mind. What is in, say, Krugman’s mind can’t protect us from people who don’t have those limitations in their mind.

Before I really get going, I note the first example of a scratch pad IS-LM. Here many people (including Jeff Sachs) think Krugman argues that fiscal stimulus is always a good approach to disappointing growth. In fact, Krugman argues that monetary policy is better except when the economy is in a liquidity trap. Policy makers forgetting what Krugman remembers but doesn’t always stress about the limitations of IS-LM will lead to trouble. The fact that Krugman knows what Krugman thinks won’t protect us.

OK so he also has some use for supply and demand curves. Here there is a problem. Economists know that the assumed slopes of curves based on utility maximisation is just one possibility. Basic micro includes the explanation of substitution effects and income effects. But policy makers generally act as if there are no income effects. The fact that economists know about them doesn’t make policy better.

The thing which outraged me (I’m calm now) is the reference to the sum of consumer and producer surplus as a measure of welfare. This makes sense so long as the distribution of income has no effect on welfare. Of course Krugman doesn’t think that or else he wouldn’t have written the post immediately below. The idea that inequality is not a negligible problem should not be confined to purists. The idea that economic analysis and economic efficiency are based on consumer surplus plus producer surplus is extremely powerful and damaging.

What economists keep in mind doesn’t matter much. What matters is what is in policy makers’ minds. The habit of treating consumer plus producer surplus as welfare while keeping the fact that it isn’t in mind has done vast damage.

Angry Bear

Up or Down Babe?………………Evil Plan 71.0 (by BDI)



 What’s a sweetheart like you doing in a dump like this? 


Well, my love sick Slope-a-Dopes, although I’m currently holding a handful of titillatingly firm BOOMs, it remains a mounting mystery to me as to why Miss Market seems to be in heat this week. Just like a woman, does anybody really know what puts her in the shake shake mama mode.  Lay lady lay,  you’re a big girl now,  don’t fall apart on me tonight.

It’s certainly not Mr. Macro’s tired beat up blood on the tracks run down looks that have Corina Corina all hot, sexy, and sultry in fine boots of Spanish leather.

In the States, the tangled up in blue economic data blowing in the wind can’t be impressing her too much, as she dons a new leopard skin pill box hat.  In the East, the business class yellow men don’t seem to be getting as much carnal satisfaction from Bangkok’s sad eyed ladies of the lowlands these days.  In Europe, the times they are a changin, what ever happened to all those privileged sensual French affairs with forever young latin lovers under the sizzling Tuscan Summer sun?  Honey just allow me one more chance.  Most likely you go your way and I’ll go mine.

Will the FED’s Mr. Tambourine man Ben Bernanke enchant her once again with his arousing poetry and gracious gratuities? Intensely stimulating our blonde on blonde with more pleasing easing sexual heeling.  Got to serve somebody.  All I really want to do, is baby make love to you.  Will our deflated limp love minus zero earnings suddenly stiffen straight back up, fulfilling all her hidden desires on a night like this?

I want you, please don’t say it ain’t me babe.  I’m so excited I’m about to blow my shot of love, baby let me follow you down.  Make you feel my love.


She will be ultra aroused, only to be utterly disappointed.  SPX 1389 and then right back down to 1269 like a rolling stone.

Evil Plan 71.0………It’s not dark yet, but it’s getting there.


BDI SOH’s Idiot Savant in collaboration with Bob Dylan                                      (all words in bold belong to Bob)



On a more serious & somber note, please watch the scenes below. They capture the essence of the country’s melancholy, for me anyways.  Can we so assuredly shoot the moon to new market highs in such a melancholic state?


This is darn good too:


As is this:


One of Dylan’s favorite’s, Mick Taylor’s beautiful song “Winter” captures the country’s anguish


Slope Of Hope with Tim Knight