Many thanks to those who came to the chat last night. We concluded that the real estate-related stocks have definitely maybe put in The Top. ;-) We also reviewed a couple of day trades for kicks. Here’s the complete transcript:

Zoomie: Hi all

james: sup zoom

Zoomie: not much, yerself?

jfra: howdy all…

Zoomie: hi

james: chillin

james: mao - i guess your a celebrity - dont worry - your secret is safe with me

james: WTG brother

CMaoxian: celebrity?

james: modesty has always been yer hallmark

Zoomie: lol

CMaoxian: are there an unusual number of for sale signs in your neighborhoods?

james: no

SALLY: YES

james: its been pretty steady down south

james: cant really gauge a drop off yet

CMaoxian: i keep getting reports from friends on the coasts that they can’t go three feet without running into a for sale sign

CMaoxian: where do you live, sally?

SALLY: houston, tx

nickm: good evening traders!

james: well mao - thats been the case in NC for the past year

jfra: james, lots of houses for sale in NC?

james: yes

CMaoxian: are they selling or just standing there?

james: they’re eatin em up like they’re eatin at the wafflehouse

jfra: hmm…

SALLY: they are standing where i live.

james: they are selling - depends on location - as always

CMaoxian: well the Housing Index doesn’t have an ETF, so there’s not an easy way you can play them as a group

CMaoxian: so we’ll look at a REIT ETF (commercial) and a handful of homebuilders (residential)

CMaoxian: here’s a weekly chart of the IYR (Dow Jones US Real Estate ETF), let’s review the state of commercial real estate before moving on to look at the homebuilders

CMaoxian:

CMaoxian: you can see that since 2004, there have been three separate times "technicians" have called a Top

CMaoxian: welcome sara

james: 38% fib study has a bottom around 56, weekly, 02 bottom

Sara: ty

CMaoxian: so maybe calling a top here will prove to be premature once again

CMaoxian: drilling down to the daily chart, let’s look at this last break in the IYR

CMaoxian:

CMaoxian: you can see how violent the break was this last time

Zoomie: a classic hole in the wall

james: no trend just crashes - theres always late comers

james: im not sayin further highs

james: but there will be support

CMaoxian: i agree james, that’s why i’m not sure if "The Top" is here yet

CMaoxian: you can also see how price broke down out of the little bear flag that formed recently

CMaoxian: so this sucker bears close watching at the very least (pun intended)

james: im with you - been waitin for a phat panic to get long these builders

james: but thats me

CMaoxian: speaking of the homebuilders….

nickm: what is "phat panic"?

james: blood in the streets

Zoomie: when my mother in law is late for dinner

nickm: you mean when you are late :)

jfra: lol

CMaoxian: here’s Hovnanian’s chart, the hardest hit among them:

CMaoxian:

james: 55 - im all in

james: even if its for 3 pts

jfra: nice chart CM

CMaoxian: HOV has broken hard, all the way back down to the highs earlier this year which are acting as "support"

jfra: i see 55 gap

james: subdivision where i live close to

james: for the past 10 years they’ve sellin lots

james: now - now

james: they have a "closeout"

james: the builders know

CMaoxian: next is DR Horton, builders of the Prairie Palace

CMaoxian:

CMaoxian: all the homebuilders charts are similar of course, i’m just featuring the hardest hit

jfra: curious to fib #’s on these

james: fibs are alway subjective

CMaoxian: the weekly trend on all these puppies remains UP at the moment, despite all of the daily trends having turned down

james: i was lookin for a panic in these today

james: no dice

CMaoxian: next up is Centex:

CMaoxian:

chud: how do you define the trend, cm?

CMaoxian: Fuzzy defines it for me, which is of course proprietary, lol

CMaoxian: but you can use something like price being above or below both the 20 day and 50 day exponential moving averages, which is about as simple as it gets

chud: i’m gonna have to get fuzzy drunk one of these days and try to get some secrets outta him

james: hey chud - i’ll buy

james: what are the odds of a break of that previous high? - thats a buy - short term

CMaoxian: hi foo

foofighter: hi CM

CMaoxian: last homebuilder chart to consider is my favorite, Toll Brothers:

CMaoxian:

james: i love TOL

james: trading it anyway

CMaoxian: you can see that TOL has broken fairly hard too, but hasn’t yet returned to the highs set earlier this year

CMaoxian: frankly that daily chart looks ugly, but i look at their numbers and think, hrm, they have a great business

james: way more down to go - jeff mathews had a great post a few weeks ago bout it

james: spot market playin and all

james: ty mao for the link

CMaoxian: that was a good post by Matthews about TOL, lemme find the link

chud: Playing the Spot Market for Houses, by Jeff Matthews

CMaoxian: thx chud

CMaoxian: one stat that i love to throw out is that most of TOL’s buyers have household income above 100K so they’re not a skittish bunch

CMaoxian: if you read that letter by Gary Shilling that i posted excerpts of, you may have noticed this

CMaoxian: paraphrasing Shilling: the recent leap in the share of income is going to the top 20% of Americans while the other four quintiles’ shares keep slipping.

CMaoxian: that top quintile is buying TOL homes

chud: TOL has fallen right to it’s 20 week MA. maybe holy grail?

CMaoxian: you can give the grail a shot, chud, and if it fails then you know there’s more down to come

CMaoxian: i was going to mention that, chud: the weekly grail is something to watch, for its *failure*

chud: then maybe try the 20 month

chud: one of the holy grails HAS to work

CMaoxian: not necessarily, price can slice and dice the holiest of grails

james: the thing about the builders - for me is - how can you short them now - after a break that hasnt happend in years

james: maybe that is a signal

james: k - i get it

james: need another rally for me to sell - cant sell down here

CMaoxian: so the bottom line is, is this "The Top" for the homebuilders and REITs and the answer is a decisive maybe :-)

nickm: keep in mind that tuesday/wednesday THIS WEEK are home sale #, which can move these either way

CMaoxian: thx nick, i always think the market has anticipated those numbers by now

Zoomie: Bill Cara has an interesting chart on mortgage cashouts

Zoomie: Mortgage Cashouts

james: and they aint done

CMaoxian: frankly i don’t know anyone who has cashed out

CMaoxian: i think it’s still a minor phenomenon, but what do i know.

james: mao - you missed a royale rumble with matthews and ceo of OSTK last week

james: laughed my arse off

CMaoxian: i saw it james, a friend sent it over

james: WTF?

james: was that for real?

james: thats the question i kept asking myself

jfra: gotta see Mark Cuban’s blog request..can anyone show me how to naked short OSTK..unbelieveable

james: oh yeah

james: Mao - you heard about PIMCO squeezing the shorts in the Tbond pits?

CMaoxian: you sent me the article james, yes

james: now thats a lesson in trading

james: tout TV (CNBC) has been all over it

james: CME has a new mag out

james: GANN, LIVERMORE< BARUCH - the legends of BOSOX owner!

CMaoxian: anyone have any day trades of note we can review?

chud: i dont know about the "of note" part

Zoomie: sure

Zoomie: ADSK on the 19th

james: SNDA - 38.05 on that phat candle day - round 2:30

CMaoxian: i’ll grab some data zoomie, and take a look

CMaoxian: we’ll look at ADSK first and then SNDA

TraderMike: sup

CMaoxian: hi mike

TraderMike: so what’s the verdict on housing? a top?

CMaoxian: it’s a definite maybe, mike ;-)

TraderMike: I knew you’d say that

Zoomie: might not do this trade again….:)

james: nice post today TM

TraderMike: thanks james

chud: looked like a nice suspect, zoomie

CMaoxian: ok where’d you enter, zoom?

TraderMike: what ticker?

CMaoxian: ADSK

Zoomie: I liked the volume, broke out to 52 week highs, but I didn’t wait for proper retracement

nickm: any chance to post the chart CM? so we all look at the same

CMaoxian: yes nick, as soon as zoomie gives me a lil more info

chud: what do you mean by proper retracement?

Zoomie: went long on 4th 15 min candle, kinda a doji

Zoomie: stopped out soon after

TraderMike: hard to avoid that with the action in the indices today

chud: TM: this trade was on friday

TraderMike: ah

Zoomie: market was strong at time, then tanked

james: wild reversal

james: even in the oils

james: considering earl didnt have that bad a day

CMaoxian: that’s not a dummy bar, zoom

Zoomie: yes, I see

TraderMike: I would have been concerned about it being pinned to 40 for options expiration on Friday

Zoomie: no real retracement

Zoomie: k

TraderMike: which is why I take those days off

Zoomie: anyhow, entered 40.89, exit 40.55

CMaoxian:

Zoomie: thanks TM, I follow your blog, not close enough I guess;)

james: thats about how i play it zoom

james: that might not be what you want to hear - but

james: thats my max R

Zoomie: lesson I guess is it was not my trade plan

Zoomie: jumped the gun

james: its hard not to scratch that itch

CMaoxian: yeah that’s jumping the gun zoom

CMaoxian: the good part is you stuck to your stop and took a small loss

james: word

james: thats kept myself afloat

CMaoxian: hi lurch

james: it is hard though

lurker: Hi, Chairman!

chud: it’s kept my blowout slow and painful

james: i hate it

james: i’ve started scaling - into and out of positions

CMaoxian: the tone was kind of lacklustre last Friday, so that didn’t help either zoom

chud: anybody trade PPCO today by chance?

james: ADSK - MAO - what clues would you look for "at that time" - cause, in the moment - that bar looks strong

james: just set a stop and play it?

CMaoxian: i like to see a retracement, james, or at least some real hesitation; i don’t want to be getting long above up bars

CMaoxian: ideally you have a swing low to place your protective stop beneath

james: word - i hear ya - you like those tiny bars - and then get long above those?

CMaoxian: i like orderly retracements, clearly defined swing lows, and yes, narrow range bars are ideal to get long above

CMaoxian: let’s look at this SNDA

CMaoxian: what are the details?

CMaoxian: SNDA - date entry exit etc?

CMaoxian: i’m looking at SNDA and trying to figure out when it was a suspect

CMaoxian: back on the 10th or 11th?

chud: TM: does eSignal track number of trades or trade rate?

TraderMike: not that I know of

james: TM & MAO - what do you scan for - on a real time basis, during trading, - new highs/ new lows or unusual volumer?

TraderMike: volume & big % movers:

CMaoxian: i look at both, james… what are the details of your SNDA trade

james: so - do you buy highs and sell lows - cause when i get em on my screen - thats where they are

chud: there must be somethng to hide about that SNDA trade

CMaoxian: chud did you do anything in the past week ;-)

chud: mostly stop outs.

chud: stopped out of PPCO today

CMaoxian: ok we’ll look at PPCO and call it a night

chud: entered above the 11:00 down bar

nickm: any chance to discuss for a while how to screen for candidates? what people use, tools and criteria?

chud: entry above that 3rd inside bar would’ve been better but i missed it

CMaoxian: yowza, what was driving this puppy?

CMaoxian:

chud: some kinda drug results

chud: it’s a pharma

CMaoxian: it had quite a little run before 11 AM chud

chud: yea, should that have scared me away?

CMaoxian: well the 10:15 inside bar was bettah, as you noted

CMaoxian: did you lose 30 cents on it?

chud: just lost 20. i tightened the stop up a bit when the tone started to turn south. shoulda closed it out for a scratch in retrospect.

chud: would you have held the position or closed with a sharp tone change like today?

Zoomie: seems like they run the stops at lunch

Zoomie: when the volume is low

chud: seems like it zoomie

james: im out - thanks again CM & TM

jam