Two mini head and shoulder patterns are now showing up in the DJIA and the S&P500.  I will highlight each with some notes.  I am going to hide the moving averages so the charts do not have too much clutter.

If this pattern plays out - it would be bearish.  Here is the target.  The high (head) was 8,877.  The neckline is about 8,220.  This results in about a 650 point head to neckline range.  So a downside target would be 7,570 (8,220-650).  This developed over approximately 2 months (May 4 to July 2), so I would expect this move to happen over the same period.  I guess the target is 7,570 by Labor day.  Personally, I think the right shoulder is not fully developed - it needs about two more weeks of horizontal work (right in time for the beginning of earnings season).  Also note the the DJIA closed below the 50 and 200 day moving averages today.

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Bear Flag?  Time to short?

Look for a break of the $67.43 level to the downside with heavy volume.  Average daily volume is about 20 million shares per day.

As most of you know, I do not like Jim Cramer.  Everyone knows that Cramer has called a bottom in housing about 20 times.  On September 7 2008, he said June 30, 2009 is going to be the official date of the housing bottom.  Well, tomorrow is the big day. 

I would like to share a video with you.  This video shows the shadow inventory in the Southern California housing market.  Remember this is inventory that is not yet on the market.  You tell me, has housing reached a bottom?

NOD = Notice of default

I received an email asking for a watch list because I have not done one in a while.  Ask and you shall receive.

Here is what I am watching with a close eye - in no particular order:

1) (GS: 143.49 -3.83) - This stock opened on Friday at its 21 day moving average ($144.43) and moved nicely from there.  This on might try to work its way back to $151 - hopefully volume will kick in at that level.

2) (FUQI: 19.96 -0.68) - This stock is starting to get its mojo.  Volume has really come in over the last month.  It has not closed below the 21 day moving average since May.  I am waiting for a buy point to develop.  Number one in IBD 100.

3) (ISRG: 158.71 -4.39) - This one has also regained its 21 day moving average on Friday.  The only thing that scares me is a possible head and shoulders pattern might be developing.  I am seeing this in many stocks.

4) (NTES: 33.53 -1.10) - This one tried to break to new highs on Friday, but was accompanied with little volume.  Maybe a bit more rest is needed?

5) (VIT: 14.25 -0.30) - This stock is really starting to move with massive volume.  Might be going parabolic.  I am still waiting for a buy point.  Number two in IBD 100.

6) (CVGW: 20.00 -0.30) - This stock is thinly traded.  Volume is starting to come in here.  I am still waiting for a buy point.

7)  (GLD: 91.25 -1.14) - I have mentioned gold many times in the past.  Still waiting for a break of the $97-$99 level.

Press Release

Release Date: June 24, 2009

For immediate release

Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.