Tuesday, April 25, 2006

Stop Me If You Think You've Heard This One Before

The saturation of green on my screen from my short positions is my simplest, favorite indicator that things are clearly going the way of the bears. (Da Bears....) Lovely stuff.

Crude has double-topped. Energy stocks are completely exhausted. And hyperbolic insanity like CRS and TIE are reversing. Beautiful.

Let's take a look at a few charts.

First is the Dow. I want you to look at something interesting (particularly you, hurricane5.....) I've highlighted in green all the bullish rises over the past 18 months or so. Do you notice a trend here?

(1) The length of each rally is progressively shorter
(2) The gain of each rally is, by and large, progressively smaller.

The most recent one is just pathetic. The "rally" lasted three days. (Constant reminder: click any image to see a much larger one).

Crude oil has reached a complete saturation point in the media. Everyone is talking about the spectacular rise in crude, in gold, in copper, silver.........and, as all good contrarians know, when every flippin' schmoe on the planet is talking about how high or low something is, it's probably time to fade the position. Crude tried to push higher today, but went limp fast.....

Look at Genentech (DNA). Head & shoulders patterns do not come much cleaner than this. I could absolutely see this heading down to $60.

A similar pattern, mentioned here many times already, is Express Scripts (ESRX). I still have no clue what this company does (and I take a certain amount of pride in that, being a pure technician). It's a stupid company name - - do they write screenplays rapidly or something? No matter. It's headin' down.

And from our Tilting At Windmills department, I humbly offer a NTRI chart once more. This dynamo rocketed higher today based on blowout earnings. I dunno; looking at the trendline, I'd like to think it's reaching its potential at this point. But I've been wrong on this one more than once before!


TryumphTrader said...

Talking to Andrew S. last week brought up another key point for the brears. Remember in 2000 what the popular new show was? "Who Wants To Be a Millionaire". Just by answering some questions poof you were "rich". Whats the newest popular TV Show for America... "Deal or No Deal" just by Guessing correctly you win a nice sum of money... Something to think about!

Hurricane5 said...

Yes, I do indeed notice a trend in the Dow. It continues headed higher. I'm not sure how you can make a bear case by looking at that chart. You can highlight with as much green as you like, but the trend is up. In fact, by showing that chart it really strengthens the bulls case.

Let me take a moment and boast in my glorious NTRI call. On April 4 and April 10, I said NTRI would report jaw-dropping earnings and rise 10%+ in the aftermarket. It did. Your readers made a 34% profit if they took my advice. I also said that it will see $80 in 2006. It will. I could make a strong argument for $115 by years end. I won't be too greedy, but don't be surprised if it passes par in the next 6 months.

PB said...

This comment is for everyone that doesn't think that the current high energy prices have any long-term effects on consumers or inflation (that means you Mr. Bernanke!) Anyways, up here in Canada, gasoline sells by the liter. (that's between a 1/3rd and 1/4th of a gallon) up until recent memory gas sold between the low $0.50 cents to a high of low $0.70) with the recent run-up in oil and gasoline prices are above $1.00 per litre. An inconvenience of this is that many, if not most stations do not have a space for this extra digit! Small price to pay, BUT no one in their right mind ever assumed prices over $1.00 when they planned for the signs. So what am I saying with all of this? Well, if gasoline prices impact us to this degree in the industrialized west, just imagine the poor folks in all of the emerging countries who depend on cheap energy for a good share of their economic growth. High energy prices do not help inflation numbers or the growth of the world economy. Severe dislocations will be the result. we are very much close to a breaking point.

costas1966 said...

You point about the Dow is very well taken but nevetheless it is doing higher highs and higher lows. It is in a confirmed bullish uptrend. Just last week we had the biggest up day in over a year on enormous volume. The Dow is just retracing some of that gain only to move higher. The bulls are in charge.

The above comment is not me. It is
the view of the majority of the analysts and market participants. That is how they see the market. The market in my opinion is doing what it is supposed to do. It is fooling the majority of investors. The topping proccess is stealth it is hard to see but it is there. Also notice how the trick of higher highs and higher lows is beeing played in the DOW which is the most widely followed index, at least by the public. The truth is in the Nasdaq and the S&P 500. Both indexes have been churning on high volume for the past 6 weeks now. Somebody is selling. Nasdaq has failed to make a higher highs while the S&P 500 only managed to put a marginal high that lasted for 1 day. The a/d line has been making lower lows and lower highs for the past 2 years. The biggest one year gain in the DOW was expiration related and had no follow through this week, its sole purpose was to trick the majority and trap them at the top when the market will break down the next few weeks maybe days. Also remember May is seasonally weak month and it is the most likely period to have the break down in the markets, right after earnings. Meanwhile the biggest bubble in history in imploding silently under our eyes while interest rates are moving higher after having completed a multiyear bottoming process. ARE YOU SURE YOU WANT TO BE ON THE BULLISH SIDE?

Kapil Khanna said...

Oh well, i knew i would expect another case being made for the bearish market by Tim today.
The length of the rallies on the dow fading is an interesting observation, but not conclusive by any means. For this market to turn bearish, it needs to breach 10900. Why keep making a case for a bearish market when you can wait for the 10900 breach. Come on now, 10900 is just 4% from this level, cant you be pateint Tim?

Tim Knight said...

Kapil, I agree with you. It's not a clear-cut bear market until the series of "higher highs, higher lows" is broken. I do recognize that. But, let's face it, the "oomph" is getting pretty modest. As for what level it has to breach, I'd cite two......11,039 (the low set on 4/17/06), and then after that, 10,825, which would break an over two-year old trendline. Now THAT would make the bearish case much easier to argue.

Marc said...

JOE is even prettier

TR said...

Fun to hear the bear . . . one day he will be fat and happy. Unfortunately, I expect soon.

John Wheatcroft said...

I disagree. First you can't call a top using daily charts - you have to use weekly or monthly. Second if you look at the weekly you will see very clearly where the "bear" begins and that is about 10200. Until it drops below 10200 it is only a "dip" and dips will be bought over and over and over again by the program trading devices that the 10000 hedgefunds have at their disposal.

In other words the only way we get to 10200 is via a three day crash.