Tuesday, May 02, 2006

Crude and Gold Soar Again

Once again, gold and crude oil went straight up. These markets are just amazing. I don't tend to focus on commodities in this blog, but looking at the lifetime history of gold, crude oil, and copper, I am just blown away by these charts. There are fortunes being made (and lost, on the short side) out there. This is the equivalent of the Internet Bubble in the world of copper.

The stock market remains frustrating for both bulls and bears (with the exception of those who are long oil stocks, who have been doing great for many months now). Below is the past several months of the $INDU shown on a minute-by-minute basis. As you can see, we're "due" for a downward movement, but it's been stuck the past several weeks, not really going anywhere.


There are many reasons the market "should" go down, but the market isn't going to read this blog and suddenly obey! If you look at skyrocketing oil prices, tension in Iran, a falling dollar, and the recent report that Medicare and Social Security are going to fail even earlier than the prediction of just a year ago (Medicare is just 14 years away from bankruptcy, according to our government - - and I'm sure that'll get closer), one would think we'd be seeing prices in a tailspin. But not so.

Here, for instance, is the percentage chance of OIH (the oil service sector ETF) recently, up more than threefold:


One stock in particular (which even I'm not fool enough to touch anymore) is Hansen Natural, HANS. I'm not sure what they're putting in these soda cans (crack perhaps?) but it must be addictive stuff, given these valuations. I've put this graph in arithmetic form to illustrate just how amazing the price rise has been. It's got to fall someday, but I don't go near this thing - - it's a monster!


One recent recommendation that seems to be working out is Genentech. The head & shoulders pattern is complete, and it lost a couple of points today. This chart looks better than ever for a fall:


Long-time reader PB commented in last night's posting, "what is the point in being bearish in this market if all it does is go up on seemingly bad news??? It'd be a lot less painful just to go long!"

I'm afraid you are correct.....it seems the least painful thing to have done over recent history is just to pile on to the markets that seem insane (gold, copper, oil) because they just get more insane. The trick, of course, is knowing when to get off. For myself, I just don't want to do it - - the risk seems far too high in these hyperbolic markets.

10 comments:

cristri25 said...

i am a bear and my paws are starting to hurt....

Tim Knight said...

You and me both, brother!

Hey, I've got a simple question - - how do you get prompted about my postings so quickly? Are you using some kind of "live" links in Firefox?

Kapil Khanna said...

Tim,
Markets reward those that are patient. Markets also do not reverse direction immediately. They do so over a period of time. If you dont want to trade in the current direction, then be patient for it to turn. Do not anticipate or predict a change in direction. You are not on trial, making a case to the jury for a bear market.

cristri25 said...

OIL at 75 and AMR and LCC up today ? The market is about to have a rug pulled from underneath. My paws are burning but yes I am a tad ahead of the drop. Paws burning.

cristri25 said...

OIL at 75 and AMR and LCC up today ? The market is about to have a rug pulled from underneath. My paws are burning but yes I am a tad ahead of the drop. Paws burning.

acceltrader said...

Tim- Well put. No pun intended.
Something does not seem right (Near Term significant upside)about this market. Unless you're long OIH HANS and Ethanol stocks this market is really churning.

When the market takes a hit on Maria B. chatting with BB something tells me volatile times ahead. Know the reporters are going to site USD drop, Gold & Crude rise for further increases..This could be maddening for awhile, but we just need to trade what is in front of us and avoid gettig run over by freight trains. I, like alot of traders I know, find it tough to go long alot of this crap that is flying (Frieght Trains).

cristri25 said...

The traders set up for the first drop will profit the most... who will be the lucky ones. There will be many more profits to make but that first market pull back will be fast and furious.

Market, you are on thin ICE my friend. I am taking names and prices.

my2c4u said...

i have been reading here 4 a while. originally i was thinking tim is a genius, since he has guts to put anything. after followed 2 of his recs, i found he's wrong, and i moved the link from my site. after a few months, i think this site is worthy reading, since the bear voice is very clear.

however, you cannot short anything just because it's too high. TA-wise, there is a reason the pattern needs to be completely formed, not half-formed. i think that's why hurricane is mad about. i don't know whether tim will agree with me?

i think it's still a bull market. even though cristri25 said who catches the first drop will profit the most, that's not a wise approach to try to catch the 1st drop, since u will lose many many times by doing that. nobody knows where is the top just yet.

on the other hand, lots of sectors turned bearish laterly(bio-tech, healthcare-plan...), while a lot more sectors trying to be( technology...). of course, there are some very bullish(banks, insurance, no need to mention material, oil).

my2c.

Tim Knight said...

Well, I'm no genius (clearly!), but what I try to do is offer suggestions that at least a good probability of a move. Take a look at symbol FORD (this is not the auto maker, whose symbol is F, but the symbol FORD). I was suggested shorting that (check my December 27th entry last year) when it was at about $21, and it's down to $6 now. So the pattern that I observed was strong, and the prediction was right. But plenty of times I'm wrong. What I'll try to do more consistently is state a stop price, so the "I'm wrong" level is more clear. If I did that, maybe I wouldn't be in such hot water with hurricane5 and NTRI!

my2c4u said...

tim, u r doing a great job! ur inputs definitely help.

i bought puts on esrx right before the drop after read here.

hit 1 winner or 2 doesn't make the day, the percentage of winning and the timing is everything, especially for a option trader like me.

maybe bear's day is in the making...