Wednesday, June 14, 2006

As I Was Saying....

Well. There's our bounce.

As I mentioned late last night, I believed today would be the bounce day. In spite of some serious struggle up and down, the bulls finally got their act together and finished with a Dow close of over 100 points on the plus side.

This will be heartening to the bulls, but they will still be on the defensive. This is a psychological game, folks. It's going to take another nice up day or two before all this worrying about doomsday subsides. People have very short term memories.

At this point, I'd suggest either staying out of the market completely until it's ready to short again or, if you're aggressive, going to the long side. There are some good charts out there for short term long plays. Here's DuPont (DD) for instance with a nice clean ascending channel.


Another stock that's suffered recently and is at its ascending trendline is Southern Copper (PCU). These kinds of charts represent relatively low-risk short-term plays.


I'd say the Dow's probably got another 200 to 250 points on the upside. I imagine we will get back over the north side of 11,000 on the Dow which will cause all the predictable "recaptured" headlines. We need to give the bulls enough rope (and hope) to hang themselves with. So let them have a run at it. The red circle illustrates my retracement target.


The S&P 500 has probably about 20 to 25 points to the upside before the bears can crash this party again. I've again illustrated it with a circle showing the retracement target.


I appreciate all the nice notes and thank-yous I've been receiving. I enjoy writing this and am glad some people are benefitting from my thoughts on trading. Take care.

13 comments:

oldsoothsayer said...

Beware of the Fed manipulation through its friends the big banks.
Bill Cara will agree on that one.
The show started at 9:30am this morning.
Despite the bad news on the Core CPI, the market went up sharply high; then settled down.
Then 13:50pm (for those who trade on 15 or 30mn) the buying was too obvious. Nothing like that can come from the crowd. It was like a bloody "insider tip stuff". It went on for the next half an hour and settled down again.
Then the last round.
The last half an hour! Bloody bankers. They just run that stuff up to squeeze the shorts.
But the market is the market folks and that baby has another 3 to 3.5% to run down.
Why in Scheol are they running such a poor scheme for a marginal 3%. People will turn their position around like maniacs and then will be the danger of a stampede.
That is really sad!

Brian said...

Hey Tim--

Just wanted to say thanks for this blog. I'm quite new to trading (still working on my paper trades before I put my own cash on the line), but I've been learning a ton. Since I started reading this blog a month ago I'm up about 10%. So thanks for that!

There's a couple of things I've been wondering.

First, how do you find so many trading setups, considering you're a pretty busy guy (I'm assuming)? Do you just sift through mountains of charts, or have some software to help scan for setups?

Also, what kind of strategy could one use to trade a small trading account (like $5,000 or so...that's the most I can save by end of year)? Can one effectively trade with an account that size? I figure I could only afford to hold 2 or 3 positions at a time to keep commisions from eating me alive (even Scottrade's $7 adds up...in my paper trades it's taking on average 20% of my profits!).

Also, any reading to recommend?

And thanks for keeping this free! I read this every day.

- Brian

Andrew M. said...

Hey Tim:

Ever since I got back from the INVESTools conference in Las Vegas, I have followed this blog religiouly every day. It is great to have such a BEAR to look for great ideas. I look forward to the release of the new Prophet.net software for even better analyzing. Keep up the great work.

Andrew M.
Greensboro, NC

cristri25 said...

i agree with oldsoothsayer ....

FollowtheFoot said...

keep up the great insight or on-sights Tim! I love reading this blog since I chanced upon it. I am a follower of footprints from the market and have closed out most of my bear positions except one or two where the technicals are strong on the immediate downside. It is always great to get an expert and experienced viewpoint from you that confirm my outlook.

Soothsayer, I like that observations of yours. Helps to put some perspective to the market behaviour. Thanks !

FTF

TR said...

TK . . .
I like what you are writing. I can tell you that the market has rewarded me handsomely over the years without much work on my part. I used to always think of the upside.

Wish someone would have taught good vs evil. Is good (Bull - they always look at the up?) and bad (Bull - waiting to charge the fall?). Anyway, this is a great blog that others should see. I lost a good amount of capital trading bullish in bearish declines (then made bad decisions to trade bearish in bullish runs!). You posts help with the confirmation.

Note - I have not seen my man Hurricane in a while, he must be feelin' some pain. Dude, don't fight the storm, just move with the oncoming flow . . . you will feel better!.

Like the posts, keep up your thoughts on the major indices. I use them as my sentiment indicators.

SERIOUS note - how do you get around shorting good stocks? I look at some monsters and can't believe they are reacting so violently. Guess those damn computer programs! How do those guys keep up!

Best of luck for tomorrow!

bsi87 said...

Brian,

Read Alexander Elder's Trading for a Living and Come into my Trading Room. Great books. They have helped me esp in money mgt and position size. Those areas will break a trader before poor stock selection/entries/exits.

I try to keep my commission costs at 1% or less so it's possible to have 4-5 positions. I guess I'd look at some no load funds like Rydex or Profunds and use longer term indicators and try to build equity first.

Good luck.

anunakki said...

First comment/post. Been following tim and this site for about 4 months now. I traded in the late 90s and made a lot of cash ( as did everyone) and been busy with the business i started with said cash. I now have time on my hands and have started trading again. I have sifted through dozens of sites and this is BY FAR the best one out there.

Someone asked how Tim finds these great charts..probably using the tools available on this site..the pattern search tools are AMAZING. I lose myself for hours on them. man I remember going through the Daily Graphs..that was excruciating.

Thanks for this fantastic site ( by the by I am up almost 29% in the past 2 months thanks to this site )

Anunakki

Shay said...

Thanks for a great blog. I follow this blog for a month now and like your market analysis and stock selection.

This is one of the most professional blogs on trading, if not the best of them all (and I sifted through a lot of them).

Keep up the good work

John Wheatcroft said...

Much of the trading today, indeed much of the trading every day is "program trading" - trades made by machines that are as dumb as dirt but programmed to react to certain stimulous - that stimulous presented itself today. Consequently the machines bought.

The rest of today's trading was position squaring before expiration.

The CPI was relatively benign and at best a non-event - all traders know that Ben is going to raise at least .25 at the meeting this month and by August this data point will be all but forgotten. The machines that do over 60% of all trades don't really care they react to pricing.

Please don't bring the "big banksters" conspiracy do dah to this site - I've already had to leave two other, very good sites because of this nonsense.

cristri25 said...

John Wheatcroft do you dismiss the notion of an actual plunge protection team ?

chris

walter said...

nice upward channel forming on the VIX...

BA maybe setting up for really nice short opportunity, in unison with everytyhing else, pretty much, but yesterday's news was rocket fuel - will have to see if this push lasts...

John Wheatcroft said...

Yes - there is no such thing as the plunge protection team. It makes no sense. The only way the market can work for the benefit of the banksters is for it to have volatility and that means lots of transactions. Banks don't care if it is up or down they get theirs anyway. They are like the house in a poker game - they don't play they just rake a little bit out of every pot they really don't care who wins or loses. When the market is down they add to their inventory. As the market goes up they sell to the suckers. It is truly a simple, non-comnplicated game.

If there were a bunch of people out there in never never land with billions of spare dollars why in the world would they use them to prop up the markets? I'd buy Tokyo or Hong Kong or gold or something else with real value and so would they and so would you.