Monday, June 19, 2006

A Clear & Present Danger

OK, this isn't the slam dunk I was hoping. The market was weak today (down about 100 points) but has recovered some. Worse, there is a plausible argument to be made for a short term bottom at this point. Notice this bottoming formation. The market has to be firmly and decisively weak tomorrow. Otherwise the bulls might be slowly pulling that baton away.


oldsoothsayer said...

Would you be more specific Tim.

One thing I am 100% sure of is that the market will not get weaker tomorrow.
It will not go below the 1235 mark for the SPX500 (for certain!).

This is a real retracement like the one we had 15 days ago.
Too involved by now!
Might last at least another 3 days.

The question is:
Will it last or will it fail?
I am not so sure right now!

John Wheatcroft said...

A very dull day - I cashed this A.M. and sat and watched. Re-loaded with some gold shares this after. If inflation is indeed going up then gold has to go up too. Or so they say. I just buy it because between gold and oil I've had a good year.

Weird - with Korea fueling a missile, obviously they are going to fire it, gold sat tight all day and oil went down hard. Maybe the market doesn't pay much attention to the international situation. Or their too busy fretting over what Ben is going to say next week.

Personally I think Tim's earlier DIA put recommendation could be a winner except I expect the Dow to sit within a few points of right here for the rest of the Summer. Just like every year. But I don't know nothin'.

Tim Knight said...

I know I seem to have contradicted myself - first I say the market's going to hell (this morning) then I say everyone look out for the bulls (this afternoon). Truth to tell, my suggestion to buy puts would have been profitable. Later today when I have more time I'll lay out more completely my view on the current market. If we've just in a lazy up-and-down market, this is probably the bottom. If we're truly in bear mode now, we'll crack beneath last week's lows and get really serious.

Sanjay Sola said...

Trend looks firmly down to me. Not sure anything will change tomorrow. There's no major economic news except some housing starts.

Charts are headed down, stocks that were green reversed themselves, no market leadership, semis and railroads continuously looking bad, and terrible market volume in a seasonally weak period.

market will retest lows again. it will take some time and it's never easy even for the bears.

downosedive said...

Tim Knight - thanks for the warning - better to say this rather than loose credibility through getting it wrong. May still go the way you originally suggested, BUT the 11000 figure for the DJA is too significant to give up without more of a fight. The fact it went well below that last week is a great sign, but the subsequent rally and todays fall of 72 points doesnt yet suggest that benchmark has been defeated. I just have a feeling a rally to 11000 in the next 1 or 2 days will happen. After that any further weakness taking it definitivly below 11000 may be the downward path we are all waiting and hoping for........please keep us regularly posted, as always we hang on your analysis!

chanon said...

Think if VIX VIX stay below 19, Dow could continued upward trend for the rest of the week, and through earning season(heard will be good, cause of downsiding and more efficiency in operation) Im looking at 5day chart using Linear regression channel, on DOW and VIX



Kapil Khanna said...

Like i posted earlier, the intermittent bottom in the DJIA is going to be valid for a few trading sessions. The intermediate trend is bearish, long term still bullish. There is going to be an attempt to take the market up, got to wait and watch whether it fizzles out or gathers momentum. Cover puts and be patient for opportunity.

mike said...

Two facts that may have no bearning on where we are going but thought I'd throw them in. Historically (according to Traders Almanac) this week after the options expiration in June is a loser a very high percentage of the time.

Second, from a charting perspective, Neely/Neowave things we are going up a bit more this week (topping) then starting a big drop thereafter.

cristri25 said...

the trend is firmly down. housing is a wreck. oil is still around 70. Korea wants to launch a missile. Ben wants to takes rates to 6.

the market on a 15 minute chart today looks like a disaster.

this market is testing lows this week.... Tim ... I know it just seems to easy .... !

cristri25 said...

the bull is dead.

cristri25 said...

if korea launches that missle ...

PB said...

Any rallies from here on will get sold! That's what makes a bear market and that's what is going to make money this year!

stockshaker said...

I try to look at where's the party at. Notice the hardly noteworthy volume on the bullish run in the end of the day, compared to HUGE THUD! when teh bears came back closer to the end of the short-short-short rally.

Also, end of the day looks like an Evening STar candlestick formation.

This means one thing: Bulls, Good Evening, and Good Night.

Anonymous said...

This market has some work to do around 10,700 - 10,900 with upward spikes to 11,100. Trade that range for a few weeks before we go lower, much lower. 10,000 will fall this year!

oldsoothsayer said...

How a 100% certain can you be?

Sounds like Tim has a point on the possible weakness of the market tomorrow.

I have gone again and again through my cycle studies and I just discovered that I was focusing too much on the unlikehood of a short cycle.
In fact, such a short cycle is very rare, however possible.

On the basis that such a short cycle is conceivable, the thing that goes in favor of a fall of the market is the following:


WEEKLY cycle: It is only one week away from its mean (+/-3).
So 2 more weeks counting this one.
Heading straight down.

DAILY cycle: it is 8 days away from
its mean (+/- 4.5).
Heading down for the past two days.
And it should be continuing so.

Intra days cycle: 3 more cycles. The last one should be monitored to see the direction it takes at the end of the move.

What to conclude.

Weeks and days cycles are heading south and probably the last intraday cycle will follow.

Knowing that in cycle theory the big changes in trend occur when all the cycles come to an end at the same time, this scenario holds.

Although the weekly cycle could be a new one going up. The days are not over; they have not even reached the lower limit of their range (in 4 days).

So 8 trading days average is almost two weeks. These 8 days could last another 4 days (upper limit of the probability range.
So 9 days is very probable.
And 9 days is end of next week.
The turn should occur at that point!
And Tim is right about tomorrow going down.


costas1966 said...

15 comments so far. No Bulls, many bears some claim including myself we get more consolidation before we go down. That means there are too many bears, too many shorts and the market will do what it likes to do best. Take the most ammount of money from the most ammount of people at the least ammount of time. We are ready for a rally. Get ready to lose some money if you insinst to stay stubbornly on the short side.
You need to be like a Palm tree in a tropical storm, very flexible, that should be the strategy for the next few days.

cristri25 said...

"15 comments so far. No Bulls,"

ALthough ... this is just a small blog ... you forget about the PUMP circus on CNBC everyday calling a bottom.

costas1966 said...

Cristi that is a non event. Who ever is parading on cnbc, they are always bulls since they want to sell the public stocks al lthe time. To me chat rooms are more important short term psychological indicators than CNBC's take on the market.

Mark said...

The way I view the stock market is much like the weather, no one knows exactly what will happen, but there are great indicators of what could happen if one has enough data. I'm pretty good at predicting weather in the mid-west, maybe not exact temperatures, but I can tell if it's going to rain or shine. This current market really feels like good ol' fashioned mid-west weather. Wait 15 minutes and it'll change.

Tomorrow it will be mostly rain (bears). Let the bulls run for cover! Maybe even some scattered thunderstorms. My, how I love the rain, and a great steak!

11 of 13 stocks I picked today did as expected, and the other two will likely fall in place tomorrow or the next day.

P.S: Great blog Tim, I'm learning a lot from it! Thanks for putting your thoughts down where some new people to this experience can learn from it.

kimberlysgarden said...

Your suggestion on the diamonds gave me a nice profit for the day. Thanks! Where shall I send the Krispy Kremes? (i'm assuming the ever popular glazed . . )

John Wheatcroft said...

This looks to be a good day to get a little long in MRVL. MRVL is going to split 2 for 1 on July 10th and it has been trading with the market for several days. Usually when a well-liked stock is going to split it starts to rise a bit into the split regardless of market trend.

So I picked up a quarter position this morning after the chaos and will pick up another quarter tomorrow. Since it is a 4-letter stock it instantly goes into my "don't trust this bunch of crooks" box and I will watch it carefully for the next two weeks.

For those of you who play using options some calls might be profitable but watch your step as the stock is a volatile little cuss. Not a recommendation only a thought.

John Wheatcroft said...

Another thought for the few bearz in this crowd - the VIX is already oversold and if it closes around here (16.48) we'll probably go down hard tomorrow (or not - I stopped trying to predict day to day 20 years ago). Anyway a good spec play is to trade the vix.

I'm largely flat except for the MRVL I mentioned earlier and some gold I've been adding to over the past couple of days. While I'm not a gold bug, miners and oilers have been my bread and butter trades all year and it doesn't look as if this is going to end soon.

Just a thought, not a recommendation.

Good trading.

Anonymous said...

john - by go down hard, do you mean the VIX or the indices?