Wednesday, June 21, 2006

Ouchie!

Well, the baton has been passed (for the moment) to the bulls. If you think this is a one-day wonder, you might consider the DIA puts with a stop at 112.85 (I've put in green the retraced H&S pattern below). But, make no mistake, this day belongs to the bulls, and it could be the start of a multi-week lift. We'll drill down into it deeper tonight.

46 comments:

Anonymous said...

Ouchie is right! I opened some shorts this morning and have taken a bit of a beating so far. No worries yet, though, as the individual stocks I've shorted haven't yet surpassed their previous resistances. Always keep those levels in mind, even with a tremendous rally like we're seeing today. Don't let the sea of green play with your emotions and force you into either going long or covering your short. Wait for those technical levels to materialize and be breached before acting.

Anyways, we overshot the 11,103 level, yes. But this afternoon is retracing a bit and is now 11,106 as I type. If the volume picks up to the downside this afternoon and we close below 11,103, then it might be a small victory for the bears. We'll have to wait and see.

costas1966 said...

Very likely that could be the case. Instead of a multiweek lift I would rather say it could very well be

a multiweek drift lift. No matter you got to give it to the bulls today

Anonymous said...

Cover now or limit losses on an afternoon slide...but I see the slide being a bear trap this time.

I've made some money short...going long...actually I've been long the last two days...lucky enough to get out yesterday quick.

Today I buy on a drift.
Good luck

traderdave said...

Tim,

Like many days after reading your post, I have your numbers posted on my white board and track intraday market progress. Today - Ouch indeed.

Thanks for your in depth market analysis and commentary. I have to say peoples posting comments and responses are pretty awesome as well. I commend you on providing your take on both bullish and bearish sentiment. Your blog makes the other blogs/media commentaries I review each day second rate.

Thanks - David

stockshaker said...

I don't think it would be wise to say bull or bear right now, in the short term - I doubt we'll see direction before next week.

But then, isn't that a pretty safe bet to say that considering every major website is saying the same thing.

sorry guys for market analysis regurgitation.

Im still holding on to spreads, and just letting time value deteriorate for those poor suckas who bought them off me.

Or will I be the sucka?

bsi87 said...

The 50 DEMA for the DJIA was at 11,120. Naz, SP500 and Russell are way lower than their 50 DEMA's so they haven't even come close to retracing a good part of their fall. I added to my DJIA short position. At minimum, I see a retest of last week's lows. If those lows don't hold, it projects to 10,300 to 10,100. Wouldn't rule out a furious counterrally if we see those lows break AND the % of stocks trading below their 50 DSMA is 20 or less. Latter triggered what I consider a short covering rally last week.


Time will tell.

costas1966 said...

Watch hurricane 5 coming out of the woods touting his stocks.

Sanjay Sola said...

I'm watching the S&P and Nasdaq 200 day moving averages: 1260 & 2150 respectively. If we close above it, i'll close my short positions and go long using those as support for my long positions. otherwise, I'll stay on the short bus.

Looking for market leaders in case the tide turns: maybe Google, Boeing, SMSI, SMDI, Celgene, Garmin. I really don't like any of them. but they held up well on down days.

Cramer called bottom yesterday, by the way.

costas1966 said...

Cramer has been calling the bottom since 1295.

christri25 said...

First thing ,,,, Cramer is a putz.

Second thing,,, Today is hard for the bears but this is where the smart money is selling. When the FED raised 50Bps watch out... the floor will drop out.

christri25 said...

Thrid thing...OIL is up today .... what a joke.

DW said...

Let's see what the afternoon brings. The last few days the bears have come in at during the last 2 hours, lets see if the same happens today.

DW

costas1966 said...

Remember guys be like a palm tree.
Dont let small loses become big loses.

Anonymous said...

Here's what amazes me: the Dow took 23 trading days to drop less than 900 points.

It has taken only 5 trading days to gain more than 400 points back!!

What's up with that?

When you look around the market and every single stock is in the green by 5% or more, then there's gotta be something wrong.

Perhaps the bulls will exhaust themselves and the bears will come out and drive down the market once again. Who knows. But in the last week or so, the bears have been completely gored.

BTW, the SPX will not close above 1260 (major resistance now) and I doubt very much that the NAZ will close above 2150 today. The major indices are starting to fade going into the late afternoon.

Lots of buying today, not much selling (on a relative scale). Up volume compared to down volume is around 9:1 today. That's unreal.

The bears need a catalyst to induce more selling. Otherwise, the market will be back on track and ready to roll. Will the 11,700 level be breached? My gut tells me no, but this rally could definitely go through summer if pre-earnings look good and Q2 earnings don't disappoint.

It's a strange market, indeed.

Kapil Khanna said...

This rally was inevitable and has come as expected. Now what needs to watched is if this fizzles out or turns the intermediate trend to bullish.

Anonymous said...

That's what they said when the 11,000 mark was reached.

Now look where we are.

PB said...

Don't be fazed, sell into any rally, specially ones that go over 100 points! I am not surpirsed that the bulls would try a rally like this, they are running out of time with the fed meeting set to begin next week, it will be back to selling in no time! DIA Sept. puts look mighty cheap today!

John Wheatcroft said...

Now we know why I gave up predicting. It could be that we are coming to the end of a quarter and the funds and funds of funds and hedgemeisters all have to get the ROI up and you don't do that when in cash. The market already discounted the Fed's next two moves so that is a non-event again.

In two weeks we start another earnings season and that will determine the fate of the rest of the summer. A few good ones with some positive guidance and look out above. A few missed with some negative guidance and look out below.

Gold and oil are both flying again and I'm smiling. My MRVL spec seems to be turning out OK and all is right with my world.

Good trading.

Anonymous said...

again, this rally is nonsense. Its days like this YOU SELL....you buy when everything is down and sell when everything is UP....I take this rally as a grain of SALT. WE ARE NOT GOING BACK TO 11700+ no way possible. Yes we may break out to the upside but it is extremely limited, I think this rally holds into the close and goes into tomorrow morning however I do see a wave of selling mid morning and traders taking profits. We will be stuck in a tight trading range for the next 3-4 months after that its anyones guess. I dont think a month worth of selling says it all. I dont think were done going down. I think the DOW goes back down, im calling 10500, easily by mid summer....Unless earnings are great this quarter this market will be totally stuck in a trading range...DO NOT FALL FOR THESE RALLIES.

Anonymous said...

if your looking to short, short the ETFS....

Anonymous said...

Looks to me like another failed attempt by the bulls to break above top range resistance today.

Bulls are likely to try again tomorrow, but I still see a drop on Friday.

Dave said...

the $vix uptrend was broken, and the $Comp:$SPX down trend was broken

This rally is going to last. Usually when those 2 things happen the rally does break through.

Anonymous said...

how far do see the dow going, 11200+ 11400+

like i said earlier I do not see the DOW climbing back to 11700 anytime soon.... I dont think the selloff we had warrants such a rally and if it were to go that high and break new highs I would certainly be placing puts on every index...

if we open up tomorrow i will most likely be adding short positions

GX2006

bsi87 said...

Looks like tomorrow will be interesting.

The Dow was up something like 90 pts in the first hour and it's down about 22 points in the last hour. The Mom and Pop retail buyers trade the first hour/pros the last. Volumes are just average. I think the bulls get nailed tomorrow. JMO.

bsi87 said...

VIX/VXN are now trading near bottom of their 20 day Bollinger Band. Rallies usually start off a reversal at the top (max fear), not at the bottom. (A reversal off the bottom is usually a great chance to short).

Anonymous said...

bsi87 your saying its a good time to take short positions in stocks as of tomorrow morning...

VIX dropped below 15.50 looking like it could be a great time to short until VIX heads back to 20+++

do you agree or disagree

bob

christri25 said...

yes.. the bulls lost today .. but the DOW gain was propped up by DD !!!! come on !!!!!!!!!

6 stocks led this DOW rally ! I agree with bsi87 ....

the cbsmarket watch headlinw was FEDEX rallies market and put inflation fears behind it... INFLATION IS EVERY WHERE. read the FEDEX 10K they raised the fuel surcharge 16% !!!!

brian said...

john wheatcroft--

just curious if you're short or long MRVL. Had a nice rally today, but I see a massive head and shoulders, as well as a descending triangle breakdown, and has retraced to the HS neckline (also the bottom of the triangle). Even if the market rallies i think it could hold under resistance...unless it doesn't...then I'll get creamed! but that's what stops are for, and seems low risk here. what's your take?

bsi87 said...

Bob,

I thought it was a great time to add to short positions today when the DJIA hit its 50 DEMA at 11,120 and then backed off. The problem with starting positions in the AM is the market makers play games, gapping them up or down at the open. Makes it hard to get a good entry. If VIX trades above its close AND open, it'd confirm the move.

Top of the BB for VIX is 22, could trade thru that. It hit 24 so 23 might be possible.

I think the mkt is gonna chop around so being a permabull/permabear will be less lucrative than swing trading esp when the indicators are way overbought or oversold. For example, a week ago Tuesday I thought I ought to close my short positions and go long with the VXN that high, the McClellan oscillators doing their thing, the % of SP500 stocks trading below 50 DMA's approaching 20,MACD's diverging but I didn't see any reversal signs going into the close where the big boys were buying. Shoulda,woulda,coulda. Makes me think it was a short squeeze.

So I'm net short but trading long in very small positions and taking 5-10% profit on the longs and getting out.

Anonymous said...

Any guesses for market leaders if this rally is confirmed?

I like energy and metals for quick trades and out.

Long term i like the industrials with Asian exposures and super quality Chinese stocks. I bought a ton of NTES at around 20.25. That stock kicked ass on earnings but unfortunately the next day was the first day of the big market correction.

I look for some profit taking on Thursday and a strong finish with modes gains.

Today was a follow through rally no way around it guys. For how long, that is the question. The Fed is already in the cake,,,barring a major international crisis - I'm biased long on my next 2 weeks of trading.

Looking forward to Tim's analysis, he made me some nice green over the last 3 weeks.

stockshaker said...

Where are you guys finding these graphs of % of stocks in SP500 trading below 50?

And what does this all mean, what is so special about 20?

I've read that somewhere, but don't know where, and don't know why its so signficant.

I think that its a little risky to be placing movements on tech indicators right now, since its speculation of the FED that is driving this volatility at the moment.

I personally, am a betting man, and I took the bearish approach that nothing meaningful is going to happen from the FED meeting, and this is what was based on the last meeting, the meeting before that, and the meeting before that one.

But all this hoopla about stocks trading this way, and VIX/VXN trading that way - is a little misleading since at this point, everyone is speculating ahead of the meeting, and corp earnings.

stockshaker said...

and what do you guys think about the volume that happened today?

is that rally provoking?

dsantos said...

I don't know... I bought puts today, I think the market is going lower tomorrow. It sold off near the end of the day and the volume was increasing then. Who knows right now, let's not have any multi-week lifts though, or I am going to be on the street :-)

downosedive said...

Help.......Ive been hit bad today, shorted, panicked at the strength of the rally and closed. Lost around £500 (about $850) in real money, added to my loss this year on the Dow, Im down about £5000. Nothing I do ever seems to go right I hold loosing positions far too long and then close just before the turn. I hope for a better sense of direction from this blog, but at present none of us can be sure what will happen short term. Still some good comments today, just boils down to individuals nerves as to how to react..........

Anonymous said...

Nosedive, if you are new...do 1 of 2 things when trading...wait for the trend to be 100% confirmed before trading....if you can't do that you are going to lose during periods of high volatitity.

I feel 75% that we have a follow through to a rally (but even given this, if it were 100%) there is no guarantee that the rally will sustain.

You have to pick your spots and phase in to your positions until you have more experience (which is the 2nd thing I'd advise doing.

Anonymous said...

Tim, just wanted your thoughts on this. When a possible rally hits, I look for 2 things, Nasdq leadership and IBDs follow through on rally within 7 days.

I think the small stocks held up a little better than Dow during the late afternoon period. What I'm primarily looking at is the volume as the cement to the follow through...what I see is that the volume day like it was on last WEd and Thur. up days is higher than the down days we've had.

Now the issue is todays volume to me...it wasn't great, yet it was better than the two previous days of weak market action.

Looking forward to your input on the internals.

John Wheatcroft said...

Brian = I'm playing MRVL long based on its approved split 2 for 1 on July 10th - I'll sell just before the 10th. I only trade the long side - if my indicator shows that the market is going down I put 1/2 in money market and 1/2 in Rydex or Profunds inverse funds and take a vacation. My indicator just turned to the up side however which means (usually) 10 to 20 days of sideways or up. I do think the VIX will make itself known tomorrow however - it was oversold yesterday and twice as much today - currently 20% in the red.

Downosedive - the most important rules in trading - 1. nobody knows nothing, 2. patience is a virtue. Don't look to a blog to make you rich you have to do it on your own. You can get some good ideas from this and other sites but in the end it is your money, your action, your play that makes it or doesn't.

And the rest of you stop wishing for easy money - there ain't no such thing. Find a bad company with weak funamentals and short it. Want some help - find a calendar of earnings and look at the trail of the stock leading up to the earnings. If it is rising into earnings it is probably doing ok - if not it probably isn't. Short that stock before earnings. Remember also that 9 times out of 10 MSFT dropped after announcing earnings even when they were good.

Don't short ETFs - you are going against the big boys and that is foolish. Also they don't move enough to make the risk worth while. You might use a sector ETF to back up a large short - E.G. Short OXY - long XLE. Work out the math on your own. Just a thought (and not even an original one) - not a recommendation.

Have a good evening everyone.

Sanjay Sola said...

Nosedive, shorting is tough. most people don't know how to sell a stock, so they won't know how to short.

I practiced shorting in my fantasy stock portfolio before i began shorting in my real one. try the Zacks.com simulator and work on your timing of what to sell short and when to do it.

i've become a much better trader in the last 3 months since i've been using the simulator.

Anonymous said...

rally ?what rally?
I bought SPY puts (124 July put)first at 1.5 & then some more 1.3 & last buy at 1.15 (just when SPY peaked)& sold 2/3 rd just before close @1.4! May be I should close the balance 1/3rd tomorrow at a profit & try long 126call if this rally stops dropping at 124.2-4 area

Brian said...

Nosedive--

I'm new to trading too. Started in January with real money, lost about $600 total over 4 months (while chump change to some, with an account of $3500 and recent college grad's income, that definitely hurt). So now I'm paper trading and won't go to real money again until I've been successful after 6 months. I found as I lost more I got more nervous and felt even more of a need to dig myself out, thus taking bigger risks, and seriously clouding my judgement. Playing with fake money has given me more perspective (whether I can keep that perspective once I put real $ back in will be another story).

Check out Elder's book "Trading for a Living". I just finished it. Amazon has a great version with study guide included. The most important point I took was regarding the psychology of trading. He says trades often reverse right after people get out of a losing position because the psychology of losing is the same for most people...and once those people are out the stock to reverse. It felt like he was writing a direct account of my own trading patterns. He also makes a good point that trading is not just zero sum but a MINUS sum game when you account for commissions and slippage. So the odds are against everyone. Fear and greed are powerful forces, I couldn't keep throwing my money away while I learn, so I took it out for now. But that's me. You know better than I what is good for you. Best of luck to you.

stockshaker said...

Its harder for the new guys to trade right now, you're coming in at a time when its completely madness, people whispering Bear, Bulls trying to salvage.

No wonder people are losing their shirts.

The best way to trade, I've found is just play the individual stocks, theres always clearer/cleaner resistance/support lines.

None of this knee jerking market movements.

BUT DONT EVER go against the market, the house always wins. (most times)

downosedive said...

Thanks to anonymous, stockshaker, brian, sanjay, john wheatcroft for your comments, nice to get some feedback and will take your views on board. Im UK resident, but chose the Dow to speculate on because its so overinflated in terms of its index and also because its far more volatile than our UK index the FTSE. Having said that Im wobbley as to whether it really will go down from here, I know it should and you all know it should, but whether it will is another matter. As has been said here many times recently, there are a lot of bulls in high profile places and at the end of the day its sentiment rather than anything else that dives any market. Another site Im with issued a sell notice aginst the DOw LAST WEEK. They rarely issue either buy or sell notices, but when they do they always claim to time it correctly. Another bullish site turned bearish a couple of weeks ago as well, so there is some changes towards bearishness taking place. Just need to other punters to join in! Another rally tomorrow should indeed lead to a profit taking session on Friday, but then where to I wonder............

Anonymous said...

Careful...

When everyone is bearish, it's usually time to buy. At least in the short term, that is.

However, it's probably good to be bearish for the long haul, as the economic crises that are hitting all corners of the world are actually REAL. So, the bears will EVENTUALLY be right, but the real question is: when?

People are talking about buying gold now. Sure, it's come down a heck of a lot from its speculative highs. But the question is, will it go down even further? Nobody knows. Will the dollar continue to inflate, or will it gain support with the Fed rate increases? Who knows.

My money is betting on the Fed to continue to raise rates throughout the rest of the year. All the central banks are doing it, and Japan has made it clear that they will raise their rates. The US won't be left behind, so they'll raise theirs to keep up. I suspect that eventually, everything will come crashing down, but I don't think that'll happen quite yet.

The bulls may indeed have their summer rally. I don't think there is any doubt that last quarter's earnings will be great. The real question is: will the earnings report be realistic with their forecasts (lowered), or will they keep them artificially high until the Big Boys are able to unload their stocks, then in the next couple of quarters, we'll start seeing some significant earnings misses and some downward earnings revisions moving into 2007.

I wouldn't think it unlikely.

Anonymous said...

d

Anonymous said...

profunds just released 8 new ETFs that are ultra bullish and ultra bearish...

one for the nasdaq 100
s & p 500
dow 30
midcap 400

if you really want some risk try trading these

bsi87 said...

re:% stocks trading below 50 DSMA http://stockcharts.com/h-sc/ui?c=$spxa50r

re: 20. Average number of trading days in a month.

re: Nosedive.
1) Cut your position sizes back or trade on paper. If you lose 6% of your equity in a month, close ALL positions and study where you went wrong.
2) Use Elder's Triple Time Frame to determine where the mkt/stock is.
3) Good money mgt/risk mgt is more important than guts or even the stock pick
4) Take profits sooner in a volitile (sp) mkt.

Try to be observant of all things going on around you. For instance, when gold hit $750, Barrons had an article on a guy who predicted $2000/oz. That was an indicator of "a" top. Note magazine covers. I think this week's Newsweek was on India. By the time the general press recognizes something, it's the bottom or the top. I kick myself that I didn't buy PGE and Edison when Newsweek cover was on the CA utilities. That was THE bottom. Same thing for oil. Guy on Nightly Business Report predicting 85-90 oil. Remember when Goldie said oil to 100 last spring. That was a tradeable top.

Know what season you're in. May-Oct is usually, not always, tough mkts to trade from the long side.
Know the time of month. Seems like mkts are driven lower till the last 2-3 days of the month and then rally thru 5-6th day of the new month.

Good luck/good trading.