Thursday, June 15, 2006

Perfectly Predictable Retracement

Here's what I wrote last night:

"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."


Shouldn't I be charging for this advice? C'mon folks, this is great stuff!

Seriously, I'm getting nervous about being so spot-on, because I'm bound to royally and profoundly screw up soon. Markets cannot stay this predictable. But I still sense the market has changed, and if a bear can predict with extreme accuracy even bullish behavior, you know that it's the bears, not the bulls, that have the true pulse of the market.

Because you know what I think now - - - party time is back. For the bears. If the market rallies tomorrow, I'm going to be extremely concerned, because it would make much more sense for the market to end down. And continue down next week.

The psychology shift can even be seen in headlines - look at's home page. They talk about "revenge." That isn't the kind of pissed-off, bitter tone that bulls take during normal times. But they are on the defensive. And they want to rub our bearish noses in their two day rally.

Looking at the minute-by-minute intraday chart of the $INDU over the past 30 days, and you can see the market exactly touched the descending trendline. And I did not draw this trendline today, people! I drew it a few days back, so this isn't a retrofitted drawing. It's the truth.

The fear got squeezed out of the $VIX in just one session. Utterly crushed.

If the market is down tomorrow and continues down next week, you seriously need to send me a box of Krispy Kremes or something. Because I think that's what's going to happen next.


Anonymous said...

I think MarketWatch was talking about consecutive triple day gains, so they were adding yesterday's 100 points to today's total.

WaterMelon4 said...

Option Expiration will potentially bring a world of volatility Friday, that I may have to stand aside and watch. I love volatility but it may be completely irrational tomorrow with all the big boys upset we’ve been taking their money!

mike said...

Nice job Tim!

Based in part on your targets and some things I've read from other experts I trust I entered into some short positions toward the end of the day...not a ton but some. My question is ... is there something specific you'd look for during the day tomorrow that would change your tune? For instance if DOw jumps way above this line? Like to know if there is a point at which you would exit your shorts and change your stance to one of an intermediate term rally as a few other sites expect (3 to 6 weeks).

Thanks for a great site!

DW said...

Pretty good follow through to yesterday, however still holding below of the 200 SMA on the SPX.

Tomorrow should be interesting. The indexes busted through several short term resistance levels today...

Tim any comment on the significance of todays long white candle?


Anonymous said...

I'm a bull but I still read this site since Tim has been pretty good lately. It appears to me not everyone believes in this rally, unless we're down -20 on the nasdaq tomorrow it's a win for the bulls, flat day would would make shorts nervous going into the close.

CowboyTrader said...

Looks like we will get a run to 1270 on the S&P 500 to finish off the 4th leg of the Elliott wave, then down down down into a burning ring of fire to say 1210 to finish off the 5th leg.

Pete said...


I'm glad that you mentioned the "Encylopedia of Chart Patterns." This book has made me into a much better trading by being able to ascertain profit and loss targets prior to entering a position. I used to trade technicals until i quickly learned that oversold can become really oversold. Does have a feature that scans for chart patterns like H&S and double tops?

sab63090 said...

Tim, you forget today was Part I of Triple Witching....Part II is Friday. My guess is strong at least in the morning, maybe a late day sell-off.

Anonymous said...


I have the same thoughts, think we could be up till around noon tommorow then the swings will start.
If we don't get a substantial move higher tomorow it will be an ugly close with explosions going off in a number of funds and portfolios all related to opex.
I would keep an eye on the broad tape for early indications.
Congrats on the recent preformance.

Kapil Khanna said...

Its been a long time that i have posted now. Been busy covering my puts last few weeks :).
Just a few of my thoughts on the market recently.
The long term trend is still bullish, intermediate bearish and tertiary bull for now. What is to be seen is if the long term trend changes from bullish to bearish. Breach of 10200 turns long term to bearish.
The best trades occur when the intermittent trend is the same as the long term trend and you trade in that direction :).
I am patiently waiting to see if the intermediate stays bearish or turns bullish, either way its a waiting game for me now.

cristri25 said...

the low volume today was a patetic attempt by the bulls ....

cristri25 said...

it was tough day for my PUTS !!!
i think though in 2 weeks ... i will be happy.

Anonymous said...

Hey Tim-- you really have been "spot on" in recent days and I thoroughly enjoy reading your take on the day to day action of the market. But, in all fairness, you (and many of us)were spot-off for a good long time as the market churned higher and higher and higher. So don't scare yourself too much-- just keep sharing your thoughts with us. Thanks for the time you put into the blog.

TR said...

great stuff . . . I closed the shorter end of positions yesterday.

I LOVE THIS blog site. contrairian to the news!!!! Not always right on the way up, but weary enough to keep me thinking.

I am setting my tops / bottoms tomorrow! I have a load of cash sitting idle today with the markets below their their 30 day MA (did you say NO TECHICALS - is MA not a techical? - great insight regardless!!!).

Charge everyone but me $1(just kidding). I like your view!!!

Making sure I get my positions tomorrow. You made my last two weeks profitable. I have better confidence in what needs to be done in the near term.

good luck to all!!!

stockshaker said...

Didn't anyone notice how the largest volume in the day came in the last portion of the day?

Im looking at 15m graphs, and look at at the last 15m on the Dow - the largest block of volume occured in the last period - and what happened in that 15m? IT went down.

I think the bears are itching to get back into this.

And I hope they are hungry, as there are way too many puts and spreads aching after the last two days (even though it was inevitable, but i love selling time)

stockshaker said...
This comment has been removed by a blog administrator.
stockshaker said...

it is unbelieveable that the rally in the last two days accounted huge points, but somewhat inevitable considering the last month. I am a technical trader by heart, but often sit back and think about fundamentals as well - Despite the glory bull articles surfacing in the last day, RECLAIM 11k, that anyone just thinks about WHAT caused this downspin in the first place? NOTHING HAS CHANGED, the FED has now all but certain to increase rates, housing is still going to suffer, and commodities are at all time highs

The economy, and the markets thrive on housing, and commodities, and we have found ourselves in a situation where things have not changed.

Technically, I would not be surprised to see a sell off tomorrow. the puts are in place, and Im just waiting to fish in the profits.

I LOVE the propoganda on wall street sites, how the articles alluding to a (gasp) Bear Market are located in 10 point Times font in the lower part of the website. When the real selling commences, I'll feel like a kid on a road trip to disneyland.


John Wheatcroft said...

Krispy Kreme donuts? A man on a winning streak with a death wish - incredible. If half your readers are making half again what they imply they should be sending Omaha Steaks. If the market is down tomorrow and continues down next week ...

I don't think so but we'll see.

Remember this is a Friday in the Summer which means everything closes (virtually not really) early. Most traders made their week yesterday so they are gone at noon. Got to beat that traffic to the Hamptons.

Good trading.

Sanjay Sola said...

Bear markets are always known for their fantastic up days. the biggest days occur in bear markets. too many stocks up 10% on daily average volume. same commodities junk heading up.

hmmm. sounds like a bear market rally to me. shorted a lot yesterday into the close. thanks Tim.

Super Bull said...


You made a good fundamental case for GOOG. Technically, GOOG is very impressive and is classic base action. I have a feeling that it will shoot straight up next week and run into earning. I think GOOG will have a 5 handle after earning announcement. Long GOOG.

brian said...

I second the long on GOOG. The long term seems to be consolidating in a triangle, and it has actually risen while the market's been tanking. But then again, since most of us seem think the market is going down...

Tim Knight said...

I own puts on GOOG with a contingent stop at 395.43.

rob t said...

Hi Tim, would you please tell us what positions (other than GOOG) you are currently in and what are some on your watch list? Thanks. Rob