Friday, July 28, 2006

Sheesh

I, for one, am glad to see this week is over. On the whole, it sucked for bears. Ever since June 14, the bulls have, more or less, been at the steering wheel. We've had some hopeful days now and then, but the sad fact of the matter is that we still get triple-digit push-ups like today on the most feeble of news.

I feel exactly like I did when I wrote this posting in May. Interestingly enough, my feelings of despair at that time precisely match the peak of the market. To the day! So maybe there's a little hope, eh?

There were a few bright points this week, like the nuking of some Insurance stocks. But more and more bulls are getting heartened by recent activity, and you can smell the stink from the media about how rosy everything is. Apparently a slowing economy is great news.

I see the comments section is more active than ever. I don't even want to walk into that bar. God knows what is going on.

The Dow Jones 30 is still - but just barely - in a safe place for bears. I've pointed out five levels. Exceeding each one will make things progressively worse (and if it goes above 5, I'm going to enter the exciting world of retail shoe sales). This is an extremely dangerous juncture.


The note on the chart for the $OEX speaks for itself.


Below is an intraday (minute by minute) chart of the $SPX. It has obediently stayed under the trendline. Now, that's all well and good, but given enough time, the S&P 500 go climb to 10,000 and still be below this line. But at least this slender wall is holding up.


Jeez, I hope next week is better than this one. I enjoyed early June a hell of a lot more than this.

57 comments:

Mark said...

Tim, you pointed to the things I was wanting to mention about the DOW that I saw today! Draw a line from 4 to 3 to 2 and past 1 and you have a slight downward wall that 5 had breached. I will say that if it crosses that line, it may be the final straw before I turn bull and run with at least halfway with the crowd. Live and learn...

Unless there is a serious drop on Monday, I don't see the DOW hitting 10500 that I was looking for. At this point, even 10600 could be in jeapordy.

Mark said...

I should have said breaking lower than 10600 could be in jeapordy.

Super Bull said...

I am a fundamentalist at heart although I use technical charts from time to time. I would love to be a bull again for it is so easy to make money but the fundamental news today is awful. The economy is slowing down and inflation is picking up. That is hardly a recipe for a sustain bull move. I am shorting stocks right now. One notable mention is GRMN which is wildly overvalued and is facing tons of competitions.

CowboyTrader said...

I was actually heartened by the rise today. I have been waiting for the S&P 500 to hit 1293 which is the .382 fib level from th elow in Aug 04 and the high in May 06. When this happens and hopefully its soon, S&P is going to 1187

Dave said...

Right & GRMN has broken below its support @ $95 with the 50 day MA just above that. It was nicely on stronger volume too :) I'm with you on that break. I'm in @ 94.75!

I'm thinking this is end of the month window dressing like we've seen at the end of each one of the last few months, but I'm still a little un easy being short right now. I'm going to be closely watching the action the next 2 days.

One thing that is in our favor is that the volume was on the weak side, and the OBV of the S&P doesn't really look bullish to me.

Ah well... here's to keeping an open mind and riding the market for which ever direfction it gives us!

Have a good weekend

Mark said...

Pay no attention to me, I'm just kicking myself for not riding this thing on the way up. Everything appears to scream "SELL!" to me. But it appears too many are not listening?

It almost feels like sitting at a blackjack table and the dealer has a six showing. Some dude takes a hit on a seventeen, and busts with a face card. And that sets the dealer up with a low card to beat out everyone else.

It just plain sux...

Kapil Khanna said...

Tim put it nicely, "Wow what a weeeeek". It's a weak rally that's taking this market higher. When this rally dips, i am going to watch it real close. That's what's going to tell me whether its gathering steam or is a fart. A higher bottom of anything above 10900 and i am getting bullish.

Anonymous said...

Press the six and eight up four units, and give me all the hard ways please. ....and the stick man screams seven out!! pay the dont's! Just a bad dream! ChronicTown... a.k. a. Hardeight!

Anonymous said...

Tim, how on earth can you say the bulls have been in control since June 14? Who was at the steering wheel the first half of July? And didn't you just the other day say that neither the bulls nor bears were in control of this market? Rally days have been on lighter volume overall, and leading stocks have been taken out and shot. Nasdaq = bear flag on bear flat on bear flag (daily chart). It's been an erratic environment to be sure, but my shorts have worked out beautifully-- but you have to take profits when they're nice and not get greedy when conditions are so volatile. The major averages closed right at resistance. We may bounce another day or two, but then it should be back down. Not to worry.

costas1966 said...

http://www.idorfman.com/Charts/

This is not mine. It is from a poster at prudentbear site. I suggest you browse it you may learn something

Julles3 said...

Gee, Absolute zero volume in this up leg. Retrace from major resistance 11250 Dow Jones. A bounce on the Nasdaq, simply correcting oversold territory, Home builders another bounce,,,, Dead cat at that.

I'm respecting your out look Tim, I'm looking for a maximum advance of the Dow Industrials of 1280 ... Then we Short! Julles from Oz

Thanks for putting your view's out here for all to read. Simply stunning!

cristri25 said...

Month end rallies have been on tap. Somewhat saying that the fund managers want to send out nice reports to clients.

GRMN , something stinks closed my short from 101.

BA , Tell me about this one ?

cristri25 said...

The DOW30 ...DRUGS and Financials leading the way.

The NAZ still sucks.

Whats up with inflation. I am damn confused.

SHORT GS if it stays under 153 ?

LONG ESRX if the NAZ rallies.

EddieFl said...

I hope you all have your stops in place. IF you are short, this market may take off on Monday to do its seasonal summer rally, dont fight it. If you can reverse and get long, I am sure you all know how hard that is, but it takes courage to make money and even more courage to admit when you are on the wrong side of the trade. Who is up to it?

Anonymous said...

Too many people confused, bears bulls you name it. When the market is selling off we have everyone saying its going lower etc etc....Now that there is a rally in place everyone thinks its going higher. Im sure this rally could bring the markets back to 6 year highs but on what reason, too many negatives outweigh the positives. Only positive thing I see in the short term is a pause to the interest rates which again does mean anything. I have read numerous articles stating that after a pause the markets actually do alot worse based on past information. Im sure we will top out soon and head back down. If the dow does past 11700+ I think a run to 12000 is certainly possible. However if 12000 is touched before or around september I would expect a huge drop going into the end of the year. No way can a sustained rally last under so many problems the markets are having.

Anonymous said...

The medium-term trend is still up. We've been in a bull market since early 2003. The S&P continues to trade above its key monthly and weekly EMAs: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID369857

You have to be very nimble to make money by trading against the trend.

dash

EddieFl said...

I trade what the market gives me. Go with its trend, which ever time frame you are in, why fight it, just ride the wave.

I beleive the summation of every govertment report, earnings, key inflation figures,interest rate action, world events, geo-economic news etc....shows itself in the price of the market. I dont try to figure it all out. I keep it simple by just looking at the price action. As Tim does very well

I am not an economist, Ive known traders that get bogged down with over analysis.

Anonymous said...

Jesus! Why be a perma-bear/bull it doesn't freakin' pay sh*t!! Play WTF you see! Stop tryin' to guess WTF the fed is going to do next, whether it's a bull or bear market, mid-presidential term, and all that other SH*T. At the end of the day all that matters is whether or not you were able to trade in the direction of the price trend of the equity. If the trend isn't clear park your sh*t in cash...simple as that!

Anonymous said...

TIM has done a great job! Thanks.
If you are full-time trader, this blog also has something that might interst you.

http://bluelightnewsletter.blogspot.com/

John B said...

I've been messing with some numbers, using a discount of future earnings model on two of the Russell Indexes...the 3000 and the 2000.

From the web site I got the following numbers for the 3000:

Close for 3000 729
P/E 17.1
Expected Growth 12.32%

When I calculate the rate that would be required to discount those future earnings back to the value today, that rate is 13.90%...not bad considering the long Treasury is 5.50%. Most of the yield differential can be attributed to volatility which has averaged 11.28% for the past year.

But look at the 2000

Close for 2000 700
P/E 20
Expected Growth 15.11%

That rate required on the 2000 is 14.50% or only a .60% yield pick up. But in addition the volatility of the 2000 is 18.10%, almost ba 50% increase.

Put another way, by increasiung your risk by 50%, you get a yield advantage of 60 basis points.

But look what happend is growth goes back to its long term average of about 8%...the 3000 goes from 729 to 535 while the 2000 goes from 700 to 513.

Yeah the markets are fully priced now...does not mean it will fall. I have no idea about that. What I can say is that a logical investor faced with a decision to buy Treasuries with no risk at 5.50% or stocks with volatility increasing and growth rates at the high end historically, the "prudent man" must buy bonds.

Just a thought


John

Anonymous said...

John, you're right on target about the markets being "fully priced" right now. And you're right, it does NOT MEAN that the markets will fall. I've been saying this for a while.

I'm still waiting for that "last" rate hike before committing fully to the bond market. I get the sense that they will spike upwards once the Fed raises the rates again and does not confirm a pause. Let's face it, the bond yields are around 5.00% and the Fed rate is 5.25% already. When the Fed goes to 5.50% and does not indicate a pause, the bond market will tank, giving a great buying opportunity going into end of 2006.

Of course, to be "prudent," it might be wise to start scaling into bonds right now, considering that it's still uncertain what the Fed will do in the coming weeks.

I like your thinking.

-Tony

Anonymous said...

You got whacked buddy. One must be nimble in this market and not remain locked into one frame of mind. If the indexes can top the July high, they'll be in an uptrend. Simple as that. This will be very interesting indeed.

TR said...

Trying to figure a way to "post" graphs I am following. Similar to Tim K's. I am a little shorter term than most. We are in my opinion close to a top:
DOW
http://stockcharts.com/h-sc/ui
(my internal charts show that Thursday penetrated the down trend and Friday confirmed the break in the downtrend. Would read this as a change in ST direction to neutral or "channeling" - why?)
SPX
won't put the site (they default - anyone that knows of a public site where you can save your drawings, let me know)
Similar to the DOW, broke through on lower volume but broke the trend line (short term). Good channel pattern now.
NDX
Fought like heck to come up, still in a downtrend. While others still may be hopeful, I think technology needs some "new" news and leadership. This index (and the stocks in it) needs some help or it will continue to trend lower.

Anyway, I commented on biotech (heathcare related) and finacials as the leaders and was criticized. Short term there appears to be strength, but would be careful thinking that the market buying is weak and ready for lower interest.

Best of luck in all your trading. Really appreciate Tim's forum!!!! Keep up the charting and idea's TIM!!!!

Anonymous said...

Here's a simple point: we are closer to the top than the bottom right now.

Now, if you can figure out how to turn that little piece of knowledge into solid money, I'm all ears.

Anonymous said...

Wow interesting sentiment going on here. Lots of bulls, interesting.... What happens when growth slows= estimates get cut and multiples contract. What you are seeing right now is the beginning of a slowdown..... The top for this market was reached on May 10th. We are going to be fully overbought by the fed meeting.... Interestingly enough, I havnt taken any whacks on the short side- patience has paid off- can bulls say that since may??? SBUX
, WFMI are interesting earnings to watch... i've got puts on those and added at the end of Friday to the QQQQ and DIA puts.....we are getting ready for the next leg down.

We haven't even had a 7%CORRECTIon on the Dow yet.... brutal. 20% is a normal correction and 30 is a bear market.... wait for the fun to begin and play smart.....as soon as earnings are done. I will just be playing the indexes.

Good luck!

PB said...

It's those damn stinkin' hedge funds that have to keep messing everything up! Since when is hint of a pause (and we don't even have the hint)a cut? Unbelievable! Every stupid little new gets bot! I can not construct a fundamental or technical case for buying this market in today's environment. I'll just keep shorting, too many things ARE wrong and can go wrong! Playing for DOW 10,900 in the near future

Anonymous said...

"We haven't even had a 7%CORRECTIon on the Dow yet.... brutal. 20% is a normal correction and 30 is a bear market"


I might be mistaken, but to my knowledge, 10% is a normal correction and 20% is a bear market. 30% is a drubbing :)

Regardless of what you call it, the markets are topping. We are definitely closer to the top (within 800 points or so on the Dow) than the bottom (room for at least 2,000 or more to the downside).

I've done so much reading about the markets and the economy in the past 6 months that I'm bleary-eyed. I think every single article (from anyone meaningful, that is) is calling for a downturn in the markets within the next 2 months, followed by the typical end-of-year relief rally, followed by a full bear market in Q1 of 2007.

Does anyone here read Volkmar Hable's commentary? I find that he's got a pretty good grasp on things and he's calling for a decline starting in mid-August.

-Tony

Anonymous said...

when is it a good time to buy TLT????

Anonymous said...

I think this says it all:

"Investor's Business Daily
Failed Breakouts By Leading Stocks Signal Weakness In Stock Market"

http://biz.yahoo.com/ibd/060728/corner.html

I don't know who's doing the buying, but the rallies all seem to be in the morning and the air is let out by the afternoon (suckers in the morning and institutions in the afternoon).

Anonymous said...

anon Tony, pls enlighten us on Volkmar Hable.

_ Frank

PB said...

For Bears Only!

Came across a chart recently that deflates US stock prices by a basket of commodities. This chart goes back to 1810 and it has recently signalled a MEGA trendline break that has been intact since, you guessed it, early 1980's!! The beginning of a glorious bull. Now my friends, it is time for the bull to die as it is old and weak!!! We must make room for a new and healthy bull, but it comes at a cost. Dear one at that. The bull MUST, and WILL die. Any discourse in rambloing on that corporate profits are great etc. is moot. Corporate profits aren't increasing, are they?! Also, it's also interesting to note, that capital spending by corporate america is not panning out as expected. Who will take the place of the heavily burndened US consumer?? THE CHINESE, in 50 YEARS!!

I'm long DOG!!! woof-woof!!!

PB said...

Oh, another interesting thing about this chart, and the latest trend-line break is that once it breaks, it REALLY breaks!!! We are looking at a nice DROP! A few thou, off the Dow! CIAO BELLA!

Anonymous said...

I'm reluctant to post an external link here, but someone asked about Volkmar Hable's commentary. His direct link is here:

http://www.hable.ca/downloads/Commentary.pdf

If you read www.safehaven.com, you'll see his weekly commentary posted there.

And for any serious bears out there, if you're not reading safehaven.com, you're really missing out on some good information.

-Tony

Anonymous said...

BEARISH engulfing pattern on ESRX -- picked-up on friday on the rally about that robust GDP #!

scottishinvestor said...

Great site, some great guys but perhaps needing a little foreighn perspective to correct your isolationism. The markets are rising and will probably continue to do so beacause the world is awash with money. With oil at $70 plus the sheiks have to park their cash somewhere and, historically, quality equities have provided the best return. These guys are no small investors, they are pumping billions per day. Allied to this many American CEO's are so unimaginative that all they can think to do with their own cash piles is to buy back shares. If you bears are going to end up frustrated, blame liquidity.

Anonymous said...

scottishinvestor --- you are one enlightened dude!! Must be that Scotch!! Hey, do you remember the 1970's?? Yeah, you know, the one with oil shortages and HUGE spikes in oil prices. Hmmm, how come we didn't get a rising stock market then?? Those oil sheiks must have spent the petro-dollars on women. Now that they are older, not even viagara does the trick, so they must buy stocks?? Anyways, your argument is very weak. CEO's buying back shares can only last so long. Do you not think that under-investment by US CEO's will not catch up with stock prices? Enjoy the ride, as it's almost over.

Sanjay Sola said...

Still no rally day or confirmation day. we're in a downtrend folks. Stick with the trend and you'll be OK. when the market gets overbought and is facing heavy resistance, that's the perfect time to short. you want to make the big bucks, not dinky gains. going short here is low risk.

no worries from this bear.

Anonymous said...

yup new shorts this week look good

Sanjay Sola said...

more end of the month buying today. I will short more at the end of the close. Tuesday, the market will fall. lots of shenanigans.

scottishinvestor said...

Deed I do remember the 70's. No rally because of high inflation and oil money reinvested in what was then a very underdeveloped mid east. American co's should do very well over next few years. India and China have 40% of the world's population and are developing very rapidly. The demand for the successful American lifestyle will generate huge demand for U.S. goods. Look at any long term chart (from 1900 say) and history speaks with one voice. Hiccups along the way, such as 1929, but bears only appear from the woods for short spells.

Anonymous said...

scottishinvestor said:

"The demand for the successful American lifestyle will generate huge demand for U.S. goods."


Surely, you must be joking.

Just because the Indians and Chinese want to grow and prosper (which MAY be related to the "American lifestyle"), it does NOT mean that they will be buying USA-made goods. In fact, it probably means exactly the opposite.

China is our biggest source of goods. In fact, I find it difficult to locate any NON-Chinese made goods in my local stores. If the Chinese want the American lifestyle, then they will simply "buy Chinese".

USA makes very few goods now, and that number is declining on a daily basis. The trade deficit is increasing annually for a reason, and it's NOT because China and India are INCREASING their imports of USA-made goods.

Jay said...

"If the Chinese want the American lifestyle, then they will simply "buy Chinese".


LOL thats good stuff!

scottishinvestor said...

"America makes very few good now"
Levis, Nike sneakers, I-Pods, Coke, Macdonalds, Lear jets etc.

Sanjay Sola said...

shenanigans are almost over. short away for the big money.
short conditions are super favorable now.

Nasdaq to 1950-1960 in a few weeks.

Anonymous said...

Lear jets???

Hahaha. Dude, you must be here only for comic relief.

I don't know about Nike, but the Wilson tennis shoes that I have on my feet right now are Made in China.

My Dockers pants that I'm wearing are made in Bangladesh.

The phone that I have on my desk is Made in the Philippines.

The Logitech mouse that I'm using right now on my computer is Made in China.

My Dell computer has a sticker on the back of the case that says Made in China.

The Dell 19-inch LCD display for my computer is Made in China.

Need I continue??

Or maybe you are implying that these products are not part of the "American lifestyle" and that the Chinese and Indians will start buying Lear jets by the dozen to flood the USA with money.

Wow, "Scottishinvestor", you really are a trip.

Anonymous said...

super blog dude.

Anonymous said...

Nike manufactures a large part of their apparel in china & other asian countries.

Anonymous said...

I'm sure the sugar and coloring for coke is made in china.

scottishinvestor said...

Yeah! But the profits appear on Wall Street.

Mark said...

Wonder if you look on the back of half the "Wall Street" companies, you'll see "Made in China"?

EddieFl said...

The money to be made is still here in the good'ol U.S. of A. All the World's money , liquidity, comes here. Not to mention the regulations to keep your money safe. The flight for quality and safe harbor brings the money here. Good luck trying to bring a lawsuit or file a complaint to a broker or an exchange in China or Malaysia or Morrocco for that matter. World investors want some type of assurance on thier money.

But I do agree, that China is a sleeping giant that just woke up, and they are ramping up mighty fast. Some China Equities I trade are PTR (oil) and FXI (index) when I want to play China.

The market basically moved sideways today, consolidated the gains from Friday. No heavy selling.

Anonymous said...

Take a trip to Shanghai and you'll know what the hype is all about.

Anonymous said...

Anon at 1:32pm:

Are you in Shanghai or in the US?

You will then understand what EddieFl was saying?

Sanjay Sola said...

End of the month is finally over. what a relief. stocks continue to defy gravity. the Dow is putting in a double top it seems.

Anonymous said...

Where is the market going? I guess it depends on who you want to listen to, the analysts or history. Check this out:

http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&CFID=6567261&CFTOKEN=73006534&category=Market%20Commentary&newsletterid=1254&menugroup=Home

Anonymous said...

Looks like Tim is still licking his wounds. Market action, however, still shows signs of a bear rally about to fail at key resistance levels. With the possible exception of energy, the stocks running up are speculative momo types, not, for the most part, leaders. Furthermore, anyone watching intraday futures today saw each move higher greeted with sharp selling into strength. I think the stage is being set for another wave of selling sooner rather than later. JMHO.

Mark said...

So when reality bites, it will bite a big ol' hunk o' beef, eh?

This end of month thing got me confused. I'll definately have to make a note of it to remember. Does it happen most/all/some months?