Wednesday, July 26, 2006

Some Junctions More Crucial than Others!

I want to start by offering the stock market bulls an insight into their future once this tug-of-war finally ends.

A lot of people have been asking about sentiment, since apparently there's a lot of bearishness out there, and it's widely considered a contrary indicator. I was intrigued by this, but after examining the graph below, I've concluded that it's a fairly meaningless exercise. Sentiment rockets up and down to the point that it's just noise. The creator of this graph pointed out a few times that bearish sentiment correlated with a market bottom. Well, yeah, but I can just as easily point out three times that bearish sentiment correlated with a top. Because it's meaningless! I've circled (in green) one such example.


Dow 11,257 is what we want to not cross, people. I was nervously watching the Dow today as it ratcheted up another 50 points. But it couldn't keep it up, and it closed down by a point. What's remarkable to me is the doji pattern that formed. How's this for a tug-of-war, folks? I can't remember the last time I saw such an incredible doji. It has indecision written all over it. No one has control of this market! And it's getting tiresome.


Since last Tuesday, the S&P has been pushing ahead with a series of higher highs and higher lows. Not good for us bears. But it has stayed beneath its trendline, and I see strength starting to flag. Make no mistake, though. We have got to close out this week with some meaningful weakness! Recent market activity is far too heartening to our bull friends!


On a daily basis, you can see the S&P is also in a doji pattern (although not to the freakish degree that the Dow was) and we are still safely below the trendline. But we are very close to the danger zone, folks. One more good, strong day, and things are going to suck.

46 comments:

Howard Lindzon said...

what a stressful life being a trader with all the lines and stuff


I forget how to connect two poiucts with a ruler. thank goodness


do lov your spunk though

shawn said...

love the humor! It's been interesting over the past while to read the posts and see an ultra bear sweat a little. i'm a young trader and this is just a very crazy market. Let the good times roll!

Anonymous said...

A tighter doji formed on June 16th on the DJ. Also, note the double bottom "W" formation on the dow - or is it the beginning of a double top??? Who the heck knows.... just stay tuned.

Sanjay Sola said...

this market is getting ready to dive. i think the GDP report on friday will be an important day.

Anonymous said...

It's always darkest before the dawn... Looks to me like the bulls are showing weakness by not being able to follow through on their intra day rallies.

PB said...

Outta steam bulls! A weak GDP number will get them buying, as a deteriorating economy is somehow good for stocks! Yup, all long stock purchasers now get a free hit of crack for being brave enough to buy. I don't know when reality will strike the bulls, but the longer this drags on, the more painful it will eventually be. I think this circus will be heading outta town very soon.

PB said...

Nice loss on the transports today! I wanna see the DOW 30 plunge 2.8% in one session too!!!

Mark said...

It's almost like, "Let's keep it up until the end of the month, and then everyone will see we have a bull market!" Gonna need a serious dose of Viagra to keep it up.

Anonymous said...

Lets face reality, This is a sideways market, we are in step five of the five step process. We might have to wait awile before we can take this thing down to where it belongs.

Anonymous said...

GDP is going to move the market this friday, if gdp is weak expect a rally due, many will think a weak GDP number will keep the fed from raising rates after august 8th and most likely pause. A strong GDP and were headed back down.

chanon said...

still like this chart
CHART

If anyone has time, daytrading isn't too bad in this kind of market, buy and hold then wishing it goes in your direction is just tough. Look for Industry leader intraday. Scoup up MYL and NUE today.
Intraday Leader

TR said...

So Tim, I am a little of the chicken of the group. I like the downside opportunity, but unlike the posts not in on the "put" side yet.

My buddy got in on the BBH Aug 180 call yesterday for less than $.2 than I had my order in (scalp play - Short term damn it!). I think this is one sector that is showing bullish action. Today, the gain would have been over 120% on my option (he is a wuss and took off at 80% - just kiddin, he is making money). Still looks like financials (dllr as an example, not my fav, but still rockin) is coming into favor. Notice a few days ago I took crap, but not bad the way I look at it.

Anyway, got another 10 contract of my SPX credit spread on the top into strength (gotta love it). Your post has helped me forever and I will continue to watch your thoughts forever.

REAL QUESTION: WHY ONLY 250 POSTS, dude you were the KING of some of the greatest financial software? I love it and enjoy seeing what you are looking at with that "PROFIT" system. You da man!!!!

Good tradin'!!!
another TIM

TR said...

Hurricane5 rocks! NTRI is just starting it's rise!!! Keep up the posts. DUDE seriously, I like your thoughts and admire your ability to take this boards crap!

oldsoothsayer said...

Tomorrow might be another up day; however it will not be strong.
It will seesaw.
I doubt it will break he S&P trendline.

In fact, I don't think it will ever break the trendline; although it is going up to 1285 allright in the "mid-term".

Scenario will be the following:

Let's say up tomorrow - no one can tell (only that it will not be a strong climb if climb there is).
Might even do a lower low!
Then friday, as some on said, bad news and down for at least two days.

HOWEVER, the thing should go back strongly northward to the 1285 mark after that short slide southward (up within three days or so).

After that a good 8 trading days or so on the down side (target below 1220) and back up 10 days (lower high).

After that, folks, it is southern winds for two years (target 590).
Yep! And maybe the big one (-25%, if the cycle decides to go fruity on us.
A bear's dream. An assuasive surfing journey on the big wave of Mother Nature's recovery.

Anonymous said...

Just be watchful of month end mark-ups by the Hedgies. Let this NOT shake our Bearish ground. Don't get Sore and Short some More!!

Mark said...

tr, I think Tim and the rest just give Hurricane5 hell because they can, and it's all in fun. I mean, he is (or was?) the only regular bull that would keep coming around to entertain/educate us.

Personally, I think NTRI will keep going up (trends that way) and it really doesn't show much slowing down. People used the change in personnel to scrape some profits. It will keep going up as Hurricane5 said, but I'm not sure what the top is. But it will come back down when it gets to the top if the air that is under it no longer supports it.

-------------

Today's market was perfect for what I expected to happen. Tim may find it boring, but I find it exciting, as the pull of gravity and time will draw the market to its corrected value.

The DOW needs to get under 11000 for 10400 to be possible in Aug. It is rare for the DOW to move more than 600 points in a month, but has done about 600 points several times in the past 6 months.

That being said, the DOW will get under 10500 by the Aug OE.

costas1966 said...

This is what I read from the chart that you are posting on AAII bullish percentage. Everytime the AAII bullish percentage dips below 35% it correlates with a market bottom. It seems to me that this indicator picked up the 1998 bottom (which you ovelooked to circle), It picked up the 2003 bottom and the 2004 bottom. The
faulty signal in August 2000 you are refering to, it is not an extreme reading. It is only a 40-42% bullish sentiment, not even a borderline situation. Even if I include the August 2000 reading this indicator has worked 3 out of 4 times, which is a 75% success rate. I would not dismiss this indicator as meaningless.


Now there is another sentiment indicator, the investor intelligence sentiment which tracks the sentiment of the newletter writters. Now that indicator does not show an extreme ammount of bearishness. There is the web site for that idicator. http://www.schaeffersresearch.com/streetools/market_tools/inv_intel.aspx?click=jumpto

I would love to see both indicators
at prophets charts compared with the S&P 500.

costas1966 said...

Hurricane 5, got hell because of his arrogance and the fact he was blaming TIM that he lost a ton of money after following his reccomendations. He was always talking about Tim's stock picks that did not work out and never about his good picks. Off course Tim has always been using stops on his stock picks something that hurricane 5 never did. The truth is though that his attitude improved over time and he really was not a pest anymore. His exit from the board was surprising but I think it is just another attention seeking ploy to satisfy his super ego. I think he will be back.

acceltrader said...

I'd wish he come back - sold this a bill of goods on NTRI & GOOG-600. Nerves of steel that boy..or freaking nut who likes to incinerate cash.

Anonymous said...

The market has made some nice falls into the 10,700 area. Everytime it does this, it recruits a few more bears, as such the next downleg (which will be the third), will be the most serious one. Expect the Fed to kick it off Aug 8th by not pausing. Bulls are now marked for death. Anyone remember August 2000?

-Frank the Tank

Mike Stone said...

Oldsoothsayer,

Why just the 38.6% retracement? Why not 366 or lower?

The Nikkei bottomed out below it's 23.6% retracement at 7K. The Dow in 1929 also did.

Are you basing this on a wave ccount?

Anonymous said...

costas writes:

'This is what I read from the chart that you are posting on AAII bullish percentage. Everytime the AAII bullish percentage dips below 35% it correlates with a market bottom. It seems to me that this indicator picked up the 1998 bottom (which you ovelooked to circle), It picked up the 2003 bottom and the 2004 bottom. The faulty signal in August 2000 you are refering to, it is not an extreme reading. It is only a 40-42% bullish sentiment, not even a borderline situation. Even if I include the August 2000 reading this indicator has worked 3 out of 4 times, which is a 75% success rate. I would not dismiss this indicator as meaningless.'

I noticed the same thing. The reading Tim highlights in green is clearly not an extreme in bearishness, so concluding that AAII is a meaningless indicator from this observation is a curious observation.

There is no doubt bearishness is rife in the markets. Short interest is possibly a more meaningful measure as it involves people putting their cash on the line as opposed to stating their opinion in a poll. June saw the largest ever rise in Nasdaq short interest. Almost twice as big as the last record rise. People have already slammed the market with the short trade, and (so far) support has held. From a sentiment/positional point of view the conditions are ripe for an explosive rally.

dash

Brian Donahue said...

Tim--

I noticed one thing on that chart of investor sentiment. The low you noted that corresponded with a market high was not actually an extreme low. All the major lows had sentiment down around 30%, which is where it is now according to that graph. The one you circled is only around 40%, a low, but not a historical extreme by any means. I gotta say, this chart actually presents a bit of a bullish case. If markets break over their intermediate downtrend lines then I'm going long until 11,675. If not I'm on the short side and looking for Dow to finally crack 10,650...that'll be a huge!

I think this market is totally exciting...those trendlines are converging so prices have got to find a direction soon enough. I'll bet the direction of that break will send us in some direction finally.

Anonymous said...

Tim,

Today's sacrificial lamb was the Dow Transport which has shed 200 plus over the last 2 days.

The DJT shed 123pts. today and the DJI was only down a mere 1.20.

My friend this says strengh in spades and move over Dow 11280.

The office was a buzz today with my favorite song by my bullish cohorts:

Lions & Tigers & "Bears"..Oh my !!

Lions & Tigers & "Bears"..Oh my !!

What they don't know is that I am long the Micap 400(EMDU6) from 716.25 and as you remember I went long the $XAU per the $132.50 call option(.swohg)filled at $5.00 and the YGQ6(Mini Gold) at a break above $606 and I was filled at $606.90.

My eyes will be dead on the Dow Transport and if it breaks above 4400 we're off to the races.

My stops are set but maybe a bit to lose at this time ..may adjust them early a.m.

In closing this day let me share this... don't allow your readers to think that we have some open marketplace here ..cause we don't.. it just sounds good and pulls in the suckers who think that a 100 lot buy or 1000 lot buy moves the market.

Soros moves the market..Rothschilds move the market..Goldman/Sachs moves the market.. so the moral is.. just be satisfied with what the market gives and hold on as the market moves to Dow 12000.

At that point(12000) maybe the sponsors will send the market into the tank and hopefully we're along for the ride.

Bulls & Bears & Diamonds..Oh my!!

Bulls & Bears & Spiders.. Oh my!!

Ya gotta love this blog.. it tolerates a jerk like me!!!!!!!!!

Here's a big high five "paw" to ya!!!

(Not) Always a Bear

Brian Donahue said...

Just saw costas posted essentially the same as me...guess I should read through the blog more thoroughly before posting. cheers to you costas!

Hbarr said...

SEE blew up. Blamed it on restructuring charges. I dunno... UPS blows up, AMZN blows up, and then SEE... Coincidence, or is the consumer slowing down the mail-order spending to pay for gasoline and food?

The bulls are rallying around FDX. It's a remaining totem that they pray to. They say that UPS suffered because FDX is eating their lunch. Okay, but then why aren't they bidding FDX up to new highs? Looks like a topping pattern on that chart. Somebody has been selling this precious icon. Look at the volume build as it slid in July.

It's been a month since FDX reported. They report again in September. If they're going to warn before then, I expect to see the stock break under 104 first.

Jessica_Rabbit said...

Your humor, wit and insights are priceless! Thank you for taking time out of your busy day -- you are very much appreciated.

Question: Will the outcome of Google's click fraud settlement suit have much of an affect on their stock? Thinking of straddling my put...

Anonymous said...

To: Jessica_Rabbit


I am quite sure that every reader of this blog has a opinion about straddling your put!!!!!!!!!

My question is do you have the experience for this kind of spread?

Questions:

Are you in-the money on your put and looking to straddle or out-of-the money and looking to strangle??

Are you looking for a long straddle or a short straddle??"

Are you seeking to profit from potential "adverse" volitility??

Lots to consider in advanced option strategies.

Give us a little more info about "straddling your put" and we'll light up the board for you!!

I remain,

(Not) Always a Bear

PB said...

(Not) Always a Bear is obviously inhaling some toxic fumes. He thinks that DOW 30's non-confirmation of the fall in the transports the SAME DAY portends strenght. GIVE IT SOME TIME BUDDY! - by all means be an idiot and go ahead and buy into this market, then you can go to a bull-blog and cry that you lost your money! - Oh my!!!

Anonymous said...

FTSE now above its July high. Often acts as a precursor for the S&P.

dash

Kapil Khanna said...

We have a clean breach of the falling trendline on the dow. This market is going up, next crucial resistance is 11260. If thats breached, we are turn bullish on the intermediate trend.

Anonymous said...

everyone is bullish all of the sudden wow....never seems to amaze me.....why are we in rally mode...this is just going to lead to a harder fall when it does occur...

I think we rally up until August 8th, no pause and the markets will give back all of this rally. Todays data again was stronger then anticipated. This only means a definite 100% chance of a .25 raise on august 8th most likely followed by no pause. If there is no pause 2:15pm august 8th short this market.

Hbarr said...

If the market doesn't act humble and weak going into the Fed meeting it'll be begging to be slapped down. Hard for Wall St. to convince the Fed that they've gone too far already if the bulls are romping.

bsi87 said...

re:OIH.

Appears to hit resistance and reversed to the downside. Putting on a short position here. See if it can break that 130/132 support line.

Do your own homework.

Anonymous said...

Someone please tell me why this pos market is keep going up?

I only hear bad news coming.

oldsoothsayer said...

Mike Stone,

Why not the next ones?
It is a possible scenario.
We will see then where the situation leads us.
For now, it is definitely 590 in the next two years.

Yes, I guess the pattern for a 3 waves down goes along with the cycle moves and patterns so far.

This is why things are, on a probability level, a very contingent assumption.

Indeed, if in the next ten days or so, the market starts to sink heavily, it might be a good sign that this trend is on its way.

costas1966 said...

Kapil, considering that the economy is slowing down, monetary policy is still restrictive and the weakest season of the year is in front of us, if the 1260 breaches I am turning very bearish. That is the point where bears turn bullish and bulls turn euphoric and that is when markets top when everyone is on the same side of the trade.

bsi87 said...

Wow, interesting day. Yesterday was the DJIA doji (I like spinning top myself, Elder's term) around the 50 DEMA. Today is the Naz's turn at the 20 DEMA (not enough gas to get thru the 20 day at the end of month window dressing?!!!)Also trading below the open now. Trannies trading to the downside, no help from them although they're pretty oversold. Can get more oversold tho'. Good article in Barrons free site by Mike Kahn about the Dow Theory.

OIH hit the 50 DEMA and has started to reverse.P&F chart shows 106 as a possible downside target. The H&S formation per Tim measures to 90. Either will work for me. GRIN. I've read that the E&P guys are slowing because they can't get enough qualified personnel and the costs are skyrocketing. FWIW.

Long DXD, QID, USO. Short OIH.

Do your own homework.

Anonymous said...

bsi what price did you get in on DXD im looking to get in around 67.50-68 area...

QID i own already, bought in the upper 70's but a very small position, looking to add to that around $70

Jessica_Rabbit said...

I was looking for opinions as to whether a favorable ruling for Google might give the stock a positive boost --which could easily translate into a 15-30 point move. It hasn't really been receiving much attention which leads me to believe it's not a big deal (at this point anyway).

But then again, anything is possible so as a precautionary measure, I thought about legging into a long straddle. Just trying to mix things up.

Thanks for your feedback.

--JR

bsi87 said...

anon,

my average cost on DXD is 71.01.

VXN is starting to reverse. Mkts look awful bad to me.

bsi87 said...

anon,

re:DXD

I don't think you're gonna get DXD at those levels. Best to forget what you paid and look for a breakout above the HOD.

Sanjay Sola said...

THE BEAR HAS ARRIVED! Short away. Negative divergence in the index.

market leaders plummeting like rocks.

Today, we are taking out the last of the strongest: Celgene, Bidu, and Garmin. We got em' all.

I am planting the Bear Flag on the corpses of the Bulls.

PB said...

STAGFLATION --- please look this up dear bulls, before funneling more money into the market. Bunch of losers!!!

Sanjay Sola said...

market is prepping for its next leg down. that's why it took the big leaders out today. The market went is overbought now, which means some very big gains can be made pretty quickly.

Apple at $63 and Celgene at $46 are great shorts. both are overbought. do you DD.

bsi87 said...

Looks like Naz 2025 (the Oct 2005 low) is the last bit of support. Kinda of a rounded top formation, measures 325 Naz pts down. Near term, about 60 Naz pts down. If we saw a 1% down day plus some heavy volume like 2 billion shares, that'd confirm the move down. Naz also showing a bearish engulfing where it was above yesterday's high and then sold below yesterday's low.

I think the Naz goes down first and pulls the DJIA with it. Still a boatload of DA's talking about moving to high quality bluechips. When they raid the cathouse, they take the good girls along with the bad. And they won't spare the bluechips.



DJIA needs to break and close below that 11,050-11,060 area on some volume as well.