Monday, July 31, 2006

Wanted: Clear Direction. Please!

The Dow was down 34 points today. Big deal. This market is so boring these days. There's just no direction. A little tug up. A little tug down. Intraday graphs are like spasms. The S&P 500 is basically exactly where it was when 2006 began. It went up a while. Then it went down a while. And now it's up a little. Zzzzzzzzzzzz........

Oh, before I forget, this blog is now part of the Ticker Sense poll. Thanks, guys! Is there a way to auto-click the Bearish radio button?

If you have the time and the interest, here's a fascinating (and long) article about large economic trends, particularly centered around debt and interest rates. Bottom line is that a recession is virtually a foregone conclusion.

Oh, one other thing. By happenstance, I found this KlipFolio product. Download it - it's free! And you can add your favorite blog (ahem) to it.

I have two standards for judging new software: does it work right/feel right immediately out of the box (the answer for Klip: yes!) And am I still using it in a couple of weeks? (We shall see!) I've sometimes become jazzed about stuff that I never touch again. Which means, to me, it's not useful. Klip seems awfully cool, though.

OK, on to charts. And there's a bunch of 'em today. Because I've got to believe the market will eventually snap out of this boring funk. And, if there's a God (or at least a sensible God), the market will fall big-time. So let's be prepared, Scouts.

HANS has been fascinating to me for a long time. It has bagged a nearly 10,000% gain over the past couple of years, and I think everyone on the planet is waiting for it to snap at some point. Here's the astonishing graph. Some people have become very, very rich on this stock:


Let's take a closer look. This graph is more recent, and it features two moving averages on the price graph as well as a moving average on the volume graph. Notice a few things. First, volume is really starting to soften on this stock. Second, the 50 day moving average hasn't crossed below the 100 day moving average in a very long time. I'd take this as a strong sell signal if it does. To be honest, I'm short the stock already. I guess I (foolishly) want to get in early on what I hope will happen.


I want to put the S&P graph up again simply because it's so beautiful. You can see all the drawn objects I've laid down on this graph. It would take an amazing amount of bull power (you can think of a more colorful term) to turn this market decisively upward. But it's happened before. The jury is still out right now. There are many strong forces at work that could rip the guts out of this market.


From here on out are graphs with stop prices. Simple. I think all of the following charts are optionable, so you might want to pick up puts. The stop price I cite is the price above which the position should be closed. First up: AMG 95.05


ATW 50.64


DIA 112.56


HUM 58.26


IYR 75.02


MER 73.50


MO 81


MON 43.86


OIH 152


Good luck! And, remember boys and girls, if you want to see a bigger graph, just click on any of the small images. Click Back to return to this blog. See ya....

37 comments:

Anonymous said...

I like this little tidbit of information from the published CPI data:

Purchasing Power of Consumer Dollar (1982-1984 = $1.00)………..$0.493 (50% loss in value)

Purchasing Power of Consumer Dollar (1967 = $1.00)……...………$0.165 (84% loss in value)


Inflation? What inflation??

costas1966 said...

Technicals point that a reversal is near. This is what I see. Resistance at 1280.38 was tested Friday and today without penetration implying underlying market weakness. Market is in a 2 month bearish flag formation with upper boundary at 1283.5-1284.5 so there is more resistance above even if it overcomes the 1280.38. Volume has been declining as the market has been rising the past 3 days indicating lack of conviction in the latest rally. The 10 day slow stochastics crossed into overbought territory 4 days ago including today. Note in yellow areas that the 10 day slow stochastics has picked the top 3 times since last May. The market has topped within 4 days after the indicator crossed into overbought territory. There is no doubt in my mind that we are very close to a reversal. Lets see how they do this. I see 2 possible scenarios. Will they drop it here for a couple of days and then rally it back to resistance at 1280-1284.5 and top it when the Fed meets. Or will the real selloff starts here with just a relief one day rally just before the Fed meets. My instict tells me it will be scenario one. But regardles, this market will top soon and initiating some short positions is warranted here.

Sanjay Sola said...

kind of fun to read these. don't they sound like stuff you might read today?

On The Economy

"One of the most striking features of the present chapter in stock market history is the failure of the trading community to take serious alarm at portents which once threw Wall Street into a state of alarm... Traders, who would formerly have taken the precaution of reducing their commitments just in case a reaction should set in, now feel confident that they can ride out any storm which may develop. But more particularly, the repeated demonstrations which the market has given of its ability to 'come back' with renewed strength after a sharp reaction has engendered a spirit of indifference to all the old-time warnings. As to whether this attitude may not sometime itself become a danger-signal, Wall Street is not agreed."

The New York Times (Sept. 1, 1929)


"The economy is showing secular productivity growth of a magnitude not seen in decades. Inflation remains under control. The U.S. boasts budget surpluses as far as the eye can see. The build-out of the Internet, so rich in promise, is still in its embryonic stages. The stock market excesses of early this year have largely been purged from the system, without exacting any systemic damage. In short, the Goldilocks economy is alive and well and the bull rules."

Barron's (August 28, 2000)


On The Stock Markets

"In many ways this has been the most remarkably cheerful summer in recent financial history. The stock market speaks for itself. After the serious decline in May, prices of the leading securities have been marching steadily upward...This prosperity might be disquieting if it were accompanied by any of the symptoms of inflation."

Outlook & Independent (August 7, 1929)


"For four weeks, stocks have climbed, so much so that this week the Nasdaq composite index - the one so horribly wrecked in March - moved into a plus position for the year...Some see flattening interest rates and an economy essentially under control fueling future market gains."

Seattle Times (August 31, 2000)

costas1966 said...

Sanjay Sola I like the quotes. I want to point out that the market topped the next day after the Seattle times article and it embarked on a long 2 year decline. Nasdaq lost immediately 33% within 1.5 months after that article. All that happened at a time when the FED paused the same August.
Then the Fed moved agressivley to cut interest rates on January 3, 2001 which produced a one month bear market rally only to be followed by the nastiest 2 month decline the Nasdaq would ever see with a 50% drop. Just a little history reminder.

Every Wall street idiot would argue that this is not 2000 because we had the internet bubble at the time and they will tell you now things are different and this is a softlanding. The same idiots ignore the fact that there has been only one of those soft landings against 9 reccessions in the last 45 years. The idiots also overlook the fact that the housing bubble puts the internet bubblet to shame and this is a much more dangerous time than 2000

Tim Knight said...

I think what we saw in 2000-2002 was just a prequel to what's about to come. A fun little read for those who like 1929 idiot quotes is "Oh, Yeah?" from Trader's Press.

Dave said...

Tim:

In today's full edition the best quote is quite possibly the latter half:

"Oh, before I forget, this blog is now part of the Ticker Sense poll. Thanks, guys! Is there a way to auto-click the Bearish radio button?"

EddieFl said...

I am sure you guys know that if there is an obvious trendline or resistance level, that everybody and thier brother can see, and the whole world is looking at and waiting on that trendline, you know the price shoots right past it. Or the trendline becomes a non-issue. If you have been trading more than 2 weeks you know this.

IMHO we see SP500 at 1300, by the middle of August. I'm not a "perma-bull", just going by what I see.

Tim,awesome board by the way.

AT said...

Great board, Tim - really enjoy the posts and the discussion here.

An article in todays CBS Marketwatch may be of interest. It shows how investors are rotating into defensive sectors:

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B5350D6C2%2D7049%2D402B%2DA48D%2D769867CE287B%7D&siteid=mktw&dist=

I don't know if the link work. The article is titled "Finding market leaders in the wrong places".

Bill said...

but then again you can make the same argument about the double bottom on the Dow and S&P and the same resistance level: when everyone can see something and expect the same thing then it probably isnt going to work.

plus all this talk about cosolidation and how its bullish, low volume after another low volume move like we had on friday is bearish and shows sign of a reversal if anything. no result occured, if you punch a guy square on and he doesnt go down, its gonna be a long fight and you probably will lose.

PB said...

eddiefl --- please read some of the quotes above, and then do you still think it's wise to go long here?? This market can crack at any moment. It's quite unbelievable how stupid some of you bulls really are. I guess it's a lot easier to go along with the masses than to think for yourself.

Anonymous said...

this market has no leadership, not even the hot energy sector is leading in the last 60 days. Yet the intelligence challenged bulls still want you to buy. Fukkem!! Use your head and price in all the risks out there, as it's obviouse the market has not taken full inventory of all the risks out there ... and the risks keep growing by the minute.

- Frank

EddieFl said...

To answer Bill, yes, you do have a valid point, price patterns are more likely to hold and be valid, like double tops, double bottoms, Head and Shoulders, flags etc..

I find that it is trendlines or resitance levels, for example the trendline says it should hold at 1200, then it would shoot down to 1150, making everybody hit thier stops, or worse go short. Then it zooms back up to its original trend above 1200 to go higher. Basically to stop people out.

Im still long. Looking to get out at 1300 on Sp500.

EddieFl said...

pb: Thanks for concern, pal. Im keeping my long positions until I see otherwise.

I use stops, always.

PB said...

I'm short, SP500 goes to 1300, I'll short more. Every little pathetic rally will in the end only make me richer. Thx for your input eddiefl, but the bulls have nothing at this point to hang their hat on!

downosedive said...

Good comments in this section - 2 themes reocur - firstly the low volume behind the rally and secondly a more definate feeling that the market will drop any time now. Personally having monitored the DJA indices fore hours yesterday, I could see no sign of a further bullish push forward, just an apparent (and successful) attempt to restrain profit taking. However for todays run, I have a feeling that this ridculous and foundless false run up, has now finished at least for the time being............

stockshaker said...

Im not one to start up fights against my own people, fellow bears, but aren't we just regurgitating the same points over and over and over day by day, about why things should fall like gravity doesn't exist???

I honestly, would LOVE if things fall straight to the ground, because I think thats seems like the natural tendancy based on today's current events, but they haven't.

Actually, to be even more bold, I could care less if things started flying sky high, because all that means is changing positions, reversing spreads, and generating profits.

It doesn't matter.

But what does matter, is undecisivness. And to me, that is what is so frusterating.

No direction, and knee jerking spasms. and I think that makes it hard for any of us traders, because technicals and oscillators, and trendlines mean absolutely crap, if today it violates, and tomorrow it completely reverses.

Tim, how do you handle situations like this? Im sure many of us here are full time traders and use the stock market to generate liveable income, and that means having to make trades when times seem risky, and volatile. And despite how that sounds, we are able to do this by taking the less risky plays, and having to accept less than usual, but (highly-probable) profits.

How do some of you guys trade in these volatile times?

EddieFl said...

Stockshaker: (good name by the way). How do we trade in these volatile times?

Pick a time frame, if your 15 or 30 minute charts, you have had some nice moves. If you are on Daily charts, like I suppose most of us are here, wait for a trend reversal or good entry. And not much has happened on Daily besides the MAy/June selloff, which was very, very nice.

And use stops on every trade, letting a position go 3 weeks against you or 100 points the other way, is a looooosers game. Its very shaky during the summer, sideways action usually. IMHO..

TR said...

Interesting, so yesterday was resistance. Go bulls go . . .

Good charts today. Would be nice to see a few shorter term charts, I see a sideways pattern on the dow. Looks like the NAS is a big downward trend. See ya at lower lows. :)

Nice comments and quotes listed today. Keep on sharin'. Love the data.

Sanjay Sola said...

Nasdaq 1960 by next week. look for breakdowns in Celgene and Hansens soon.

We saw the Google, Bidu, and Garmin breakdown last week. so we can expect Celgene and Hansens to break soon. they are the last of the leaders.

not sure about Apple, it's wildly overbought. probably a better short after their conference next week is over.

PB said...

hey eddiefl --- you must be hugging and kissing your calls right now!!! hahahhaha

DIE BULL DIE!!!

marhattan said...

Stockshaker:

First, I'd ask people who are giving advice what their return is before taking them too seriously... =} I've met money managers who consider themselves experts and agree that 6% annual return is excellent "in this market." I would say they don't know cr@p, but they consider me 'just lucky.' =}

I average at least a 20% return each month. It's definitely been more challenging the last couple of months. Before May I was rockin' with at least a 50%-100% return monthly, but those days are over for the time being... I also only trade the SPX.

I was/am an investools student and although I have to admit I outgrew most of their strategies a while ago, I am very thankful to them for my beginning education. It saved me a lot of grief and I still do use their Big Chart to see where the industry money is flowing (as a way to gage the overall economy and trend) and their market forecast tool still. I like to look to see when there will be a reversal cluster... I use the 1 year chart for my overall trend and the 10-day, 10 min. chart for signals to get in and get out, primarily.

I generally keep one longterm position one to two months out (currently bearish) and then watch the futures trading in the morning before it opens to figure if I'm a bull or bear that day and wait for the signals... The S&P futures have to be trading +/- 3 or more for me to get excited...

It's not a perfect system, but it's what works for me... =) I hope that helps!

EddieFl said...

Marhattan, good sound sytem. I use a similar style, get in short term for entries and exits. I've backed off some of intraday trading, stick mostly to Daily charts now.

PB, haha,, not kissing the calls. I stick to futures and equities and compound the returns. As of this writing the SP500 is down -0.67%, not exactly a reason to leap from any tall buildings. too funny.

This board is alive its a beautiful thing !!.

Bill said...

Look at the anemic volume so far today, no direction is right!

Does anyone see a retest of the lows for the S&P, charts look a bit eager to buy during the last low, and volume was still a bit high. Anyone see a low volume re-test of the lows as was this last runup on low volume until tuesday next week, and then finally a breakout of the established range once the fed comes out with their decision.

Also, fridays JOBS report will be interesting and may be a catalyst to retest the lows, regardless of the outcome such as the GDP was a catalyst to retest the highs.

Anonymous said...

FYI - "Ticker Sense has updated the results of its Blogger Sentiment Poll for the week of July 31 - August 4. This week's poll saw an increase in bearish responses from 37.50% to 45.45%, even though the Dow had its largest one-week gain in two years. The percentage of "neutral" investment bloggers also dropped to a four-week low. As Ticker Sense points out, "We are starting to see a little more conviction from respondents also as the number of neutrals dropped below 20%." In previous polls, the percentage of investment bloggers who were "neutral" about the stock market was as high as 40%."

Hbarr said...

I discount the high bearishness numbers for a good reason. The individual investors who are in the market today are the SURVIVORS of the pump and dump of the late 20th century. They aren't so easily fooled and they understand that current economic conditions are poor.

It's no accident that "dumb" retail was net short in June while the "smart" specialists got caught being net long in the recent dump. I'm sure the specialists would have loved to have been short, but there was a shortage of suckers to buy their inventory.

Sanjay Sola said...

Most of my short positions have fallen on pretty good volume, so i will stick with them: AKAM, CAKE, SIRF, CWTR, AMTD.

best not to overthink this market. today is a clear distribution day. we have good volume and more than the required 0.7% loss in an index. So institutions are selling and that is good for the bears.

we also have a pretty good guess that the Fed will raise rates to 5.5%. it looks like a done deal to me. the surge in natural gas just adds to the inflation problem and will hit consumer pocketbooks.

the Nasdaq needs to break 2060 still. ultimately, the path of least resistance is down with interest rates. market is overbought, so it makes selling that much easier.

I'm looking for more negative events to begin piling on in the next few weeks: Iran, Israel hurricanes, inflation, etc.

Shawn M. said...

marhattan - what signals are you looking for on your 10day / 10min charts for timing entry and exit? RSI7 divergence to price or some other signal?

Anonymous said...

Gurus, any good short picks?

Sanjay Sola said...

cyclicals are great shorts. Semis, transports, construction, and steels. retail.

stocks with too many stock splits because there's more supply. I like low relative strength stocks.

google (goog), netlogic(NETL), and whole foods (WFMI) have really broken down. they are all trending down now.


do your due diligience and have an exit plan and a target.

marhattan said...

shawn m -

If the futures are trading big in one direction or another (+/- about 4.5, or more) then I'll generally just buy at market when it opens. I originally tried to use technical signals to get in but on a day when the majority of the move happens in the first five minutes (like today, futures were down 4.4) if you wait for the MACD and STO to top out, most often you miss out as the price just doesn't recover.

If the futures are trading +/- 2 to 4.5 then I'll usually wait for MACD and STO to top out/bottom out and then get in. I used to use the 3 and 10 MAs to time my entry and exits and I still do to some extent, but I seemed to get in or kicked out too early. The 7 and 15 MAs seem to do a little better, but really I only look to them for confirmation of what I'm seeing in the MACD and STO. Also, I look at the Adv/Dec. line to also judge the trend, but it's not much of a leading indicator...

If the futures are trading < 2, i may sit out for the day.

Of course, this is all mostly predicated on what the year chart is doing... I look to see what the MACDs and STO and trends are for my overall stance. I will trade against it, but only on a short term daily basis...

Pretty basic. I used the fancy stuff for a while, but I ended up overtrading my account. So now I've come full circle and stick to what's easy...

marhattan said...

anyone use bollinger bands? the S&P is setting up for a good squeeze right now...

Shawn M. said...

marhattan, thanks for the detailed response. I use BBs to ensure that my long time spreads (often diagonal) are likely to be within the profit zone when the short option expires. I also look at OX based prophet charts using a daily chart with 20,2 BB and 10 SMA to get a quick read of trend and OB, OS or neutral conditions. By squeeze in the S&P I assume you mean a decrease in price volatility and increased range boundedness as viewed with BBs. If so, I agree with the assessment of a sideways market in the shorter term.

Anonymous said...

why is AAPL going up, when everything else is going down?

Anonymous said...

Guys, volume is low today.... I think the up move will finish at the fed meeting....

I just cleared out some puts and am sitting in cash until I find something interesting enough.

Sanjay Sola said...

bollinger bands and moving averages don't work very well in bear markets. just follow the institutions, they are selling.

costas1966 said...

volume is very light today. Not much conviction to the downside either. thats a perfect setup for a rally tomorrow.

Sanjay Sola said...

good call on the bollinger bands. I guess they do work.

i should have covered today. it looks like we'll retrace.