Wednesday, August 30, 2006

Bulls Free to Run

Good morning.

There is - unfortunately! - a fair bit of "open space" for the bulls to roam upward. There's really not much in the way of overhead resistance on the major indexes and, by and large, there's a decent amount of space between current prices and the next Fib level up (which is where they peaked last May). Not a great setup going into what is usually a "bear's month", September.

Take the $SPX (please!) I've marked in yellow the wide open space that bulls could trample upward, if they've got it in them (and, in the past month, they certainly have).


Much the same can be said of the Dow Industrals.



The NASDAQ is a bit more of an exception. It's approaching a fairly substantial trendline from down below.


Being exasperated gets old. I'm just going to keep sitting and puzzling. Weird, weird market....

55 comments:

Anonymous said...

insane market

Anonymous said...

It's the EOM rally. About anything can happen.

bsi87

The Hube said...

I think this market is full of short term traders who think this/next week will be good and they can get out (all at the same time) before the market tanks seriously.

smallswinger said...

My apologies. I rarely post (only 3 times) and I promised to keep you updated on my small cap swing indicator. I was only going to post when it made switches, but I am not yet in the habit of posting. So I'll post once a day on it, then I'll get in the habit.

On 8/28 the scmall cap swing indicator truncated the SHORT signal and moved to a value of +5, i.e., LONG.

Here are the recent values:

8/28 +05 LONG
8/29 +23 LONG
8/30 +41 LONG (Intraday @ 11:30 am EDT.)

Personally, I don't trust this advance at all and am VERY reluctant to go LONG. I'm waiting until September 5th or 6th before I change any positions.

costas1966 said...

"There is - unfortunately! - a fair bit of "open space" for the bulls to roam upward."

Tim the fair bit of open space is only 1.5% higher, relax.
This is the time to look for agressive short positions. I am preparing myself for a ramp up to the highs and an top. If it happens I am going 300% short.

"Not a great setup going into what is usually a "bear's month", September."
Are you kidding me? This is a great setup. We are going into September/Octomber testing overhead resistance with the market being overbought on no volume. On top of that, the bear troops, i.e. Tim Knight, are losing their morale. It could not get any better than that.

amarneil said...

I had posted about 2 weeks ago----buying calls on GOOG for Sept.380 strike.....still looks very good to me for this time frame, that is, thru Sept 15th, which is expiration day for the calls...as i post this the calls are $9.00...

On the flip side the XOI..OIL...presents a great opportunity to go short....or buy puts....oil below $69 a barrel today.

Best luck !!

Anonymous said...

Don't be fooled. This is the end of the party. Big Boys are marking up while they can. We are very overbought and still the tape does not waiver. Come Tuesday the party is OVER as Nenner said on CNBC. This is the set up for a great shorting opportunity. Grin and BEAR it until then

Big Bill

http://video.msn.com/v/us/v.htm?g=46bf5c10-2bed-449a-b05a-5e3274f0ca03&f=rssmoney&fg=copy

Anonymous said...

Market holding up well, who knows what the afternoon will bring maybe another rally.

cnbc continues to hype it up. All indices at 3 months highs!!

wait till the next drop comes, it will be nothing like the JULY drop.

EddieFl said...

I think we are at a crossraod this week, market trying to make its mind up. we have had at least a one week pause, basically going sideways. after a nice run up.

Now its making up its mind, whether we go higher or down,

Get on the next leg up or down, and maitain stops, always !!!!!!!!!!

(can we get any feed back on those that posted a couple weeks ago, saying they didnt use stops, never do. How are you sitting now?, What is the loss? What did it take for you to get out of your losing positions, what was the pain trigger?)

I wonder if anybody will post the above info.

Anonymous said...

OIL IS GOING BACK UP!!!

Trader 2006

Anonymous said...

eddiefl,
Yes, i recall being dismantled by a bunch of bears here by telling the anon individual to place tight stops and don't let your losses run. All those folks that say to double down 2 weeks back must be in deeper losses right now. Again, news are simply noises and i hope some of the traders here learned a valuable lesson. Money management and proper use of stops is very important.

costas1966 said...

"OIL IS GOING BACK UP"

That sounds like. I am long on oil I am down and in denial.

Sell your losers quick and live to fight another day. There is always another trade.

Anonymous said...

eddiefl - I do not use stops. And the pain is pretty bad on a percentage basis. Oh and I am using puts not shorts. If the market moves down like I think it will I will be fine, if it doesn't I will consider it hefty tuition paid to the market. I have learned a thing or two about TA and timing. Big Bill

Anonymous said...

eddiefl,
I wrote the last msg.

The Trader II

Anonymous said...

Eddie still holding SDS and QID, will add more, the market may see new highs but soon after its right back down, no catalyst to keep it up. Next drop will look worse then the July Drop.

Trader 2006

Anonymous said...

costas i dont hide my trades, im not long oil, i was going to long USO but never did, however I do own SDS and QID. Added a little more to my QID position yesterday.

Trader 2006

costas1966 said...

Trader 2006 I was just speculating
when I said that. No harm intended.
Oil broke resistance at 70 and it looks like a double top. I would not touch is at this point unless you want to daytrade it for a quick bounce which is very risky game because you are going against the prevailing trend.

Anonymous said...

I would not short oil unless it breaks 67. It's in a nice trading range the last few months.

The Trader II

Michael said...

re:oih

There went 134. Volume is approaching the 10 day average. If it closes 1% or lower on greater than average volume, that'd be like a breakout day per IBD, only in this case, it'd be a breakdown day.

re:PCU.

long at 89.50. Cornerstone value. Stop under yesterday's low.

bsi87

EddieFl said...

Thats good, I was just wondering who was using stops or not.

I know I learned my lesson a while ago, I gave too much money away, letting them go against me.

Money management and position sizing are sooo boring, but sooo important, they let you stay in the game, until you refine your system and get more disciplined.

Not having stops is very detremental to your account, it only takes one catostrophic move against you, and your done. (there is also a correlation between people that dont use stops and people that value thier own opinion of the market more than what is actually happening,, i have to save that for another time, you could write forever on that subject.)

Good luck Gentleman.

Anonymous said...

costas no prob, i didnt get offending...

as for oil though, seems like a good amount of people are saying its going lower. I have seen this before, back in June oil touched these levels and everyone thought it was headed lower, it never happened, this time it may be different we may go to $65 however long term out, oct, nov, dec i think oil climbs back to $75+. Another thing is Iran, the deadline is tomorrow, that could easily move oil 1-2 dollars in either direction. Im still bullish on oil, i do not own it but if it were to drop with energy and oil stocks falling i would concentrate on buying PXE and PXJ.

PXE around $15.75-$16.25 area
and PXJ around $16.00-$16.50 area.

By the way this market seems like it still wants to go higher, haha...

Trader 2006

Anonymous said...

Market wants to go higher. Watch out bears!

niko said...

Look at XLIXH. Almost no time value on a possible triangle's high barrier.

XLI puts.

niko said...

Oops. Didn't mean a triangle (I was researching something else), I meant the resistance of a Dow Theory down.

Anonymous said...

re:PBR. one of the IBD Canslim picks today. Long at 88.47 with trailing stop at 87.66/87.60 limit.

Do your own homework.

re:OIH

Sliced thru 134 but looks like it's gonna close above that level on heavy volume. gotta think about whether I want to hold the short here or close it and reopen later.

bsi87

Anonymous said...

OIL got to 68.6 and have rallied since. Last trade at 69.9.

The Trader II

stockshaker said...

Hey Tony, I think you pointed it out, if not, sorry for not giving recog. to who did.

I really liked HAL for some puts, but I also sold some really overpriced puts just now, Look at Septmber 32.5 - I sold mine for 0.55 a peice. Looks like a REALLY good deal (to sell)! Especially since expiration friday is all but two weeks away.

Sanjay Sola said...

any thoughts on TRMB?

stockshaker said...

Sanjay, I see a break from a resistnace of around 49, but volume is pretty dull considering...

Anonymous said...

Oil back up, very interesting....wouldnt be suprised it trades to $72 next week.

Trader 2006

Anonymous said...

Closing OIH short.

MACD is diverging. I thought when it broke 134, it'd go on down but it's moving back above 135 and the volume wasn't heavy like yesterday. I'll look to reopen the short around 141-143. Too many oil bears for me.

bsi87

Tim Knight said...

Don't get me wrong. I'm not a bull. Heaven forbid. I'm just saying there's not a lot holding them back.

My portfolios are actually doing dandy today, since oil is getting so beat up. Huzzah!

Anonymous said...

Hasn't oil gone positive and now back above 70 Tim ?

Denver

Anonymous said...

bsi87: I like PCU. I was actually going to go long at $90, but then I took a look at the recent price action and decided against it. Pretty much the basic materials sector has been left for dead. As spot prices continue to drop and production ramps down (mainly due to the housing industry slowdown), I can see some earnings disappointments for all of the producers. I do love the divy, but beyond that, I'm afraid there could be some 5-10% plummets in the future for that stock, so I'm staying away.

Anyways, did you ever grab that $60.90 GLD position? I saw it dropping yesterday and decided against taking out a new long position on GLD. I'm going to wait for the breakout. I get the feeling that 99% of the gold traders out there are waiting for the same thing, so it should be a rocket once it crosses the upper trendline, which is now around $645, I believe.

Yeah, I reduced my position size, but then found that I'm still getting stopped out on trades, mainly because I'm too afraid that the markets will continue to push higher on no news. I guess I could REALLY cut them back and open up the stops, but then I'd need like a 10%+ decline on a short position just to make any money at all. Hardly worth it in this market.

I'm going to wait for next week to see what the big boys are going to do. A nice distribution day on Tuesday or Wednesday would really start the ball rolling to the downside. If I miss out on a 2% move while I'm waiting, then so be it.

Good luck.

-Tony

Anonymous said...

AMZN and EBAY both up over a dollar each on no news, and Nasdaq up only by about 10. Strange! AMZN is just a retailer - why does it merit such high p/e compared to WMT, TGT and COST?

downosedive said...

eddiefl
Im one of the past posters who admitted never using stops. Needless to say Im now totally pulverised and my spreadbetting company is due to rake in several thousand pounds profit when mid Sept expiry comes along. You see, I know that if I had used stops, I would simply have rentered at any little sign of a daily downturn in order to try and recoup my losses. So I dont think Id be much better off than having stuck with my losses by not having stops. Also, as I tried to point out before, I am counter balancing some of the loss by going long at the same time. However as I said the net result is a disaster. However, I havnt complained on this site and am hoping that Oct proves everything that it should, but I have to say at the present rate, I have my doubts. So for the next trading period, I MAY only go long, in which case I can guarantee the market will go the opposite way and plunge. But will you all thank me by send a donation for doing that? Hummm?!! Even as I type Im watching the index run ever higher

Anonymous said...

Tim, I must admit that I don't know what you're talking about regarding the September setup. I agree with whoever said this was perfect.

Upward drift, ultra-low volume, bearish rising wedge formation on the indices (the S&P at least), and declining volume as we get closer to the top. Institutions have NOT been selling during this latest run. They have been buying very cautiously, but nothing spectacular. Once they turn on the faucets and start selling, look out below. Plus, you can see the "churn" at the top here around 11,380 on the Dow. Lots of movement, but not much progress being made.

It just doesn't get any better than this, really.

-Tony

Vince said...

I agree with Costas. Great post and insight.

It seems like everyone has forgotten what a down day looks like - we have very short memory spans. It was really just 3 weeks ago that nobody wanted to go long.

Looking at this week's action, I wouldn't expect any less of the market. If we're going to have a decline, they have to spike it up before hand. Otherwise it would too easy.

PB said...

costas 1966 --- Well put!!! This market is wearing down the resolve of the bears, when enough of us turn, then comes the drop. I myself am bullish for the little upswing we'll have here 'cause that's the way the charts are pointing. It's a good trade and everything is in the bulls favour right now.

Vince said...

Tony, you're absolutely correct. In any case, we're due for a reaction next week, since I think they're going to hold up the market this week as long as they can.

Anonymous said...

Tony 12:38 good post. Sometimes i dont know if your bullish or bearish or right down the middle. This market to me is just oo boring to even watch yet I sit and watch it anyway. A bulk of my portfolio makes up QID and SDS so on days like today I usually stay in the red. Volume is slowing, a short term top may be here but I think if there is any pullback of 1-3% people will be buying it right back up without a problem.



Vince

Agree, I think everyone has forgotten what a down day looks like. Look at EBAY, AMZN, DELL, INTC, BRCM, NVDA and RMBS. All of them up between 1-5%. If i had long positions in these stocks and was up 5%,10%, 15% or even 20% i would be taking profits. I cannot even come close to buying AMZN at $30.50 when just last week it was $27. Know my luck ill go long and everything will just fall apart. Ill stick with my positions and wait patiently for the next drop. I just dont see a straight run into the end of 2006, im nearly positive we are going to get a drop of at least 5% sometime over the next 3 months. How things will look next week when volume comes back is a whole other story.

Trader 2006

Vince said...

Trader, looking at the sentiment on this board - it looks as though the bears have given up. I wonder what that portends for the market . .

Before the rally on 8/14, I remember reading this board and the bears running rampant here.

Anyway, if anything this proves how hard it is to position yourself correctly when people are partying it up at the top or bottom.

Michael said...

Tony,

Remember the Triple Screen.
1) 1st time frame is the longest, using an MA to determine trend.
2) 2nd time frame used to see the stock/ETF trading near 20 or 50 DEMA for support, watching for reversal signs.
3) 3rd time frame is hourly, trying to buy in lower 1/3 of the range or sell in the top 1/3 of the range.

If you're getting stopped out, you're not buying at the right price and/or your stop is not based on volatility, hence it's too tight.

re:PCU. I'm not thinking about fundies. They can mess up a good trade. (GRIN) It looks like a nice setup and my risk is a buck for about 11 pts upside.

re: GLD. Yeah, I bought it. Again, it's about a buck risk for 5 pts upside.

bsi87

PB said...

If oil slips past $65, it will be because demand is weakning, that is anything but bullish for the economy and hence markets in general

~ Nona said...

I sold all my tech holdings over a year before the crash. I even began to wonder if I hadn't made a big bad mistake as the techs kept moving upward, ever upward, after I cashed out.

I don't know enough (yet) to day trade, short, use options effectively, etc., etc. But I have a feeling that all the cash and short-term bonds that I'm now holding relative to everything else is going to pay off for me...sometime.

Everything I read about investing -- and even trading! -- talks about patience. Maybe we could all use an infusion of it.

And thanks, Tim, for this site, your comments and your charts. Love 'em!

~ Nona

PS: bsi87, I'm holding quite a bit of GLD. Thought about buying more today. Maybe I missed an opportunity....

Thoughts?

Sanjay Sola said...

my guess is that we'll get a small pullback tomorrow to and then head up on friday.

Anonymous said...

At this point it is strictly day-trading the energy sector and interest sensitive sectors. That is until last quarter begins (Oct). The possibilities of storm, Iran, Israel, Ben and China leaves every possibility open. Plus you have market makers and low-liquidity. EQUALS no trend. No point finding a trend, until a trend develops and end-of-year posturing begins for mutual funds. The only definite is fund managers want to be paid to look good by year-end, all other numbers are justifiable by somebody with bigger fanny packs. Tim, hope you still had those PUTS on the energy sector today. Still the best blog out there.
Al

Anonymous said...

bsi87: Yes, I realize my stops might be too tight. But in most cases, I'm just unlucky.

For example, I shorted AAPL at $66 with a stop at $67 as it was selling off (risk/reward of about 1:5) . It got down to $65.10, but then reversed and actually ended up almost in the green on the day. Then, after hours, there was an announcement about a new CEO or something, so the stock went back up over $67 and continued up over $68. Just plain bad luck.

Then I tried some long trades, but got stopped out by mere pennies as the stocks spiked down below support in the morning, then eventually climbed back up and ended up well in the green on the day.

Either way, you cannot possibly risk a whole lot of cash on trades in this market on either side, long or short. So, if I were to make money, it wouldn't be much. Likewise, when I lose money, it's not much. I've been playing the short side mostly, because if something of significance DOES happen in the markets, it's likely to be to the downside. Unfortunately, this endless drifting of the markets has gotten my trading all out of whack and I've been losing more than I'm winning.

I'm just sort of biding my time until next week. At least we should see some direction then.

If PCU gets some volume to the upside, I might consider taking out a long position. As it stands now, though, it's been drifting between $89 and $91 for almost a month. When some news hits, the stock might get back into play, then I'll start trading it again.

-Tony

Cavalier515 said...

When did Nenner speak? Is he predicting a market turn starting on Tuesday?

chanon said...

by chart alone, energy stocks ready for bit of upward bounce
Energy
DOW

Anonymous said...

Long BOOM.

Chronictown said...

MOT hit top of bollinger band on 20% more vol. Whats a girl ta do??Any feedback would be outstanding!When the last bear goes long the market will tank! thanks,Chris

Ron Sen, MD said...

Volatility expansion setting up. Looking at the ratios of historical volatility 6day/100 day or 10 day/100 day < 0.5 the data:

Dow 9/30
NDX 17/100
SPX 94/500
ETFs > 400K shares/day 20/48

Total 140/678 (some overlap)

Anonymous said...

Ron Sen, MD said...
Volatility expansion setting up. Looking at the ratios of historical volatility 6day/100 day or 10 day/100 day < 0.5 the data:

Dow 9/30
NDX 17/100
SPX 94/500
ETFs > 400K shares/day 20/48

Total 140/678 (some overlap)

4:33 PM



what does this imply?

Anonymous said...

Tony,

I bought GLD for about a 5 pt play. Stop is below the kangaroo reversal yesterday about 60.26.

re: APPL short. No position, long or short. But it broke above the 26 week EMA about 6 weeks ago so by that standard, it wouldn't be a short to start with. When I look at the daily chart for the past month, I note that AAPL hasn't traded below the 50 DEMA. An ideal short is one where it rallies up to the 50 DEMA and reverses, meaning the bulls are outta gas. In this situation, the 20/50 DEMA are acting as support. Then the Average True Range is about 1.90. I like to set my stop about 1.5 the ATR so the stop would be about 3 bucks. Likely your position size would be smaller to offset the wider stop. A buck was way too tight unless trading off minute/hourly charts.

I've had my share of trying to short what I call "elephants", stocks that haven't broke down but I just know will (GRIN). Problem with an elephant short is if you bag it, you make a ton. If you're wrong, be it early or bad entry price, the elephant runs you over.

If your system for shorting is working for you, then maybe you just need to tighten it up a bit on selection, entry, stops, etc.

good luck
bsi87