Thursday, September 28, 2006

Let's Get This Over With!

OK. Please get to a new high, Dow. Please! I'm so sick of this media obsession. Get it done. Cross over 11,750, even by just a point or two, and let's move on with our lives. That would probably be enough to start a sell off.

Once again, the market wasn't able to grab the brass ring today. It got within 22 points this time.

Watching the intraday on the $INDU over the past couple of days is really interesting. You can see very clearly the shoving match going on. The bulls made a breakout happen today, briefly, but it eased back again. The vast majority of people (like 99.9%) want to see a new lifetime high. That would be big, easy news.

For me, all I can say is one word: oil. Specifically, OIH. I'm sick and tired of stocks right now - - general stocks, at least. OIH and those related to it are doing great for me. I'm going to ignore the madness and focus on oil. My stop on OIH is any price over 131.07. The high today was 131.00, and it eased off from there. Phew!


Anonymous said...

just kick me in the nuts, being short playing puts since JUN has been a disaster. will i ever come back from that loss ? tough to say.

chart trader said...

Afternoon pumps came out and saved the day for the bulls. Hoorray!

Will they keep doing this for end of quarter window dressing so that the fund managers get to take home fat bonuses (at the expense of the hapless fund investors, who have no idea how they're being screwed)? If yes, we should see some sharp sell-offs next week.

On the other hand, if they're going to keep it up for elections so the Repubs can claim a strong economy, we're in for a long, hard October too.

I wish I could go long, but all the charts are screaming 'Overbought! Short me!'

J said...


cancelled cc stock up $15.53. what a will be very nice play tommorrow if it close about all time high @$104.....

smallswinger said...

My Small Cap Swing indicator is presently on the hairy whipsaw edge with the Russell 2000 and S&P 600 in a fairly stalled “Diamond” pattern. It triggered back to SHORT during the day and with the Russell 2000 “unchanged” the stochastics I measure have completely flattened. I could continue LONG or call it SHORT – it is that close and it is my call. Since I believe more in the SHORT potential than the LONG potential I have called it SHORT.

Be warned, though, that a couple up days in the small caps will whipsaw it back to LONG. I hate it when a model reaches these whipsaw levels, and they all seem to have them.

My feeling is that even the big boys are tired of holding this market up just so they can have a good 3rd quarter report for their clients. When October gets here, I predict they will be ready to take profits and let the markets tumble, knowing they have three months to create decent returns for the 4th quarter – better to correct now and have more time to recover.

There is still the “election” caveat that could attempt to hold the markets up for another six weeks or so, but boy, that is a long time with the imbalance that exists in the market technicals. My bet is for an October correction.

The new SHORT signal is at -19 at the close of 9/28.

Here are the recent values of my Small Cap Swing Indicator for the last four or five switches.

. . . . . .Small
. . . . . . Cap . . . . . . . . .Russell
. . . . . .Swing . . . . . . . . .2000 . . . Cumulative
Date . . . Ind . .Signal . . % Chg . . . . % Chg

08/28 . . +05 . .LONG . . +1.1% . . . . +1.1%
08/29 . . +23 . .LONG . . +1.2% . . . . +2.3%
08/30 . . +39 . .LONG . . +0.8% . . . . +3.1%
08/31 . . +48 . .LONG . . +0.0% . . . . +3.1%
09/01 . . +52 . .LONG . . +0.1% . . . . +3.2%
09/05 . . +62 . .LONG . . +0.8% . . . . +4.0%
09/06 . . -19 . .SHORT. ..-2.1%. . . . . -2.1%
09/07 . . -43 . .SHORT. ..-0.8%. . . . . -2.9%
09/08 . . -61 . .SHORT. ..+0.3% . . . . -2.6%
09/11 . . -72 . .SHORT. ..-0.1%. . . . . -2.7%
09/12 . . +18 . .LONG . . +2.4% . . . . +2.4%
09/13 . . +41 . .LONG . . +0.8% . . . . +3.2%
09/14 . . +54 . .LONG . ..-0.4%. . . . . +2.8%
09/15 . . +65 . .LONG . . +0.2% . . . . +3.2%
09/18 . . +70 . .LONG . . +0.0% . . . . +3.2% (short triggered)
09/19 . . -06 . .SHORT. ..-0.5% . . . . -0.5% (& confirmed)
09/20 . . -05 . .SHORT. ..+1.2% . . . .+0.7%
09/21 . . -13 . .SHORT. . .-1.0% . . . ..-0.3%
09/22 . . -37 . .SHORT. . .-1.2% . . . ..-1.5%
09/25 . . -43 . .SHORT. . .+1.2% . . . ..-0.3%
09/26 . . -39 . .SHORT. . .+0.4% . . . ..+0.1% (long triggered)
09/27 . . +17 . .LONG . . . +0.4% . . . . +0.4% (& confirmed)
09/28 . . -19 . .SHORT. . . .0.0% . . . . 0.0% (whipsaw short)

Normal LONG target: . . +65 to +75 (max: +95)
Normal SHORT target: . -65 to -75 (max: -107)

I remain 100% invested in SHORT positions as of Friday’s close, 9/15/2006, with little faith in the upside potential of the “very short duration” LONG signal on 9/27.

Anonymous said...

Man I can only imagine your losses for the year.

Mysterious Q-Man said...

Hi Tim,

Enjoy the blog.

Where do you see the OIH going. Down 38, which is the neckline amount, or less then that number?



Tim Knight said...

I see OIH going down in the medium term to $110-$112 or thereabouts.

J said...

Man last time I checked the year is NOT over yet.

Anonymous said...

I guess it depends on who the Boyz are and who they are trying to help.....Wall Street firms or the Republicans???

If the Fed is our opponent on the other side of our short positions, then it will take an extreme event out of their control to temporarily knock things down.

One thing is for sure....I used to be a Republican. This time, I'm the guy that they hope forgets to vote.....and I certainly will not.

Anonymous said...

"I used to be a Republican. This time, I'm the guy that they hope forgets to vote.....and I certainly will not."

I know where you're coming from. I voted for Clinton in his 1st election, and that was last time a voted for a Democrat for Pres.

North of 55 said...

Wondering out loud, did you (Tim) cover your COG shorts? Someone was wondering about VIX options... They look rather nice for a short term play with a firm target. Unless 99% of traders keel over in October and perform absolutly no trades it would seem that he V index has at least a 20% upward swing on the way.
Had puritan stew tonight, is it called that because that's what's in it or beacause that's who makes it? The info on the tin wasn't specific, he,he.
Arcording to a poll on Marketwatch 50% of particpants believe that the XAU will fall on Friday, while the other 50% are convinced it will rise. Total polled: 2.


smallswinger said...

"Man I can only imagine your losses for the year."

4:07 PM

Wish you had a name. Anyway - I invest in small caps. That is why it is called a Small Cap Swing Indicator.

On 9/15 the Russell 2000 closed at 729.35. Tonight, 9/28, the Russell 2000 closed at 729.94. My short positions are down 59 cents per share on the latest trade. Terrible loss, huh?

John said...

Tim...your time may be at hand. The 10 year may have overshot its mark by racing to at 4.63%...on a possible move to 5.10%

If that is the case, fair value for the S&P is about 1270, based upon the spreads from August. However, this does not take into consideration and earnings slow down or growth rate reductions. Also, it does not include the desire to own stocks.

Good Luck


Anonymous said...

They have gapped up the futures..... the top is nearing.....and I think by some point today judging by the acting I may start getting involved..... 6 days of UP. I don't think so.

Anonymous said...

anon 6:01

Yup, my stomach is churning so it's time to stick in an order at the open. Buy PSQ at 66.10. Inflation high as it's been and the mkt appears not to care. It won't matter till it does. I think the approach is to take small positions on the short side at the bottom of the 20 day BB. JMO

re:DDSS. Small speculation here. Long at 5.41.

Do your own homework.


Anonymous said...

this market seems like its out of steam, i think a pullback to 11300-11400 could certainly be what it needs

trader 2006.

Anonymous said...


The "boys" managed to gap it open but it's close to trading below the open.
Think it's gonna break down after 10:30.


Bouncing around. If it breaks above 5-5.05 this afternoon, I think it opens it to 6.50. I'm watching KRY. I think it sells off more and make a nice paired trade with USGL, i.e. sell USGL and buy KRY, not necessary a short and long.

re:ALY. IBD pick. buy limit at 13.94.

do your own homework.


spinning_head said...

Watching the NYSE 1 minute tick chart over the last few weeks has shown the significant lack of any selling pressure. The tick spends almost no time in negative territory for the last month. -1000 or lower ticks, which normally are fairly frequent, have been missing for days at a time.

On the other hand, expecially for the last week, the tick will be 50, followed by a print of 900 a few seconds later, spiking to the extremes of 1400 or even 1500. Program after program I guess.

It all seems very manufactured to me. 'They' REALLY want this thing to print a new all time high so they can yell 'you are missing out!' and STOCKS ARE THE PLACE TO BE!

We haven't had a 1% move in the DJIA since Aug 15. We had 6 in July, 7 in June, and 4 in May. The market is moving up but it sure hasn't been explosive.

Anonymous said...

spinning head thanks for the info

Trader 2006

Anonymous said...

The SPX:VIX and NAZ:VXN ratios are higher than Sept 1 and look to be forming ascending wedges.

Putting on some Proshare orders at bottom of the hourly BB for EOD trades.

OIH showed a reversal at the 20 day BB yesterday. Adding to short position.

do your own homework.


Anonymous said...

bsi87 - The dog ate my homework, now what?

Al K.

Anonymous said...

bsi what proshares are you buying??

trader 2006

chart trader said...

One of the indicators I like to use is the OBV, especially in real time charts. (I use TDAmeritrade). Its really a useful, and a few patterns I've learnt to recognize are:

1. Steady accumulation by a serious institution: continuous flow of small orders, OBV steadily rising, but almost imperceptibly. You can only see the upward slant on a 5-day view. The following price rise tends to be solid.

2. Hot money (probably hedge fund or large trader): signals manipulation. Price spikes up rapidly. Afterwards you can see the price steady as the OBV declines - it indicates the big guy is sneaking out, distributing his shares to dumb guys attracted by the price spike. Price then falls rapidly, with bagholders wondering what hit them.

The games money managers play....

Anonymous said...

heard today that hedgefunds are starting to bet on the housing decline!!!

Trader 2006.

Growing numbers of hedge funds have placed bets on a slump in the US housing sector in recent weeks, weakening a key index tied to the performance of subprime mortgages, according to dealers.

“We’ve seen macro hedge funds become increasingly negative on the US housing market. It seems to be the one trade that they can all agree on,” said Jack McCleary, head of US asset-backed securities trading at UBS.

As a result, the ABX index – which represents a basket of credit default swaps on subprime mortgages and home equity loans – has declined significantly. The lowest-rated tranche of the index has been most affected, widening by around 50 basis points over the last two weeks.

CDS on asset-backed securities such as home equity loans provide a type of insurance against the default of a specific security. The buyer of insurance pays a quarterly premium in exchange for guaranteed payments if the underlying security experiences losses.

Hedge funds have thus bought insurance on the ABX or on individual securities in the index to place themselves on the winning side of a housing downturn.

However, the trade only begins to pay out if there are losses on the underlying securities – a phenomenon that has not yet begun to play out even in the riskiest subprime mortgages.

Mustafa Chowdhury, head of US rates research at Deutsche Bank warns that the bet could cost hedge funds a pretty penny before the market really starts to turn. “Shorting the ABX looks a little like a race between the cost of the trade and widespread house price declines,” said Mr Chowdhury.

Mr McCleary at UBS explains because many macro hedge funds have struggled to make money in a flat yield curve environment, “they view this as a very cheap option to buy on what they think is a relatively certain decline in US home prices”.

With almost every passing data point, signs of a slowdown in US housing have become increasingly ominous, suggesting that losses on mortgage pools may not be far off.

Annual prices for existing homes fell for the first time in a decade in August, according to the latest data, while aggressive underwriting and weak mortgage lending standards have flooded the market with increasingly risky pools of mortgage debt. Deutsche Bank warns that subprime residential mortgage-backed securities issued in the first half of 2006 could “potentially be one of the weakest vintages”.

Until recently, the mortgage markets have remained largely unperturbed, since weakness in housing has not yet translated into rising defaults and mortgage delinquencies.

Scott Kirby, head of structured products at fund manager RiverSource Investments, explains that, contrary to previous housing downturns, the market has also been buoyed by the popularity of collateralised debt obligations – bonds backed by pools of other bonds. These portfolios can include various loans but many are backed by consumer debts, of which housing-related loans are the most common.

“CDOs and other structures backed by sub-prime mortgages have provided a very strong technical support for the market. We didn’t have this dynamic 10 years ago and it has yet to be tested,” said Mr Kirby.

Despite the increasingly gloomy outlook for housing, the CDO machine has continued to buy mortgages because, as Mr Chowdhury at Deutsche Bank explains, “the flat yield curve means there is no spread in most other markets”.

But the market is now preparing for a deeper housing downturn. Mr Kirby at RiverSource Investments said: “A period of flat to negative home price appreciation will warrant watching closely as it places subprime and home equity borrowers most at risk of defaulting.”

Anonymous said...

Bonds definitely cracking. Showing another bearish engulfing pattern, 2 days apart.

JMO, if we see yields moving up, it'll unwind the equity trade on an asset allocation basis.

Full disclosure: short TLT at 88.05.

AL the K: go to the back of the room.

Trader 2006: SDS, SH. Have some PSQ already.

re:USGL. Nibbling at 4.68. Looks like a cup and handle with the neckline at 5 bucks. Break and close above 5 opens it to 6 bucks.


Anonymous said...

im in SDS as well, looking for 66-68 sometime in last october

Trader 2006.

Anonymous said...

this market is boring the last 2 days, trading flat all day. This shows that the market looks like it wants to move down but money is still keeping it up.....

Trader 2006.

Tim Knight said...

"this market is boring the last 2 days, trading flat all day. This shows that the market looks like it wants to move down but money is still keeping it up....."

Exactly. Zzzzzzzzz.

Maybe something will be different on Monday. This is a total snoozer.

Anonymous said...

Does volume have to be decent or average for a stock to break above resistance?

If volume is low at the top half of the move does that mean it doesn't support the prices?


Anonymous said...

can they just close it above 11724 today, they can party all weekend long and then selloff the markets for the month of october!!!

Tim im hoping they begin the first trading of october with a nice selloff!!

Trader 2006.

Sanjay Sola said...

Google looks pretty awesome right here. low volume consolidation and forming a symmetrical triangle. watch the volume to catch the move to the upside.

Anonymous said...

I thought today would have been a strong up day considering RIMM is up over 17 bucks.

Anonymous said...

Looks like they're running up the Q3 "winners" for now. See what next week brings.



Ashok said...


I'm afraid i cant agree with your Google call....I see it down to 393 and then possibly to 383 ish.....

Tim....seeking your expert opinion...

I own 150 contracts of OIHVF...Oct 130 puts at a cost of 8.25.....they are down to 4.30/4.40....:(......suggestions??

Anonymous said...

QID VOLUME = 1,169,500
QLD volume = 175,300

Trader 2006.

Anonymous said...

Impotent MF's just couldn't close at an all time high!

Such losers!

Longs will get mauled to pieces in October ... looking for at least 11,200 on the DOW before October closes.

- Trader Fred

Anonymous said...

im predicting NDX 1600 by October 20th......

thats a 3.3% drop. Not asking for much.

Yea they should have at least closed the dow at new highs. Now i have to hear that the dow was close to closing at all time highs all weekend long.........

Trader 2006.

Anonymous said...


I dont look at today as being a total snoozer. Look at a daily chart of XAU and OIH for instance. Your OIH is making another run at the neckline. It should be an interesting Monday.