Thursday, September 21, 2006

Stop New High Mania!

They just couldn't let us have a triple digit down day, could they? The Dow was down about 115 points earlier, but we closed down 80. Oh, well. Not a bad day, particularly since the media is all ga-ga over the possibility that the Dow is within spitting distance of an all-time high. It would be nice for that not to happen.

My portfolios were up today, but not as much as they might have been if oil had cooperated. OIH was up about 2% as oil and related companies tried to recover from its recent bashing.


The aforementioned $INDU gave back yesterday's gains and is clearly showing some respect for that trendline that it is under.


The $RUT is hopefully stuck in a rut. That horizontal trendline is the "throw in the towel" zone, and we do not want it to cross on the upside. This is a nice bearish engulfing pattern at this point.


More short ideas. Here's DST......


ESRX, offered up a week or two ago, is doing nicely.


As is NVR, also suggested a while back.


One I discovered today was Panera Bread, PNRA.


That's it for now. As always, good luck in your trading.

31 comments:

smallswinger said...

My Small Cap Swing indicator moved to a SHORT signal early on 9/19/06. Bad news on 9/21 in the Leading Indicators and the Philly Fed Index was actually seen as “bad news” (wonder of wonders) and the markets were down a good measure. Current SHORT signal is at -13 as of Thursday’s close, 9/21.

Here are the recent values of my Small Cap Swing Indicator for the last four 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%
09/20 . . -05 . .SHORT. ..+1.2% . . . .+0.7%
09/21 . . -13 . .SHORT. . .-1.0% . . . ..-0.3%
09/22 . . -13 . .SHORT. ..-1.0% . Intraday @ 11:30am ET

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

I remain 100% invested in SHORT positions as Friday’s close, 9/15/2006, when the trigger was close to switching.

PS:

Tim, oil is a little too oversold to be betting SHORT, IMO. I think OPEC will support if oil goes below $60, so little potential left.

Re: Stuck RUT - If you look at several indexes on 60min charts, from Sept 14th to the present you can clearly draw a Megaphone Top or Broadening Top (higher highs and lower lows), which is usually resolved to the downside, meaning the RUT target is at least 710, or another -2.3%. I look for a lot more!

Anonymous said...

Smallswinger,

Does your work predict a follow-through of the downturn today of the indexes-(i.e.DJIA,S&P)-into next week ,and if it shows that, what percent(%)that might be.? I guess today we were down about .8%. You have one of the best and most intelligent contributions to the blog.Just interested in your opinion in the general sense ,however you arrive at that.Thanks !!

Denver

Chronictown said...

Smallswinger, Thanks for your detailed analysis. I hope your are right about the $rut. I bought oct. puts and am thinking about getting some more. RE:USGL bsi87 what is your exit. Stock seems to be falling on volume,not a good sign?? Goodluck to all! Chris

smallswinger said...

My history of the Small Cap Swing Indicator has no predictive value, other than to say that it usually reaches the normal maximums +/- ranges, i.e., 65-75. I can say that I usually see a 7-9 day swing and during that swing 2 days on average go the opposite direction of the signal

AUTUMN EQUINOX

Here is a great audio uplift for you bears. Listen to the first part, which details the significance of September 22nd, the Autumn Equinox.

http://www.raymondjames.com/inv_strat.htm

smallswinger said...

Here's my take on oil, Tim.

The dollar looks to be falling even more, after a short rally. I think it is destined for a big decline, though somewhat choppy on the way down.

When the dollar goes down, crude goes up, since crude is traded in dollars. Even if the demand/supply equation remains static or demand falls some more, an economic slowdown combined with a falling dollar spells some sort of advance for crude oil purely based on exchange values.

Hbarr said...

Take the Philly Fed saying manufacturing growth in their sector is ZERO, add the woes of Detroit, throw in a pinch of commodities collapsing, then toss in the housing crash (see KBH's disastrous/mysterious report tonight) and what do you get?

I think that if we're not already in a recession we will be by Q4.

Anonymous said...

dont short DST - they own 30% stake in a subsidiary that is going to be sold to a hedgie at a super premium. multi billion dollar deal. but, you should short it after te deal.

sam said...

Tim, do not short pnra. Not much volume and wild price swings in both directions will stop you out everytime, trust me from experience. Great site, some nice calls in mot, and shorted cal this morning.

Anonymous said...

this was a good day for the bears, however if we get a rally tomorrow and we erase every loss today say hello to new highs on the DOW NEXT WEEK. Im thinking more profit taking tomorrow, but not much. Was hoping to close the week out with the NDX at about 1600 but yesterdays rally took that chance away.


Trader 2006.

Anonymous said...

and oh btw, the end of the month is round the corner. What more it is also end of the quarter. This and the irrational exuberance, I won't be surprised to see 12k by Oct 6th

Anonymous said...

5:05 12,000 by oct 6th is possible but i doubt it. Are you the one who bought QLD today.


trader 2006.

costas1966 said...

This got to be the double top on the S&p 500. Wedging higher since june and having trouble breaking above the May highs. RSI and stochastics are extremely overbought. Priced moved out of the 20 day Bollinger bands for 2 day in a row. Overhead resistance right on top of up. This got to be a double top.

Anonymous said...

Any bears still alive?

Anonymous said...

re:usgl

I'll be looking at the 20 and 50 DEMA as exit points. I can't put sell stops on it on my broker. Staying with the position isn't worth the risk even if it's a small position, I don't want to baby sit it.

bsi87

Anonymous said...

This pullback looks like a nice buying opportunity. Any comments

Anonymous said...

yes, if you're buying PUTS !!

costas1966 said...

I thought this is interesting reading.



U.S. Hard Landing And Recession Steaming Ahead: Now More Likely than a 70% Probability!

Nouriel Roubini | Sep 21, 2006

Starting last August I made my out-of-consensus recession predictions about the US and global economy in a series of two dozen or so notes and analyses (all these forecasts were well consistent with the same bearish views about 2006 that I had expressed much earlier since last fall):

1. The economy will sharply decelerate in H2 (1.5% growth in Q3 and 0% by Q4)
2. The housing market will experience its biggest bust in decades and home prices will sharply fall
3. The US will enter into a recession by Q1 of 2007
4. Inflationary pressures will fizzles away as the slowdown and recession will reduce commodity and oil prices and will create slack in the labor market.
5. The Fed will not just pause but stop hiking and then cut rates in the winter (by December or at the latest February). Markets were way behind the curve in their assessment of Fed policy as they were still debating the next hike rather than discussing when the Fed would ease.
6. The Fed ease will not prevent a recession as there is a glut of housing and consumer durables
7. Employment growth will slow down sharply starting with outright employment fall in housing and housing related sectors
8. The world will not decouple from the US recession; there will be a sharp global slowdown
9. There will be a suckers' rally in the stock market as investors will wishfully delude themselves that the Fed will rescue them and prevent a recession
10. Eventually the stock market will fall sharply when it is clear the recession is coming (it falls an average 28% in a typical recession)
11. Commodity prices will fall as the recession risk becomes more likely
12. Fixed income will rally as the slowdown and recession risk increase
13. The dollar will start falling as the US recession become more likely while the US current account worsens
14. China will surprise markets and let its currency appreciate
15. The world will not decouple from the US slowdown; and global markets will not decouple from the US slowdown
16. Hard landing from consumer burnout will lead to hard landing from foreigners' flight from US assets as the US current account is worsening.
17. Emerging markets – currencies, equities, fixed income -will come under pressure once the recession is ongoing.
18. Credit risk will increase and volatility will be higher
19. There are risks of a systemic banking crisis given the housing bust and the amount of mortgage risk in the system
20. There are systemic risks in the financial system around MBS/Housing, credit derivatives, the risk of a stock market 1987-style rout and the risk of a hard landing of the US dollar.

After the latest ugliest housing starts figures and today's even uglier Philly Fed report I am increasingly convinced that my calls are all right; I would even increase my subjective probability of a US recession to a figure higher than 70%. As I discussed earlier this week, my prediction of a 1.5% GDP growth in Q3 – a collapse of growth relative to H1 – is well supported by the recent flow of data. Oil and commodity prices are falling, fixed income is rallying and the stock market suckers' rally has continued for a while but there are signals that the coming recession is finally making equities nervous. The Fed pause is a now a full stop and markets are starting to debate and price whether the Fed cutting rates will be in December or rather February. The global business cycle looks peaky based on many forward looking indicators. The housing market is in free fall and prices are already falling sharply (considering generous seller side subsidies and incentives). Banking stress is already evident in the sub-prime lending segment. The dollar is under weakening pressure; the US current account deficit is getting worse, net factor income payments are negative and foreigners' purchases of long term US assets are faltering. I can thus comfortably argue that almost all of my predictions are well under way to become reality.

No wonder perma-bulls are going now into a perma-freeze as the markets are starting to price in a now inevitable US recession. Of course such perma-bulls will keep on deluding themselves that lower oil prices and lower long rates and a Fed cut will rescue the economy, not understanding that those price movements are bad news – rather than good news – as they reflect the severe US and global slowdown; they are systematically biased in their forecasts. But the reality check is coming soon as the onslaught of bad macro news make the reality of a real, ugly, severe and protracted US recession more likely than ever.

In the last three months I have been called all sorts of names and insults: “Dr. Strangelove of Global Macro”; “Eeyore”; “Doomsday Cult Central”; “Dr. Gloom & Doom”; “A combination of Count Dracula, Dr. Frankenstein and Godzilla together”; a lot of this from folks whose comparative advantage is in insults rather than in the serious and detailed economic analysis that I have performed in these pages. We have heard only wishful delusional dreams and insults from such perma-bulls.

To conclude, until now I have said that the only thing orderly and soft about the comatose housing market landing will be soon the undertaker carrying the coffin; I can now comfortably also say that the only thing soft or orderly about the economy landing is the undertaker carrying the coffin.

smallswinger said...

To anonymous (bull): Buy MZZ, QID, SDS, and DXD. You will do well!

My Small Cap Swing indicator moved to a SHORT signal early on 9/19/06. Bad news on 9/21 in the Leading Indicators and the Philly Fed Index was actually seen as “bad news” (wonder of wonders). The current SHORT signal is at -39 near 9/22 mid-day.

Here are the recent values of my Small Cap Swing Indicator for the last four 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%
09/20 . . -05 . .SHORT. ..+1.2% . . . .+0.7%
09/21 . . -13 . .SHORT. . .-1.0% . . . ..-0.3%
09/22 . . -39 . .SHORT. . .-1.2% . Intraday @ 11:45am ET

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

I remain 100% invested in SHORT positions as Friday’s close, 9/15/2006, when the trigger was close to switching.

Here we go down the mulberry bush, the mulberry bush, the mulberry bush. (mulberrybush = equity markets)

Anonymous said...

re:PXP

Stopped out for a 8% gain in a week.

re:BMY

Stopped out for a 5% gain.

Nothing too exciting. Mkts aren't high enough to put on shorts nor low enough to go long.

Have a buy limit order in for PEIX at 14.75 GTC.

re:OIH. P&F chart shows 118 target. Expect that early next week and I'll cover for now or hedge for a bounce.

ZZZ. LOL.

bsi87

Anonymous said...

costas thank you very much for that nice article. Will print that one out.

Great day for the bears, this follow through is what we needed.


QID is doing great today!!!

Trader 2006.

Anonymous said...

just read an article saying Proshares is coming out with, GET THIS, 66 NEW ETFS. Ill post in a few.


Trader 2006.

Sanjay Sola said...

today is distribution day #5. leading stocks are getting ripped apart. lots of economic data next week.

Anonymous said...

How much of a factor will next week being the last trading week of the 3RD quarter be a factor it's direction next week ? I don't know ,but if it were not for that fact and also this being Fri.,I would be tempted to pull the trigger aggressively on some S&P puts.Today surprises me as well as we are getting pretty good follow through on yesterdays decline.Mortgage Lender stocks look good for big declines.Safer than betting against the indices.

Improving said...

Tim, now that OIH is breaking into the $123 mark, where will you reset your stop loss to? Would you do a contigent or trailing?
Thank you for you insight!
K

Anonymous said...

PPT in action. I think next week we will head higher irrespective of the reports. Anyways whats the authenticity of these reports, they are already skewed.

Anonymous said...

re:PEIX

long at 14.78.


Do your own homework.

Anonymous said...

sold half of my QID at $63.15 after buying it at $62.05. Still own QID and waiting for 66+++

Will buy more QID around $60.50-$61.50.

trader 2006.

Anonymous said...

I'm starting to believe next week the market goes to test the high and it should fail.....

I just smell it....

Anonymous said...

1:24 i hope so, ill take some more QID under $61.00

Trader 2006.

smallswinger said...

Some of you need to pay closer attention to the sequence of events this week. After the FED paused on rates again (Wednesday) and tried to muster some tough inflation dialog, the market psychology shifted.

That is why the markets fell so hard on Thursday. All of a sudden, the FED and interest rates become last year's girl friend -- no longer interesting. What was now interesting was the economy and future earnings. And suddenly, bad news became just that -- bad!

The negative Leading Index and the VERY negative Philadelphia Index were viewed on Thursday in this new light: Bad News IS Bad News.

Next week brings the following
economic reports: Existing Home Sales and New Home Sales, Consumer Confidence, Durable Orders, Initial Claims, Personal Income, Personal Spending, and the Chicago PMI.

Somebody tell me which ones will be "good news"? Maybe Personal Income. They could all be bad. I know a few of them will be VERY BAD.

If the markets rally and advance to the upside next week it will be due to market intervention, plain and simple.

In the new light of "Bad Is Bad" I'm betting on a down week next week. And I have put a lot of money on it.

Somebody tell me why I'm wrong. Don't tell me THAT I'm wrong. Tell my WHY I'm wrong. Not that easy, huh?

Leisa said...

I don't trust the wisdom of crowds, particular whatever wisdom is allegedly in the market. Smallswinger, I suspect that the market will stay optimistic until incontrovertible data chips away at its collective conviction that the economy will glide (hope) rather than skid (probable?) lower. Last week the market was kicked in the stomach with the Philly Index report. A pin prick to wake a few out of their dream state of economic bliss. (NY) shows strength. I just saw a terrific graph in one of my paid subscriptions (Peterdag.com). Shows GDP pegged to housing. Housing is the leading indicator, and we all know where that is leading. My short positions are red currently, but I'm anticipating that they will correct. I picked up some OS NOV 50 puts--of course it went higher, but it is now rolling over a bit with the Philly news. Good luck on your positions next week.