Thursday, October 12, 2006

12K for the Sake of 12K

Have you ever heard the saying about how someone is famous for being famous? Sort of like George Hamilton......well it seems to be the market is heading for 12K (on the Dow) just for the sake of hitting 12K.


The past three months have been agonizing, horrible, devastating, and just plain terrible for the bears. The bullish march has been relentless. Just look at the 60 day intraday graph of the SPY. It's basically like someone laid down a ruler and took it straight up with almost no interruptions.......


Looking at the daily graph, with a channel laid down on top of it, you can see the market is way, way, way at the tippy-top of the channel. Does it mean there is a law written somewhere that it has to fall now? Ummm, no. I think we've seen how respectful prices are of these channels! But it still seems more likely to be lower in the next few months than higher.


All the same, the power of the bulls has been something to behold. I wish I could show you some great bullish charts with terrific breakout patterns, but I can't. This is a momentum market. Things are super high, and they are going super-higher. Sorry. I have no charts to share with you today.

41 comments:

Denver_Investor said...

There's gotta be some hedge funds out there who were as wrong about this market as we bears were.

Wondering if we'll be hearing about another implosion in hedgefund land soon as a result.

J said...

Tim and anyone else who are more experienced in option trading:

A question for you if you got the time. What is the implication of in high volume of in the money calls. I am talking about aapl here. On a big up day, stock ended at 75.3, yet it shows 12k+ oct 70 calls and nearly 11k 75 calls traded. Bearish credit spreads buying 75 and sell 70s? what do you think? If they are bullish I'd think they'd be pilling on 80s and 85s.


This is the strangest rally from hell. Look the all the leaders, goog up 8 penny, RIMM is down 0.64. They are making the bears pay to see the earnings....here, no more no less.....

Christopher said...

Tim, do you think the cost of oil is the main causal link for a bullish stock market?

Tim Knight said...

Christopher, I am way too dumb to know the cause. I think it's just momentum, pure and simple. 99.9% of people like to buy, not short. So they pile in. The ONLY thing that can stop this train is (a) a major terrorist attack or (b) a rash of disappointing earnings in the next couple of weeks.

smokeisms said...

A word of advice to new traders reading this blog... RUN AWAY!!! You have probably been waiting around for the market to tank since it hit its low months ago for every reason your brain could come up with. Meanwhile the trend has been up the entire time which you recognize but don't accept. This is why you must run away from permabears. They infect your mind and therefore kill your trading. You can see for yourself what the market is doing. I have been trading for years and went through a period in 2004 where I was reading the permabears... guess what they were saying??... you got it.. exactly what Tim says now. Look around the internet for some permabear publications from 1987 after the crash... what were the permabears saying then?? Thats right, same thing they are saying now.

Follow the trend of the market, not what you think should or should not happen. Do not read blogs like this until you can seperate the thoughts in your brain from your actions as a trader.

I am a permabear. I think the US is about to implode in financial chaos and social strife. YET, I can make money in a bullish market because that is what the market tells me to do. This bull move even had the commodity meltdown inside it which was fantastic for bulls and bears alike. It takes a while to seperate your thoughts based on what you THINK you know from your action based on what the market is actually doing but it is a worthy endeavor to try. If you have not made at least a little money in this run you owe it to yourself try. Don't worry, the permabears are not going anywhere while you work that out. They will be here until the day the market hits 0.

I understand ths post will mark the top and the next 2 years will be Tim Knights time to shine and all you will be kissing his behind... but that is OK. I will too when the trend is down.

Good Luck,
Jim

Glenn said...

First time here in a while, I actually stopped coming here as it has hurt my trading. I was bearish and wanted to read other bearish opinions. I should have followed the trend, my lesson has been learned. I still think we tank one day, but who knows when.

Tim Knight said...

"I actually stopped coming here as it has hurt my trading."

Wow.....people sure don't mind kicking you when you're down, do they? Sheesh!

niko said...

Smokeisms and Glenn...

Glad you guys have opinions, but most of us who read this blog, read many others, and include Tim's opinions in with the rest.

With that said, even with this upwards market, I have found FAR better charts and recomendations in this blog vs. the rest of the blogs I read. I have made FAR more money off the suggestions in this blog vs. all others.

If you can't filter or combine a variety of POV's in your mind and trading, you've got more serious problems than just reading the wrong blog...

This is a resource like so many others. If you don't like it, absolutley don't read it. I can only speak for myself, but I've found this blog to be incredibly worthwhile and helpful.

My greatest fear is that Tim would stop blogging because he thinks it's not valuable to his readers, so I'm saying: Tim... keep it up. You're helping me out HUGELY. Even the desparate posts are helpful.

This blog is just as helpful to me in a bull market as a bear... possibly more helpful.

My one complaint: why George Hamilton? He's pretty damn funny and has a sense of humor about himself... How about Paris Hilton, or some other no-talent who is famous just for being famous?

niko said...

Oh, and I'd be happy to post those trades I've made from Tim's suggestions, along with percentage winners and losers for anyone interested... It would take some digging, but I'd be happy to do it if anyone is interested. I could even tell you my rationale for why I made the trade.

Just as a suggestion, always include your rationale in your trading records. Helps to clarify your thought, and helps pick out a reason why you lost on a particular trade.

wincity said...

Tim,

I read your blog every day for a couple of months now. Enjoyed it. Don't be discouraged by negative comments. I'm a permabear myself but I've made money consistently in the last few months.

EC said...

What I have realized most since I have been coming and reading this blog is everyone has a point of view. I too was swayed by reading one side, take eithr bullish or bearish. Rookie mistake but then I think we all can say that at some point. This blog helped me recognize better bearish setups! ROCK-ON TIM!! Thanks to all of you too who offer your ideas. E

Tim Knight said...

I really appreciate the support, everyone. Honestly.

As for George Hamilton - - - oh, I dunno. I guess I just can't name any movies he's been in. But he certainly appears to be a better person than the likes of Paris. The only justice is that her looks are going to fade badly verrrrrrrrry soon.

specul8 said...

In the case of - Some Weak Traders vs. Tim Knight, just read the man's profile:

"Tim has been trading actively since 1987 and focuses mostly on bearish option positions. He is a dyed-in-the-wool technician, leaning heavily on marked-up charts for his analysis."

I challenge anyone to point out where he has departed.

If you can't read between the lines, Tim is a super successful $$$ technical trader who favors bearish plays.

I am a super successful real estate speculator $$$ who is adding the art of trading in more liquid markets to my skill set and who constantly seeks out master teachers.

Although he does not know it, Tim is part of my mastermind team. He points out the bearish side of trading and has opened up my mind to key insights.

I balance his genius with H.S. Dent - Permabull.

Nothing goes up forever, and when (not if) this thing turns, we won't even have to ask him for ideas. They will unselfishly be right here, a click away for the taking.

Just want to let you know that you are appreciated man!

"Coffee's for Closers Only" -

Michael

trader said...

Timing is everything.Pretty much in everything in life,but ESPECIALLY if your trading directions on indexes and stocks.
The bottom line is :If you are wrong on your timing...YOU'RE DEAD WRONG !!

stockshaker said...

Yeah, great, I have my "I (heart) Tim" t-shirt as well, but lets get back to business. Today the dow ended smack against resistance level of a price channel. (marked by lows in a channel from jan06 to may06) So, if it goes up any higher, it will undoubtedly have broken this resistance.

So 12k? If that is whats in store, then we have much more up to see.

Teunis said...

Tim, when you go glum...maybe you're telling us the top is close at hand? Heck, nobody's listening to any of the Feds around the country who feel that it may be necessary to raise rates (Moskow/Chicago at a dinner speech tonight) and the new Philly Fed Head, and the repeating 'dissenter' Fed Head. Guess that goes to show what momentum will do.

Anybody think the SPX holds 1365 with GE reporting tomorrow?

chanon said...

After 12000, good time for correction, atleast 300 points down, think high oil price in past quarter could hurt some earnings, Time for mini correction..Please..
DOW

Ashok said...

I've been in this business for a few years now.....24 actually....and I can easily agree with each and every viewpoint presented in various posts....or disagree for that matter...EVERYONE HAS A VERY CONVINCING RATIONALE.....

One thing I have learnt over the years is to never allow the words THINK or GUESS or FEEL....to creep into your decision making ability. If I have DOUBTS about a PROSPECTIVE transaction or trade, I WILL NOT entertain it AT ALL....

The above is only my opinion....but I should mention that as I read a lot of the posts here, I see myself like I was in my younger days, never learning from my mistakes....

To make a mistake is OK ....but to continue making the same one over and over again.....and to never learn from the mistake made ....shame on (me)...!! and you....

No intent to offend....hope this helps in some small manner...
I like this place.....

Regards, all
Ashok

Ashok said...

http://quote.prophet.net//applets/javachart/printGif.jsp?id=http://TRUTH.prophet.net/TemporaryFiles/JavaCharts/301.1160718165799.print.gif&scope=common&host=www.prophet.net&symbol=$SPX&duration=5y&frequency=d


This is 5 year SPX chart with a different perspective to it.....hope it can be seen....

Ashok

trader said...

Somebody has watched "Glengarry Glen Ross" too many times.Better at least get the "Wallstreet " DVD. Gekko to Bud Fox :"Nothin' spoils my day more than losses sport". Judging by the readings,I assume there has been some substantial losses . This shorting of the market or even going long is not BUYING- SELLING-HOLDING real-estate.I've done both. If you're selling short or playing options you have to "thread the needle".

chronictown said...

There is one fact i know. Im responsible for my decisions, win lose or draw i blame no one for any loss i have taken due to my trading. insanity: doing the same thing over and over again and expecting different results. Im trying to learn from my mistakes. Thanks Tim .

Leisa said...

I remember thumbing through some stuff I printed out last year. It was B. Ritholtz's trading guidelines...and it said to learn how to short stocks and to know the short side of any trade. (I know most of you are traders, so I'm not offering any advice here.) This site has allowed me to understand the short side of trading. It's like looking at one of those printed pieces (some in color, some b&W) where you need to experience a brain orgasm to see the picture. So for me at least, understanding the long story and the short story ensures better success in understanding what the occulted picture is. So I'd like to say to Tim, thanks for the brain "O"--but that seems so untoward!

downosedive said...

To all - warning, dont be drawn in to shorting at the 12000 level, in my opinion. The indices needs to overshoot before a correction. As my previous posts, I think this will carry up 12100 to 12200 closing price (NOT the intraday)before those in the money decide to take some profit on mass. Given the recent continued strength, any fallback might be limited to 12000, rather than the 11700 previously suggested. All that assumes earnings flow positive enough to support these levels of course. I think its too early in the cycle to see earnings disappointments - the next quarter is more likely to see the start of a setback

Tim Knows How to Make Stuff Up said...

Tim
I went to cash/bonds in my 401k at end of August looking for the traditional Sept/Oct selloff...well, so much for good intentions. Anyway, I will continue to wait for a pullback. With the DOW on the precipice of 12k, I am going to deploy some shorts. In the past, I shorted the indexes via the DIA. However, this time, I am looking for more juice w/o going the option route. Have you done or are you aware of any studies that have pointed to any particular companies that are correlated to a 2x or 3x beta when the DOW turns down? In the meantime, I am looking at some of the shorts you proposed on 10/11. At all events, please keep posting.

Nimesh said...

Ti, what is your stop on COF? Thanks.

bsi87 said...

re:shorting the Dow. Problem I see with most people on this board is that they started shorting too soon and probably very large positions in relation to their portfolios. Just a guess on my part. I started a position in DXD yesterday with all the Dow hype AND this mornings national news shows had Dow 12000 as the 1st lead story. Never mind that the Dow made you no money for past 6 years, as we say at our house, you work with the material you have. In any case, the Dow RSI is well above 70 and SPX:VIX is extremely high. Shorting with a trailing stop is not that risky IMHO.

re: SLV. Missed my entry. Oh, well. KGC working well this AM. There again, one needed to be patient(sp) and wait for the Gold:USD to get extreme.

re:YHOO. Think of this one as the anti GOOG. GOOG is difficult to short and it looks like the price on the day of the YouTube announcement was "a" top. YHOO is like a dog they've kicked to the curb. Downgrade this AM looks like an exhaustion gap.

Do your own homework and always use stops.

bsi87

Andrew755 said...

Is anyone else finding this market really hard to make $$$$... I'm finding that the easy money was made for me at least april- August. September and October have not been pretty.....

I honestly wish fundamentals would become important again. Things just aren't making sense lately. For all the people who say we are idiots for not buying a market that has run 10600-12000, I don't have that kind of risk tolerance.

Im looking for setups and can't find any. Before I go long I want to see growth in earnings....which I don't think will happen.

I hope November becomes an easier month....

bsi87 said...

Andrew

A lot of what I see are nontrending plays. Have to look closely as to whether they've bottomed. I look at Island for plays. Also look at RSI for 3/6/12 month period for stocks hitting 30 during at least 2 of 3 periods.

Looks like rapid sector rotation/asset allocation type situation.

Look for downgrades, then study the charts.

2 I'm watching are LM and STX. I think LM has one more downleg that will clean out the weak bulls and have the shorts cover. Around 77.50 is my guess.

STX around 20.50 looks interesting.

YHOO just reversed and is trading above the open and the previous close. It will get the bulls chasing and the shorts will be covering.

OIH looks like it's setting up for another short in the 130 area.

good luck/good trading


bsi87

Sanjay Sola said...

market should pull back from these levels. this is a heavy resistance area.

bsi87 said...

re:DXD

I'd put a buy stop limit around 63.04 to catch a breakdown. Might not get the very bottom but so what?

bsi87

Sanjay Sola said...

with options week coming up, it's going to bget wild.

last year, the market dropped right around this time.

i'm sittin in cash. probability says the market goes down, but i'd rather just wait and buy the dips

Denver_Investor said...

It's hard to be bearish here...so, I figure it's about the right time to be bearish. Easy plays don't make money, as a rule.

The 14 day RSI on the DJIA has now completed its EIGHTH day in a row and is closing at about 76.2. Unheard of. The VIX is below 11, very rare. Everyone is wildly complacent...if that's possible..lol.

This could run a few more days I suppose, but the PROBABILITIES are getting lower and lower that we can just keep going up.

NO ONE wants to admit to being a bear here. Hmmmm...isn't that a pretty good contrary indicator?

Denver_Investor said...

RSI on DJIA eighth day in a row OVER 70 I meant to say above.

PB said...

this maerket is going higher 'cause no one in their right mind believes it shd. This latest 'rally' is built on quicksand ... it will disapper mighty quick ... whenever that is.
There is no volume to support this move!

PB said...

I don't know about the rest of you, but every chart I'm looking at is screaming TOP

AT said...

Look guys, we've been calling tops since July. Isn't it about time we became real and end this state of denial? The market may crash, but till it does, you have missed out on over 1000 points.

The spx broke through its long term upper channel, closing over 1360 yesterday and 1365 today. This is a major break, and could indicate higher levels in the future if the resistance becomes support.

My expectations for a major correction soon are rapidly fading. With this much liquidity coming in, whether from real estate, the Fed, or sector rotation (oil), the market is not going down soon. Where will all the liquidity go? After the 2000 crash, it was parked in real estate.

In fact, till now the rally has clearly been pumped up by some of the institutions. Now is the time the media hype (Dow 12000) lures the average Joe or Jane, as well as many traders who were sitting on the sidelines so far (including some bears) into the market, hoping not to miss out on the party. Prices could still go much higher while the institutions distribute shares at inflated prices to these late-comers.

These are hard times for the bears.

trader said...

It's going to be extremelly difficult to find a "TOP" on this market partly because of all the complacency in the wind.If everyone was wildly bullish it be a lot better shorting environment,but that's just not the case and that means there is fear out there,which drives stock prices higher. Also ,there has been no across the board institutional selling now for about 3 years which is an anomoly but I don't think it guarantees that that is going to happen anytime soon.You 've got to have institutional selling AND more follow through selling to get the INDEXES to really get impressive downward activity.Otherwise you get these ROTATIONAL corrections,like the one we have experienced in the last year.Like Housing ,Autos,Casinos,etc.Those all went down 30-40-50% while the DJIA stayed just under 11000.Most of us were looking for the DOW to crack and breach 10000,which at other times in history it probably would have.But no strong Institutional selling. And even if it's Bush and Paulson that are able to "PUMP" the market everyday with infusions of cash,99% of the public will take that kind of market manipulation any day of the week.It might even go on for the rest of Bush's term.So anyway,I think this is really really going to be the most difficult top to find in years and since timing is everything,we'll all need lots of luck and probably lots of cash.Here's to hoping next week(expiration week ) is crazy with volatility.

trader said...

Well said AT.

stockshaker said...

I have a sneaking suspecian that the OIH will break 130 (to the upside). Just a hunch I have...

And there is tons of money to be made! Are you kidding me? Look at all your oil and commodities! They are all starting to recover.

And with the strength in the markets, it would be quite irresponsible to start poking the words "top". And even if you are right, do you honestly think there will be a correction? I hardly doubt it. Every major resistance line has been broken, and EVEN if it does start falling apart, you need ONE HELL of a reason for it to start tanking.

Oil already has had its correction, and looks prime for recovery, that could be the only reason why the markets could start pulling back.

In fact, wasn't that the reason why the markets were down in teh first place for most of today?

muckdog said...

Tim, it could be that money has come from commodity and real estate speculation into stocks. It could also be that the stock market was pricing in a slowdown back in spring, and now that we're at the slowdown, the market is pricing in an improving economy down the road.

It does feel futile to fight the trend here. But I've been taking profits along the way to lower risk while raising cash levels, and shortening up my investing timeframes to flipping at this point.

muckdog said...

Oh, regarding the comments about bears being wrong and bulls being right? Everything is always clear in hindsight. I read blogs like this for both entertainment and sometimes education. Lots of folks with lots of knowledge out there.