Tuesday, October 03, 2006

Big Swinging Dow

Well, it finally happened. The esteemed Dow Jones Industrial Average made a new lifetime high, both on an intraday basis as well as a closing basis. The media is all over this like white on rice.........





They are treating this like we just landed the first man on Mars or something. The fact that it's headline news on all media sites - both general and financial - is great news. We did it. It's done. It's over.

Now let's get on with our business of busting some bull heads.

My frequent - nay, incessant - recommendations to short all things oil has obviously been great advice. OIH and its components got nuked today, and the beauty part is that the pattern is sexier than ever. I mean, just look at this thing. It's gorgeous.


As for the Dow itself, here's a minute bar graph of the past sixty trading days. Notice anything interesting about the upward surges? That's right - they're getting shorter and shorter, weaker and weaker. All the bull's energy has been poured into getting onto the front page of the Daily Bugle. Well, you've done it, fellas. BFD. Congratulations.


The bottom line for me is this - I've got over 80 positions, about 70 puts and 10 shorts, in all kinds of different industries. And my portfolio value went up today. That's why I'm looking this bull straight in the face and laughing at it. Savor the moment, pal. You're about to get wasted.

143 comments:

Anonymous said...

Fan-freaking-tastic, especially that chart of the shorter spurts from the tired old Dow. Lights out.

Uncle Jack

Anonymous said...

While I agree the market is due for a pullback, wouldn't it be premature to call the start of a bear market until the DOW breaks its trendline?

Anonymous said...

Tim,

Just curious why you prefer playing the short side of the market vs long.

Thanks,
Erik

Anonymous said...

Tim I know your an Ultra bear on Oil but I was thinking a big drop in oil is only a stronger catalyst for the overall market, isnt that what we dont want now. If oil went back to 70+ stocks could easily fall 5-10% in the next 3 months.

Trader 2006.

Anonymous said...

very good call on oih

Chronictown said...

the party starts soon! $rut not participating, Mr. "T" doing his job!I pitty the fools! I cant wait to watch the heads on cnbc when this baby starts the plunge!Cheering no mas!

PB said...

North Korea's Kim Jong Il is a BEAR! --- just as the DOW sets new highs, he's announcing nuclear missle tests! That shd make Mr. Market poop his pants. Will the market just shrug this off? I think we'll see a 30 point decline tomorrow

Anonymous said...

Hello sir,
I have to thank you for the OIH highlight.
I got in last week and out today near the end of the market at .20 cents off the low for the day. I do not know if it will pull back before it goes lower, if it does I will get back in. But I got 60% in 7 or 8 trading days! You are my hero! Thank you for generous time and effort w/this web site. It helps me earn while I learn.

Kevin in Sacramento

Anonymous said...

These comments are getting embarassing:

"My frequent - nay, incessant - recommendations to short all things oil has obviously been great advice."

Sure, but you conveniently forget to say you've been also recommended shorting everthing else, and at SIGNIFICANTLY lower levels.

"That's why I'm looking this bull straight in the face and laughing at it. Savor the moment, pal. You're about to get wasted."

Oh sure. We haven't heard that before.

Anonymous said...

Im looking to go long PXJ or PXE tomorrow if there is another selloff in those ETFS. PXE has bounced off 16-16.50 about 5 times already since coming to the market in October of 2005. Past performance does not guarantee future results....

Trader 2006.

J said...

Is GS the new GOOG? This thing seems topless, matter of facts all financials seems topless, maybe this time it is different: inverted yield curve is Great for financials.

Anonymous said...

Tim,

It looks like XAU broke its neckline today as well. I am waiting for it to really get going southward. I went to the blog expecting to see some comments on XAU as well. It did better (assuming you're short) than OIH today.

Anonymous said...

f$#k the bulls. this may be the last celebration they have for many years to come.

Anonymous said...

Have to agree with another "anonymous" that while yes, the $XAU and OIH have obeyed their bearish charts that you and many others have commented on, you have been dead wrong on most everything else for a long time. I will never understand the benefit, logic, or point in declaring oneself a diehard bear or bull. Top traders go with the market-- they don't clash wills against it.

Tim Knight said...

To both of the anonymous folks that were dissing earlier picks of mine - - then don't waste your valuable time here! Get lost!

"Just curious why you prefer playing the short side of the market vs long."

That's a complex question. Lots of reasons, most of them having to do with a badly tormented soul. Plus being stupid enough to be rational in an insane world.

Tim Knight said...

Oh, as for $XAU - - sorry to ignore that one. Yeah, that's cool. I selfishly left it out since I'm not positioned short on gold. I was a doubter, but I shouldn't have been! It that H&S breaks, wow......

Tim Knight said...

"Sure, but you conveniently forget to say you've been also recommended shorting everthing else, and at SIGNIFICANTLY lower levels."

Oh, one last thing. Have you ever heard of stop prices? It's not like I stupidly hold on to bad trades forever. I tend to have tight stops that get me out quickly. It's the big winners that make up for it.

Dickhead.

Anonymous said...

Tim has more money than all of us put together. I value what he says and you should to anonymous.

shorty

PB said...

Hey Tim! looks like the anon losers are back ... maybe you can post another picture of them for us? :) hehehe ... just kiddin' ... anyways, it takes brains and balls to identify short candidates while the rest of the herd buys, holds, and is stoopid! I get what your blog is about and it is unique in the blog-sphere! Please don't change it for these unknown dick-weeds!

Thanks and keep up the good work!

north of I can't remember what # said...

Yes, finally good to see XAU is doing it's thing, about time!
A confession though...
Though still doing well with xau puts, The bull-trap that preceeded this trend got me square between the eyes. I have a nice xau call in my account that is worth less than Toilet paper Tight stops! Preach it! Lets hope for some follow through tomorrow. SHLD is acting funny....?
Enjoy the Blog!


Doug

Anonymous said...

Why fight the up trend and go short the broad market before there is confirmation of a break in the trendline?

The market appears overbought, but history has shown that it can remain overbought far beyond what many in the bearish camp can tolerate.
JMHO

Respectfully,
Dickhead Don

Anonymous said...

Tim,

Glass houses, man. You seem to take pleasure ripping on the bulls and posters that disagree with you, yet you are so defensive when they challenge you.


Adam

Anonymous said...

You have got to be the most stubborn trader I have ever seen. It's just strange to hear how a trader can take such a strong stand of being bearish. For me, it's not a matter of being right or wrong or bullish or bearish. The ones who notoriously calls for a market direction usually turns out to be a loser. It's an odds game. The thing is to have good setups not betting on whether it's a bear market or a bull. It's amazing for someone intelligent as you being so stubborn and hard headed. I hope you have a lot of money to blow being stubborn. Good luck.

Anonymous said...

"it takes brains and balls to identify short candidates while the rest of the herd buys, holds, and is stoopid!"

Ok, shall we identify the dozens of "short candidates" Tim's identified that have continued to push higher for months? Sheesh.

plunger said...

"Top traders go with the market-- they don't clash wills against it."

they also dont post anonymously on blog sites spouting about their "clever trading and unpassioned eye of the market." - get a fuckin life, tim posts opinions here some good , some bad, some great, the difference is its a tech. site, do your own dilligence , i would love to see your portfolio with every stock you pick obviously perfect and no losers,- bullshit!! even the greatest traders in history, only hit @ 40-60%, if your doing better, make some calls here publicly and post your name, and lets see, if your gonna challange his picks, the old adage -PUT UP OR SHUT UP

plunger said...

tim great call on oih, i got in early and got out way to early, made little and lost a little more on my next position tho, i enjoy the hell out of the charts you post here, im a true technician as well, and enjoy others perspective on charts and patterns as well. alot of good traders here as well who bring quite a bit of intelligent opinions. people who love to post neg. things about you here are the same ones who love to see others fail because they dont have the balls to try themselves. keep up the good work, thanks for your time and effort on this blog.

Anonymous said...

Why not show us these puts and shorts you have that ALWAYS seems to make money. I find it a little strange you ALWYAS seem to make money on ALL you puts even when the market is making new highs. I guess you just have the magic touch. LOL

Anonymous said...

Looking for a contratrend rally in the oil sector now. PXJ,LNG for example.

Bought some NHY near the close which is a "Dogs of the World" play.

Other dogs that I'm watching are GGB,KTC,PCU,and TOT.

Reading this morning's WSJ, bond yields and energy dropping are cited as causing the rally. Wonder how they'll feel if they reverse?

do your own homework

bsi87

Tim Knight said...

"Why not show us these puts and shorts you have that ALWAYS seems to make money."

Sigh. I'm going to try this again. I have never - ever, ever, ever - claimed to have every trade be profitable. Now that would be a lie for anyone, from Paul Tudor Jones on down.

What I said was that I always use stops. That's the only "always" I'll ever claim. And, by doing so, I get blown out of my bad trades (and there are plenty of them!) swiftly and relatively inexpensively.

Learning to be a good trader takes a long time. If I were going to point to a major failing that I still have in trading, it's closing positions before the profit has running been realized. I'm workin' on it.........

Oh, and by the way - - if the above is to suggest that I am somehow cagey about my positions, far from it. I often post as many of my positions as will fit on a screen, which is probably idiotic. But I'm doing this only to share ideas others may want to consider.

Anonymous said...

re:SLV

looks like the gap and trap.

no position but watching for the 105-100 area.

bsi87

sam said...

Tim, told you PNRA was not a good short. You would have got stopped out with it's 2 point jump today. A better short would be SBUX with a stop at 35.50. Sam.

sam said...

Tim, PNRA now up 4 points, looks like shorts are running. Still love your site, us bears need to stick together, our time will come. Sam.

Tim Knight said...

Yep, I got stopped out of PNRA. AND THAT IS TOTALLY OK!

I read a great quote the other day - it said that trading should be boring, like doing factory work. I agree! If you're looking for adventure & excitement - well, to paraphrase Yoda - a trader craves not these things.

Anonymous said...

Tim,

Why bother with these clowns.... I really appreciate what you do.... anytime someone is willing to share there knowledge with the public it is great.

As for these other guys, they are either bitter that they couldn't figure out how to make a blogger.... or they are bitter at their trades that they need to waste their time bashing you.

Keep up the good work!!! I read and interact on here often.

Anonymous said...

Oh ya,, forgot my name on that last one andrew755.

Now this is interesting oil goes up...... and the market moves up with it....hahaha. It works both ways I see. Oil is holding major support right now and could fire back.

I say the markets ramps for today then sells off on Bernanke... either or....we wait for earnings.

Cheers

Anonymous said...

wtf........................

Anonymous said...

wmt disappoints with a 1.3% sss compared to 1.8% 2 days ago...hmmmmmmmm

trader 2006

Anonymous said...

adp jobs prediction comes in at 78,000. who knows how accurate the # really is.

trader 2006.

Anonymous said...

re:SLV

Now trading below the open AND the previous day's close.

re:OIH

There went 120. See how it closes. That's the tell.

re:jobs/T2006. ADP has gotten better

bsi87

Anonymous said...

Today is a very important technical day if the S&P 500 fails to make new higher high then the pattern of 2 day retracement and a run to new highs that has been established the past 2 months will be broken and the bears will gain the upper hand. I myself decided to take a gamble by shorting pcu and nue today


Costas 1966

Sanjay Sola said...

i'm happily in cash. there aren't any stocks i'm interested in right now.

at some point this market will correct, just like all markets do and it will correct viciously.

if the Dow is up today, that's 8 days in a row. odds are that the Dow is going to fall pretty hard. Dow's trading at a P/E above the S&P 500. Dow has a P/E of 22 and S&P is a little above 16.

Anonymous said...

Bulls are parading on CNBC non stop one after the other. How can so many people on the same side and be right.?

Costas1966

PB said...

and that's with earnings running at record highs! what will happen to the market when earnings start coming down? It's pretty hard to grow earnings from these levels.

chart trader said...

Dow UP again almost 50 points??!! My God, is there no end to this madness? Where is all this liquidity coming from? Who is crazy enough to keep buying at these levels? All the charts are screaming 'Overbought!'.

Methinks 'they' will keep driving it up till the elections to get the Repubs reelected. 'They' want to hit Dow 12000 and beyond.

No luck for the bears.

Anonymous said...

Oil is holding $58......major support.

I think it might rebound here......but too risky for me.

These markets are looking toppy.....
short the indexes...... overvalued considering economic situation and earnings are next week.

Anonymous said...

re:MEE

long at 19.38

re:LNG

long at 25.50

I have buy stop limit orders above the HOD of all my underperformers esp GDX and others to catch any intraday reversals.

I'll be putting a sell stop above the HOD for TLT. Looks like they're monkeying around with it.


bsi87

Anonymous said...

8 up days in a row..i cant wait for the day we get 8 straight down days...


trader 2006

niko said...

I'm glad for all the debate. It's great that we have some doubters on this board... when everyone agrees, the site is less worthwhile.

One thing I think is NOT helpful is the ad hominem attacks. Whether or not Tim makes moeny on every trade isn't the point. He's not making comission on your trades. If you doubt the value of this site, there are many others available for you.

I would say keep up the critical thinking and counter points, but maybe don't go after Tim... Not helpful to anyone, and if you chase Tim off the web, many of us would be pretty miserable. Just add his opinion to the bank of opinions you ingest.

I for one am glad for the perspective, and I'm straddling calls and puts right now, though the trend is decidedly bullish.

One more thing: the anonymous thing is still irritating to me... You've got a name, use it.

Anonymous said...

last time gold dipped this much it ran 50 dollars an ounce

trader 206.

Anonymous said...

Oil is back.... back to even..... it held support at $58......

BEN is up on No volume...and has a divergence attached to it. Same with SPY.

chart trader said...

Walmart lowered outlook, yet most other retailers are UP??!!

The Fed is simply pumping huge amounts of money ('Your Tax Dollars At Work') to prop this market up.

Free money for the longs, courtesy 'Helicopter' Ben and 'Goldmansex' Paulson. Enjoy.

I just wish I had had the guts to go long despite all the overbought indicators.

EddieFl said...

Up, up and away. Dont fight the trend. If you are a trader, simple things like: always use stops, go with the trend, the trend will always go further than anybody thinks,etc... are worth putting in concrete, it will save you $$$


BTW, lets leave Tim alone, I have been at this for six years, I have NEVER seen a website that gives as much valuable info as this one, or a person that obviosuly is very busy , give his time to a Blog like Tim does.

Most of it is free, and the part that he charges for is well worth it.

If the anonymous posters, think they can find a better financial site that offers more than this one, with an owner-creator that is more involved then Tim, please point me to it. (there isnt one)

Tim, these anon posters may be the Puritans disquised as critics,,, right along the same lines.

Anonymous said...

re:DOG

buy stop above the open to see if DJIA reverses.

bsi87

Anonymous said...

Can someone answer this question please:

Ok, so I understand the printing presses are working overtime and the M3 number is skyrocketing. But how, technically, does that affect stock prices??

I mean, the money has to actually go towards buying stocks... just because it's being printed doesn't automatically make the markets go up. The money has to actually go into the hands of people that BUY the stocks. And that's what I'd like to know... how does the money get from point A (the printing presses) to point B (into the hands of the floor traders to buy stocks)??

Thanks.

Eric G.

Anonymous said...

re:OIH

trading above its open. If it looks like it's gonna close there or above, I'll be closing the OIH short around 230PM. Have a PXJ buy stop as a hedge.

bsi87

niko said...

Check out CKFR. Looks like it closed the gap on an imperfect H&S crash. Jan 07 50 puts have a 0.70 time value.

spinning_head said...

Regarding attacking Tim on his OWN web site.

To these people who do this I have a question.

Would you go over to Tim's house, and to his face tell him it's ugly, his kids are ugly and you think he's a big loser?

Well, would you? Didn't think so...'cause people who act the way you attackers do are cowards.

You only act that way because the internet gives you cover. And, surprise, surprise...you ALWAYS seem to be identified as ANONYMOUS.

Well, this is Tim's place. Behave, be respectful or go elsewhere...and I'd suggest a therapist's office.

..by the way..this market is making me REAL cranky...lol; I guess there is just no end to this uptrend

inverted yield curve
slowing economy
crashing real estate market
hedge fund blowups
4 year cycle
years now without even a 10% correction
NO PROBLEMO!!

Tim..thanks for all your hard work on the blog. We need a place to vent!

niko said...

M3:

One of the ways M3 affects the economy is by stoking inflation and devaluation of the dollar.

If earnings are high, but the dollar is devalued, earnings in real dollar terms are not what they seem to be... You're earning more nominally, but of less valuable dollars.

If earnings are lower than they appear, especially when M3 isn't published, you're creating a false sense of growth which can lead to a crash in the price of the stock.

Secondly, printing money, because it stokes inflation, leads to a slower overall economy, which is obviously bad for stocks.

M3 is generally an indirect cause of a stock devaluation.

Anonymous said...

Eric G.

These days, the money doesn't even have to be printed. Just create electronic pulses in some computer somewhere by tapping a few keys. Hey presto - billions of dollars available.

The Fed OMO (Open Market Operations) allow it to create credit in major banks. This credit is used by the investment wings of the banks to trade securities.

This is not a conspiracy theory - the Fed OMO are well documented. Sometimes they work in reverse to suck in extra liquidity.

Just because public focus has been totally on interest rates does not mean this tool has been discarded.

You can read about similar market interventions by the Japanese Central Bank attempting to get out of their recession, when they had cut interest rates almost to zero.

Tim Knight said...

"Would you go over to Tim's house, and to his face tell him it's ugly, his kids are ugly and you think he's a big loser?"

You might be able to get away with saying I'm ugly and I'm a big loser, but my kids are gorgeous. Luckily they got my wife's looks and not mine!

Anonymous said...

jan 14, 2000 close at 11722

jan 31, 2000 close 10,940


trader 2006

Anonymous said...

this rally could be gone in less than one month.

trader 2006.

Anonymous said...

OIL IS DOING IT.......coming back and held $58.

It is pulling the market back......barely but....

Bend this thing over......there could be a reversal at hand.

Anonymous said...

oil could move higher, suppose to get a bit chilly here in the northeast in the next few days. Heating season is very soon, could put the barrel back at 65 in the next month. PXJ, OIH, IEO, OIL, PXE, VGE etc could be good buys very soon.

Trader 2006.

Anonymous said...

WTF just happened......nasdaq up 27 dow up 67

Trader 2006.

Anonymous said...

WTFFFFFFFF

Anonymous said...

WTF everyday

not good

Anonymous said...

Last time we saw extreme intraday highs back in 2000 the dow fell apart. I wouldnt mind seeing a 150 point surge.

Trader 2006.

walter said...

anyone here read Nouriel Roubini's Blog:

http://www.rgemonitor.com/blog/

It's very good reading if you are bearish on the economy and are looking for the data to support why...

PB said...

Bernanke 'the mouth' is speaking. Do you really think he'll say ANYTHING to stop this party? Hell no! He'll only encourage it. As Kudlow likes to say, the markets are the best economists, so if the markets are not breaking down with all this negativity, then I guess there is more to this story than just manipulation.

OIH is due for a bounce

went long TLM at $14.53

Anonymous said...

QID averages about 5X more volume than QLD on a daily basis.

Trader 2006.

Anonymous said...

pb why does kudlow alwayssss say

this is the greatest story never told,he says it constantly.

as for bernanke, everyone hated him back 4 months ago now he is the king of wallstreet. I think he will only say good things to keep this rally in high gear.

trader 2006.

Anonymous said...

Lumber prices have fallen to their lowest weekly level in nearly five years as the slowdown in the U.S. housing market dries up demand for building products.

As of Friday, weekly composite prices per thousand board feet of framing lumber had fallen to $274 from $401 a year earlier, according to Random Lengths, an industry newsletter. On an average monthly basis, prices are at their lowest levels since mid-2003.

The 32% plunge is far steeper than industry executives predicted, resulting mostly from a sharper-than-expected falloff in housing activity.

stockshaker said...

With so many posts, I'm sorry someone is not going to get recognition - but I do agree that today is a very important technical day for the markets. The spx has been trading in a tight range for the last few months, and today penetrated the upper boundary.

There's no denying it, this is a breakout, (1340 on SPX).

And like how all of us were talking about the markets tanking back in August (which didn't), and many of us who didn't take the break from the 1280 on the SPX (which I'm sure, many didn't as well), WE ARE now in another breakout.

Things are overbought, yes, but thats why you have stops. Because if this market is ready to go higher (and higher, and higher), I do not want to miss out.

And I know, many of you are going to argue "Earnings", well, until the data supports, then trade accordingly! But are you willing to miss another opportunity? cuz god knows many missed this bull market so far!

I will look at new call positions if tomorrow confirms today's action. But I am still holding puts on metals because that is where the action is right now.

X, NUE, and TS all broke out of triangles (I'm still looking for more conviction on the downside)

i have mentioned these before.

Anonymous said...

Im still sticking with my 1600 NDX 100 prediction by the 3rd week in October.

Trader 2006.

Anonymous said...

stockshaker if thats the case then ill sell off all my shorts and inverse funds and throw it all into

QLD, i dont play options due to risk so i guess we will see at least a 10% jump in the nasdaq by the end of year which should give me a great 20% gain in QLD. 20% between now and DEC is pretty good, dont you think. Knowing my luck ill make this Risky move and the nasdaq will drop back to 2050......

I believe its too late to chase anything. Ill admit that i missed the run and will hold my inverse funds and shorts and wait it out. Things will change. They can happen very fast. One day 11798 and a week later 11500. Things dont go straight up forever, there will be a pullback, how much of a pullback is anyones guess. If you look at my previous post you can see that in 10 days the dow dropped over 800 points.

trader 2006.


Trader 2006.

Anonymous said...

can you say program trading.


Trader 2006.

PB said...

if oil strenghtens from here, NDX will have to take a bow ... interesting how tech has rallied almost from the moment OIL started to drop ... coincidence?

Anonymous said...

I just did a bold move, went long many many shares of QID....

Trader 2006.

PB said...

the way I see it, all bull markets exceed their previous highs, so the DOW has achieved that. The S&P and the Nasdaq won't, as tech is weighing them down. Gold will still surpass $850 and it has a date with a price well north of that.

Yes, this mkt is frustrating the heck out of me ... but I am patient and giving it time. I will look to short the DOW at 150-200 points higher from here. Already short QQQQ

- Patience Daniel Son!

Anonymous said...

Dow's Strength Spooks Chartists
John Dobosz, 10.04.06, 12:45 PM ET

pic

By This Author
John Dobosz
• Gurus Drop Google, Go For Meth Treatment
• Dividends For The Dirt-Poor
• Value Abounds
More Headlines

Related Quotes
AKAM 51.27 + 0.12
FDL 22.48 + 0.07
FMD 69.29 - 0.16
HITT 42.93 - 0.26
IGV 43.43 + 0.48
INTU 33.94 + 1.11
NVDA 30.18 + 1.88
QQQQ 40.87 + 0.56
XLG 101.66 + 0.84




The Dow Jones industrial average finally did it. It took nearly six years and eight months, but the iconic index--consisting of 30 of America's bluest blue chips--has taken out its old January 2000 closing high of 11,722. But after the traders on the floor of the New York Stock Exchange are done giving hugs and hand-pounds, what does the Dow's push into record territory really mean for the market's future? Very little, say many chartists and other momentum-based advisers, who base many of their investing decisions on technical analysis and market internals.
Click here for three new "real money" buys in technology stocks from Dan Sullivan, veteran editor of The Chartist.

"The fact that the Dow hit a record high is not a factor in our bullishness, and it could well be a cue for a brief sell-off, but it does reflect the fact that trends are up," says Timothy Lutts of Cabot Heritage in Salem, Mass.

Lutts believes that one of the best things the market's current rally has going for it is prevailing doubt on the part of individual investors, many of whom sat out the substantial run in stocks over the past two months.
Special Offer: Are you invested in the right Fidelity select funds and ETFs for the current market? Click here for the best-rated funds--including surprising strength in utilities--in the current issue of All-Star Fund Trader.

"What has yet to come, and we're confident it will, is the irrational enthusiasm of the individual investor," says Lutts. "We're very bullish on the next few months, partly because of the buying power we saw back after the bottom [in June], and partly because of the four-year presidential cycle."

Dan Sullivan, editor of The Chartist newsletter, is also optimistic that the Dow's push to record territory will help awaken individual investors and compel them to commit fresh funds to the market. "It's just one index, but it does attract attention," he says.

Beneath the buoyant times for stocks at the surface, however, Sullivan sees a source of trouble going forward. "The Value Line Index and the Russell 2000 are now lagging the more heavily capitalized companies of the Dow," he points out. When smaller, more speculative issues lead the market, it indicates that investors are willing to take risks, something that's good for the market's continued advance. Large-cap leadership tends to underscore an aversion to risk.
Special Offer: George Putnam recommended Apple Computer in the Turnaround Letter at less than $8 a share in 2003. His Walt Disney Co. recommendation is up 100%. Click here for Putnam's buys this month, including this revitalized PC maker.

John Murphy, veteran technical analyst at Stockcharts.com, also sees several negative divergences in the market. The Dow and the Standard & Poor's 500 have regained the ground they'd lost since May, while the Nasdaq and Russell 2000 remain well below their 2006 peaks. In addition, the Dow Jones Transportation Average has failed to recover to its earlier highs, so it does not confirm the Dow's fresh push to record territory under the popular "Dow Theory."

dow-nasdaq_590x398.gif

Like Lutts, Murphy is also aware of the strong historical precedent for a market bottom after a substantial decline during midterm election years, followed by a strong gain to the next year's highs. The problem this year is that the market did not decline substantially.

"The four-year bottom is usually preceded by a fairly serious market decline, which was absent this year. That may be a warning that this is not a normal cycle," says Murphy. "That's why I advise basing one's decisions on current chart trends and their technical indicators more than anything else," he says, and he points out that other signs trouble him about the market's health, including the economic outlook.

"One of the symptoms of an early contraction economic phase is when basic materials and energy stocks peak, and money flows into consumer staples, financials and utilities. That appears to have happened," says Murphy. That's also a sign of an aging bull market.

"Money is still seeking the relative safety of blue chips, and it is by no means a sign of great investor confidence," says John Schloegel, an analyst at All-Star Fund Trader. "We are also concerned about lack of volume, which suggests that investors may not have as much bullish conviction as the price trends are suggesting."

In the meantime, Schloegel is playing the momentum that he finds in blue chips. He's buying the Rydex Russell Top 50 (amex: XLG - news - people ), First Trust Morningstar Dividend Leaders (amex: FDL - news - people ) and the WisdomTree Dividend Top 100 (amex: DTN - news - people ). For more adventurous investors, he recommends the Nasdaq 100 Trust (nasdaq: QQQQ - news - people ) and the iShares Goldman Sachs Software Index (amex: IGV - news - people ).

Sullivan and Lutts are finding most of their buys outside of the Dow, with both buying Akamai Technologies (nasdaq: AKAM - news - people ). Sullivan also recommends Intuit (nasdaq: INTU - news - people ) and NVIDIA (nasdaq: NVDA - news - people ). Lutts is bullish on Hittite Microwave (nasdaq: HITT - news - people ) and First Marblehead (nyse: FMD - news - people ).

More Newsletter Watch Columns

Anonymous said...

pb why short QQQQ when you can take out the risk of shorting and BUY QID.....

Im long QID...bought twice today, i know im risking alot but enough is enough.........


Trader 2006.

Anonymous said...

This is insane!

Confused Investor

Anonymous said...

Thank you, Uncle ('Helicopter') Ben for all this free cash, this early Christmas gift.

Dow 12000+ here we come!

Anonymous said...

Go long, young man, go long.

Thats where the gold is.

Anonymous said...

hahaha 11:36am hahah

wait till the drop comes, especially at an all time high on the dow!!!



Trader 2006.

Anonymous said...

I wouldnt want to be the last one who bought at the TOP!!!!!!!

Remember in May, June and July...remember those constant drops. Triple digit losses were no problem.


Trader 2006.

PB said...

Trader 2006 --- I have puts on the QQQQ's

42 Nov's

Anonymous said...

sweet pb.

trader 2006

Anonymous said...

As I look back at charts of the DJIA, when the market hits new highs for a second time after a prolonged period of time,it hit many,many more new highs and possibly never went below that figure again. What do you think happened at 1000,2000,3000,5000,9000..etc etc.Funny how that works isn't it ?

Denver

Anonymous said...

Any more short ideas ... wait, i have no more money because being short was a total bust. Horray for me. EXPENSIVE LESSON. how can anyone be a bear ? where is the BEARISH action ?

Anonymous said...

as the FED pumps to save the GOP .... all the bears are screwed.

Anonymous said...

The boyz want the markets up. It's just that simple. It doesn't mean anything that charts looked bearish for the last couple of days. These guys are the ones with the big buildings with U.S. flags flying outside of them. It is their world, folks.

When it suits these people to allow the markets to fall, they will do so. They will fall at a pace of their choosing. When they want the markets to go up again, they will.

We will likely see some sort of change in direction after elections. In the mean time, prices may go to the stars.

Anonymous said...

You all watch, when he will have made more than ever today. I bet you he will. His magic shorts and puts made money even today. LOL

Anonymous said...

11:54am agree. Its all a game

Anonymous said...

Oh yea sorry, he made money today because of his tight stops, sorry forget that little bit of wisdom.

Anonymous said...

This market is just dandy!!!!!

Anonymous said...

"You all watch, when he will have made more than ever today. I bet you he will. His magic shorts and puts made money even today. LOL"

Yep, he'll be telling us how he's making a killing in chewing gum puts, and how the bulls are "such turds" as once mentioned in a blog entry.

I don't think I've seen a finance blog get it more wrong for as long as this one and still be pig-headed enough not to change. There is no better contrarian indicator though, that's why I read it.

Anonymous said...

Hmmmm... while all of you weirdos insult Tim, reminder...this is his blog and you are the visitor.

Oh and news flash..... THE BEARS ARE CAPITULATING. This is the type of thing that happens at tops.... bears run for cover and bulls gloat......sort of like the bottom in June and July.

I'm not too concerned...... the higher they run it without taking a pause the faster it will fall without dip buyers...especially with earnings around the corner.

Anonymous said...

Just like the bulls were feeling it in May, June and July the bears are getting the same treatment, I think the bulls will be feeling the downward trend soon.

Trader 2006.

Anonymous said...

We are OVERBOUGHT, any bull know what that means.


trader 2006

Anonymous said...

Anybody who puts an opinion of something on any blogsite or website out there has to be able to handle ALL the comments and opinions of it's possible readers.If you don't want to be called on it ,then DON'T put it out here on a public forum on The WORLD WIDE WEB.If you are wrong or people disagree, you are going to hear about it.Thats just the way it is . If they can't handle it, then they should just be a genius at home privately and silently .

Denver

plunger said...

have to disagree denver, markets always correct, its a natural occurrance. not saying i expect it anytime soon, i have no idea when, but to burst your bubble look back at the dow, in 73' all time high, then big time tank, 40% drop i think, if thats not good enough, how about the all time high on the naz in 2000? we sure as hell aint higher from there. and when you you get high after all time high it better be with a HUGE amount of volume. no diffence to me tho, i try to trade with the trend, not to well lately tho,

plunger said...

not the last comment, agree totally on that, what you had said earlier

Anonymous said...

I think the critical comments made by the bulls are probably fueled by Tim's continual name-calling and bashing of those who disagree with him, namely bulls at this point in time.

Tim is a lightning rod (sort of the stock market's version of Terrell Owens). I imagine some of the bulls took it personal so they are lashing back.

Eric C

Anonymous said...

i hear alot about M3 money on this blog as the reason for liquidity in the markets, curious what people here actually think M3 money is?

Anonymous said...

"I think the critical comments made by the bulls are probably fueled by Tim's continual name-calling and bashing of those who disagree with him, namely bulls at this point in time."

Exactly. We've been right and had nothing but insults - "these guys are such turds" "dickhead" etc. All we've done is point out how wrong he's been. I have see people make fun of Tim, but no name calling.

Anonymous said...

Plunger ,

Both good points.This is now the most difficult spot for both the bulls and bears because of us being in uncharted territory.I'm having difficuly finding direct historical relevance to THIS particular market.I'll do more research on the '73 scenario. Of course NASDQ did'nt exist back then so who knows.Right or wrong,I doubt anyone falling asleep watching THIS MARKET !!

Denver

Anonymous said...

f*u market

die

PB said...

what ever happened to rational thought? this name calling is really childish and speaks volumes about your intelligence level.

Anonymous said...

THIS IS IT, EMOTIONS ARE AT A HIGH. Bears are captitulating and bulls are declaring victory.....

Short every thing you can right here.........

This has the sign of a top......

downosedive said...

Noone bothers to comment on my posts, so i can say what ever I like!!
Dow WILL hit just past 12000 BEFORE any corrective fall. In fact a close of 12100 to 12200 ish is possible. THEN it will fall back to 11700 and this will be its new floor. It will then continue a zig zag type up trend at least to whatever its 12000+ high last was. Then I give up perdicting. Think Im talking rubbish? Maybe, but remeber this post and judge by results. Oh, and the timescale for a 12000 plus trading close......between 1 and 4 weeks

Anonymous said...

I think 12,000 is right but 11700 being the new floor, no way. Does anyone remember what happened in June and July or is that forgotten since the dow is up over 10% for the year.
Every bull was crying those few months. Now everything is bright and sunny again how long it will last is anyones guess. All the talking heads are bullish again, i remember watching a network channel a couple of months ago and when asked if they were bearish or bullish most came out saying bearish, this was when the dow was trading around 11k. Well looked what happened, they were wrong. All the talking heads being so bullish makes me think.

Trader 2006.

We dont need houses said...

Listen bears the only way we can take this market down is to short it like no tommorrow.

Like Tim says the housing market is due for a crash so why own an overpriced useless piece of junk that has no intristic value?

Sell your 2ndary houses (or even your primary house and rent an apartment) and use the money to short this market, its all worth it! The crash will come and you will be billionaires.

Lots of bears have done such things, lets not let their actions come to vain!!!

Anonymous said...

What a DAY. Glad its over....of and we closed at intraday highs thanks to all the program trading. These guys will make their 7 figures and more when christmas rolls around. The rich always get richer.


trader 2006

plunger said...

dead right denver, this market is like an anomoly all its own. even market tanks in past followed some economic factors. but this one moves with no common sense making me wonder if im missing the best part of the move or if i'll be buying at the top. seems like i've already missed out on best part of rally if the trend continues on it's path. your right about the second top breaking resistance tho, seems to be true in stocks and markets, question to me is how high and how long,
good luck,
let me know if your thoughts on the direction compared to past highs if you dont mind

Anonymous said...

TIM HELP. WE ARE IN TROUBLE!!! WHAT A F IS GOING ON WITH THIS MARKET

Bear1929

PB said...

we closed at near the highs of the day, that's a bullish sign.
We're outside the daily and weekly BB band and at the top of the monthly. So a pullback is coming ... when? fcuk do I know, but I'm short and staying with it for the time being!

Anonymous said...

QID RECORD VOLUME 2,263,900. Highest since going public.

Trader 2006.

plunger said...

short sqeeze from hell trader 2006, people trying to play the resistance selling out when it broke, and broke big!

One Way Stox said...

HOW MUCH HIGHER DO WE HAVE TO GO BEFORE YOU REALIZE WE'RE GOING UP!!

HOW MUCH HAS THE DJIA GAINED SINCE THE FED STOPPED RAISING RATES?!?!?

WHAT HAPPENED WHEN THE FED FINALLY STOPPED RASING RATES EARLY IN '95? THE MKT WENT ONE WAY -- STRAIGHT UP!

plunger said...

2nd -3rd week in oct going to be big decisive move according to fib and dow theorists, oct.18th - oct 31rst. double phi days

Anonymous said...

Amazing. The Dow is now about 240 pts above its trendline support (2% above).

-Keith

plunger said...

One Way Stox said...
HOW MUCH HIGHER DO WE HAVE TO GO BEFORE YOU REALIZE WE'RE GOING UP!!


whole different economy in 1995, tech boom, dot com era, wheres the new push coming from? wheres the leaders in the market all i see is sector rotation in the markets. hard to figure why the dow hits all time highs but only ONE stock in the dow is at a 52 week high?? explain that to me and we'll understand

plunger said...

good point keith, i'd be curious to see natural retracements above spike highs?

Anonymous said...

Isn't the huge volume in QID bad news for bears?

Anonymous said...

"Isn't the huge volume in QID bad news for bears?"

High volume= CAPITULATION.....

Cheerleading, and braggin usually = top.... goes both ways for the selloff in the spring.

Anonymous said...

I thought High volume would be good news. Most would have sold QID a while back at 75++. Market has been in an uptrend and more volume is showing in QID rather than QLD.

QLD volume on the other hand has been well below QID volume for weeks. QID volume is about 4-5X what QLD is on a daily basis.


trader 2006.

watcher said...

Tim, I'm a great fan of yours and have been reading this blog for several months now. I think every trader has to look back and learn from his mistakes. You have been bearish throughout this 1000 point rise of the Dow. Can you now look back and say what went wrong, and whether the technical patterns were wrong or your interpretation?Don't get me wrong, I'm just trying to learn. No offense intended. Lord knows, I've made plenty of mistakes myself.

Anonymous said...

"wait till the drop comes, especially at an all time high on the dow!!!"

We've heard that song all summer long. Why miss out on this big rally anticiipating a major drop that may not come for weeks or even months?

I'm a bear at heart and agree that the markets are completely out of control. The market is a constant stream of flowing money! Reach in and pull out a handful at a time. Don't get greedy or you'll end up a deer in the headlights and watch all your profits and capital flush right down the drain.

By the way, it's very uncool to bash Tim. He gives so much. If you aren't benefiting from what he shares, MOVE ON!

Love you Tim!

JessicaRabbit

Anonymous said...

I remember in July the charts were showing many gloomy forecasts for the market and that in the end it didnt happen. What makes everyone think that looking at the charts now means were going higher???

Trader 2006.

Anonymous said...

Why I thought the volume in QID was bad news for bears is that it might indicate there are still way too many bears. But it could also indicate bears selling their shares. Who knows, I certainly don't.

Anonymous said...

I really, really, just don't get it. Some of you guys-- and Tim (sorry)-- seem to think you know better than the market. A stubborn trader can't and won't stay ahead for long, and is trading with ego instead of trading skills. Flexibility is the hallmark of successful traders-- a willingness and readiness to move WITH the market, not spend months on end fighting the current. If you think the fundamental structure and health of the economy sucks, that's fine-- but it shouldn't keep you from grasping that a market trend is a powerful force that often can and does defy logic. Tim has taken a lot of criticism here lately, some undeserved, some legitimate. This is an active, interesting blog to follow, but I guess my main gripe would be that when someone challenges its owner, his claws come out. I would expect classier, more professional discourse from someone in Tim's position. Additionally, many here assume he is highly successful and trust his direction, and that's scary. Maybe he's successful, maybe not. But anyone with 80+ puts and shorts in place all the while we've been in rally mode off the July lows shouldn't be your primary or only guide to the market.
--tt (btw, I tried 4 times to enter an i.d. with no website and it wouldn't let me. That's why "anonymous")

Anonymous said...

Usually when the bulls scold the bears about how they should be managing their portfolios it is usually a sign we are approaching a top.

Do earnings worry you?
How about that interest rates are still at 5.25?
How about the weak housing sector/
Inverted yield curve?
Oh but the fundamentals don't matter.....

eerrr how about the divergences...all over the place. Volume wasn't blowout crazy today was it?

Just because people can throw money at the market and it goes up doesn't mean you should be involved...the bigger risk is to the downside. BUT maybe you are right here, we need euphoria...... be more bullish

Anonymous said...

The 14 day RSI on the DJIA is now at 73...a very overbought reading.

Not that I'm sure it means anything in this market where anything that used to mean anything now means nothing.

It's worth taking a look at the daily DJIA chart from earlier this year and comparing how the chart looked the first week in May and how it looks now. Just about the same IMO.

The theory that the Dow is just making a double top is pretty much out the window as of tonight.

Someday this market will start paying attention to some of the negatives, like a significantly slowing economy.

Anonymous said...

You missed the entire point, anonymous, which somehow doesn't surprise me. I'm neither "bullish" or "bearish" in terms of an all or nothing stance. I do my best to go with the market, and avoid getting locked into one mindset or another. I think the global economy is rife with red flags, and I'm concerned about where we're headed. However, I have also been short gold and silver over the past few weeks, short oil stocks although I've traded in and out along the way, and I've been long brokers, defense, select tech and retail, and my biggest winner, RIMM. When the wind starts to change, so will I. Cheers.

--tt

Anonymous said...

Interestingly enough, when is the last time that you heard about companies fundamentals???? Earnings/multiples? I mean considering they are in a week.

Its a little bothersome that not once have a heard anyone say so and so company looks cheap here.. almost like caution thrown in the wind.

Anonymous said...

Bears, I go out to play golf today and come back to see that you have let Uncle Ben open his mouth and the Dow go up 123 points. I thing --tt has a point, you need to think on your own. As my friend, bsi87 always says "Do your own homework" This week I finished bring up my own website/blog and to have a good blog is not simple to bring up and monitor. Tim's job is to monitor this blog and he does a great job. He let's things ride and doesn't step in unless it is necessary. As you may remember, I come from a Puritan background but I am not a Puritan, I don't care for the name calling, bad language or rudeness on this blog but I overlook it but that doesn't mean I don't form opinions about the person making these statements. Some people look at the world like a competition, "them" and "us", "bears" and "bulls" and get a little over excited and name calling happens in good fun. The market is a competition but there is no "them" and "us', there is just you. A thing we all need to remember.

Al K

EddieFl said...

Al.k. good level thinking. I like TT's comments on moderation and following the trend and losing your opinion.

Solid advice.

The blog is a community bulletin board, maybe an electronic townhall meeting. I know half the people in here would not be so vocal if we met in person, but that is the nature if this medium.

If it bothers you, just close the window, simple.

Anonymous said...

Tim:

Please share with us how your tight stops helped you make money today. Please help us idiots who follow you like a puppy by telling us about your magic puts and shorts with those tight stops that just won't LET you lose money. ROFL. I would bet you don't even trade. This blog must be just a way for you to make a fool of people.

Tim Knight said...

That's it. Anonymous posters are going to get shut out. If you want to comment, show yourself.

I don't mind insults, put-downs, or what have you. But you at least have to be a person and not anonymous.

niko said...

Thank GOD.

The kids were making this board intolerable... Informed dissent = good. Ignorant 12 year olds = bad.

onewaystox said...

Plunger...'different economy in '95, dot coms, tech boom...'

Netscape didn't ipo till 8/95, Windows95 wasn't introduced until 8/95, & Intel's big Pentium upgrade didn't happen until 8/95.

We'd already gained 24% on the DJIA by 8/1/95...after the fed stopped raising rates in the winter.

Now? The yield on the 10yr. has dropped about 15% since July, (gasoline down nearly 30%), yet the DJIA is only up about 11% from its July lows.

All the big money is coming out of Big Oil Stox, & buying the DJIA Stox That Haven't Been This Cheap On A P/E Basis Since 1995. Corporate buybacks & M&A over the last 3yrs has eliminated about 5-6% of the total stock available to be traded on the US exchanges.

New Highs beget New Highs. You can either buy now when things are still cheap, or, in 6-12 mos, say to yourself, "Wow, I geuss once that 11750 resistance was broken, it REALLY DID BECOME NEW SUPPORT". goodnight everybody.