Monday, October 09, 2006

Even a Bomb Can't Stop the Bulls

Set aside all the dogma. All the points of view. All the rationale. It boils down to this simple fact:

The mentally-unstable leader of a country widely recognized as one of the most hazardous and threatening in the world successfully deployed a nuclear bomb.

And how did the market react? It went up to its highest point in human history (as measured by the Dow Jones Industrial Average).

Something is very wrong here. I can't explain it, and I certainly can't fight it. I'm sick of it, but that obviously matters not a whit. I haven't thrown in the bear towel yet, but it's definitely balled up in my right hand, and my right arm is extended behind my ear, ready to hurl it.

In the meantime, I've been scaling out of short/put positions (including indexes) and moving into long positions. I do this with some trepidation, especially considering how in relative terms the market seems so high these days. Take note of this Dow 30 chart (in spite of the Dow's pushing a bit above the upper resistance line):

One recent suggestion that did quite well was Express Scripts (ESRX) which has been falling nicely (I've circled the point where I suggested it as a short).

Google, mentioned last week as a long, is likewise prospering. I'd add to this "the market is insane!" notion the fact that they just spent $1.6 billion on a company which has never made a single penny of profit and is threatened on many sides with horrendous potential legal action.

US Steel, also mentioned as a long candidate (at the circled area) is also on the rise.

I don't have time for a long entry today, but I'll reiterate that BLUD looks sweet as a long. It had another good day today. This is a beautiful saucer pattern, folks.


walter said...

anyone notice the pathetic volumes on the indicies today... isnt that what us bears are looking for? a new high on one of the worst daily volumes in a long time? doesnt the market do the most obvious thing in the least obvious way? - that means its going down, we just arent sure how/when...

and c'mon - who cares if some aggregate of 30 stocks goes up (i.e. Dow 30) - there's lots of horrible charts out there and we are ignoring them here...

we are doing exactly what the bulls want - capitulating... i am not saying fight the tape, but we should posting chart after f-ing ugly chart here and picking our entry points...


Tim Knight said...

If you see ugly charts, tell us the tickers. I love charts. Share!

walter said...

on the following charts, i am following trendlines (thanks to you) and price and volume mechanics with some candlestick analysis where appropriate (many of these may sound familiar):


now, these charts look great in the sense that you would be crazy to go long on them, but i am a permabear - i am only interested in shorting, regardless of what the rest of the market is doing. a bull may see something totally different...


mde said...

Please post what charts look bearish. They all seem to be turning upward.

PB said...

Monday was Columbus day and Canada had Thanksgiving ... maybe these account for the low volume + the rumors about N. Korea. The US dollar got unusually strong against yen/euro/swiss franc on Friday and kept it there again today. Seems to be a influx into US assets at the moment. Let's face it, once the God of indexes, (the DOW) hits lifetime highs, it's a good bet it will keep going. Probably will suck everyone along with it, and when there is no one short, whammo!

walter said...

now, i am not saying that all of these will go down, but i do feel that they show a lot downside potential given those issues i mentioned above...

Denver_Investor said...

The bond market was closed today so that might account for the low volume.

I have been trying to pick a top here by buying a few QQQQ puts every few days thinking we have to be near at least a few day correction, and they just keep losing me more and more money. I have stopped that.

Once again...we haven't had a 1% down day on the S&P 500 since July 13...almost 3 of the longest stretches in years.

Back in May, right before the implosion we had a big up day, followed by 3 small advances. Then the market fell hard and fast for several weeks.

That is exactly where we are as of tonight. Big up day on Wed, 3 small advances since. Have no idea if a fall is straight ahead or not.

The tick kept spiking over +1000 again and again today...signs of program after program. Conversely, the tick hardly ever got below zero today. Very unusual. Somebody is buying every dip or near dip...every one!

The stock market acts like the economy must be gaining speed, and the bond market acts like a recession is straight ahead. Both of those things can't be true.

I've been a full time trader for about 7 years now and in all honesty I can't ever remember being so clueless about what is happening. I just don't get it., I am stepping aside for now. Good luck to everyone.

Sanjay Sola said...

SWFT, a transport company, guided up for the quarter from 38-42 to 50-52 cents based on lower fuel prices and workers compensation expense coming in significantly less than expected.

transports should do well with oil down.

Ken R. said...

Here is an "ugly" idea, or for a bear it is a thing of beauty. Consider the chart of SMH. The chart says to me that a move down to the July low is imminent. Two features of this chart are noteworthy. First, it is showing recent weakness. Whereas over the last 15 days the SP500 is up about 3%, SMH is down 1%. This indicates to me that there are few buyers. Secondly, it has broken down through the trendline formed by connecting the lows on 8/11 and on 9/7 on several occasions, the last being 9/29, and has failed to move back above the trendline since then. The more risky approach is to enter a short (put) now and use the value of the trendline as the stoploss. Because I believe the potential move down is quite sizeable, a less risky apporach is to wait for the next down day with good volume before entering a short position.

chickin6 said...

I do not understand what all the excitment is about? My own projection for QQQQ top was 41.72, I am comfortable with that... and I don't care what anyone else does, cares or thinks...

Kevin said...

XAU is retesting it's old support as resistance just at the neck of the head and shoulders. What news is out there that would keep you from a put w/a tight stop if it starts to go down w/any conviction?
Kevin in SAC

chickin6 said...

I do not know if I can post a chart? so I will try a link, and I flubbed up the date, but the price is ok

I play with charts all the time

chickin6 said...

guess not

Tim Knight said...

Gorgeous looking graph, chickin6! A beauty!

niko said...

Look at ATLS. Looks like a long, flat H&S on a weekly chart. The sloped neck puts the breakdown at about 37.5 or so.

On the upside, check out PHRM. It ought to test the gap at some point, and I'll probably get in around 20.25 or so...

stockshaker said...

so gorgeous, I have no idea whats going on with it!

I can see where you get 41.72, but I would think 42 is a better top out point right now, before going down to about 40.95, or even 40 for a much better support, and then going back up.

TK, steel is doing amazing. Good call on X. I'm very, VERY glad to drop my bearish sentiment on that one last week!

I'm watching a lot of oil, commodities, and such, and all of those look like its stabilizing. Isn't it nice to see all these stocks just poised to go up? It's like a freakin gold mine out there with all these stocks, they all look so cheap!

Which i think if those go up, isn't there some type of negative correlation to the general markets???

And I think that is the only way we'll start seeing the pullback in teh indices, based on the oil recovery. There are too many outside factors with respect to the oil industry to just believe a breakdown of a 130 support level on the OIH will suddenly cause oil to fall to sh*ts.

now if only housing started falling again, these sideway ranges are starting to get annoying.

stockshaker said...

dammit niko, beat me to the posting! Kiddn'

My last message, I was refering to QQQQ for the support at 40, and 40.95 (early part of message)

Niko, ATLS looks like a nice long setup. Look at the industry of that company: Oil and Gas Drilling... are you surprised?

bsi87 said...

ZZZZZZ. Not too much to get excited about, even with North Korea.

Looks like my CVS/WAG plays will come in today. They were puking them up last week, now they're gonna gap up open. Ain't human nature fun?

still looking to accumulate some KGC, GSS,USGL when they hit bottom of Bollinger Band and show some reversal strength.

re:OIH. Still carrying the short. Looks to me that it'll hit 116 and change and then bounce to 130-132. This could be the trading vehicle for next 3-6 months. Buy when they're puking it up and sell when OPEC sez they're gonna to cut pumping, around 130-132. Just MHO.

Can't get excited about shorting or going long the major indices. Shorting looks more promising but we're not at extremes.

PS another tell. Ron Insana leaving CNBC to run a hedge fund?!!!


bsi87 said...


coming into my buying range at 38.27

Do your own homework.

bsi87 said...

Look beyond the indices. Note how the talking heads are talking up soft landing and tech. Note the GOOG buy of YouTube using their stock for currency. Kinda like when AOL used its stock to buy Time Warner. Bells are ringing IMHO. Maybe not to short but to be cautious on those issues.

On the other hand, they're talking about money coming out of commodities and oil and going into other areas. Time to do that was in mid June, not now.

time to look at beaten up commodities. I have TCK buy limit at 58.99 and AL at 38.07.

Zack's has MEE as a strong sell today and the stock takes off today.

Many opportunities away from the beaten path. JMHO.


Mysterious Q-Man said...

Hi Tom,

Once again good post and details. I think you are right on the money with GOOG. These people running the company have done a fine job for awhile, but now I think they are just sticking their heads in the sand. They are spending money hand over fist aquiring YouTube, which as you pointed out, has earned absolutely nothing, and is under fire from legal and competitor websites. I think this stock is going to be in huge legal trouble when click fraud is becoming more mainstream. I mean, this stock is worth 140billion market cap from just a search engine? I think this pig is going to get slaughtered and will drag the market down with it based on fears of another 2000 disaster.

bsi87 said...


showing a kangaroo tail reversal. short short limit order at 434.71. ATR is 8.82 so my trailing sell stop will be 13.22 above my entry, assuming I get short.

Do your own homework.


walter said...

MON took a dump this morning... I like it short in general, but tomorrow it releases earnings - anyone got any thoughts here?

EddieFl said...

WHAT WILL IT TAKE? a Nuclear Bomb. I guess not, market still goes higher. !!!

European indexes making 5yr highs. per bloomberg, i think we are heading into a new Bull leg going into next year. If the Dow is hitting all time highs, and Europe just caught up, then what is left? is strength in the Asian markets , once everybody is on board, and it feels like we will never go down, that is when we go lower.

Momentum begets Momentum!!!!

The thing with trends is that the longer they go, the longer they go, (cheech and chong). The longer the charts look positive it starts turning WEEKLY indicators positive and giving buys signals on the WEEKLY charts, and you know that brings in the real big money!!!!, The George Soros-Macro- Big Money. !!

all the above is in my humble opinion.

stockshaker said...

Does anyone know why Housing is rallying like crazy? DOES anyone know why its breaking through a sideways trend to the BULL side, despite all the data?

Take a look at MTH. Broke 45, on really good volume.

Does anyone have an explanation?

walter said...

housing is value play now

J said...

DNA stangles tonight, this thing has been basing for year and half gonna to move big time........

Jana said...

Many housing stocks were upgraded today-hence, the rally.

Nevermind the giant cuts and incentives, industry layoffs and stagnation of new permits.

Let's buy, buy, buy.