Tuesday, October 31, 2006

Trick......or Treat?

What a roller coaster of a day. I thought we bears were going to get a real treat (Dow was down over 50 points) but it turned out to be more of a trick (market went positive before the close, and finally settled down only 11 points). Here's a line chart of the action over the past few days on the Dow. Totally direction-free. What a mess.


I continue to tout the Russell 2000 as a good place to own puts if you think the market is going to fall. It's got a super-clean stop price too. Puts on this aren't heavily traded, but the bid/ask spread isn't too godawful.


The Transports are looking ready to begin a fresh descent. I like this progression of lower lows and lower highs. A clear tumble here would spook all the Dow Theorists pretty badly.


Bear Stearns (BSC) isn't in any textbook bearish pattern, but the puts on these will have a lot of juice if the steam ever starts to come out of this stock. It is high enough to make this a relatively low-risk/high reward trade.


A more conservative trade would be along the lines of Cigna (CI). I would buy puts many months in the future on this one, since a gigantic insurance stock isn't going to be horribly volatile.


Earnings season isn't providing the kind of clarity/direction I was hoping. Bulls and bears are both losing their minds in this market. So we wait.

18 comments:

Leisa said...

Toshi...On Cigna...just beware that CI is an "odd man out" in this industry of giants, and they are dwarfed by WLP and UNH....news of their being in play (consolidating with another odd man out to WLP/UNH) would not surprise me. I know that you are a technician, but it's worth knowing some of those niggling fundamental risks.
No position.

Leisa said...

Tim/others...any thoughts on the steel stocks? I see OS (more linked to oil) and X rolling over a bit. I'm still mesmerized by Prudential issuing some negative reporting in September and these stocks rallying so hard thereafter. No conspiracy theory, just simple wonderment.

ch7guy said...

NOV 80 puts on capital one had a sweet day! I sold mine later today for nearly 100% profit. thanks for the tip TK

PB said...

Today, some 'unknown' force, pulled a very bad trick on us! The day was going fine, until the last hour of the trading day, when Mr. Bull, who is now also a magican, took the market up in a matter of minutes to close almost positive for the day. Now I can see why the conspiracy theorists are crying foul, this market is making a fine fool out of many of us bears!

Anyways, a little sliver of 'good' news on the technical front is the MACD (12,26)has started to turn lower and has actually crossed the MACD 9 ema on the DOW. The DMI line is also showing signs of weakness. All I'm looking for is a period of consolidation (hopefully with big moves down). Looks like we're at least moving down to the 27 day EMA. After this aft's run-up, now is a very ripe time to go short on some YM futures

chronictown said...

Gold is breaking out big time. $614 is the 38.2 retracement from former low. $636 is next.It will be interesting to see if it can close above $614. USGL up 13% in the last two days.All the miners will follow gold. Is this a head fake or is gold going to $700 after the elections?? Stay tuned!Whats a girl ta do?

Sanjay Sola said...

we'll probably see some last minute heroics by the bulls today to save this market from the red. but really, the market is too selective to buy and it's dangerous to go long anyway.

with this type of economic data, the markets should not be making new highs.

Andrew755 said...

Patience bears..... patience....

at the open I cleared out my ESRX long trade on the bounce. and added to my SPY put position on strength earlier this morning.

I'm growing skeptical that we are going to have a meaningful correction this fall.... anything more then a few days of wacking...I'm keeping my eyes open though.

I want the oil to sell off so I can get in.....

Stay patient guys.....it appears that this market whether or not it wants it, needs to have the air removed from it!!! Should create some buying ops.

Andrew755 said...

I just cleared out of my Spy puts.... I don't like the way the market is trading..... looks like it wants to ramp.

Based on what is going on with the economy...the yield curve continuing to invert... I'm going to stand aside. This market is ticking me off.

Denver_Investor said...

...speaking of tick(s) ..sorry

The NYSE 1 minute tick chart has definitely taken on a different tone this week, compared to the last few weeks. We are now see -500 and lower ticks fairly regularly. The +1000 spikes are still occuring, but less frequently and they melt away faster. All signs of less buying pressure and, dare I say it?, manipulation? (not sure, but the way things were going for a while it sure didn't look right)

A short possibility. SMH, the semiconductor HOLDR. The SOX indes has been lagging all through this rally, and now seems ready to turn down.

Yesterday Barron's online published a research note from Baird saying the demand for NAND flash memory, like the type used in MP3 players and camera and other electronics has fallen off a cliff. This isn't a good omen for how electronic sales are going at your friendly consumer electronics store.

Also, JOE, the St Joe Company, a large land holder/developer in FL panhandle had an absolutely awful report yesterday and is now at a p/e of around 90. They said they won't be giving any guidance on earnings going forward. The stock is still over 50, but sinking.

bsi87 said...

Buys: CVS,STJ

Limit on CVS at 28.88. Low risk buy on a retest of the low it set with WMT drug plan.

Sells: Bonds

Closed the long position for a profit.

Precious metals. Gotta look at that one again. May put a short position on in next few days.

costas1966 said...

10 day sdma has been violated for the first time in 8 weeks on the S&P 500 if it closes below and i have the feeling it will then the correction is in. TIE and CHRW are 2 stock i am looking for the short side. TIE I already started a position.

Sanjay Sola said...

Ben will start pumping money into this market.

we won't see much of a decline before the election no matter how bad the news is.

the market is under supreme manipulation. DOW 12,000 is too important to the manipulators. the economy must look good for Bush.

costas1966 said...

Support is at 1372 on the S&P 500, 9 day support. They are defending it tight now. Lets see if the manipulators decide to take profits and start manipulating it on the sell side.

PB said...

denver_investor

could you pls point me to where yoyu are obtaining your NYSE tick data?

Thx

costas1966 said...

NYSE tick Data can be obtained from prophet.net, under the symbol $tick

Kevin said...

Hi Tim,
You mentioned CMI a while back, Great short down over $10 in less than 2 weeks near 80%gains, has hit resistance just above 123. We will see if it hold tomorrow. Thank you for the great suggestions, it is great to earn while I learn.
K in Sac.

Andrew755 said...

Man I got shaken out of my SPY puts earlier today..... i'm abit annoyed. But on the good side of the day... ESRX traded up 3.5 bucks in the mornings then sold off 8 bucks...boy was I glad I was watching that closely this morning. Not a bad day, could have been better.

I'm completely bearish right now BUT.... elections are next week and you know they aren't going to take it down for the next week. So if we get a gap down tomorrow...I will be looking to Buy Oil and Alumnium......Rotation time.

PB said...

thx costas!