Tuesday, November 14, 2006

Burying the Bear

See this towel? It's 100% cotton. And I just threw it in.

There's only so long we can pound sand, folks. Ever since July, the market has gone straight up. Iraq doesn't matter. The swing to the left in the political scene doesn't matter. The doomsday economic scenarios don't matter. There are way more buyers than sellers, and that's all the market needs to keep making new highs.

I had suggested recently that we probably should go back into our caves until the second half of January, at least. It seems that's probably the case.

I feel a personal commitment to doing a blog entry here each day. I must say, right now it's probably about as fun as someone doing a blog about the wonderful prospects of the Republican party. It's kind of a drag.

All the same, let's take a look. The NASDAQ Composite pushed higher today, and from a Fib retracement level, it's got plenty of upside left.


The NASDAQ 100 is just as disturbing. Just look at how much open air there is between where we are at and where we could go.


A closer look at the markets - this one is the S&P 500 - shows that you could basically put a ruler on your screen and plot the market from July 16 to the present. It's basically an unforgiving push higher.


The only bit of weakness today in the stock indices was the Dow Transports. It continues to not confirm the Dow Industrials strength. I'm sure there are some that could make an argument that Dow Theory is best left in the dustbin of history. I have no opinion.


Homebuilders were strong today, recovering from the collapse that everyone knows about. Here's BZH.


GOOG looks very strong. It has logged a new lifetime high, and this is a very nice looking pattern.


Redback (RBAK), which I've named here several times, continues to perform well.


If you're still looking for something to short, you might consider Yahoo (YHOO). This is a long series of lower lows and lower highs, and let's face it, Google has totally trashed these guys. Amazing that the Google guys wanted to sell out for a couple of million bucks to Yahoo early on. At this point, GOOG's market cap is $150 billion, compared to $37 billion for YHOO.

54 comments:

Stuart said...

tim, what do you think of EXPD and GRMN as long candidates? Thanks!

Denver_Investor said...

Tim, thank you for posting every day. You're right, this is no fun for those of us who tend towards the bear side.

The only scenario I can come up with that makes sense is this: The money that would normally be going into real estate is now all going into the next asset that is rising. And right now, that is the stock market.

It doesn't matter that the fundamentals don't warrant it (at least in my opinion). It's where the action is, and therefore it is attracting fresh money.

Does anyone else think fundamentals are getting less and less relavent to the market's behavior?

It seems to me the driving factors are now the availability of liquidity, as determined by the central banks, and the trading activity of the hedge funds and momentum chasers.

Since we can't know what either of these players are planning or doing, do we individual investors stand a chance any more?

onewaystox said...

Trader Tim congrats on your MOMENT OF CLARITY.

I think you get a pin after your first 30 days.

one day at a time. you'll be OK.

h. lovil said...

Denver- the little guy always had WS to carry with their insider information and games. Now we have hedge funds too.

Regardless...we bears were wrong! I have a large hole in my trading account to prove it.

Fundamentals clearly dont matter. A GDP of 1% doesn't matter. It is just like the property market where losers where buying $2 million condo in San Diego, that you could rent for $3500 a month all in. Imagine shorting against those bozos.

So what do we do know. IMHO the lack of a pull-back makes a waterfall event the more likely. This run-up is built on NO consolidation whatsoever.

But we cannot stay short for ever, waiting for that event.

I have gone back to my cave, bloodied and bruised and will watch for another chance to short..it will come.

Keep posting Tim.

Des said...

Ditto, as in 'Please keep posting'!

Livermore said...

the housing market comment is just wrong. leverage on a home is 10:1 last time i checked reg-t is 2-1....

that fact that you guys think the market goes higher he means that the end is upon us. did you see someone covered their shorts in the esz6 contract. that is why on all those charts that people look at from back in 2000 there is a spire at the top. thats shorts covering... no longer where dumb enough to buy at those levels. it was the shorts commitin suicide

smokeisms said...

Here is how I look at Dow Theory... the Transports moved to all time highs just over a year ago, therefore the fact the DJIA had not was a non-confirmation. Now that the DJIA has moved out to all time high.... all is good. Dow Theory is totally behind this move in this primary bull market. But, I'm no expert...

Tim Knight said...

Here's a fun read (and we can see that not just stock bears suffer) http://iamfacingforeclosure.com/

PB said...

just read s/where that todays post 2:00pm rally was based on someone having to close out 122,000 e-mini SP500 futures contracts. I'd like to belive it, but we are at 6 year highs here, why did the person cover now? ES has traded at this level before on the last few weeks.

I think it has to do with Microsoft introducing Zune ... what did you really think B Gates was doing with ALL that cash? Him and Buffett are colluding!

Just kiddin', it's just my paranoid mind!

Anonymous said...

I gave up on the short side today , and will look to join the darkside when trading starts tomorrow. One more bear bites the dust.

h. lovil said...

Mish thinks we have reached the top. Of course he also thought that 1000 Dow points ago!

http://globaleconomicanalysis.blogspot.com/

2Bits said...

Don't forget the upper channel resistance of the $COMPQ (1/26/04, 4/7/06). We're within 10 points of it right now.

MT said...

Tim,
I'm a long time lurker, first time poster...My friends just did an "intervention" on my behalf. I think I got it now, just keep repeating..."The trend is my friend. I will never trade against the trend again."

ctkwtk said...

P&F (rev) objective on $indu 12250. Objective (rev) on $rut 790. $wlsh objective (rev) 14100. Many sectors totally overbought by bullish percent index. Still looks toppy to me.

Anonymous said...

Tim,

Don't give up or stop writing!

We bears are right, just early. Big money is thrashing the shorts right now.

We are living in The Twilight Zone. e.g. in speaking to a fellow long-time fiscal conservative, we are both thrilled the Democrats won last week!

The power has shifted wayyy too far to the right and to big oil and other big corporations.

The Dems want the White House back in 2008, so look out for the creepy crawlers when they start turning over the rocks.

We are seeing the last throws of distribution in the market, the smart money trying to unload on the gullible and unsuspecting.

2007 will be much much different.

Good luck.

Anonymous said...

wuss.

Old Soldier said...

Tim,

LONG Time since I have posted - No pun intended. As I have said in the past - I play both the Long and the Short side and it continues to make me money. I respect your bearish posture and have learned so much from you but I must also say that it is ok to be a bull at times especially when you are making money. As an example: I am in 2 fantastic Long positions LVS and DKS. Just finished CAL and SRE last night. If I had remained a hardline bear I would not have found these awesome plays. I will also be looking to play them on their way down whenever that time comes. Here are a few Long picks to get some of you bears started: JOYG, POOL, ICE and COH. I assure you all that we will be playing the short side sometime in the future.

Tim I hope you keep the posts coming. I learn fromthem all.

Anonymous said...

I decided to come out of my bear cave a few weeks ago and have been cashing in on big moves from EFUT and DIVX. Gotta love the dumb speculators throwing money around like its 1999. I still think the upside is limited but will play it until trend changes from everything goes up no matter what.

Anonymous said...

just to show you how messed up this market is, the homebuilders ETF (ITB) was up over 5% today!

Tim Knight said...

"wuss.

By Anonymous"

Oh, and I'm permitting anonymous posts again. I'm a glutton for punishment.

Anonymous said...

Hey Tim,
I took cmi from 135 to 118 on your suggestion just got out a few days ago at %150 return. Thank you for the great posts.
Daily reader

EddieFl said...

Timbo,

Dont give up, hold cash till you see the white of thier eyes or at least a decent short pattern.

That chart you showed of the Sp500 since July, with a line down the middle says it all, it has not been a good time to short.

You live and you learn, lets keepo the motor in idle till you get the green light again.

anunakki said...

i think as soon as the last bear that reads this blog turns to a bull..we will have seen the top of this market.

Tim..nice to see you not only posting shorts !

I took my bear hat off a while back BUT I still continue to see bearish signs..today I was looking at the S&P and thought it looked suspiciously similar to that waterfall we had this past May. Macd is diverging...oversold CCI...stoch swinging into oversold...I dunno... a 38.2% pullback soon will take us right back to support from Mays waterfall.

Until we have more than a bearish 'blip' I suggest we all run with the crowd as theres good cash to be made.

Anyone else take that ride on the Efut today ? Holy smoke...I made more today than the past three months combined.

Heres what Im looking to play tomorrow...

WIT, CHRS, UCTT, ININ

anunakki said...

oops.. I meant overbought for stoch and CCI above !

z-stock said...

attention ..eddiefl.. MSTR…

MSTR is running out of steam..
used up ALL
of it’s forward eps.. @ $128/130 …
(06/07) eps =4.96./5.70…
look for this one to correct $15/16
new support @110/114 …
dec 125 put has a decent chance to triple…
and /or it might form a 10 day glass ceiling…. (example:hydl,mro)
and you can play it for 10 days…
then on the 11th day ,TANK…

z-stock adbe etn nyx

and
Tim, keep posting....SPY at 142??? (ugh)!

onewaystox said...

Tim,

now we'd like you to teach/show us what "FIB. EXTENSIONS" look like.

keep your chin up & get in the war.

Anonymous said...

is that an upper trend-line I see on the SP500? How far back does that go?

EddieFl said...

z-stock,, good observationon MSTR, i know when that stock moves it can have some very nice long ranges. I will look at your data tonight after work.

Z-stock have you looked at IBB (Biotech Holder, I can usually trade that here at work on the 10 minute charts. I like for 3 reasons.

1. it covers some decent distance intra-day.
2. it gets me in the biotech sector, and has some decent liquidity

3. I like playing sectors, oil, chips, biotech, etc... Especially Biotech, once a trend has begun it sometimes trades in its own direction regardless of what the general market is doing, accounting for less whiplashes.

It is one of my favorite trading vehicles,

downosedive said...

Im currently short still. Ouch. I really do feel at these levels that further progress upwards is likely to be characterised by the normal zig-zag upwards trend line. Im hoping to short trade on a 1 to 2 day basis, but at the moment it just all up and no down. unbeleivable, even bulls should be worried by this pattern as it means without any meaningfull selling a whole lot of steam is brewing up

PB said...

downosedive --- I'm with ya' bro!

check out the SOX index. Many indicators are pointing to a drop from these levels. Upper trend-line, outside of it's bollinger band, MACD, RSI, Momo divergences.

Anyhoot, DEC puts shd double your money.

As for the market, it's beyond ridiculous. This whole move from the summer lows could be negated.

Denver_Investor said...

I think we all could use a good laugh, and I think this could be it:

The Alfred E Neuman Market

http://tinyurl.com/cjksc

EddieFl said...

Tim,


I was wondering if you ever thought about a chat room platform for paying members of Prohpet.net.


Looks like you may have enough daytime participants in here, just a suggestions,

Anonymous said...

tim thanks for opening up the blog again, i could not sign on with my user name for weeks..


Trader 2006.

Anonymous said...

PB what is up I have been reading your posts for weeks, its like what your writing im writing, I cannot understand this FU$%Ing market place. I really cant. In 37 mins we get the fed minutes and im afraid they are going to run this market up again even higher, this will be the 16th new high for the DOW.

As for the nasdaq it doesnt stop moving.....straight up....

when this market was tanking back in May, June and July we got triple digit bounces.... fast foward to november and 3 straight up months and guess what not even a minor pullback. I cannot comprehend that. We have heard of an oversold bounce now where is the overbought fallllllllllll.


TRADER 2006.

Anonymous said...

cpi is tomorrow. We get something like the PPI and these markets are going to even go higher.....

i remember i was long and couldnt sleep at night, now im short and waking up each is hurting me espeically seeing the markets greener each damn dayyyy.

WHERE IS THE SELLOFF TIM>>>WHERE...

TRADER 2006.

downosedive said...

The only fall in this market.....as MEEEEEEEEEEE.........aghhhhhhh!! Off the edge of a cliff I go

Anonymous said...

I have been watching the talking heads on cnbc and reading numerous articles, what is going on in housing, im thinking housing collapse will lead us to recession however everything i read shows the housing market bottoming....THe market continues to move higher on this news i believe and that the federal reserve is going to cut interest rates.....each day im losing money on my shorts and puts....im about to throw in the towel especially at NDX 1800.....WTFFFFF


TRADER 2006.

Anonymous said...

down did you go short??

if so your not doing so bad, i have been short for sometime now...im not going to lie, i missed out on the last 15% jump in this market because of my stupidity......i was long throughout the summer but once i saw things moving higher in august i thought we would have another pullback, never happened...nasdaq up over 100 points in about 7 days.....doesnt make any sense....


TRADER 2006.

Fuzz said...

Thanks for the all clear Tim. I picked up some March SPY's and Q's so it's probably safe for you to go back into the water.

Anonymous said...

fuzz on the long side?

Anonymous said...

9 minutes left before the fed minutes....

dow up 55

nasdaq up 19.


i hope today is a blow off top, it would be a great feeling to see this rally just fizzle by 4pm. Feels like were the housing boom of 2001 2002 2003 2004 2005...

Trader 2006

Anonymous said...

still worried about inflation but the economy is going the way they want it to go....


from the fed minutes

Nancy Drake said...

People are buying with two fists today. The rally continues.

The bears...go down in flames yet again. I feel bad for the bears, but as a trader, I know that eventually the trend will correct and even turn down (2008 maybe?). Until then...the path of least resistance is up.

Bear: The Other White Meat.

Nancy Drake said...

BTW ... not sure if it has been said above me, but now that Tim has tossed in the 100% cotton towel, it might be time to go Short.

:-P

PB said...

I am really at a loss to explain all this buying. Must have s/thing to do w/ stocks being a better buy than bonds. How that makes sense I do not know. I'got blown out to cash, so now I wait 'till we get some revrsal signals. All I know is that a 5 month rally without any real pullbacks is stretching it. But the market keeps chugging higher. Even the fed minutes were interpreted as bullish, when they were clearly not!

P.S. - welcome back Trader 2006

Anonymous said...

when this market go down??

I can't take it!!!

what, no more bear markets? only up?

This is crazeeey!!

I will be home-less soon!!

Anonymous said...

"Real GDP was expected to rise at a somewhat slower rate over the next two years than in 2006 in part as a result of less impetus from household wealth, interest rates, and fiscal policy. The projected increase in real output over the next year or so was a little below the staff's estimate of potential output growth, leading to a lessening in pressures on resource utilization."

This means buy, muther-fukkers, BUY!

Anonymous said...

this rally is just so overbought, as soon as you think the market is done going up it moves even higher. GDP at 1.6% last month = buy. Since when is a slowing economy a place to see markets move higher. The bulls have destroyed every bear, they even know it. I thought the bulls were hurt back 3 months ago when everyone thought the sky was falling, however most bears did get it wrong and it seems the bulls have made it another strong year in the markets.

As i write this the dow has come back up over 50 points and nasdaq up above 13.
16th RECORD high for the DOW this year the 16thhhhhhhh.

Now i have to hear the repeat all over the news tonight AGAINNNN!!!!


PB thanks...

Trader 2006.

downosedive said...

Trader 2006 - no you are NOT stupid. NONE of us are stupid. We are realists in terms of how we think the markets should be measured against current reality and anticipated future developments, both economic and political. The stupid ones are the bulls - they are buying a fantasy land. Even if all events were to result as they beleive, the markets are still too high based on economic and political measurements. Its only if you view matters from the valuation angle I mentioned over the last two sessions that the markets could be suggested to have a lot further upside, but that is an extreme way of looking at the markets and indeed life in general. Anyway the point is, yes we have all made the wrong judgement these past few months, BUT that ISNT because we are stupid. Hang on in there and believe in yourself. Everything comes back into balance eventually and so will this vile rally.

Anonymous said...

down thanks for the word of advice, I understand where your coming from. The bulls buying into fantasy land I think is a good interpretation of this entire market place. Seems to be an illusion, and its not because im a short. If i was long this market I would have probably stepped aside 500 points ago and would have been scratching my head at every advancement in this market. It baffles me, especially knowing that the threat of recession is at its highest in many years. The bears will take it back, when I dont know but it wont be fun for the bulls when this rally comes to an end.

TRADER 2006.

Anonymous said...

THE DOW WILL CLOSE AT 11,674 at year-end

- NOSTRADAMUS

Anonymous said...

First off, Tim, thanks for turning the anonymous poster feature back on. I definitely didn't want to start signing up with Google just to post here.


Now, as to the markets, I said it before and I'll say it one more time:

The Big Boys have NOPLACE ELSE to put their money right now! Bonds? Nope. Real estate? Yeah right. Commodities? Many of the big players don't trade commodities. Fixed income? No way, as long as they can float equity markets with false liquidity.

So that just leaves stocks. And if they keep pumping money in, which way do you think the markets will keep going?

I don't see any end in sight. No bear market will happen until they drain that liquidity back out of the system, which could very well be NEVER.

This is pathetic.

Granted, investors can always go foreign with their money, and quite frankly I'm not sure why they don't. But since this entire rise in the market has been manufactured and manipulated in its size and intensity, I wouldn't be surprised if the "Powers That Be" have put restrictions on where the freshly-printed monies can be invested (i.e., they must be invested domestically).

-TonyB

Anonymous said...

Overall, all of this sounds kind of contrarian/capitulation, at least in the short term. Can the bulls tread water until they reload the ammo?

What it will boil down to longer term is whether there is a significant economic slowdown/geopolitical situation. Duh.

Anonymous said...

The commercial S&P futures position for this week showed the largest net short position in history. It also is at the largest % of total open interst since this bull started in Oct. of 02. The smart money doesn't normally cover as the market goes up, instead they usually add more shorts. These traders aren't influenced by emotion so they know that all markets eventually regress to the mean. When a market rises parabolic like this one is the correction is almost always swift and violent. I'm starting to see a lot of shorts throwing in the towel so I'm guessing this will end up bing a fairly safe level to start shorting.