Thursday, November 16, 2006

Profits in the Face of Gains

It was one of those nice days where the market went up but my portfolio went up as well (in spite of being completely short). Weakness in oil and gold were the reason.

Taking a look at the NASDAQ Composite, it's pretty plain that the market is at the upper boundaries of an ascending channel. Setting aside bullish/bearish arguments, don't you think it's time for the market to take a breather? Even if we're in a bull market for years to come, it doesn't go straight up. This graph alone should persuade you that it's more likely to ease off than push above the bounds.


The same argument, but for different reasons, applies to the S&P 100 ($OEX). Look how far above the 100/50/30 day moving averages the price is. It hasn't been this lofty since December 2003 (and you can see the softening that happened afterward). We've come very far, very fast.


As I mentioned, gold was weak today. I like how this graph is shaping up. The stop remains the same as noted earlier.


Now here's an interesting and unusual graph. I plotted YHOO and GOOG onto the same chart, each with their own independent axis. What's fascinating to me is that during the first half, the stocks tended to share the same fate. But during the second half, it's clear that GOOG has kicked YHOO's butt, and there's a growing rift between these two. Does it mean that GOOG will eventually "catch up" with YHOO by drifting down sharply? Or that YHOO is simply a company of the 90's and will never catch up again? Time will tell.


Now on to some specific short favorites. Here's AEM, which takes advantage of gold's weakness.


AL is a good play on weakness in industrial metals.


ARE is a very clean short in the world of real estate.


I like MRO as an energy short.


COF is shaping up nicely. I've mentioned this numerous times.


HYDL is another sweet looking short.


We're still in "a new high every day" mode. This can't last forever. You know that as well as I do.

47 comments:

Anonymous said...

I would be surprised if positions with substantial gains would not want to begin to take a look at locking in gains prior to the end of this year. I assume that 2007 tax law will be written by the Democrats and will not be as good for investors as the 2006 tax law.

z-stock said...

I see a possible, Spy @ 145.8
By years end

Take june low 122.55
Multiply by 19%
S&P 500 Q3 earnings up 19%
And Spy= 145.8

don’t kill the messenger….
z-stock..

z-stock to eddiefl
Ibb possible more upside
short looks like 82.2/82.8/83.5
buy is easy 75.8 =200 day
best entry day for Ibb short is
bbh near double top and amgn near 76

dna and amgn calls …look interesting..Ibb drivers.
Biib put . looks interesting..@ 50/51 54 not likely...
Biib nice little double top
With very little forward eps momentum…
z-stock ccj pcar

Anonymous said...

sure the spy will hit 190 this year. I dont understand how you are positive for teh year with only shorts.

Anonymous said...

Ok, here's a great link for you all to check out. It's hilarious. Trust me, I wouldn't steer you wrong.

Read this if you want a glimpse into how crazy the market is behaving:

http://www.stocktiming.com/Wednesday-DailyMarketUpdate.htm


-TonyB

Anonymous said...

Tim, I really love this blog and have learnt a lot from this blog personally.

Anyways, last time you had the chart of AL with a nice H&S pattern, I bought some puts and ended up losing some. So, all I am saying is this time it might be difficult to just TRUST the charts/patterns. I am staying away from buying any PUTS or shorts, rather occassionally trading on the long side.

JC

Tim Knight said...

I know exactly what you mean, JC. My trust in this market has been badly shaken.

Michael said...

re:YHOO/GOOG

This has worked nicely as a paired trade. When YHOO released earnings and stunk up the place, it was about the 4th time but the MACD was diverging. So I went long. It was the anti GOOG without being short GOOG. GOOG compared to YHOO or risk alternates is now in rarified air. Anything untoward happens and it will be interesting. Hence my short today of GOOG.

YHOO finally caved in today and I closed the last of my long positions, very nice profit with minor, controllable risk.

I put a PSQ stop limit order in at 62.46 stop/62.50 limit just above very short term resistance. If it isn't triggered in the first hour, I plan to move the stop to 10 cents above the first hour's high. I will repeat this everyday forward as the risk in the mkt has increased dramatically. Position will represent about 5-6% of the portfolio so it's manageable. If we get a situation like May, there'll be time to add to it. JMO.

PB said...

re: DJIA monthly chart

VOLUME has been sorely lagging this latest thrust upwards.

Volume is definitely not confirming the trend.

How long can they keep this up?
This market is discounting the next 50 quarters!

All the bad news has been discounted, only good news seems to need discounting.

anyone here trade SOX ?
Any thoughts on it?
Went short at 480.

I hear the trucking sector is still good! See you on the road if this trade doesn't work out! AND LOOK OUT BULLS ... I'LL BE RUNNING YOU FUKKERS OVER!

Anonymous said...

Dear Tim and fellow bearz!

I just got a call from GOD himself and he told me that this rally is done! (for now)

Smoke 'em if you got 'em!

Anonymous said...

only wussy,s put there picture in the comments section, you are a wuss, and i would come down and bitch slap you for that.

Anonymous said...

Dear Anon at 5:52pm:

You mis understood what I told you, I repeat the markets are going a lot higher than you can dream of.

Your's Forever,
GOD

Anonymous said...

Tim,

If you ignore them, they will go away...sadly the internet is now available in juvenile detention centers for the mentally inept.

R41

Anonymous said...

It always boggles my mind why people waste their time posting garbage on this blog.

Seriously, these people MUST have something better to do, don't they???

-TonyB

Tim Knight said...

"Seriously, these people MUST have something better to do, don't they??"

Yes. But there's a refractory period after they yank their skinny johnsons. So that's when they show up to post here.

Anonymous said...

I've been a cautious bull during this beautiful rally, rather than a hungry bear. However, this following piece of information caught my interest. It seems I'll be wanting to take profits soon just in case something happens at the end of this month.

"Since August 25th, 1999, the Dow Industrials have formed their most significant tops within one week of a consecutive series of Fibonacci weeks from that date. What is so fascinating here, is the next top is scheduled for the week of November 17th, 2006 +/1 one week, shortly after the coming U.S. elections. One point to make here, is that the declines that followed these tops were all severe. Every one."

source:
http://www.gold-eagle.com/editorials_05/mchugh102806.html

Anonymous said...

TonyB --- to whom are you referring to? (must be the guy and his picture comment) don't know who that is, but I bet he doesn't even know the nature of this blog. It's probably a bull.

Anonymous said...

Why are you still recommending shorts if you "threw in the towel" three days ago?

Tim Knight said...

"Why are you still recommending shorts if you "threw in the towel" three days ago?"

Because I was born a bear and I'll die a bear. I don't mind picking a towel up now and then.

Anonymous said...

Hi there !!
Anyone interested in today's closing prices ?!!?

GOOG will close at $495 today
VLO will close at $52.50 today
AAPL will close at $85 today

This is just an example - I make my money strangling these guys every third friday.

Just a friendly heads up fer y'all.

Max

Anonymous said...

As y'all can clearly see ... Everytime today GOOG goes to $494 it is a screaming buy (or sell at $496). Whether long or short, simply exit at $495 every time (that's the easy way). Dont'cha just luv the way the big money "pins" a stock on expiry day ?!!?

Happy Profits
Max

Anonymous said...

Such a well-behaved monster is that GOOG ... I wonder if it will go all the way to $496 - maybe best to short at $495.75 ??

Max

Anonymous said...

dow trading flat all day, you would think with housing starts and permits down that this market would take a breather, but no. Nasdaq showing weakness, the DOW I think goes positive soon and brings the nasdaq back to 2440-2445 area......they so want this dow at record highs for the 18th time........how its hanging on to 12300 is beyond me...


Trader 2006.

Anonymous said...

and there you go....GREEN GREEN GREEN GREEN ...WTF...housing permits and starts PLUNGING and the dow goes green ...WTF is going on with this market.

Trader 2006.

Anonymous said...

Don't forget to sell some GOOG - it's at $496 again. (of course, don't forget your stops).

Max

Anonymous said...

why do I feel that the DOW is going to be up 25 points sometime around 1-2pm and the nasdaq back in the green....


Trader 2006.

Denver_Investor said...

Tim..you have shown the chart for AEM several times as a short possibility. Perhaps you rely on the patterns with any looking into the fundamentals, and I do that sometimes too.

However, I own AEM, Agnico Eagle Mines for a very good reason. This Canadian gold miner has a negative cost for every ounce of gold it mines. The by products (other minerals) MORE than pay the company costs.

Therefore AEM is extremely leveraged to a rise in the price of gold. Just wanted everyone to have that piece of info. Higher gold prices could make AEM scream higher.

good trading everyone..

Denver_Investor said...

in the post above I meant to say 'withOUT looking into the fundamentals'

Anonymous said...

here it comes,,,,,here comes the buying,,,

Trader 2006.

Anonymous said...

... and, just in case y'all are wondering - I have a stop at $497 for this trade.

Max

Anonymous said...

MO spike 1.5 in min without any reason.

i cannot belive this market

Anonymous said...

and there you go, up 25 points, ITS LIKE FUCKI$G CLOCKWORKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK



nasdaq showing signs it might go green....honestly this is the best market in the world....i used to go to sleep at night when i was bull wondering where the markets were headed, always worried about those down days.... but now since im bear waking up in the morning is just oo hard, everyday is brighter than the next.....

TRADER 2006.

Anonymous said...

Damn - stopped out on that one - that puts us at 2-1 for GOOG today.

Max

downosedive said...

trader2006 - how right you are, DJA was up 24 an I opened another short because this crap is just unsustainable. This is true bull behaviour at the very peak of an upwave. Its all so random and desparately seeking reasons and excuse to carry on up that just arnt there anymore. Weve heard the same old crap day after day about how its going up because of blahh blahh blahh, same old news churned out again and again - and that really IS the sign of a top, at leat for the next few days. Its all so tired now. We should see some pure profit taking, but I would expect to see the indices below 12200 and then it will hit Xmas rally party time and proabaly end the year around 12500. BUT what about next year? Ohhhh, suddenly all will realise that all the 'good' news is totally factored in, nothing left to add and THEN I think we will see a retreat to about 11750 during the first quarter. After that, I wouldnt like to predict.

Anonymous said...

down you really think we will see an xmas rally, i continue to think that any "santa clause rally" is already priced into this market. Its tough to think they will call it a santa clause rally when for the last 3 months its been straight up..


also funny how GOOG cannot break 500, its like there holding down for some odd reason.....50 cents on 499.50 and they cant break 500.hmmmmmm

TRADER 2006.

Andrew755 said...

Just cleared out of my ESRX trade.... was @ 70 yesterday.. down to a 4-5 %....

I'm shorting the next blast... I'm confident that this will be all. Tax loss selling, profit taking will kick in.....

I'm going to be patient for the next few days unless I say an irresistable opportunity.

Andrew755 said...

When is US thanksgiving? What day are the markets closed??? Cheers

downosedive said...

Trader2006 - yes you are logically saying the santa rally is already here. However this isnt a logical markey as we all know. So joe public is continuing to be primed by the financial analysts and gurus through the media to expect the usaul year end/new year start rally. Given the current market mania, I very much doubt that they will be disappointed. In order to have that rally, a little dip is necessary otherwise even the hardest bull will run out of momentum by then. Im caught up with my shorts too much to close now, but i will roll my positions into the first quarter of 2007 and ADD to them either late Dec or early Jan because the market WILL fing Feb and March very difficult ie I beleive the end of the 3rd quarter WILL register a fall. I cant guess how much, it may not even be much at all, BUT Im certail it will be a fall. Is it worth the risk? To me yes, because Im a pure pure gambler

Anonymous said...

down I agree, however there needs to be at least a 2% decline in order for the talking heads to at least agree on a santa clause rally. Also, it seems every single year they hype the santa clause rally and it seems that every year they get one. While spoil the party now, i guess its a 90% chance they get their year end rally. I think the next major dip will put the dow around 11500-11700 area that I think will occur around your time frame, however I have been very very wrong prediciting these markets the last 3 months.

Trader 2006.

Anonymous said...

Looks like we will close at intraday highs.....To me a -5 on the nasdaq still feels like an up day when your sitting at 2443.

As for the market trading today. WHAT A BORING DAY IT IS. ITs days like this where I think there should have been a down day instead of an up day. Those flat trading days where the market floats somewhat higher are days I believe they are trying extremely hard to keep it up. However they always keep it up. 18th high since OCT going in the record books yettttttttttttttt again.....This is getting boring...


TRADER 2006.

Anonymous said...

holy mother fuc*jker dow up 31point

this is getting ridiculus

Anonymous said...

Yes, what a perfectly "FREE" market. Looks like most of the stocks will be pegged to one of their option strike value.

Next time, I am getting ready to screw these mother fsckers in their own game.

Anonymous said...

fuC this, intraday high closing on the dow....18th record high.....truly amazing,,,,,

NEXT TIME THESE MARKETS TANK AND IT LOOKS LIKE WERE HEADED FOR DOW 5000 IM TAKING EVERY DIME I HAVE AND GOING 100%%% LONGGGGGG.....

FOR 1231094353 time i dont understand this market. I hate saying this but im agreeing with every talking head on wallstreet about dow 13,000. I have come to the conclusion that there is no stopping this market and that anything is possible.


TRADER 2006

downosedive said...

trader2006 frustration reflects my own and your dry wit also reflects my own. At least there someone else who understands and experiences the sheer pain and frustration of this unbeleivable market rally. This is too unreal/real for words from me. You have said it all on my behalf and for that much I thank you. I felt forced to close one of my shorts jsut now simply because my losses are running upwards faster than god knows what. For gods sake give us a break next weeeeeeeeek

Anonymous said...

down im glad were on the same page, truth is IF I was long this market at lets say 11500-11700, I would have sold most likely at DOW 12,000 and taken out short positions. But to see it up day after day with no meaningful pullback makes you think long and hard. I would feel forced to close my positions as well, I have done so with a few of my positions. Sold off one long position I had since MAy that finally went positive after 6 long months. Im holding onto plenty of QID and adding more on each dip, Next purchase will be in the $49-$50 area. Im hoping it doesnt go that low.

Also what got me to go short the market was right after elections when I found out the democrats took both the house and senate. Every person on every finance network mentioned that the democrats taking the house and senate would be a big negative for wallstreet, some predicting a drop of a small 5% to a maximum of 20% over the next 12-18 months. No signs of any drop since November 7th. Market closed at another record high. Next week may bring on more of the same, especially the hype behind the xmas shopping and how wonderful this season will be due to everyone spending more and more. I forgot to tell you that avg savings rate in America is -1.5%.....

TRADER 2006.

Anonymous said...

trader 2006, I agree 100%, who the fuck has money to buy these fscking iPods and Sony PS3s which cost 500 bucks. Where the fsck are these ass-holes getting money from? Are they all selling drugs? I will consider buying either the iPod or the PS3 if it costs like $20-30

trader said...

Don't forget all the huge merger,buyout, and IPO deals in the market just this week alone .Ex- 19 Bil Clearchannel offer : Multi Bil NYMEX IPO,Weinstein Bros merging with Blockbuster/ US Air buying AMR ,etc etc.The market is not going to sell off hard in this environment.Just too much money coming in right now . And 12300 isn't that much higher than 11750.
And all major indexes are hitting 6 yr and/or all-time highs going into the holiday season.What else can we expect the market to do AT THIS MOMENT IN TIME ?

Anonymous said...

I wish I bought 500 share of NMX at open and sold within ten minutes for a 15k profit. damn someone made alot.