Friday, December 08, 2006

Similarities to Early December 2006

Pretty quiet day out there. With all the chatter about what this market is most like (and I've been as guilty of this as anyone else), I think we can all agree the current market most resembles December 2006. You never step into the same stream twice, right?

The Dow Transports is just about the only stock index behaving in a truly bearish fashion these days. Nothing dramatic, but it simply lacks the strength of the other indexes.

Something I've been shorting lately has been the $XAU. It's at a bit of a crossroads right now. It's not in a head and shoulders pattern in the traditional sense - - it has the rather gruesome formation of a shoulder, a head, and then two shoulders. Yuck. So it's really more like a price channel. And it's pretty much at the top of that channel now. I'd put a stop on this at $149.70.

Federal Express (FDX), obviously an important part of the $TRAN, is another short of mine. It seems sufficiently weak to hang on to.

RIMM, mentioned here earlier this week, has seem a decent swelling of volume during the recent selling. Stronger volume on downdrafts is what I want to see.

This was not a week of fireworks, to be sure. I feel like we're just going to wind down the near and it'll sputter to a stop. There won't be a lot of excitement until earnings season appears in mid-January. That, to me, is the only proximal event that might help us bears take charge again. At this point, it's somewhat of a stalemate.

Go find some mistletoe this weekend. Oh, and hey, do me a favor - - I'm thinking of having a little get-together in Second Life next week, just for the hell of it. Post a comment if you're interested. I'll post the Teleport SLURL here if I decide to do it.


anunakki said...


Are you joking about Second Life ? lol... Ive been avoiding setting up an account for fear that it will become addictive.

If you're forming a get together I may just have to !

Have a fantastic weekend


Anonymous said...

Have a great weekend bulls........


Anonymous said...

Most resembles Dec. '04 to me. At least $NDX.

Anonymous said...

Enjoy your insight. A few weeks ago there was a short piece in Barron's to the effect that on an inflation adjusted basis the indices are still well short of all time highs. Would be interested in your thoughts and relevant charts.

Have a great weekend.

Dances With Bears said...

Yeah I agree.
I think Tim means 2004.
If so QQQQ going bye bye soon.

Tim Knight said...

No, I meant 2006. As in now. I was trying to be cute.

Anonymous said...

I was just watching CNBC (yeah, I know, but I never watch TV) and they had 2 guys on that pretty much summarize the bulls vs. bears case.

The bullish guy said that he was confident in the lowering of interest rates in the 2nd half of 2007, while corporate earnings were going to slow down, but remain in the upper single digits or even double digits. He liked technology as a sector. He did not like oil or materials.

The bearish guy said that earnings would slow much more, perhaps to the low single digits, while oil and materials would continue to rise as the dollar weakened throughout 2007. If the Fed cuts rates in 2007, the dollar is finished. He saw the Euro trading in the 1.45 range in 2007 (which coincidentally is where *I* think it's going). This guy thinks the Naz will decline more than the Dow or S&P.

Anyways, I think that pretty much sums up the bullish and bearish cases. I don't know who's right. My bet is on a weak dollar and rising gold/commodities.


Eat the Bears said...

My positions are short XAU short XLE (maybe a bit early).

Also short Retailers.

Long Tech, Long SPDr's - now partially hedged.

Just thought I'd lay my cards on the table....

There are times to be bearish and times to be bullish - now is a time to be bullish (but less so than a few months ago)

At any given time there are sectors to be bullish on and sectors to be bearish on.

Silly to be bearish on Tech and S&P's if an interest rate cut is pending at some point - the market will anticipate this... and anticipate this.. and anticipate this..

Better to be bearish on oils golds metals etc.. as a bet that inflation is whipped (for now)
- anyways these have had the biggest run the last few years - so why not short these things rather than indices like the NAZ and S&P that are just coming to life?

good trading to all out there...

...Now... on to dinner....

A nice 'Bear' steak tonight...

Anonymous said...

I don't see anything bearish on gold stocks. I think they are on a trading range that will soon resolve to the upside with a target the 1980 high. Some bearish action that needs to be watched is the mortgage finance companies like nfi nde cfc ahm. Those are the same babies that I tried to short in Octomber and i GOT MY BALLS HANDED TO ME, so I am once bitten twicw shy with shorting these stocks. Anyway all of those stocks had some serious sell offs today on volume maybe the next light volume upside retracement are a short.


Anonymous said...

Since Bernanke took office in Nov 2005, the Dow is up 15% in US Dollars, but only up 3% in eurodollars, while gold over the same time period is up 36%. So it's not that the US markets are going up, it's that the dollar is falling relative to other currencies and therefore inflating assets. If interest rates are cut in the spring the dollar will fall more and therefore other currencies and metals will continue to go up.

Anonymous said...

"Since Bernanke took office in Nov 2005, the Dow is up 15% in US Dollars, but only up 3% in eurodollars, while gold over the same time period is up 36%. So it's not that the US markets are going up, it's that the dollar is falling relative to other currencies and therefore inflating assets. If interest rates are cut in the spring the dollar will fall more and therefore other currencies and metals will continue to go up."

Bravo. Finally someone with a brain.

Now, in terms of individual stocks, there are plenty of them that are up more than 36% this year. That much is true. But if you're looking at broad measures of the US economy, then the Dow, Naz, and S&P are the indices to watch.

And in that respect, they are LOSING GROUND with respect to other measures of wealth, particularly gold.

If you're trading short term, then you might be able to short gold and other commodities. But in the long run, you'll lose your shirt in this economy. Could the Fed raise rates again? Sure, why not. But if they do, the dollar MAY rebound slightly, but the markets will crumble. Also, a stronger dollar is NOT what the US wants, because all of the BILLIONS of dollars of cheap Chinese crap that we import on a daily basis will suddenly cost more. And for an economy that's driven over 70% by CONSUMPTION, we cannot afford to absorb higher cost for imports.

On the other hand, if the Fed CUTS rates next year, then the dollar will crumble and consumer spending will continue because imported goods will be "cheaper" on a relative basis. However, the foreign financiers of the US debt will NOT be pleased with a weaker dollar, as their investments in our debt will be losing money.

So, in brief, the Fed has two options: raise rates and piss off the US consumer, or lower rates and piss off our foreign financiers.

Or they can do nothing and watch the economy die a slow death from lack of stimulus and reduced consumption as the Housing Bubble ATM closes for business.


eat the bears said...

US dollar bears are going to get their head handed to them on a platter when 'they' stabalize the US dollar beginning in Jan.

I will be eating those US$ bears - just like the equity bears I ate in the nice run from Aug-Nov in the DOW and NAZ...

Bears never learn...
It's all about sentiment.

They keep shorting at the bottom.

Get ready to feast on all the hard money crowd bears.

Equities will be up %30 next year - people will be dumping their silly gold shares hand over fist to get out - and chase all the tech and financial equities higher at much higher prices.

Even if we enter a recession later in '07 - 'they' are going to run the market to the moon prior to that happening.

Right now 'they' are letting the market pull back to let the bears 'reload'

Then the 2nd upleg can begin at which time every bear in the world gets roasted.

Havn't you wasted enough money on puts??

Yum - bear meat....
I'm hungry again...

enjoy your weekend in your caves

Anonymous said...

Bear meat does not taste good. But bulls make helluva steak!

It is in no one's interest to have a weak USD. Foreigners will be selling their currencies in support of the greenback.

Also, SECOND LIFE Tim? How about REAL LIFE???

I went to Second Life to check it out, thought it would be fun. That place is anything but!!! The damn jews wanna charge for everything there!

z-stock said...

About that 1% own 50% from a couple of posts ago. Want to equalize the wealth, without changing anything? Here’s a simplistic first step, kind of like ethanol replacing gasoline. Let Corporations Stamp it's own legal tender gold dimes. Stamp 1/10th of an ounce of 99.9 gold coins, with the corporate logo on the front, and product ad on the back. Each Gold coin will be redeemable at spot market prices. $58 to $71. Corporate name branding can drive consumer demand. Example: The Boston Red Sox organization, could apply for a variance with the Treasury Dept, to stamp it’s own gold dimes. Boston Red Sox fans, would want the Boston Red Sox gold dime. Gm could give Gm gold dime rebates. Gm could make deals with Sprint and McDonalds and give those corporate coins away along with the GM coins, and on and on. This essentially floods the consumer market with U.S. legal Tender gold in a form the consumer understands and demands. This demand, (demand is the key) props up the current fiat money system. Propping up the fiat money system puts a very real drag on wealth accumulating at the top. With a potential thousand years of free advertising for corporations on each coin being transacted, consumer demand will not be allowed to wane. I can already feel the jingle jangle of five gold dimes in my front pocket, going down to the drug store to spend one of them, at the current spot price.
Have a great weekend,

Anonymous said...

"The sun don't shine on the same dog's ass all the time."

z-stock ... you're an idiot with too much time on his hands!!!

Why not just make currencies exchangeable for Gold like they used to be?

Anonymous said...

Gold for paper. That will never happen, It will stop the money printing system in one instant.

z-stock said...

ANONOMOUS 9:07 , OK, I’m not an expert. I assumed that fiat money systems are non sustainable. Maybe the US has the fiscal restraint to be the first government in history to ever succeed at it.
Here’s my original premise. The government sucks at selling gold as legal tender, let Madison Avenue do it.

chronictown said...

eat the bears, i remember when my ego made me sound like a jackass too. Im glad that you have done so well,good luck to you sir. IMHO we are close to a top. this bad boy needs a pull back if it wants to go much higher.Just my opinion. I think gold goes to 700 after this little pull back and i also think the miners are gonna go with it. Short $rut , long physical gold "us gold eagles" long KRY, long us gold symbol usgl, which goes on amex for the first time monday. ps made 10 dimes on puts when the rut fell the other day,that was for "eat the bears "and my ego! goodluck and good trading.

Anonymous said...

Forget stocks just for a second---- Tim mentioned second life....

Tim, Second Life???

Your confusing me, I heard about second life when it was in the launching phase a couple of years ago. I was going to sign up just to see what it was all about but never did. Fast foward to December 2006 and I just have to laugh at what is actually taking place in that virtual world. I read nearly every article related to it and just have to sit back and scratch my head that there are some making 6 figures a year. I hate saying this but I think its pretty sad what is going on in that virtual world. It is growing rapidly and im sure its just the beginning of what is to come but I have to ask WHYYYYYYY

TRADER 2006.

Joel said...

Second life is great - I'd like to know how to invest in a second-life company (there's seems to be a lot of gambling on there...).

Anonymous said...


I came across an interesting chart: Checkout DAKT, I'd love to hear what you think of this one.

z-stock said...

Zeus 111 I gave up trying to short Nfi, too. pays (15% dividend).
New 50 day = 37.9. Reachable? I think New will fall some more. It’s eps trend has been bush wacked a whopping 40% in the last 60 days ( I keep records of this stuff) This thing might be going down to Rsi 25 or worse. Possible 31/33 entry point for New. I’d wait for an up day, down day, signal (and then get in.)
Nde (down day on Mon.) or even better
hits 200 day = 42.7 ,( very small downside risk at 200 day) Thanks Z
eat the bears , these two could be the next lunch?

Michael Chu said...

Hi Tim,

I am new to technical analysis. Do you have any recommendations on how I can chart trendlines on chart like you do? I am looking for a website that allows me to do that specifically thanks.

Anonymous said...

WALT - exactly my point. Without any convertibility to a hard asset, the printing machines will just keep going.

Who polices the police?

By the way, second life is for losers that don't have a REAL LIFE!!!

Anonymous said...

This is for all you bears out there.

eat the bears said...

More tasty bear meat this morning so far... new highs coming..

Will you guys ever learn.

By the way people always say stupid things like - Oh its just like 2004 or 2003 or 1999 etc...

This is a waste of time - the market is doing what it is doing NOW - it is not 2004 or 2003 or 1999 or 1994 - learn to trade the NOW.

I'll come back to this site in February when the indices are all at all-time highs and everyone here is finally long - I'll go short then.

Until then let's keep beating those bears back to their caves.

Andrew755 said...

I just inched into SUN and THE.... I'm looking for a move in oil and the drillers......


stockshaker said...

ah, my friend, "eat the bears" - your postings are so amusing! In one sense, I understand that you are probably someone who trades the trends, thats commendable - leave the emotions outside. On the other hand, you gloat - and I feel your time has come. This little 20 or 30 point days, are just borrowed time on low volume.

Enjoy it while it lasts, but make sure to play the short side when evidence presents itself.

PB said...

why do bulls always feel the need to gloat??

It's like they can't believe it themselves that the markets are going up! Well, good for you Mr. "eat the bears" and your post is typical of bulls that think markets can only go up.

P.S. companies these days are NOT creating value. All this going private is due to Sarbanes-Oxley. Most new listing are taking place on London's alternate exchange.

Anonymous said...

I am down 20% this year on my 900k portfolio due to my short positions. This is the worst year Ive had this decade. Class action against bulls anyone?

Anonymous said...

This nation is full of imbeciles. Even if we operate on the premise that the '00 and '04 elections were stolen by the Neo-CONS, there were still many folks who voted for Bush, some enthusiastically. This fact alone is staggering. The thought that anyone could have ever taken our raginginly narccisstic imcompetent and cognitively challenged President seriously says all we need to know about the electorate. If there has been a resurgence in Christain faith in the U.S. over the last generation or so, and I think there has, it is no accident that it has occurred simultaneously with the phenomenon known as dumbing down.

We live in alternate reality here in the U.S. and optimism can just as easily be classified as symptomatic of some sort of mental illness as chronic negativity. It's not just that bears are smarter than bulls, they are, they are more psychologically in a different reality than their hideous bull counterparts who are lemmings heading toward the cliff, in Escalades and Hummers no less. Bulls are deluded. Remember that bulls include all those folks who are underwater in the housing market. Suck on that bulls.

Jan Allen said...

Tim, thanks for this article today; I used a number of the charts in my blog article 'Falling Silver And Oil Prices Take Stocks Lower Suggesting A Financial Market Turn From Bull To Bear'
which one can find by entering prosperingbear in the Google search engine to arrive at my blog site Age of Tyranny News.

The fact that the $HUI and $XAU gold mining stocks fell more on a percentage basis than did Continuous Contract Gold and the gold based ETF (GLD) serves ominous warning: precious metal mining stocks have detached from the price of gold; the $HUI indexed gold mining stocks have failed in their capability to accumulate and preserve wealth; this being confirmed in the weekly $HUI:$GOLD chart.

The 'age of prosperity' created by the HUI gold bugs mining stocks is over.

I believe that the world has reached a significant juncture: I recommend gold and gold and gold alone as the means of wealth accumulation and preservation.