Wednesday, February 28, 2007

Animal Mother

I am channeling Animal Mother. Bulls, you have a real chance of losing control. Stay sharp!

Some folks (well, one - Health Affairs - only God knows what on earth that name is supposed to mean............) suggested I would falsely claim I called the fall. I didn't call the precise fall (otherwise I'd be on Time magazine), but, come on, I gave some pretty clear warnings.

On Saturday, my entry was appropriately entitled, "I'm Starting to Like This Market". I wrote:

The Russell 2000 has been unkind, but I think we're over the worst of this. Here is a sixty day intraday graph; the head and shoulders target of 30 points to the upside has been plainly reached. Clear as a bell.

On Monday, once again, an appropriate title - "Crossroads" - where I wrote:
Accept my good wishes that the higher highs/higher lows pattern be broken in the coming weeks. The bulls must be conquered, and breaking the pattern is the first step in breaking their spirit.

Finally, after the fall, on Tuesday Night... for tomorrow - - again, I haven't looked at a single chart yet, but my early guess is a quick drop in the first half hour and then a big rally afterwards. Not hundreds of point, but maybe 100.

And what, dear readers, did the market do today? There was a quick drop in the first half hour. And then it rallied 100 points (well, 137 at its peak, but you get the idea).

Let's turn to the delicious Abby Joseph Cohen and see what she had to bark today......(this is just an image; don't bother clicking on it for the video; you have to go to for that).

In the video interview I watched (on perpetual rah-rah CNBC, which I never, ever watch, except in the rarest of instances), she stated that the market's "valuation, if anything, has gotten a little bit better". Yep, if you liked the Dow at 12,700, you'll love it at 7,000. She goes on to say that she (it is "she", right?) is targeting a 10% increase this year........and that's conservative....."assuming a deceleration in ...profit growth..."

AJC says of the U.S. equity market......"our market is underpriced....[and represents] very good value." Of course it does, you devilish temptress! The interviewer asked her what, if anything, would give her concern about the market. Her multi-million-dollar a year answer? "Events within the economy." Well, my scrumptious little sex kitten, you certainly know how to earn your keep. Rorrrrwwwww........

Let's put our brains back in and get serious. How high will the Dow go up (ahem - "recover" - - from the "correction") before we get a chance to really rake the bulls over again? Cast thy eyes this way:

.....and this.......

........and this.........

The $VIX pulling back to the horizontal line shown would make things more tempting. My God, the bid/ask spread on S&P options today was wider than Al Gore's waistline. (I think the man has decided to consume - live - anyone not living green. Notwithstanding his $30,000/year house bill on electricity and gas).

I'm going to break form and offer a few bullish ideas. Now, don't get me wrong. I don't actually buy any of this crap. I just get sick of being called a permabear. So I grit my teeth and throw some buys out now and then. Here's ABT:

LEH pulled back beautifully to its fib fan:

And SHLD, which I've mentioned repeatedly, remains a handsome graph:

I received many, many emails over the past 24 hours thanking me (some just in general, others with multi-hundred percent gains from my ideas). One kind gent even sent me a video. I share it with you now. Here, my friends, is how the bulls are coping with the market. (Although the bull is disguised as a giraffe here):

The Price of Tea in China

I am writing this Wednesday morning, a few minutes into the opening bell. I stayed up until 2 going through charts and resumed at 5:20 this morning. So this is a late post, but it is in the context of Tuesday's mini-crash.

It has been a long, long time since I have awakened to such a beautiful sight on Tuesday morning:

In the end, Tuesday turned out to be the best of times and the worst of times. It was the best of times since it was spectacularly to finally see a real fall, just like I had hoped for the previous day (see my Monday post). It was the worst of times since, for my index options, I closed them out when the Dow was down just 120 points. I made money on all my options, but there was a huge amount left on the table. Deeply disappointing, but nice to see the smart bears beat the dim bulls for a change.

A few interesting notes from yesterday:

  • I had a record amount of blog traffic. It's weird, because usually my traffic is very steady. Maybe my regulars came back repeatedly to see what crazy Tim was going to say. Or maybe those who visit me occasionally figured it would be a better post than most.
  • A number of people wrote me emails to thank me for the profits they made. I appreciate that, but the credit goes to you! I'm just here sharing my thoughts, for better or worse. What you do with them is up to you.
  • Quite a few people keep asking about the sales of my book (especially, strangely, my detractors). I have no idea! I do track its rank on Amazon, and it briefly made the "Best Sellers" list on the business books/investing section, but remember, this thing hasn't even hit any stores yet. It is just off the press. Only time will tell, but I'm pretty proud of my book. I think it's a good read!
  • On a personal note, I've been waiting for the perfect opportunity to use the subject I chose for yesterday's post ("I Am Become Death"), a reference to Animal Mother in Full Metal Jacket. I felt it fitting!

I think few stocks better represent the broken promises of this fraudulent bull market that Google. What a snoozer this thing has become! Just look how it's been doing a whole lot of nothing since November. This is a relatively blue chip high tech stock, but you can just hear the air coming out of the tires.

If you look at the NASDAQ over the long term, you can see we might have a loooong way to go before we reach bottom.

Looking at the same index with a shorter time horizon, we plainly bounced off the upper resistance line.

The Dow Industrials were just crazy yesterday. I was - - and this is further proof of just not God, but a Cruel God - - trapped in my car virtually all of yesterday, taking dangerous glances at my Treo. The market was down 200 or so for the longest time, then it was suddenly down 500. I honestly thought the president had been killed or something. But it was just this orgy of sell orders all at once, I suppose.

Looking at the long term industrials, one could easily argue that yesterday was an anomaly. There aren't any major trendlines broken here. Just some very shaken bulls.

The Russell 2000, which I've mentioned quite a bit as a good index to buy puts on, took a better tumble than most yesterday.

And just look at the QID (and its volume!) It's pretty clear there is a growing interest in this double-inverse funds!

Looking at the $SPX, you can see a brief pause about half an hour into the trading day. This is the point where I - shame on me, shame on me - did an "ad hoc" close (which I had forbade myself from doing). Pure idiocy.

But here is perhaps the most interesting chart I have for you today - the SPX on a daily basis. Take a good long look at those trendlines that made up the channel, above which the index had broken out. And to which point did the index fall yesterday? That's right - almost precisely at the same trendline! If any bulls are ready this, you can take that as an encouraging sign.

The volatility index went stark raving mad. This almost certainly cannot sustain itself.

A close look at the $VIX shows the amazing breakout. This borders on unbelievable.

I had no position on the $XAU, but I wish I had puts on this bad boy. The plunge in China had a profound effect on metal prices.

Oh, and the Dow Transports breakout I mentioned last week as great news for the bulls now is rendered moot. The pattern has been shattered.

Continental Airlines has broken its trendline. I've pointed out the target on this. I own puts on this (which I bought prior to the breakdown), and I have high hopes for this position.

One other stupidity on my part - I closed out my CME puts yesterday at a fantastic profit. But the profit became much more fantastic as the CME kept falling. These expensive stocks can make for fantastic puts, especially when volatility is low (as it was not long ago!)

Lastly, Goldman Sachs - - whose puts I've been derided for owning - - is another winner. I'm hanging on to this, although I sold my MER just to trim my investment bank exposure. But you can see by the trendlines there's plenty of room left to fall.

I apologize again for the late post, but I hope I made up for it by the size of this one! Thanks again for all the congratulations and pats on the back. I'll let you know if any bullish Australians have left any cowardly voicemails for me.

Tuesday, February 27, 2007

I Am Become Death

Oh, now you know I'm going to have fun writing about today. I can't wait. Come back later on. By about 5 p.m. PST or so.

Update! Folks, I am dying to do today's blog. But it's 6:30 p.m. and I've yet to even look at my first chart! And the comments section looks like a fistfight, which I always enjoy.

Please be patient with me. I don't care if I have to stay up all night, I am going to get this entry done.

But let me save you a little bit of wondering......

(a) Health Affair, no, I didn't "call" this fall, and I never would have claimed I did. Indeed, look at yesterday's post. I talked about how we were at a major crossroads. And how I had trimmed my positions somewhat (index only - - I kept 100% of my puts on equities).

(b) Every single one of my positions - every one - was a put or a short. Now, hurray for me, BUT, I left a HUGE amount of money on the table (to the tune of six figures) by bailing on my shorts half hour into the trading day. So don't ever claim I am saying I am such perfect trader. Good for me for hanging on to my 30 put positions. But SHAME on me for closing out my index options, ALL OF WHICH AT LEAST DOUBLED BY LATER IN THE DAY.

(c) As for tomorrow - - again, I haven't looked at a single chart yet, but my early guess is a quick drop in the first half hour and then a big rally afterwards. Not hundreds of point, but maybe 100. I'll say more once I've look at the aforementioned charts.

Have some coffee and come back later (or wake up early!) for more.....

Monday, February 26, 2007


Greetings from the snowbound tundra of the California Sierras. To me, the definition of civilization is anywhere with an Internet connection, so I'm still quite content.

Today was a good day, but I can't help but be concerned that we will have, yet again, another swing up. I'm not saying it's going to happen. I am saying that it seems to keep happening, and the most polite word I can think to describe this wave-like action is "annoying."

What we need, of course, is a clear, obvious, idiotic-comments-suddenly-cease kind of break in the market. Until then, I have reduced my exposure somewhat with the worrisome anticipation that this stupid market might find its legs once again. The $NDX at least had a nice bearish engulfing pattern today.

The $OEX shows a wonderful example of just how monstrous the divergence is between the price action and the RSI. This market is running on fumes. But there are a lot of people who like sucking those fumes. The bulls always radically outnumber the bears. We are a lonely bunch, aren't we?

The S&P 500 is just another example of this higher highs/higher lows market. In fact, to make matters worse, the lows don't seem to be dipping as low. There are some bright spots, of course. The investment banks are starting to weaken. Some issues (like the CME) are finally making some real progress downward. But others - like RIMM and MSTR - have surprised me with their incredible strength (obviously I got stopped out on these - I may be dumb, but I'm not an idiot).

The Dow Transports, which I've pointed out should be providing comfort to the bulls, is at risk of breaking its inverted head and shoulders pattern. This could be nothing more than a pullback. But if it falls much more, the very clear bullish pattern will have been neutered.

I mentioned Continental Air (CAL) before. The head and shoulders pattern on this is forming nicely. We could be seeking a neckline break in a day or two.

And although CRDN as a whole isn't an exciting chart to me, I was blown away at the size of this bearish engulfing pattern. This is like the John Holmes of these patterns - I rarely see them this big.

Accept my good wishes that the higher highs/higher lows pattern be broken in the coming weeks. The bulls must be conquered, and breaking the pattern is the first step in breaking their spirit.

Saturday, February 24, 2007

I'm Starting to Like This Market

I am starting to like this market more and more. Several reasons:

  • People are starting to wake up to what a train wreck the housing market and defaulted mortgages are going to be
  • We've got a new financial mania on our hands - insanely huge private equity buyouts - that provide a catalyst for financial catastrophe. Remember the failure of the Japanese to buy out UAL back in 1989? That alone caused the mini crash of 1989 - - and that is a puny deal compared to the absurd BSD type deals going on right now.
  • Upward momentum is rapidly waning
  • The charts I have been waiting impatiently to start falling are finally doing so - - the investment banks.....the financial service companies......the real estate con artists. They're all starting to crack

The Russell 2000 has been unkind, but I think we're over the worst of this. Here is a sixty day intraday graph; the head and shoulders target of 30 points to the upside has been plainly reached. Clear as a bell.

The S&P 500 is now on the wrong side of the tracks (for the bulls). Look at the broken trendline, and observe how the momentum is leaking out.

Cabot (COG) looks like a good short term bear play.

Lehman (LEH) is representative of the investment banks, finally losing their luster.

I don't have any particular on MWP, but this is a good example of hyperbolic mania.

Recent recommendation NVR had almost 40 points whacked off it yesterday.

Maybe our filthy paws are starting to get a grip on this deluded market. I hope so.

Friday, February 23, 2007

Internet Desert

I will be doing my post tomorrow morning. My Internet connection has been extremely unreliable, which is sort of like cutting off my oxygen supply. It's certainly made me a lot less charming to be around. Come back Saturday!

Thursday, February 22, 2007

Shave This....

Let's face it. The whole world's gone crazy. The Dow is pushing toward 13,000 just for the sake of going to 13,000. A third-rate Marilyn Monroe dies and creates a courtroom circus. And a rich, beautiful young woman loses her mind and decides to pattern her life after Colonel Kurtz...

A quick entry tonight. First, for you FOREX types, the NZD/USD seems to have pushed high enough to once again represent a low-risk short trade. I'd put a stop at .7070

The NASDAQ 100 has been terribly strong - - reaching a six year high today in the face of a weak day on the Dow. It's tough to short in the face of such strength, but at least it's clear the $NDX is at the top of its rising channel.

ANDE, a long suggestion I've made many times, has all the right stuff.

Bear Sterns (BSC) sported a nice bearish engulfing pattern today. I'm going to buy more puts on this tomorrow.

I've been hanging on to my CME puts for ages, and I was starting to get bored of them. Today the CME fell over 17 points, and it's potentially going to snap its trendline. Now it's getting interesting.

Research in Motion (RIMM), the stock that never seems to break, is high enough to keep the stop-loss level reasonable.

Finally, Ryland (RYL), mentioned here as a short on multiple occasions, is accelerating its downward trek.