Thursday, March 29, 2007

Dead Letter Office

Greetings, beloved readers. We've got a lot of new folks here today since a talk I gave yesterday about ProphetCharts was attended by nearly 1,000 people. A lot of them are asking where to buy my book about ProphetCharts. You can get it by clicking here.

As you may recall, I finally escaped Chicago this morning to return to bucolic Palo Alto. On my way out of the airport parking lot, I grabbed my parking stub which I noticed was different and more modern-looking than those I had seen in the past. Sure enough, as I approached the cashier's terminal, I saw this:


Now the purpose of this, of course, is for me to pay. So what I would expect to do is (1) insert the stub (2) see the amount due (3) insert my credit card (4) get a printed receipt (5) move on with my life.

Instead, a chunky hand extended out of the toll booth and a man asked for the stub. Not wanting to be rude, I gave it to him instead of the machine. He then proceeded to put the stub in the machine for me. (Please note I've been using computers since the late 1970s and am thus pretty handy with technical tasks such as inserting stubs). He then asked for my credit card (as did the machine). I handed it to him, and......you guessed it........he inserted it into the machine for me. The machine returned the card and a receipt, both within easy reach, but he took them and handed them back to me. And I was on my way.

During this process, I noticed on his uniform sleeve was embroidered the following: "Proud to be a Teamster. Proud to be an American." Coincidentally, on my own shirt sleeve, the embroidery read: "Ashamed to Be in a Country where Union Goons Shamelessly Featherbed Pointless Jobs." I mean, I've only got one shirt like that. What are the chances?

Now, a number of you have been asking me some questions in the comments section. So allow me to reply to a few that I found recently:

Also a comment about Tim being a bear. He is not really a bear he is a closet bull. Being a bear creates controversy and increases the traffic on his blog so he pretends he is a bear. He lives a double life folks thats my conclusion. - zeus111

Untrue! A falsehood! I am a bear to the core, for better or worse (usually worse). I have virtually no incentive to increase traffic to this site.

any reason why you would buy puts of SPY? - Jon

Mainly because I was so disgusted with the bid/ask spread on SPX options. But considering the price movement of the SPY is so much smaller than the actual index, it's probably a pointless exercise. I'll just stick to the real thing.

You've not looked at SHLD in a little while. Is there such a thing as a double top head and shoulders? If that is a doofus question, I apologize. - Leisa

You're not a doofus, Leisa, and you know it. There is such as thing as a Complex Head and Shoulders pattern (which sometimes is just a technician's way of explaining really messy price action). As for SHLD, I don't really see it. But I've still got my puts.

1) One your $RUT chart, you show a very light blue line below the broken trend line. What's that for?

2) I am assuming you are short on everything in that list you provided, but I'm curious as to why you buy puts on some things and not on others. For example, I've bought puts (successfully) on AKAM a number of times recently, and yet it seems you'd rather short the stock... any reason?

3) You show Bear Stearns and Goldman twice in your list. Once on the main list and then a second time on the shorter list. What's that about?

4) One not so technical question: Is your family from Memphis, or was I misreading that prior post? - JackGint

To respond:

(1) You are seeing a portion of a much longer-term trendline that starts on August 13, 2004. It's the lower trendline of a multi-year channel. If that one ever gets broken, hurray.

(2) I usually short the stock if the bid/ask spread on the option is just too much to stomach, or if the option simply doesn't exist. Plus I want to moderate the volatility a bit, so I try to avoid 100% options.

(3) The first list is a personal portfolio. The second list is a portfolio for a trust account. Sometimes I like a position so much I'll have it in both.

(4) No - I was paraphrasing a fairly famous Bob Dylan song.

I'm a bear also, but I've been wondering why you hang out at airports so much? - sab63090

Actually, I'm not at airports much. It's even written in my employment contract that business travel will be minimal - - I miss reading nighttime books to my kids too much for that sort of thing. It probably seems like a lot because I bellyache about it when I'm on the road.

OK, on to charts. The market opened strong today, fell for most of the day (which got me excited that maybe we'd push through that Fibonacci retracement level), but then unfortunately recovered about 60% of the day's initial gain. Kind of disappointing, but not surprising. Remember, just this morning I mentioned how we'd probably have to take a 'breather.' This is what I was talking about.


The NASDAQ 100 shows the same story. We're in a tight trading range now. Break above it, and we're going to probably have to wait a while. Break below it, and our revenge will be swift and terrible.


Yep, here's the Russell. It held that Fib level fairly well. Just look at the huge amount of action I've highlighted. Even if we do push below the Fib, that's a lot of muck we have to drill through.


Dow Theory fans who are bullish probably can't really count on the Transports helping them out. This doesn't look like a bullish setup to me.


And $XMI has "drop/retracement/drop again" written all over it.


A few specific bearish mentions. You're going to see more energy stocks today than normal. I think they've topped out. Here's Cabot (COG):


AMLN is a huge top, although it could be a fakeout. Its descent has stalled for a bit.


Black and Decker has broken a rare diamond pattern.


ESRX looks sharp. And check out my spiffy trendlines! Pretty, eh?


Goldman Sachs (yes, Leisa, I've still got those puts) has moving averages which are starting to converge after its huge run-up.


Noble Energy (NBL) is very high and is a low-risk put play.


Same with OXY.


Copper magnate PCU is high enough to be safe again.


PSB is a bit iffy, but with a tight stop it could be a good play.



And now we come to the Tim Knight selection of your video today. It may be one of the most depressing things you'll ever see. Yes. It's Christian Clown Training. Consider yourself warned.

14 comments:

Leisa said...

I suppose that you could have asked the teamster if he would also give you a b--- job, too (apologies in advance).

Looks like HP might be rolling over. I didn't come up with that on my own, but I like to listen to Gary Kaltbaum and a reader asked about the symbol. I did look at the chart. I'm thinking a break below $38.68 would be Candy Mountain bad.

Leisa said...

HP as in HPQ symbol

wincity said...

Tim,

I feel the same about the unions. Our transit workers strike often because they're not paid enough, even though they make $50000 a year simply by sitting high and watching people dropping tokens into a box. I could never understand how this could be real.

Tim Knight said...

I used to be a completely radical capitalist/libertarian. Having seen how the super-rich completely pig out, however, has tempered my spirits. All the same, my opinion about unions has been pretty low all my life. This morning's experience didn't help.

z-stock said...

(One in four U.S. workers—make less than $9 per hour:)
Complaining about one guy........
Jeezzzzz-stock

theriteway2000 said...

So do you carry a digital camera everywhere you go, taking pictures of random stuff? Your a weirder person than a I originally thought.

Oh for the past 2 months you have been driveling about how goldman sachs is going to tank and how it is 'overpriced', 'overvalued'. You do realize that puts expire? Or are your 7r4D1NG $Ki1LZZ so advanced that your puts are somehow immune to expiration?

Remember, even a broken clock is right twice a day.

AssetStrategists said...

As for Black and Decker, the broken Diamond pattern is cool but it gets even better when you add the LONG-term line that starts at the bottom of the wick on 9/26/90. Extend from there to the bottom of the candle on 3/7/00 and extend the line to the future. As I drew my Diamond, which I believe is just like Tim's, The LT trend line almost exactly bisects the intersection of the the right side of the diamond on 4/19/07 @ $88.19. Now that is way too cool!

AssetStrategists

wincity said...

therightway, ever heard of a camera phone?

z-stock, the fact that many people work hard for $9 per hour makes it even more absurd for union people to make $50000 per year doing nothing. For public unions, that $50000 comes from your pocket too.

Tim Knight said...

Wincity took the words right out of my mouth.

As for taking pictures of "random stuff" - no, not really. But I do *notice* things, and as a thoughtful blog author, I take pictures of items when I think it might be of interest to at least some of my readers.

Lastly, I find it really tough to believe 25% of the country is making less than $9 per hour. That seems absurd. In any case, I assure you the beefy teamster sitting with his tremendous ass on that stool isn't making that kind of money.

niko said...

TK,

Wondering how you feel about time value... I frequently will go for a lower volume option that has very little time value instead of the higher volume, more expensive one. What do you do?

Tim Knight said...

Niko,

Well, these days I'm trying to play it safer than normal, so the closest puts I am buying are Junes.

What's weird is that with some stocks - McDonald's is a good example - I've been able to pay, for instance, the Novembers for LESS than, say, the Julys! I guess some stocks are perceived as so boring that there's just not much of a time premium priced in. So getting a bunch of extra months for 'free' is always appealing to me.

So the way I'm reducing risk is (a) buying farther-out expirations and (b) more deeply in the money. So instead of buying, for instance, 10 contracts at $3, I might instead buy 3 contracts at $10. A lot less profit potential, of course, but radically less risk.

One of the nettlesome commenters (I think it was riteway) asked if I realize options expire. Um, yeah, I do, and I'll roll into a farther-out option if necessary. I never keep a front month. The time decay is way too swift.

chuck said...

Tim,
Just finished your book - great job!
Speaking of the book, is PSB possibly finishing a Right shoulder?

kipknight said...

Forget the charts for awhile..we need some more Christian Clown Training videos...is there a Part Three?

Jaffe said...

Hey, while searching for widgets for my blog, I stumbled upon www.widgetmate.com and wow! I found what I wanted. A cool news widget. My blog is now showing latest news with title, description and images. Took just few minutes to add. Awesome!