Thursday, March 01, 2007

Exodus 8:2

Things fall down.
People look up.
And when it rains, it pours.

First off, since my blog is suddenly so popular, a public service announcement: buy my book! Honestly, if you like charts, you'll love my book. And if you use the Investor Toolbox, you have got to get it - - it's the only way to become a ProphetCharts expert! Anyway......

Wow, no comments on how obnoxious yesterday's post was! I guess people have come to expect it. But that video was a kick, eh?

I woke up this morning - just like Tuesday morning - to a beautiful site. The GLOBEX totally smashed in by bearish action in China:

It was thrilling for a little while. The Dow plunged another 200 points. I watched my index puts (which I had stupidly sold Tuesday morning) move from $211,000 in "coulda" profit to almost $300,000. Ouch. Always nasty to see what could have been. The indexes were on a wild ride all day, at times even moving into positive territory. In the end, things were generally down a little.

I hate to say it, but I think it's more likely Friday is up than down. There are a couple of reasons. First, today's action was largely a freak-out session based on Tuesday jitters. Second, there are candlesticks all over the place - some of them gigantic. And third, people are talking bear talk now - - - it's best to maul bulls when they are not looking. That isn't the case now. The $VIX has exploded higher. (N00B alert: click on any chart to see a big version.)

A longer term look at the S&P shows how it could easily move back up to the underbelly of that broken trendline. At that point, it would be like shooting fish (or bulls) in a barrel. As it is now, I'm nervous.

It remains to be seen, but if we do sell off tomorrow, the Russell will have already accomplished its mission of pulling back to its own trendline. This is the only index on which I own puts right now. Puts are relatively expensive now, versus last week, because premiums have understandably exploded higher. So I'm afraid buying puts now is much riskier than just a week ago.

Just look at the candlestick on today's $TRAN action (wow, that sounds like something that would happen on a Castro street corner).

If we rally, the $XMI should do well. Look at not only the candlestick but also how nicely the prices have pulled back down to that former major breakout point (the horizontal line).

I bought some more CME puts today. It seems to me it has pulled back to resistance. I'd put a stop of $552 on these.

Here's a longer-term look at the same stock.

PICO, which I only just stumbled across today, has the makings of a good bullish pick.

I was really ticked this morning when I saw the NZD. I was short the currency. And it had plummeted overnight. So why I was upset, then? Because I had been stopped out on a margin requirement. See, this is something I hate about FX trading. It is so highly leveraged, it is very easy to get a margin call, and the broker will sell every single position you've got. So if you have a ten cent margin call, blammo, your entire account is closed out to cash. So I missed out on a huge move.

Just look at QID. Can you believe a security that started off with just over 100,000 shares traded in a day is now trading close to 20 million? What a success story!

RAI has formed a beautiful dome topping pattern.

And old favorite SHLD, my only bullish position, sported a nice candlestick today whose low met resistance. A stop on $172.49 is good for this one.

Friday should be really interesting, particularly since the weekend is upon us. If people are really shell-shocked and nervous, and they don't want to live through a weekend of uncertainty, maybe we'll get some downward pressure. But don't call me permabear if the market rallies tomorrow. I would say it's better than even odds on a good rally, in which case we'll have to sit things out until prices (and premiums) get reasonable again.


h. lovil said...

Tim I loookd at CME too, but the puts are sooo expensive.

What strike and expriy do you like??

Erich Brueschke said...

QID works for me becasue it can be used to short in a 401K where usually shorting is not allowed.

The inverse 2 times is also a very nice bonus for a usually slow moving index like the qqqq.

z-stock said...

I used CME april 580 call $4.20 @ cme stock price $511.

at cme stock price 534. +24 I got out , sold $7.90.(too soon) .

April PUT 470 thru 500 will work nicely, for CME stock price of $545.

You’ll need $2 to $3 stock price move to get the delta’s started.


Tim, check out one of your favorites….BLUD….ON the ROAD. Again…. W. Nelson.

dbohntr said...

Tim, the video yeaterday was on of the funniest yet. I usually only watch them once but that seemed so perfect.
CME - I picked up the April 500's for 9. and am off a dollar or so.
I hope Tim is wrong about a rally, that is not how I want to start my weekend

CommonGround said...

Got it Tim, the book that is, just bought it! I believe your popularity since Tues may be related to your bearish impression left on readers of your blog - It's healthy to call overbought overbought. Thought of you as soon as Tues performance was recorded and wanted to hear your celabratory response. Should be proud of your conservative close of indicie puts. Keep up the good attitude.

Anonymous said...

Tim, well we certainly got a change in trend this week. Bulls will try and "hope" a rally.

Cash will be king and the best thing is to perserve capital for the next big run.

Market Speculator

RLgtGLgt said...

Pulled a few K off the table last couple days with the bearishness and toppy feelings I had (with the help of your blog).

Loved that video . . . OUTSTANDING! Where do you find those things? A guy like you should not have time to run a tech division, write a book, have a family, keep up with active trading and search the web for those things!

ODA125 said...


I have given you a "well deserved Plug" for the book and your site. I am excited about the debut of your book. Good Luck and "Break a leg"!

ODA 125

Leisa said...

For those of you who read the book, make sure that you review it on Amazon.

charttrader said...

Tim, here is a surefire way of getting your new book to the top of the best seller list... get the Investools CEO to send a copy to all their current students... what a great moral boast that would be... but I'm sure you've already thought of that

dbohntr said...

At 25,000 per PHD, I think they could afford to throw in a copy of the book. I ordered mine off of the link Tim gave over a week ago. Does anybody have it yet?

Tim Knight said...

What's weird is that when I go to the page on Amazon, it doesn't let you do a review - - is this because they think it hasn't been published yet? I think their system thinks it doesn't come out until March 7th.

Any thoughts on this? Believe me, when it permits reviews, I'm gonna beg for 'em (except from angry Australians).

beanie11111 said...

Buy NYX!!!

No time left!


Tim Knight said...

I'm going to go out on a limb here and say - buy the indexes! Looks like a short term bounce up will be in play.

wattson7 said...

Tim, watch the Japan Yen. The market seems to be follow the chart trend on the COMP. Right now the dollar is falling.

JakeGint said...

Who wants to be long over the weekend? Hands?

Tim Knight said...

Not me. My bullishness was short lived. My calls got blown out, and I'm back into puts. Wow, bulls - - - having trouble getting it up?

dbohntr said...

Would like to hear what a stop would be on GS?

Rod said...

Any thoughts on RIMM? (I'm thinking that if it closes today below 140 it is a short.)

rob t said...

Hi Tim,

I just ordered a copy of your book. I have been waiting for almost a year for it to come out. I am looking forward to reading it and gaining your insight and wisdom into charting and the market. I guess I will have to attend a function where you are at so that I can have you sign it. I enjoy reading your blog and find it informative and fun. Thanks for your time and knowledge.


onewaystox said...


I heard something very interesting on Bloomberg Radio. (& it has to do with your put fav: GS)

The commentator said that even though the bonds for the brokerage firms of Goldman Sachs & Morgan Stanley were rated high (like AA or something), he said that they're trading in prices similar to bonds of junk status -- lower than BBB.

Listen, we may fool & fart around trading stox, but the guys that trade bonds KNOW what the fug is going on.

& THAT don't sound too cool.

...just passing it on...

dbohntr said...

I didn't understand you point on GS? Can you explain?

Was anybody disappointed with CME's movement?

dbohntr said...


It will be great to see the headlines " DOW 12,000 AGAIN!" That seems easy at this point, how about 11,642.

z-stock said...

I’m 80% in cash. I think I’ll wait till Next Tuesday. Gives one week, since top tanked.

I went over my trading fees at Interactive Brokers. I saved over $10,000. I’m so glad I switched out of E-trade, three years ago.

onewaystox said...

to dbohntr,

the point, db, is that IF the mkt IS the ultimate discounting mechanism, then bond traders are pricing in a disaster.

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