Wednesday, March 07, 2007

I See Debt People

I made a remark (shortly before last Tuesday's huge drop) that I was starting to feel good about the market again. I believe that even more strongly now. This market is actually starting to make sense again. And act rationally. And predictably (to a degree). Maybe some sanity is coming back.

I was also gratified to see that someone finally posted the first review on Amazon of my book. Those of you who have purchased it, please do the same!

Today's market reminds me of the contrast between fantasy and reality. See, the market people were all swept up with (until quite recently) looked a lot like this:

But the market I see (and, believe it or not, it's the exact same person in the photo above and below) is something I try to view with clearer eyes and a more logical mind:

The market is older, more tired, and more dangerous than the glossy photo shoots on CNBC might make you believe.

I continue to be fascinating by the NZD/USD trade. I don't think I've ever seen a market bounce off Fib retracements this predictably. It is incredible! Continued weakness here can only be good for U.S. stock bears.

The behavior of the Dow recently has been fascinating. (1) shows the point where the market was bottoming out and beginning to get the confidence to turn back up. At (2) it completes a beautiful saucer pattern, and it accelerates to (3). The market begins softening, which causes short-term worry, but then it regains its strength and zooms to (4). Now the bulls are starting to feel really good. But the drop from point (4) to point (5) is what this market is all about.......dashed hopes.......and, to me, is a strong sign that we may be headed for more marvelous weakness.

Here's a short term chart of my favorite index short, the Russell 2000. I don't know why the bid/ask spreads on this, a much more thinly traded option, are so much more reasonable than the gigantic S&P options, whose bid/ask is a complete rip-off. In any case, the horizontal line at 782 is my stop loss point.

A longer term view of the same index reveals the many Fib retracements I've laid down.

Now for a few short picks. Bank of America (BAC) seems to have exhausted its recovery.

Continental Airlines (CAL) is right at the cusp of a full blown breakdown.

I am madly in love with my CME puts right now. This stock looks so juicy you can just about cut it with a steak knife.

I haven't touched Google (GOOG) in ages, but I picked up some puts today.

MWP looks like a good short play on a hyperbolic stock.

And Reynolds (RAI) is a very clear toppy pattern.

I read the big economic news isn't until Friday morning. In spite of that, both Thursday and Friday are bound to be fascinating! See you again soon.........


HokieJCH said...

I ordered your book last week. I am supposed to get it next week. If it actually gets here I will write a review!

George DeTellis Jr. said...


Your book arrived today from Amazon. 400 pages hard-cover, is this the new Bible of charting?

It reads great! You're a good writer, direct conversational style. Nice charts, I'm plowing through it. I'm a registered reviewer with Amazon - and will give you a post once I've read most of it. When are you coming to Orlando?

Tim Knight said...

"It reads great! You're a good writer, direct conversational style. Nice charts, I'm plowing through it. I'm a registered reviewer with Amazon - and will give you a post once I've read most of it. When are you coming to Orlando?"

Thanks very much! As for Orlando, I just returned from there a couple of weeks ago. Won't be back until next Feb, I imagine!

dbohntr said...

Tim, I ordered your book two weeks ago and still waiting for delivery.
You brought up the other day about how much it will help using java charts, When will we get an upgrade similar to what the Toolbox has? Originally I became a Prophet member becasue there charts were superior and now they are inferior.
OMG is looking nice also.

z-stock said...

The spread today on Apr 46 QQQQ puts was bid/ask 3.12 and 3.14. That’s a 2 cent spread. My order filled at 3.14.
I’ve recently noticed 1 cent pricing on just about every contract. Lots of 4 cent spreads.
Interactive Brokers, $2.40 trades** roundtrip.

John said...

I know this is a board about technical analysis, but I want to lend a fundamental's viewpoint. Contrary to the position taken by most of the analysts on CNBC, this market is almost as expensive as it was in 2000, at least as far as the S&P 500 in concerned.

In 2003, energy and materials contributed 40% of the 500's profits; in 2006 the contribution was 67%.

Energy and materials companies are normally not that highly valued because they lack technical and intellectual innovation.

Tim, finally I see the are correct, this market is way overvalued compared to the economy and its prospects.

AssetStrategists said...

If you like MWP, you might like TTEC.

Anonymous said...

$RUT options are listed on 5 exchanges (reasonable spreads)....$SPX options only trade at the CBOE (What's the spread? Whatever we want it to be!)

Louis said...

I pre-ordered "the book" first day you mentioned....still nothing... Curse on Amazon...

beanie11111 said...

CME to $600!!!!!!!!!!!!!!!! all aboard!!!

beanie11111 said...

GOOG on its way to new highs!!

No time left.


beanie11111 said...

CLWR just ipo-ed!! Right now right here!!

26.83 now (i got some of this hotcake at 26).

The next Akamai.

Jeff said...

Opened CME Apr 550 puts today for $13.10...nice setup/clear exit on the charts...

stockshaker said...


Yeah, Im loving the tight bid/ask ranges on the QQQQ.

Penny pricing on options is where its at buddy!

Tim, we can't get too cocky about things starting to make sense.

Especially when Sharon Stone is involved.

Shes one dangerous cat!

stockshaker said...

Mr Knight - "ding ding"! Another one to a bought book!

Keep up the posting, and keep up the phenomenal work!

Not to mention, please continue to find Dr. Jekyll/Mr. Hyde pictures of Hollywood starlets.

Tim Knight said...

Glad you like the starlet pictures. I'm amazed, frankly.

Thanks for all the book purchases, everyone. I hope I don't disappoint!

Big up day today. That's OK. Let's push back to the underside of those broken trendlines, folks!

Jeff said...

CME is currently trading above 1/24/07 downtrend line...let's see how she closes. Gotta assume many are seeing the same technicals.

stealthelephant said...

Where did you find that picture? I feel so dirty.

Trader Ed said...


When you're shopping for puts on a stock, say BAC or CAL, how far out do you look to purchase these? Do you like 100+/- days to expiration?

Too, do you generally like options already ITM, or do you look for a strike price around where you see support/resistance for the underlying stock?

You talked about this awhile back, but maybe you could review the material again for the class?

Thanks much for the book (ordered) and the blog!

shiftpoint said...

I'm shorting MWP. God, where to begin.

That stock is the most manipulated thing I've ever seen. Small float, stock is mostly owned by insiders and institutions. The day the dow dropped 400+ points, MWP was up .41%

Still hanging on.

z-stock said...

Click on blue letters, or picture icon.

I’m not saying bet the farm, BUT shouldn’t you>>>>

Buy JNJ AMGN BIIB GENZ DNA AGN It’s called our favorite thing to do.
Beat up on Bio-tech. Until, Biotechs, come up to bite,chew,swallow.