Friday, March 09, 2007

Stalemate

In yesterday's post, I laid out bullish and bearish arguments for the market, since we seem to be in one of those awful stand-offs between the bulls and bears. Today played out in precisely that manner.

The widely-anticipated jobs report came out. The results were interpreted as bullish. The markets zoomed higher at the opening bell. Fibonacci retracements were touched all over the place, and then the market started to soften fast. It went negative. Then positive. Then negative. Then positive. And finally ended with about 1/4th of the gain it had at its high point. Just ridiculous.

I'm 100% in puts and shorts right now. Below are my positions. Boldfaced items are puts.


Here's the Dow 30. You can see it bounces off that Fib beautifully.


And here's the Russell. For the second day in a row, it bounced off the fib. It actually managed to sneak across the line a little, but not for long.


The $SPX is pretty similar to the $INDU.


I've got a couple of long suggestions. Here's Bowater (BOW):


And, and even better one, Pico Holdings (PICO), which has the advantage of a big volume surge recently.


A few short ideas. BBD seems to have retraced within the Fib retracement nicely.


MS, like a lot of other investment banks, has likely retraced to an area where I think it doesn't have the strength to climb any higher.


Microstrategy (MSTR) blew me out a couple of weeks ago, but it was a one-day fake out. This one looks weak.


Options on the QQQQs have the advantage of being penny-priced, which is much more fair to traders.


Reynolds (RAI) is retracing back to its broken dome pattern. I also have puts on another aluminum stock, symbol AL, but the chart isn't as pretty.


Lastly, symbol RYAAY looks like a low risk/high reward short candidate.


My kids have given me some kind of bug, so I'm typing this with the chills. Even though it is 70 degrees outside, I'm going to go sit in front of the fire! Have a good weekend!

30 comments:

Sanjay Sola said...

thanks for the short ideas. i'm in cash at the moment. just daytrading for the moment, waiting for the right opportunity.

tomthetrader said...

Great charts ..hope you feel better...when you say your all in puts ...does that mean you have gone from neutral to bearish from todays trading ? With the 1400 SPX holding and some afterhours jumps ...it almost looks too good for the Bulls this week. Brokers blowing out earnings ...quadruple expiration and ex weeks have beem up 10 months in a row ???? I cannot think of a reason to go short other than the inflation #'s on Thursday ...which is why I think I will bet the house short on MondAY !!! Let me know if you can of why you got more bearish ?

Thanks

http://www.ttthedgefund.blogspot.com

schoolofhardknocks said...

I have some similar shorts that expire in April, how far out are yours? Do you expect a drop by then? Thanks

Momo Fader said...

tomthetrader, which brokers are blowing out earnings? Do you have some special precognition on this?

I personally think that we're going to get the other shoe in the R.E. problems when brokers start discussing their exposure to the defaults and such. Look for the fireworks to start on Tuesday when Goldman reports.

stockshaker said...

Tim --

HOw do you get your graphs like that? I've been trying to find someway to get charts that I can post to my blog.

How do you do it?

Obviously its your company's charts, so maybe you have some additional software to do so, but is there an easy way for the rest of us?

Thanks!

Monster Rules said...

very nice charts!

I'm suprised u r 100% shorts already.

i'm 25% shorts, no puts yet.

max pain for qqqq, spy are in the current level.

i expect next week, 0% change after 5 more volatile days.

Leisa said...

Toshi, you are now SHORT SHLD!

Feel better. The worry in the market is now palpable. While some may call that bullish, I don't think it is bullish, just realistic. There's not enough economic data to provide further lift to this market, IMV.

bsi87 said...

RAI is a tobacco company. Reynolds Aluminum was purchased by Alcoa in 2000.

I'm long RAI. In a paired trade against MO, it looks great as a long and MO is a short. I have no position in MO. However some reading on MO sez it will drop when KFT gets spun out. And KFT looks like a potential long.

And I think the mkts are in no man's land. We saw a fear bottom but not THE bottom when the mkt's RSI is 30 or lower. I think we've seen the top for a while esp when comparing % of Naz stocks trading above 50 DMA vs the SPX stocks. Mkts got more speculative/risk tolerant than May 2006. So anything untoward, like the Chinese raising rates/reserve requirements, would easily roil the mkts. Never know what it is till afterwards, just that the potential is there.

I'm hoping bonds rally a bit so I can put a short on. TLT needs to be above 91.

I think the surprise trade for most will be the decline in precious metals. Last week showed that they were NOT the safe haven many thought. My guess people sold to lock what profits they had. But when I run comparison against the dollar and risk free alternates, the PM are not low enough yet. And surprising to me, it appears that silver will bottom before gold.

JMO, do your own homework.

marxist said...

Tim
Thanks as always for the charts and providing some trades to think about.

I had the flu bug 2 weeks ago. It was a nasty one this year. I hope yours is less so!

Ralph

Bob K said...

About that S&P trend channel that was broken "just a little bit"...

Back up to a 10-year chart, and connect the Oct '97 low, May '02 high, May '06 high, and Monday's low. They seem to line up *perfectly* for me. That line is now just a hair below the trend channel that you're looking at, maybe by $1 or so, and it's a little less steep.

It also intercepts some interesting action in '01, so that's now my Bubble Line. Anytime the market is above that line, I figure we're in bubble mode. By that measure, the S&P has been there since early October.

If the Bubble Line holds a little longer, we might get a retest of the highs, so it's worth drawing a line from the 2000 highs to the 2007 high, and watching what happens if that gets approached.

By comparison, the NASDAQ has obediently traded in a parallel channel since '03. I guess it learned its lesson.

dbohntr said...

Hope you get better, your damn book has still not arrived so I am going to have to quote from another, OMG is looking like a Double Top, Eve & Adam patttern and LXK looks like a Bump and Run Reversal that has great coresponding Volume.
Tim, when are we going to get an upgrade to the Java Charts at prophet.net?

z-stock said...

Tim, I was just about to enter the Airline sector, but RYAAY, failure to close the gap,
has me lowering my entry prices. ( Great observation, thanks) Will wait for XAL 50/52.

tomthetrader said...

momo fader ...I am just of the opinion...much different than 90% that GS is going to blow out earnings and go much higher...I am very respectful of Tim as he is a fabulous trader and chartist but with sentiment at record levels of bearishness and Cramer and Cavuto calling for puts on GS on national TV !!!! I have to buy more..been a very nice run and I will be very worried for the entire economy if there is any bad news from GS or MS in the next week...BSC and MER and LEH have some exposure to mortgages but GS and MS do not. I think after this week people may be surprised at how resilient this market can be and how frothy the last leg of a BULL market can be. And yes i do think that we are headed to a short Bear market but not until we have blown through new highs and gotten to where 20% drop would get us back here !!!

Best of luck and please visit me at http://www.ttthedgefund.blogspot.com

Tim ...get better soon...hope to hear from you Monday !!!


TTT

Yuri said...

I don't know where to begin- but I'll start with this opinion - anybody who is opening new long positions, considering what has just taken place, deserves to lose all their money. There is way too much risk in being long right now. Doesn't anyone else get the feeling that everyone is waiting around for the proverbial "other shoe to drop"? Until the recent lows have been retested, or there is any new low (even a higher low), all bets are off. With the SPX having fallen to the 38 fib, rallied then sputtered at the 23 fib - the logical, low risk trade is to short the sucker, ride it down to the previous, just established low, and hope for more. A 50% retracement of that brutal, unrelenting move since July would still only represent that magical 8% retracement that everyone is talking about - pretty much the same percentage as last May-June. In terms of risk/reward, you would easily manage 1:3 or better on the first part of this 2nd leg down. Come on people, how many better, more predictable setups are we ever going to get? I'm with Tim in considering that this "sucker's rally" or perhaps "dead cat bounce" is like having a prayer answered. If the Market just continues on up from here, then you look to see what happens when the underside of these broken trendlines are approached.

Monster Rules said...

Naz's 5th correction (2nd chart):
http://www.investorvillage.com/smbd.asp?mb=5029&mn=7242&pt=msg&mid=1635595

Tim, the 3rd chart is quite funny.
u should paste it in your blog
:-)

z-stock said...

The pundits (analyst's) have been raising GS (EPS estimates) FOR 8 month’s now, to the point where , I don’t think GS can meet expectations. If GS misses by 10 cents, the entire market will suffer.

Mhashe said...

Hey Tim, try this remedy for your flu bug. It's extremely effective and so far has worked for all my family and friends I gave it to.

Ingredients:

2 Tble Spn Organic Apple Cider Vinegar

2 Tble Spn Organic Molasses

1 Tble Spn Red Chili powder ( you should add as much as you can possibly handle. It's a key ingredient )

1/8 Tble Spn Baking Soda

1/2 Lime

1 large can of V8 tomato juice ( oif no V8, 5 Tble Spoon tomato paste will do. You can add more tomato juice/paste if you wish)

Preparation:

mix the can of V8 with 1/2 can of bottled water. Warm to a simmer. Take off the stove and then mix in all the ingredients. Drink the warm mixture slowly.

It's not only all natural and very delicious, but is choke full of immune boosters and has antiviral properties. Your Body PH will also be rebalanced correctly.

tomthetrader said...

Estimates for GS are way too low ...everyone knows it ..they will beat by a Bunch ..$5.50 -.75 but they could make $10 and it wouldn't make a difference ...it is what they say not what they have done ...Have you listened to hank Paulson lately ...pretty Bullish stuff...i don't believe it but when the government sets its' mind to it they can do all sorts of things ...which is why i think there is still one more leg to this old Bull and it probably has already started. We may test some already established lows that were from the "MEGA MALFUNCTION " at the NYSE whereas 200 points disappeared due to a mechanical error...but we have just about made that up.

best of luck to all and i hope we continue to get volatility so the Bulls and bears can Win !!!


http://www.ttthedgefund.blogspot.com

Tom

z-stock said...

I’m prepared to pull the trigger, (Tues. morning) either way GS up or down.

We’d all like to see up, because that means every stock in the XBD trading universe is going to race upwards to close the FEB gap.

We’d all like to see down, because then we can buy puts, all the way down to the XBD double bottom.

I think what has been established, is that GS earnings report, will trigger Volatility, that’s for certain.

Mike said...

Consider a short on MGM ... very weak stock ... heavy selling volume and a weak snapback forming a nice bearish wedge.

PB said...

Come on guys!

Get realistic, how many other sell-offs like this have been over in five days without at least re-testing the lows? NONE. That's not how these things work. If we do go higher from here without a re-test, it will be really UNSTABLE and we will fall even harder.

Volatility is back baby!

Market Speculator said...

Volatility is back? Where is the VIX at???? Come on!

Will it come back, sure...but now? It hasn't come back, but it may or may not.

Market Speculator

beanie11111 said...

Cramer made a bold call last week in telling his listeners to buy puts on Goldman Sachs. This could be the ultimate contrarian call for a shorts-smashing rally? lol


stay tuned....

Leisa said...

Haven't ordered Tim's book yet? What are you waiting for?!

Tim your book came on Friday. I completed it over the weekend. Your writing style is very engaging in addition to being clear and direct.

Though there is quite a bit of "how to" for Prophet.net, it did not take away from the book--and in fact will provide one with some useful things to think about no matter what charting software is used.

Tim Knight said...

Leisa,

I'm delighted you liked the book; you are one of my favorite participants on this board, so I'd be thrilled if you'd do a write-up on Amazon! Thank you!

- Tim

Leisa said...

Here's the review that I posted...

(From Page 141)

"When prices violate a trendline, however, it should normally be heeded. To illustrate this point imagine yourself driving a car down a deserted highway. Since you want to understand the concept of trendlines well, you decide to not look at the road ahead but simply open your door and keep your eye on the median line. You have no idea how the road will twist or turn or whether it will continue straight. . .For a while, the yellow line whizzes by more or less in the same place. It sometimes move a little away from the car, but it soon returns to be just outside the driver's door. Suddenly, the median line moves underneath your car, disappearing from sight. You'd better look up quick to see what's happening, because the road must be turning!"

The above is the kind of zippy and delightful writing that you will be reading if you purchase this book. I know that if I'm in this car, I want Tim in the passenger seat providing useful advice for the profits and potential pitfalls ahead. He's the first to say that technical analysis is not a be all end all and provides appropriate cautionary advice. The book has a pleasing conversational tone that de-mystifies technical analysis.

I'm not a trader, nor am I an expert in technical analysis. But, I am an investor who wants useful tools in my arsenal. Technical analysis is one such tool. Beginners will find this book accessible with Tim's straightforward and engaging reading. If you are a user of Prophet.net (which I am not), you will find many tips on using this service. For non-users, you can skip over these brief sections and immediately dive into the meat and potatoes with lots of gravy.

Still on the fence about buying the book? Then visit Tim at http://tradertim.blogspot.com and see first hand the passion and depth of experience that Tim has for this subject. Additionally you will get terrific market insight as well as being treated to a humorous post or two that may just make your day.

Leisa said...

Umm...I see that I should have written Tim engaging "writing" rather than "reading". Sorry!

beanie11111 said...

Sorry i forgot to alert you fine people about FSLR - the solar play that is exploding thru the roof!!!!


'Go green with FSLR!!!!

FSLR closed @ 52.06

Cramer had been pushing this solar stock due to their ability to reduce cost of solar energy.

After doing more due diligence on the company, i like this stock and have already accumulated a position.

Recently, a former Intel executive was hired as president to run the company.

A major reason why i am making FSLR my favorite solar play is because the Waltons (as in the family that owns Walmart) have a huge investment in this company, owning over 26 million shares.

Longer term play.'

beanie11111 said...

ALternative Energy are the new leaders of the next huge bull market.

Believe it!

belacqua said...

Hi Tim, You liked PICO's chart and today with positive earnings the stock is up 7%.

DD