Thursday, March 08, 2007

This Blog is Carbon Neutral

The bullish push back up from last week's damage continues. At this point, I could go one of two ways. One way is to say that the recovery is over and that we're about to re-enter another bearish leg. Another way is to say there are still several hundred Dow points to go before we re-enter such a leg. Apparently tomorrow morning's economic reports are going to have a lot to do with this.

As for today, the Dow was firm most of the day, but just as with yesterday, it gave up some steam near the end.

The thing is, at this point, just about any chart could be subjected to completely valid bullish or bearish arguments. So just to keep everyone confused, I'm going to show you a few index charts and say one or two bullish and bearish things about each one. First, here's the Russell 2000 on a daily basis:

Bullish Conclusions: There's free sailing until $795 before two simultaneous Fib retracements are reached. And there is a huge amount of room between the current price levels and the underside of that major trendline that was broken - - up to about $810.

Bearish Conclusions: The stock bounced perfectly off its 38.2% retracement today. It showed a lot of strength but couldn't keep it up. It's a nice shooting star pattern (albeit in the middle of a chart).

Now here is the same index on a minute bar basis:

Bullish Conclusions: Largely the same as above. You can see the Fib lines more clearly.

Bearish Conclusions: The astonishing thing to me is how perfectly it obeyed the Fib. The 38.2% retracement level is at 786.78. The high today was 786.75. That's only 00.03 points! Absolutely amazing!

Here is the S&P 500 on a minute bar basis:

Bullish Conclusions: See that blue line just beneath the current prices? That's a pretty major supporting line. If we rally tomorrow, that line is going to hold strong as major support for a while.

Bearish Conclusions: This also bounced right off the 38.2% retracement.

And here is the same index with daily bars:

Bullish Conclusions: This offers a better view of that huge trendline that used to be resistance but is now support.

Bearish Conclusions: That same line was penetrated, albeit just a little bit, and there is a huge empty space beneath the line representing how far this sucker could fall.

As for the $VIX, I feel pretty good about how much it has fallen. When it was about 20, I made a mental note that it should get down to about 13 to get the hot air out. It has done so. If today is another strong up today, this could lose a couple more points.

AMLN looks like it's close to breaking its huge topping pattern.

Chicago Mercantile (CME) was up a bit today, so my puts suffered some, but I still love this chart. Satan himself continues to speak through this blog - note the eerie point change today.

And what can you say about a stock like Google which actually falls on such a strong up day. Something tells me the leadership days of this stock are a thing of the past.

Tomorrow should be the most interesting day of the week. Let's hope it's interesting in a good way. See you then.


Lauriston said...

I really hope tomorrow is a good day for bears - I am back in bearish mode with puts for swing trades. I was long coming into the week and that worked out very well, like you I think it is time for the bears once more. Great charts as always! I am going to pay attention to CME it looks "very ripe".

ctkwtk said...

Regarding, $rut... Livingston said, "Observation, experience, memory, and mathematics-these are what the successful trader must depend on." The math part is amazing. As you say, $rut hit resistance at 38.2 fib, also daily pivot point 786.95 from 3/2/07, and 10ema last @ 787.33, all interrelated. If news tomorrow is perceived "not good" then expect a honking good red candle to complete a mini-evening star pattern. If "good" then onward and upward to possibly 50 fib, 50 ema or mid-bollinger. IMHO

Leisa said...

Here's a couple of fundamental ruminations caveated, appropriately, with "I could be wrong".

As you know, I'm not convinced that there is a "sub-prime" problem. I think it is larger than that. I believe that the minute as WFC or a WB starts to take some writedowns on their mortgage portfolios, it will either confirm (or render without merit if not done by Jun 07) my opinion.

Second, the jobs number will be very telling tommorrow. This market, as I've observed it has been punched a few times, but it is still dancing. ISM numbers were not pretty, some retail sales numbers were soft, some inflation numbers were surprising, oil is up--jobless claims, new jobs AND energy prices are continuing jabs that might knock this market over.

Sanjay Sola said...

market is a rollercoaster right now. The US is following Japan's market. I watch the Japan market to figure out how to trade the next day. This is a very unusual event.
as for volume, it is mostly because of short covering and it doesn't look like institutional buying to me.
we're still very early in the correction.

i've never seen a correction like this that lasted one week and was over.

Sunil Saranjame said...

Hi Tim,

We in India, are also seeing a pulback on our indices ie the Sensex (30 stocks), and the Nifty (50 stocks)and we hope to see the downtrend continue next week.



Health Affairs said...

Completely useless blog entry. It is funny how much you are marking up your posts now that your vanity book is out. LOL what a poser.

Neme said...

Hi Tim.

first of all, I want to tell you I really really appreciate your work on your blog.
I have a technical question about AMLN. My main challenge today is to correctly place my Stops. concerning AMLN, if it breaks the neckline at 35.50 where do you see the most logical level for a stop : a bit above 37.50 or around 39 ? or somewhere else?
thanks in advance

toober said...

Looks like the porridge is JUST right.

JakeGint said...

Thanks for the heads up on RUT yesterday... I shorted it as it came off that 38% fib line and did well by the end of day. Seems the employment numbers have the futures buzzing, even as the jobs added number is one of the smallest in months... hmmmm...

So, might we assume this health affairs troll is Aussie?

Tim Knight said...

"So, might we assume this health affairs troll is Aussie?"

Seems reasonable. The dick-o-meter reading is a perfect match.

Leisa said...

Toshi, I thought this an exceptionally good post--the schizophrenic, "I could argue this" and "I can argue that" captures perfectly the dynamic tension that I've come to understand about these markets.

I'm not sure why HA has such a hard on for you.--It's really a little pathological the way some people go in to blogs and trash the owner.

Jeff said...

Shorted a small fortune of VG at $4.62 and leveraged more with Jul $5 puts at 1.20.

CME holding below the line

Anonymous said...


funny stuff...

Can't sustain opens...

Market Speculator

Tushar said...

Hi Tim

I have been reading your blog for over a year and I didn't know how to trade options but because of your low risk trades that you mention sometimes, I have learnt how to trade options. Thanks for keeping people like me educated.

P.S: I made money on GOOG Puts over 15% in a day.
bought some Puts on CME today.

Sunil Saranjame said...

Hi Tushar,

Nice to read your post. On the lighter side, your name reminds me of Tushar Chande!



Jeff said...

CME rather large recovery from day's low and back to green

PB said...

Hey guys and gals!

Hope you made a bunch shorting NEW and NFI, which I offered up as shorts on this blog when they were in the high $40's.

As for this market, even if the correction is over, we'll have to dip back down to re-test and fill some god-awful wide up-gaps.

Anyways, might as well toot my own horn, no one else will!

tomthetrader said...

Tim ,

Thanks again for the work you put in on your site members come to you all the time because you are the best in a turbulent market. I am very bullish right now but just due to short term indicators TICK TRIN you know those guys ...but was very short into the correction and sold too soon...anyway the 1389-1398 SPX is going to be tough to crack but I am expecting a HORRIBLE one day selloff after the inflation #'s next Thursday...can you give me your thoughts if we run up to say 1410-1415 with the Brokers leading the way ..would you just get more bearish or would you give the Bull the benefit...again thanks so much ...I know what it is like to work 20 hours a day and then have some Jag say Low LIfe stuff on probably the most user friendly site on the web. LOVE YOUR BOOK I was the 1st to buy it from Amazon...!!!