Monday, April 30, 2007

Here's Your Pickle Surprise, Pal....

One of the readers of this blog posted a link to an interesting article called The Last Bear Standing that you might find of interest. Here is an excerpt:

"As Grantham points out, a bubble needs two things: excellent fundamentals and easy money. 'The mechanism is surprisingly simple,' he wrote. 'Perfect conditions create very strong 'animal spirits,' reflected statistically in a low risk premium. Widely available cheap credit offers investors the opportunity to act on their optimism.'

"And it becomes self-sustaining. 'The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you.'"

"My colleagues suggest that this global bubble has not yet had this phase and perhaps they are right. ... In which case, pessimists or conservatives will take considerably more pain."

So - encouraging in a way, although discouraging in another. I strongly believe, as readers of this blog know by now, that we are in the midst of the hugest Ponzi scheme in human history, and one day it's going to completely collapse. The question is whether that "day" is tomorrow or five years from now. One thing in certain - between now and then, the bulls will persist in posting their taunts here. Although at least to a lesser degree, now that the shield of anonymity has been taken away.

One other article of interest is Dead Market Walking, emailed to me by another thoughtful reader.

Today is the best day I've seen in a long time for my portfolio. I sometimes wonder on days like this is our national nightmare is finally over. One day does not a trend make (or break), so that remains to be seen. All the same, as you can see from this chart of the $INDU, the big boys gave up some ground, and the cyclic indicators are looking mighty encouraging.

The NASDAQ Composite, which has been weaker than the Dow, also fell. The key difference is that it was down pretty much all day, whereas the Dow sported a 40+ point gain at one point in the day before shriveling away.

My favorite index, the Russell 2000, fell the hardest. I like what I see here.

The S&P 500 remains above its former resistance, but any further drop will pierce that line and put us back into that gigantic upward-sloping channel.

The Gold & Silver index, which has been mercifully weak, continued to fall today. This is one of the cleanest, prettiest channels around.

As for the $XMI, it has kissed the underside of its former support line and is now heading in a more intelligent direction.

Ironically, I don't have much time today, so this is going to be a quick post with hardly any specific stock symbols. I offer here a few short suggestions (but not nearly as many as I could.....) There's Akamai (AKAM):

Affiliated Managers Group (AMG):

Avalon Bay (AVB):

MWP is turning down hard:

PVH is not as clean as the others, but it has certainly lost a lot of momentum.

Hopefully I will have more time tomorrow. Thousands of people come to read this blog every day, and I'm flattered and grateful for your interest. If the blog is this popular during this air-headed runup in prices, I can only imagine its popularity when we actually enter a honest-to-God bear market. Until then, I can only yearn to trade stupid, except for occasional days like today.

Friday, April 27, 2007

Kick the Clay that Holds the Teeth In

As a true sign of the times, here's an article about a 16 year old girl that is confident her business will make her a billionaire not just in her lifetime, but by the time she's 25. OK, sister, good luck with that.

I've mentioned the correlation between the NZD/USD and U.S. stocks, and I've got a feeling some are skeptical. Here's a graph of these two apparently unrelated financial instruments. You can see the correlation yourself. In fact, it gave a pretty good heads-up about the 2/27 plunge two weeks in advance.

Regular readers of this blog know that the head and shoulders is a favorite bearish pattern of mine. The way it is supposed to work is well illustrated by MRVL, shown below. The difference between the neckline and the top of the head was about $10, which traditionally is the target price for the fall. MRVL nailed its target to the penny.

My hope is that my AMR short - which has been doing great, thanks for asking - will follow suit as well. There's quite a way to go before the target is reached.

I don't have a position in Capital One Financial (COF) anymore, but I've got to say, this is one monstrously large looking topping pattern.

Merrill Lynch (MER), on which I own puts, seems to be turning the corner. RSI and the slow stochastic are in a downturn, and the retracement seems to have played itself out.

Much can said of US Steel (X) as well.

I think today might be the last "the Dow has to go up because it just keeps going up" day for a bit. My sense is that we'll see a lower Dow on Monday. See you then.

Thursday, April 26, 2007


Yawn. The bull's getting boring. By my count, 25 out of the past 31 days have been up on the Dow. So much for climbing a wall of worry. It's skipping higher.

I mentioned yesterday that the US Dollar had to soften up to have any chance of market softness. Although it didn't help today, I notice the NZD/USD did weaken considerably and is sporting a pretty hefty bearish engulfing pattern.

One nice effect this did have is to soften up gold quite a bit. My $XAU puts continue to do well.

Apple traded over $100 for a while today, its highest price in history. I remembered Dell's famous quote in the late 90s about how Apple should just give up, so I decided to look up when he said that. Well, fancy that - - right near the bottom. Buyers of Dell on that day would have about 140% in profits by now. Buyers of Apple, on the other hand, have enjoyed more like a 1,600% gain.

Akamai, a short suggestion here, continues to fall on very significant volume.

I sold American Airlines (AMR) short yesterday near its high for the day, and it is sinking nicely away from its neckline. By traditional measurements, there could be another $9 in losses on this stock.

I've never charted Honeywell (HON) here before, but it's a Dow 30 stock and worth watching. No clear bearish pattern here, but clearly an opportunity for it to take a breather.

I've mentioned in the recent past how McKesson (MCK) is dancing around its Fibonacci fan lines. At long last, it started to fall away from one of those lines today. It took a while.

Morgan Stanley (MS) represents a relatively low-risk short here, since it has apparently retraced about all of the descent that it is planning to retrace.

PSB, which I've been short a while, continues to slowly form a potential head and shoulders pattern. So far, so good.

Questar (STR), mentioned several times recently as a long candidate, moved handsomely higher today.

In honor of Steven Hawking's planned adventure in weightlessness, I thought I'd share this funny (but slightly NSFW) clip.

Wednesday, April 25, 2007


You can thank the good people of United Airlines for my ability to get this post done relatively promptly. My brief flight from Seattle to San Francisco has been delayed three hours. So here I sit on the plane, waxing poetic about this insane market.

By the way, does anyone find this image from the login page of TMobile to be strangely suggestive? (Long, uncomfortable pause). No? I guess it's just me.

Here's the NZD/USD - - what I have to say about it is basically the same as what I've got to say in the next paragraph.....

As long as the dollar remains weak, there's going to be yet another reason for stocks to go higher. Looking at the EUR/USD chart, it's clear that we're at an extreme point, but (obviously) it could push to yet another extreme. This chart, in case it's not clear to you, shows the strength of the Euro (and, conversely, the weakness of the dollar), so mentally invert it.

What's interesting about the market is just how swiftly it has pushed higher. Look at the chart below. I've highlighted each of the most recent three "surges", and as you can see, each surge is happening with greater speed. The two lonely down periods here were last summer (oh, how I miss those days....) and - ever so briefly - about eight weeks ago.

The NASDAQ Composite is still within its rising channel, at the tippy-tippy top. Clearly Apple's (AAPL) sensational earnings will push both Apple and the NASDAQ higher first thing in the morning.

The S&P 500 is clearly above its channel. An overshot, or a whole new ball game? Search me.

If you want a truly bullish picture of the market, take a step back and look at the long-term $XMI. This is a chart of an amazing breakout, a perfect pullback, and a subsequent push to new highs. This is exactly what bull markets are made of. Astonishing.

I have suggested Akamai (AKAM) as a short before. It didn't really perform until today.

I like looking for weak stocks on a day like today, because if a stock can't get it up on a day like this, it's in sorry shape. Check out ATI.

Same goes for Colgate, which actually opened higher. Look at the honey of a bearish engulfing pattern on this one.

CRS, mentioned here yesterday, is failing its breakout, and it fell today on strong volume.

Dril Quip (DRQ), mentioned in this blog before as a buy, continues to perform well. Just about anything to do with energy (either classic or alternate) seems to be zooming these days. I can at least take heart that I am in a natural gas partnership.

General Dynamics (GD) looks like a potential short. It busted its trendline a number of weeks back, and it seems to have double topped today, falling when everything else was rising.

I don't have any particular opinion on GOOG, but it only rose one tenth of one percent today - - pretty feeble, wouldn't you say? I think it may be telling. I'd also point out that all the gains from its fantastic earnings report a few days ago have vanished. Everyone who bought into that rally - even at the day's low - is in a losing position now.

I like Southern Copper (PCU) as a short at this price.

Schnitzer Steel (SCHN) - - man, can you imagine being the receptionist there and saying that name all day long? - - continues to look fantastic as a bullish play. Wonderful strength on handsome volume.

Questar also looks good on the long side.

Given today's action, I'm glad the readers voting to take anonymous comments down. You can imagine what much mud slinging would be going on right now.

Another Barrier Falls

Well, it's history now. Dow 13,000 wasn't just crossed, it was blown off its feet. As I type this (impatiently waiting for a shuttle to pick me up at the Seattle airport....) the Dow is up over 100 points, and all the news sites are breathless with reports of the Dow's new high water mark.

I remain awestruck at the strength and consistency of this bull run. The bulls were right. The bears were wrong. I was wrong.

I have no idea how long this rally is going to last. I cannot, from a technical perspective, jump in with both feet into a market like this. Those who are in already, congratulations. As for myself, I can only take comfort from the handsome rise in the stock of my employer! Thank goodness for incentive options......

I'm about to do a speech to a group about ProphetCharts (with a shameless mention of my book about charting, naturally), so I'm not sure how late my post will be tonight. So if you're reading this after hours, my apologies - - - I will get to it once I have the time, but I'm traveling today. Thanks.

Tuesday, April 24, 2007

Vox Populi

All right, the votes are in!

I appreciate so many people voting - well over 600 took part in the first "Technical Analysis with Tim Knight" poll, and the results are illuminating.

The first question was to address whether or not anonymous posters should be allowed to comment on this blog. I've flip-flopped on this decision (alone) many times. Sometimes I open it up to anonymous posters, since it increases the activity of the comments section and makes it easy for everyone to post. But then, once a few bad apples spoil things for everyone else with abuse and pointless put-downs, I decide to shut them off again.

So I decided to take this issue to the voting public. Watching the results was like watching a horse race. It was neck and neck for a long time, then "Ban Anonymous" starting to take hold. In the end, the majority voted to eliminate anonymous posters. I guess the verbal fistfights got to be just too much. have to be a registered user to post here. That definitely means the comments section will be a lot less active, but it will by the same token be a lot more civil.

The next question I asked was how to improve the blog - - unfortunately, I only gave three choices: more index analysis, more stock analysis, or a reduction in the comedy. I didn't include a forth choice, "Everything is Fine", which apparently a lot of people would have checked had they been given the chance.

Those that clicked Other entered nearly one hundred specific suggestions, most of which were along the lines of "Leave it just the way it is." So - - will do!

Finally, out of curiosity, I wanted to see if the readers of this blog tended to be bulls, bears, or simply rational non-animals. It seems that most people claim to be agnostic, neither bullish nor bearish. I guess this is similar to asking whether a person is liberal or conservative, and they answer "economically conservative and socially liberal." It's a nice, safe middle ground. So be it.

In spite of the Dow's strong run today (and its continued attempts to crack 13,000 - - come on, can't you get it over with?!?!?) the Russell is still looking good on the short side.

And the Gold and Silver index continues to behave nicely within its descending channel.

I entered a new short today, CRR.

I don't have a position in CRS right now, but it looks like a potential short, since an otherwise beautiful bullish pattern isn't seeming to catch fire - - added to which, the volume has been slowly dying down for over a year.

I like the looks of MicroStrategy (MSTR) for a short position too.

...same story with MWP. As you can see, I'm using a trip of moving averages to help drive home the waning momentum.

As for ONT, the stock I keep mentioning as a long - - it continues to look good, and on sensational volume. Remember my cautionary tale from yesterday, though.

Lastly, my X puts finally started pushing up in price. It's about time.

Everyone is obsessed with 13,000. As I said, I (strangely) want to cross it. "13k and out of the way", so to speak. I imagine once this barrier is crossed, people will check that off their list and start selling into it.

Oh, and.......