Wednesday, May 30, 2007

The Price of Tea in China

Unstoppable. The bulls are simply unstoppable.

As you know, before the market opened this morning, it was greeted by the news that China's stock market had fallen more than 6% (that would be like the Dow falling over 800 points here). Naturally, our markets opened lower. And they spent the day pushing higher.

To a new record close.

The Dow's at a lifetime high. So is the Russell 2000. And, unless I'm mistaken, so is the S&P 500. It's enough to make me consider renaming this blog The Wall of Worry.

In a balls-out bull market, traditionally bearish patterns get squashed. The chart below is a good example. This is a great-looking head and shoulders pattern. Or at least it was, as indicated by the highlight. But the market doesn't care. It's simply too strong, and this pattern - as with so many others - has been neutered.


I am buying energy stocks, because they are just about the only bullish charts that look like they have firepower behind them, as opposed to just being momentum plays. Here's Apache Corp (APA). Notice the good surge in volume on today, a very good "up" day.



Much the same can be said of Southwestern Energy (SWN).


That's about all I have to say today. This is just getting to be a bit much!

34 comments:

Dennis said...

Hello, are there any more bears out there? If you are still a bear, you are either a genius at finding a needle in a haystack or more likely a glutton for punishment. The way that the bulls grinded the bears into pulp today is positively diabolical.
(positions: long SPY, GOOD, COST)

Holdem or Foldem 德州牌手 said...

I think today's action is just a manipulation from XXX. Now bull got so much greedy and I would not scare to short here.

TOMTHETRADER said...

Tim and Company ,

This had to be expected with the great month and the window dressing and add in the last of the bears doubling down on the "I FINALLY GOT CHINA DOW" routine...the fact is the shorts are getting killed and the news out there is bad but interpreted by the money as good...Iwent back to a 200% short position very late in the day due to the overbought nature knowing that we will probably see a gap open either tomorrow or friday and it will befilled and then some as we go back and test 1500 cash SPX ...I have been the biggest Bull on the net for 5 years and the move today was the most bogus of them all as the late comers and fast money crowd will get there heads handed to them for not getting in earlier....just my thoughts

TTT

http://www.ttthedgefund.blogspot.com

tommy t said...

we are seeing signs of a later stage move now...today was further evidence of how many shorts there are, after the fed notes @ 11:00 there was a squeeze all the way to the close...not a dip for anyone to cover. Internals previoulsly topped, and price now setting up to top last. The next decent gap up could signal a very tradeable top...I figured this move would turn Tim bullish before it finally turned, but that might be later in the summer after some pullback first...so, I am now moving out of the bull camp to neutral awaiting further evidence, and also looking to short.

nunya said...

I am demoralized, crushed, deflated, depressed, and beaten. It is over, I am finished. A trader I no longer will be. I just can not accept that things are different this time… but the fact is things are different this time. I give up, I quit and I resign. I’m done. Tim, I have really enjoyed your blog…good luck to you.

The Sound said...

I'm holding mostly long-dated puts and double inverse ETFs - with patience and discipline.

tubytrader said...

I quit also. I have never seen anything this redicilious in all my life(trading over 15 yrs). I am turning in my badge next month and will find another occupation. Good Luck to all. I hope this thing crashes and crushes all the idiots that believe the market can only go higher.

Cyl said...

Nunya! You're giving up?! There is so much money to be made! Just go with the flow and take a little out at a time. I've been trought to trade with the trend. And believe me! I too feel this market is unconfortable high, so I just buy the pull backs (bull flags) and get out 2-3 days later -- anticipating a major contraction. That still yields me 6k-10k a week (on only a 45k account)! Sure, today I made a bonehead move and sold everything at the open because I didn't want to see my account take a huge hit, only to see that the bulls were back in the saddle and EVERY SINBLE ONE OF MY STOCKS ENDED HIGHER! (AAPL, AMZN, C, FWLT, and BIDU)! Oh! talk about a heartache! But I'm getting back on my horse and building up my wealth and riding this wave all the way to the bank!

Don't give up!

JakeGint said...

Smelling capitulation. Not long now, I guess.

Hey Dennis... you are a fellow David Gladstone fan? I have the whole set m'self! (GAIN, GLAD, used to own ACAS when DG was there).

I've another gem for you... a little REIT that invests in gold -- Westchester, Putnam and Fairfield (CT) county retail real estate. Talk about "they're not making any more of it!" Urstadt Biddle Properties(UBA). Buy it for the grandkids' grandkids.

JakeGint said...

Hey Tim,

Did you see this new innovation from Google? Kind of creepy, actually, but now on Google maps you can check out your neighbor's house!

ericbolling said...

cyl is full of himself. Prove you are making those kind of returns week in and week out on that little account and I will kiss your a%^.

Leisa said...

I don't know a damn thing, but it feels like to me that today's action was the desperation of trapped shorts.

Here's how I fooled myself and salvaged by portfolio. I have RTH puts, but I'm also long RTH--though more short than long. I have SNE puts, but I bought SNE and flipped it within 5 days and 8.5% gain to pay 100% for my ^$#@$@^& puts that are mostly worthless--I still expect a tank. I have HIG JUL 90 puts--mostly worthless, so I'm long HIG, but the total position is a stupid short. What can I lose? Not an f'n thing--money is already sunk, so I'm going to enjoy the upside juice until.....

Flatwallet said...

Too many bulls and bears here. Some here are elated while others are crushed. Why? You cannot expect the markets to behave in a rational manner. It all come down to probabilities and too many of you fight it all the time. As bearish as Tim sounds, he's a lot smarter than ballzy. While he is a bear, he seems to pick and choose his fights. Bullish on Energy bearish on other things. No need to give or feel like you've lost. Roll with the flow and be willing to change your opinion at the drop of a dime. You maybe a bear but you can prentend to be a bull of a short amount of time and wait your turn. This is an industry in which it may be better to be a follower.

Cyl said...

Eric,

I didn't mean to imply that every trade makes money, and I took my hits in the beginning. But I have taken a $16K account to $80,000 in less than 6 months, dwindled it all the way down to 5k (because I started shorting the SPX and RUT thanks to Tim's blog. But I was a newbie and don't blame Tim in any way. I kept anticipating a drop and it kept biting me in the ass, letting my options expire worthlessI I finally learned the hard way to trade with the trend and WAIT FOR CONFIRMATION).

Now I've slowly built it back up to $52K. The last two months have been my best. I trade at the money options with at least 4 weeks time even though I sell within a week and target 25% to 30% return.

I trade these same stocks over and over because these stocks move: AAPL (my fave), MA, ICE, X, RIMM, BIDU and WYNN. I have also traded in the last 2 months: CROX, PCP, FWLT, C, AMZN, USU and TIE. I lost money on TSO, WYNN, and MNST, and to my dismay, some of those trades would have made me money, but I stuck to my rules and tried to keep my losses short and just pulled the trigger (sold).

I am confident I can grow my account to $1 Million in a year if I stay true to my rules and not get greedy and stay with the trend. The times I have lost money have been because I violated my rules. I look at the daily chart but trade on a 30 min chart. I don't get greedy and pull a little money at a time on a weekly basis. Sometimes 3K one day, 5k another and sometimes I pull the trigger and take a 2k loss.

I don't know what other proof I can give you. I'm a technical trader, wait for a MACD cross on the 30 min chart on my fave stocks and make sure that the daily chart is all pointing in the right direction. I look for bull flag setups, 30MA bounces or breakouts and 52wk high breakouts. I use candlestick patterns, the market forecast indicator (a proprietary Investools indicator), prefer hot sectors stocks (I won't play WYNN until it's above it's 30DMA but it's on my list because it made me money last year) or hi volume stocks that out perform their sectors.

I avoid stocks with too much volitality (i.e. GOOG, CME (although I have made money with both), but at this stage in the game, I'd rather play it safer.

What can I say? I owe it all to my guru Dave Johnson (Investools Instructor). I stopped watching the talking heads and patiently wait for my setups -- with the exception of AAPL. I'm a MAC user and believe the iPhone will be huge (AAPL has made me $12K this month alone). I'm sure I'm buying too much of one stock at a time, but I just can't keep my eye on more than 5 at a time. If nothing happens within 4 days, I'm out (did that with MNST, took a $900 loss and the next day that stock moved up over $2 (ouch!)... but I move forward...

I still consider myself a newbie and attribute my success to being disciplined and patient. ANYONE CAN DO THIS. I don't over analyze, watch the indicators, get in and get out. I'm not greedy (although sometimes I think I should have held on to my positions longer ... but I too fear a major correction in the market so I take a little at a time.)

Go look at my stocks and tell me they haven't made money. Every single stock I had this morning was up today (too bad I was afraid of another Feb pull back after the chinese stock market took a hit last night) so I sold everything at the open --- bad newbie mistake -- again I violated my rules : don't trade the first half hour!

Folks, it works. Maybe it's easier for a newbie like me to trade because I don't over analyze or get greedy (I'm like a trained monkey). I love the stock market and studied hard for a year before I started to trade. I had my own business so I took time off and completely submerged myself into learning to trade. I backtested my rules on my favorite stocks and that's why they're on my list.

Tim, you work for investools. I saw you at the Las Vegas Mega Conference. Am I completely full of shit?

--PS

Eric... let me add my insult to injury: I'm a girl!

Controlled Trader said...

cyl: which options brokerage firm do you use?

Cyl said...

OptionsXpress. They're not perfect, but easy to learn.

I've been wanting to give Think or Swim a try, but right now I don't have the patience for the learning curve. And besides, if something is working, why mess with it?

Controlled Trader said...

I used izone, etrade and optionsxpress. Do you have any opinions about OptionsHouse? They are claiming to charge $10/Trade no matter how many contracts.

Your returns are good. Keep it up.

dbohntr said...

cyl,
I usually get bored with long posts, but I found all of that funny and entertaining. You go girl! If you can control your emotions and trade the trend, you can own this market. I see everything from a bearish perspective but like you once I traded the trend, the green came rolling in. Then I decided to pick the top for a month and kept buying PUTS and gave back 4 months income. Got it all back in weeks playing the same bounces.
some people are just jealous,

It saddens me that people say they are giving up. why not just trade the market? Giving up lets the bulls win.

Cyl said...

Duane,

Thanks for your encouragement! I see you're a fellow Investools grad. Ever listen to Dave Johnson's weekly Investor Talks on Thursdays? I've been listening for a year now and use it more as a confirmation that I'm seeing the right things and playing the right stocks.

I highly recommend him.

Cyl said...

Controlled Trader:

Not familiar with izone or OptionsHouse, although $10 per trade sounds like a great deal! I paid OptionsXpress almost $6K last year in commissions alone! Now that I buy 20-40 contracts at a time, I'll definitely look into them.

Thanks for the info!

Babak said...

"Giving up lets the bulls win"

this is the sort of mentality that will make you a loser.

rather than thinking yourself to be a bull or a bear, be formless, shapeless, like water...

... water flows, it moves effortlessly, it has no bias, but it finds its way.

anyone who forces the market to do their bidding, either to go up incessently or go down incessently will lose.

money is made by adapting to the market, not by demanding the market adap to you.

Trader's Narrative

btw, I wrote about the commercials massive long position on Monday. Anyone who shorts the market right now is betting against the smartest, most capitalized players.

do you want to make money? or do you want to be proven "right"?

decide grasshopper


ps who is Dave Johnson? I thought I knew all the 'gurus'!

marxist said...

I like the comments about going with the trend.

It has been hard for me since and I know I am stating the obvious to this crowd, that the markets will have a major drop at some point. We all know that the markets have broken away from fundamentals.

That has been a huge psychological hurdle for me. So, I have been buying out of the money puts as protection on any long positions.
It is the only way I have been able to sleep at nights.

I would add that after today's action that I can no longer see a soft landing as any possibility. I have been holding out hope against hope that the markets would come to their senses.

I think now, we keep going until some catostrophic event and then we get a minimum 15% drop.

I still look forward to the day when this bubble ends. I am much more a fan of rational markets.

Humble1 said...

I wouldn't say those HnS patterns are blown yet, not until the right shoulder high is used for support. so far, looks just like a typical bear rally.....

there is no such thing as rational in trading. there are only winning trades and losing trades. If your losses are greater than your winners you get wiped out. If you trade based on the reality of what is happening now [reality check - the bulls are buying every dip and bears panic easily = reality = good odds] if you trade based on what you feel [dream] then you are irrational....if you acted in such a way during your daily activities, you would take an elevator to the basement because you feel the top floor [which is where you are going] will come down to you. Crazy...

Gary said...

CYL,
I would caution that you are making a typical beginers mistake. If your account is flutuateing as much as you say your position size is way to large. This will eventually guarantee that you will blow out your account. Small sizes and plan for failure will make you alot more money in the long run than going all in where a single wrong trade will reduce your account to 0 in a heart beat.

Market Speculator said...

I'm with gary...money management is the tool that most beginners lack and usually is the nail in their own coffin.

2sweeties said...

Hi Tim,

please have a look at the NZD/USD chart: doesn't it look like it is turning up, like it did in march when the current rally started after the 26 feb. drop?

Do you think it means a new BIG rally is starting?

Cyl said...

Investing 10% of my portfolio in one trade is risky, I admit. But as I said before, I trade the same stocks over and over, have a set 25-30% profit target and I don't get greedy when I hit it. I also have no problem cutting my losses quick if the stock doesn't move in my direction.

BTW, I only invest 2-5% on stocks that I'm not as familiar with.

Cyl said...

Investing 10% of my portfolio in one trade is risky, I admit. But as I said before, I trade the same stocks over and over, have a set 25-30% profit target and I don't get greedy when I hit it. I also have no problem cutting my losses quick if the stock doesn't move in my direction.

BTW, I only invest 2-5% on stocks that I'm not as familiar with.

John said...

It sounds like they are trying to suck in all the Johnny come latelies, ie. those people that think the mkt is giving away money. Watch CNBC and listen to it. I think riskiest play right now is to continue buying blindly.

John said...

I like the ALB short that Tim mentioned. I bought some July 40 puts. I think it is worth the speculation and options are cheap right now.

Gary said...

I just don't understand why investors are compelled to fight the trend. In strong rallies 3/4 of all stocks are going up in price. Why buck the odds by shorting? It's much easier to find something that's going up and get long until the trend changes. I do agree about CNBC they are starting to lay the groundwork for a final blowoff top. The commentary is just now starting to turn more and more bullish. We still have at least a couple of months though of upside to get everyone on board before the final top, is my guess. Of course I won't even think about shorting until the COT report becomes bearish, which it isn't right now. Oct. by the way has historically been a dangerous month for markets.

John said...

Gary

What are your long ideas? AAPL RIMM BIDU ?

Gary said...

I don't try to trade individula stocks. When the COT gives me a buy signal I go long the Q's or the spiders. When it says sell I short the Q's. That's it. Pretty boring I know. But then I'm really not interested in excitment I just want to make money.

John said...

Can you keep us abreast of your COT reading and where I might be able to read this. Thnx