Friday, May 18, 2007

Sheer Energy

Another record. This is getting really monotonous.

One index that hasn't actually reached a new record, but is within a hair's breadth of it, is the S&P 500. It peaked back in January of 2000, and if Monday is up at all, it will almost certainly reach a new record closing high (and I don't need to tell you the financial media will make a huge stink about it).


The $VIX remains very, very low, indicating widespread complacency. You can see how the VIX deteriorated from 2003 through 2005 and has remained low ever since. There was a time when the normal VIX range was between 20 and 50 or so. These days, it's lucky to even stay in the teens.


Real estate has been getting hit, in spite of the market's overall strength. I've got a number of real estate shorts, one of them being AIV.


Akamai (AKAM), which I am short, went up some today, but I am still comfortable that this pattern is safely beneath its neckline.


One days like this, if you see major stocks with weakness, that's usually a very bearish sign. The CME is a good example.


InfoSys (INFY) is an even better example, since its pattern is more clearcut.


The thirty stocks which comprise the Dow 30 Industrials have obviously been very strong, by and large. MMM is no exception, although it seems awfully lofty right now, and it is sporting an impressive shooting star with today's action.


Energy has been incredibly strong. I've mentioned some oil service stocks here recently as good bullish plays. But even looking at the general OIH stock, which represents an amalgam of oil service securities, you can witness the terrific strength lately.


PSB is an other short of mine that has been enjoying the real estate tumble.


Finally, VNO is another participant in the real estate slump, and it features a really nicely-defined head and shoulders pattern.

45 comments:

TOMTHETRADER said...

Tim,

The TTT HEDGE FUND went 100 Short during the day today adding SPX puts DXD 2x short DOW and QID 2x short Nas as we have finally ( after 5 years ) joined the Bear camp officially ...My notes from investment banking in the 80's show almost identical conditions pre 1987 ...but with technolgy today much better , I do not think it can run as long before the ultimate collapse...instead of Junk bonds it is foreign governments holding up our stock markets ...all that has to happen for a bear market is rates to continue to rise and any type of "event" to get crude over $70 and gas over 4.00 per gal. The home foreclosures , Uncle ben stated , will continue into 08 and Mr. Paulson has got the Chinese on board and they are not the best market timers ...even though we could go up another 1% near term ..they can have it ...whether you like it or not ...the TTT HEDGE FUND is officially 100% short the US stock market !!!

http://www.ttthedgefund.blogspot.com

radicimo said...
This comment has been removed by the author.
Momo Fader said...

Tim, here's a link to my FSLR chart. It is maybe going to put in a right shoulder. Hard to say h&s yet. All I know is that if it breaks that support down near $59, look out below, although it could even make a neckline right there for h&s.

Fundamentally suspect co. I hope to put together a write-up on my blog this weekend. A lot to say. Target is gap-fill to $35 in 12 months +/- 6.

It's pretty rare to see RSI and MACD divergences line up like that. Best I've found in a long time.

FSLR 6months

b.healed said...

i wish i could get excited about the shooting star on MMM, but with shooting star that the dow had a couple of days ago and STILL hit knew highs i am finding it difficult to get excited about MMM.

i bought a put on akam a couple of days ago as it was coming down off the test of the neckline, hopefully it will bounce back down. i should have gotten involved in psb as it was breaking through yesterday, it will be fun to see where that one goes.

IM said...

Tom The Trader. U got mighty big balls to go short. All I can say is either you will hit a home run or go broke. I suppose after 7 straight up weeks on the Dow there is a good chance next week ends down. Or maybe not.

Holdem or Foldem 德州牌手 said...

I still hold my SP short futures, and the lose become bigger and bigger now.

Monday is a different day.

Gary said...

I'm probably one of the biggest bears here but even I can see that this is one of the strongest bull markets since 1999. How much money do the bears have to lose before they figure out that trying to pick tops is a losing game. The difference between myself and the permabears is that I don't let my bias control my investing and I'm not against making money on the long side while waiting for the market to turn down.

kapil khanna said...

I was just browsing and landed on this blog once again. Its been over a year and am surprised to see that Tim is still prediciting a bear market.
I am glad I played bull all this while.
Tim,
Hope you made money during this run up. All traders want is a market that trends. Remember trend is your friend.
Cheers!
p.s. If yur want different results, do different things.

Gemma Star said...

Kapil khanna,

Tim has done very well with his short positions in this bull market, something you would have known if you had been around this past year.

TOMTHETRADER said...

Brilliant !!!!

Oneway said...

shall I do the FIB.Extensions for the S&P500 now, or after it breaks 1,553?

Shawn said...

Ops. Another famous bear Dow theorist Tim Wood has also thrown in the towel today. I really think the bears are close to extinction, and it is this thought that keep me from throwing in the towel.

But I may be wrong for another 20 years?!

It is soooooo hard to fight the FED. So Hard.

http://www.financialsense.com/Market/wrapup.htm

tommy t said...

The sentiment still hasn't gone fully to the bull camp...it will eventually end when the bears are afraid to short ( not talk trash but actually be afraid), and a possible blowoff for 1-2 days straight up. One problem with message boards/blogs...lots of talk but maybe not real action to back it up.

manojsai said...

Sir,On feb 21 chairman of boj said he want to increase intrest rate to 1%.When japan increase its rate the carry trade will be effected causing the market to tumble.Untill it happens it is bull time and high volume stocks will go higher and higher and i wont be surprised if dow hits 15500 by year end.http://www.manojsai.mynewblog.com

Humble1 said...

there was a technical event on Friday besides the obvious new highs posted here. I am surprised not to see mention of it. I will post it later, but first I want to see if any of the experts out on the net pick up on it.

Yuri said...

Don't see anything bearish in the FSLR chart - just a nice upward, sustainable slope, with higher highs & higher lows.
Interesting note on the SPX closing in on a record, and after hearing this you people who are short may want to hang on to those shorts a couple of days - last year at this time, after a relentless 7 months and 13%, the DOW was within 0.7% of a new alltime high. It didn't make it, but instead sold off 7 plus percent. Do you really think the floor traders at the NYSE really care about a new SPX record? We will get there, in time.
During that week, the market started creeping toward the record, Mon-Wed, and then all hell broke loose on Thur-Fri as the DOW dropped over 260 points.
On the day that the SPX set that record, Friday 03/24/2000, it formed a beautiful doji reversal candlestick, confirmed the following Monday, and what followed was an 11% selloff. The intraday high on that Friday was around 1553. Talk about a climactic end to a Bull Market - just doesn't get any better than that. While I don't give history much chance of repeating itself - you never know!
Just some food for thought from the pages of Market history.

Gary said...

Yuri,
The key statement was 7 months. We have only been rallying for 2 months so far. Final uplegs average 6 months and 34% in bull markets. Not to say that any of us know whether this is a final upleg or not. But the market is not stretched time wise yet. For that matter it's not stretched price wise yet either.

Dennis said...

Wow, the market is very strong. Even the small caps went up. It is dangerous to short the market.

Tim Knight said...

"Wow, the market is very strong. Even the small caps went up. It is dangerous to short the market."

Thanks for letting us know, Dennis; you're only about 10 months too late in letting us know ;-)

Yuri said...

Gary, I guess it's all a matter of how you define a trend. I was taught a simple, but reliable method of looking for the 10 week exponential moving average crossing over the 40. If you use this methodology, this rally started in Nov, 2005, and comprises a 29% move. Take a look at a 10 year weekly chart of the DOW. Very illuminating.

SimpleTrade said...

Tim, do you think China's rate decision will cause a correction in China's market, and then US will follow next week? I read Yahoo Chinese site, seems like traders in China are concerned and think Shanghai index may have a 10% correction next week.
If you check Shanghai, Dow, these indices are due for a pull back. It just need an excuse, now we have it.

JakeGint said...

Even though I share some of your concerns, Trader Tom, I recall from my IB days that the junk bond meltdown was in the late eighties very early nineties, when the gummint mandated that all S&L's had to disgorge them, good or bad.

Then Apollo and a couple of other groups made a gajillion dollars buying them cheap.

'87 is slightly before my time, but I thought that was something else... currency flux or something?

downosedive said...

Gary
You normaly talk sense, but now even you have lost it. What the heck do you mean 'weve only been rallying for 2 months'?????? Havnt you noticed the DJA has been ralling for 11 months, have you been asleep for 9 months of that?

TOMTHETRADER said...

Yes, It was the 5th year of the market and it was 30 sessions of a/d line breakdown and Investors Intelligence Bulls were record high. Very similar to today ...Greenspan was also in his first year ...


Black Monday- the Stock Market Crash of 1987
The stock market crash of 1987 was the largest one day stock market crash in history. The Dow lost 22.6% of its value or $500 billion dollars on October 19 th 1987! In order to understand the crash, we must first study the cause.

1986 and 1987 were banner years for the stock market. These years were an extension of an extremely powerful bull market that started in the summer of 1982. This bull market had been fueled by hostile takeovers, leveraged buyouts and merger mania. Companies were scrambling to raise capital to buy each other out, in essence. The philosophy of the time was that companies would grow exponentially simply by constantly purchasing other companies. In leveraged buyouts, a company would raise massive amounts of capital by selling junk bonds to the public. Junk bonds are simply bonds that have a high risk of loss, so they pay a high interest rate. The money raised by selling junk bonds, would go towards the purchase of the desired company. IPOs were also becoming a commonplace driver of the markets. An IPO is when a company issues stock for the first time. “Microcomputers” were also a top growth industry. People started to view the personal computer as a revolutionary tool that will change our way of life, and create wonderful profit opportunities. The investing public was caught up in a contagious euphoria, similar to that of any other bubble and market crash in history, the chart for the 5 year bull that started in 1982 is very similar ..maybe Tim can show the two periods side by side or on top depending which position he is in the mood for !!!

It is Saturday Night !!!

Gary said...

Downnosedive,
The correction in Feb. and Mar. was similar in magnitude to every other correction so far in this bull market. I don't see how it is unreasonable to assume we have started another upleg. It seems pretty obvious that we have, since we are making new highs (isn't that the defintion of an upleg) Also at the bottom of that correction the commercial traders in the S&P futures market drastically reduced their short positions which says to me that the big boys also think that the market just had a "normal" correction and were now ready to buy long again.
Yuri,
I'm not sure why you think that since this rally has increased 29% in a year and a half that means that a top is near. If that was the case you sure would have missed a lot of the 99 bull market.
If you are willing to have an open mind I would urge you to read the archives on my blog. I think most of the ideas I post are just simple common sense. I try not to let my personal bias influence how I invest (I'm bearish BTW). In a strong bull market like this one I just can't let my personal bias control my decisions or I would lose out on the opportunity to make money on the long side.

Yuri said...

Gary,
As I said, what constitutes a trend depends on what technical indicators you are looking at. If you are using a 30 period MA (very common), then Feb 07 did not violate that 30 period line enough (2-3%) on a weekly closing basis to constitute anything more than a normal correction (3-5%).
We are very overdue for a major (8% or more) correction on the S&P - I believe we have set a new record in that regard.
I am very wary of the elevated risk, both absolute and seasonal, at these lofty price levels, especially the DOW stocks. Which brings up my other point - can the money flows into the DOW 30 be explained away by the weak dollar (acknowledging that many of these have significant overseas earnings)? Or are fund managers being defensive, hoping to not be hurt too bad during a correction. Many fund managers don't have the option of sitting in cash, as they have ratios, quotas, and pressures that retail investors lack.
What I have seen, and why it is hard to profit on some of these corrections, is that they come so suddenly, without warning, and are so sharp. Back in Feb, the indices were looking quite bullish - gradually retracing back to the 30dma before buyers would once again step in to move them higher. If you were overall short then (and let's exclude Tim from this conversation), you were in the vast minority. On Tues. - whammo! No chance for longs to do anything more than take the punch. If you decided (wrongly, in this case) that the sky was falling, and reversed your stance, or simply opened a bunch of new short positions, the market rallied hard the next day - the S&P was up almost 17 at one point. The one day drop was seeming like an over-reaction at that point.
What I am getting to is that it is the Permabears that profit most from these corrections during a bull market. I, on my part, not being a permabear, am hoping for a change of trend, or at least for some more normalized price movements on these indices. Parabolic moves scare me. They can lead to very sharp, hard-to-profit-from corrections.
Short interest is at an all-time high right now. That alone would simultaneously encourage, embolden and frighten any bulls out there.
I don't want to make this a Crusade, but if there is some justice in the world, this market will soon correct, and in a BIG WAY!
The Shanghai Composite is up 100% since mid-December. If I am not mistaken their market PE is over 40. If that is not a bubble waiting to burst, what is? They are having a virtual feeding frenzy over there, and mostly due to stupid, retail investors who haven't a clue. Geez, they have opened 100 million individual brokerage accts. in a year. There are seasoned traders in China expecting a 50% correction. Yes, it will probably be China that causes our market to correct. Talk about the short side opportunity of a lifetime....

Gary said...

Yuri,
The Feb. correction most definitely did not come out of the blue. I had been building a short position for 2 months prior. We also had a very clear technical signal that the bottom had been made when the S&P traded below the lows and then had the big reversal on Mar. 14. You obviously won't take the time to read any of the posts on my blog. The COT report predicted and confirmed the rally out of July, it warned of the Feb. correction and it has again predicted the rally out of the Mar. low. I have confidence it will warn when it's time to take money off the table and go short again. Right now though it's telling me the big boys are buying like it's 1999. This makes sense we are at the end of a very long bull market. the market is starting to trade parabolic. It's as simple as that. Not a good idea to fight that kind of action. Markets don't top by just falling off a cliff. There are warning signs and volatility at the top as the bulls and bears fight for control of the market. We have not seen those signs yet. Trying to pick a top is a money losing game. I choose to wait till the big boys tell me they are selling before I start shorting.

TOMTHETRADER said...

Gary ,

"Markets don't top by just falling off a cliff"
Not alot of warnings before 87 and yes it was just a fall off a cliff...I would like to see how you rate that or is it different this time ???

TTT

http://www.ttthedgefund.blogspot.com

Tim Knight said...

First off, I don't put much stock (no pun intended) in statements of "this market is just like back when..." in terms of the market as a whole. Every time someone has predicted this, it didn't pan out, even when the charts were remarkably similar.

I remember after the crash in 1987, all kinds of "it's 1929 again!" articles appeared, the the charts comparing the Dow in the 20s to the Dow in the 80s were compelling and terrifying. Obviously they were obviously totally wrong, too.

And even if I did believe that broad equity markets repeated "past battles", I see no similarity - zero - between the charts of 1987 and the charts of 2007. They are like night and day.

I think the market is changing constantly. I think individual securities can be analyzed for patterns which have statistically significant predictive trends (like the head and shoulders pattern, or the cup with handle). But I would refrain from saying, "oh, here we go again, this is just like the Amsterdam market back in 1863!" The market is new every single day.

TOMTHETRADER said...

Of course it is not exactly like 82-87...mothing is exactly like anything but there are patterns that unfold that we use history ...I think the Chartist mind gets so caught up in what the next arithmetic move will be they lose track of the drovers of the stocks themselves and the action of these stocks today is much like 82-87 and the steep run and technical indicators are much the same ...I am sure Tim has his own very successful way of beating this market but I think Tim should probably take a hardder look at history and sentiment as well as a lot of fundamental points to allow him to be a bit more flexible

"First off, I don't put much stock (no pun intended) in statements of "this market is just like back when..."

NO pun intended but the average gains I have seen looking at the archives over the past 5 years are not really good ???? Don't you think that the time has come to maybe incorporate some new techiniques and maybe be a little flexible instaed of just hoping the world will collapse ??? You are a tremendous player and sure some of your calls have panned out but I would not like to be stuck in 90% bull markets my entire life and be short all of them.

TTT

http://www.ttthedgefund.blogspot.com

hong said...

Tim:

I think we are in a beginning of another bull run.

TOMTHETRADER said...

Brilliant!!!!

Mousefinger said...

Bull run, bear run ... doesn't really matter at this point. The trend is up. The path of least resistance is up. The 200 day MA is a distant memory.

I'm picking my shorts by sector ... looking for sector breakdown and looking for leaders breaking down. Beyond that, large sacks of cash can be made on the long side for now.

"The markets can stay irrational longer than you can stay solvent." -- Not sure how said it dot com.

downosedive said...

Gary
I agree with your observations, but not the time period. The market corrections you refer to are all part of the same bull run and that run started 11 months ago. Minor market corrections cannot be seen to be bear runs - minor in the sense of time period. Had the corrections lasted for a longer time duration, perhaps I might be more inclined to agree 100%. As things stand though, Im firmly saying this is an 11 month bull run!

Gary said...

Tom,
I'm not sure how you can say there was no warning in 87. The market was down 11% from the highs by Oct. 15th. On Oct 16th the market dropped over 6% in one day. That sure looks like the market was trying to tell you something to me. Oh and BTW the COT report was short. Who knew????

Gary said...

downnosedive,
I guess each of us will have to believe what we believe. I'll point out that the smart money is on my side though. I'm still not willing and never will be willing to fight the big money, ever.

b.healed said...

great discussions this time around

downosedive said...

Gary
I agree with you that there is probably still another 9 months or so of up trend - this fits well with my reckoning. In the meantime as with any up trend, there will be some short downward dips, but no trend reversal or even halt for another 9 months. What level do you think the Dow will hit at its peak? I find you posts interesting as they fit in well with my opinions. I didnt mean to offend earlier! I think I misunderstood the point of your earlier post! Your thoughts on Dow peak number?

Gary said...

Boy...if I could predict that, I sure would be rich wouldn't I. It's anybodys guess. BTW any number that the guru's throw out there will be just that...a guess. I just let the COT report tell me when the big boys are starting to take money off the table.

Will Rahal said...

Now the DJIA is literally in uncharted territory, it is useful to use other
Indexes to find a level likely to cause a temporary pause.
To get a perspective go to:
http://wrahal.blogspot.com

Debbie Davis said...

Huge volume on ONT today!

Gary said...

Will,
Haven't we learned the lesson about trying to pick tops yet?

beanie11111 said...

NYX en fuego!!!!!!!

beanie11111 said...

1.4 months left for the permabears to kick the bulls (even though it looks like the other way around still) before the waking Giant Bulls slam the bears to oblivion.


you've been warned.

downosedive said...

Gary
Ok, well I thought Id ask anyway! As you say following the the big players is the improtant hing and we sure would be looking forward forward to any updates on that!