Thursday, May 31, 2007

Talk About the Weather

I've always felt a bit sorry for meteorologists here in the San Francisco Bay Area. Because, between about April and October, they really have very little to say. The forecast is, more or less, as follows: "There will be patchy morning fog, clearing by late morning. Highs on the coast will be in the lower to mid 60s, with lower to mid 70s around the Bay and low 80s farther inland." It varies little from day to day, week to week, month to month. No rain. No hail. No nothing.

I'm starting to feel a bit like that about the markets these days. "Horrible economic news was reported to me. The markets rallied on the news to historic new highs. Bearish patterns were laid waste."

Oh, well. At least we didn't go up another 120 points today. The economy came in with the weakest numbers since 2002, and the Dow was basically unchanged. Looking at the RSI and slow stochastic, you can see how the market is seeming awfully tired, in spite of the progression in prices.


Much the same can be said of the S&P 500 ($SPX).


I was distraught at all the gorgeous real estate head & shoulders patterns getting trounced yesterday, but maybe there is hope yet. Apartment Investments (AIV) is no longer a perfect H&S, but today's weakness is a good sign.


I haven't posted American Airlines (AMR) in a while, but this is a head and shoulders pattern which remains cleanly intact with what appears to be a nice retracement to the neckline in progress.


JC Penney hasn't completed its pattern yet, but - - - it could! Keep an eye on it.


A lot of investment banks seem exhausted lately, whether you look at GS, LEH, or any of many others. Here is Morgan Stanley (MS), which seems to have made a bit of a double top.


Whirlpool (WHR), a Dow 30 component, is very lofty right now. This seems to me a short with an attractive risk/reward ratio.


And the Big Oil stocks - Exxon Mobil (XOM) is a favorite of mine to watch - likewise have an attractive risk/reward ratio for shorting right now.


There's a ton of economic news tomorrow morning. Let's see if June gets off to a better start for the bears than May was.

19 comments:

Gary said...

Tim,
I just can't understand why an obviously experienced trader continues to try to find reasons for why the market should go down. You have to know that markets aren't rational. Investors buy because the market is going up. That's all there is to it really. If you want the COT info. I will send it to you completely free of charge complete with explanations of how to read the reports. Take the time to study the data and then decide whether you want to continue to fight the smart money.

Carl Futia said...

Tim:

You should keep in mind that the stock market is a DISCOUNTING mechanism.

So the slow growth in QI 2007 was anticipated by the May-June 2006 break in the averages.

Along the same lines I would imagine that GDP growth for QIV 2007 will come in at 3 % or more given the relentless upsurge in the averages during the first 5 months of 2007.

Carl

TOMTHETRADER said...

Tim,

The Eric Bolling poster is a fool and we don't need that here ...the markets are definitely tired having lived this on the Bull side for the last 4 1/2 years with mini stops being a BEAR I am back at 200% short as the 1530 SPX cash was suppose to get stalled today and break to 1500 but I guess they will save that til tomorrow ..the market was about to break today but coincidentaly at the time it was breaking someone came and manipulated the tresuries and oil markets to help the SPX with a last second buy program that raised the tick over 1000 ...how long can the bailing out continue ..as I say they are in a race to keep the market up much like in the mid nineties as the rolloing recessions kept rates low but corporate profits up and there is nothing but bullishness when so much cash is available for so little stock as buybacks and buyouts limit what you can buy ...Tim you don't believe this but try to find a share of CAT to buy ??? Just trying to trick you into buying a stock long !!!

best of Trading to all and no more Eric Bolling ...Carl is a great blogger and I look forward to his remarks as he was looking for short term much lower prices that did not materialize ..is he still looking or going to change and skip the down part ??? A lot of bloggers do that !!!!

Tom

http://www.ttthedgefund.blogspot.com

bh_prop said...

Whatever "Eric Bolling". Get a life and quit impersonating a real trader/TV personality.

BTW everyone, this is Tim's blog, if he is bent on being bearish, let him be, Bob Prechter goes through life a permabear also. At least Tim gives you his opinions at no cost. Prechter actually makes a living selling his mostly wrong forecasts.

John said...

Tim

Don't forget ALB. Still looks like a nice short. July 40 calls seem cheap at about $1.

John said...

Meant July 40 puts.

Gary said...

Tom,
As an experienced trader I can't believe you think that a mutitrillion dollar market can be manipulated. If that was actually the case how do you explain the bear market from 2000 till 2002. As long as the big players are buying the market goes up when they start selling the market drops. How hard is that to figure out.

Tim Knight said...

"At least Tim gives you his opinions at no cost. Prechter actually makes a living selling his mostly wrong forecasts."

Ummmm, thanks, I guess. :-/

Cyl said...

Tim,

Do you ever take spread trades? If so, care to share any?

TOMTHETRADER said...

If you don't believe the markets can be manipulated at times talk to ANY floor trader and they will tell you that there are certain times durung the day and cetain areas ..especially oil and and s and p futures that can make a huge difference ..the tresury used to buy the dollar everytday to keep it from collapsing ..sure it doesn't work in the long run but it definitely stops any momentum from building ...Cramer is the first to tell you that the hedge funds manipulate the markets constantly ..you are much too naeve if you think it doesn't happend especially with some of the oil alliances that ganged up on Amaranth ..read some about that debacle and you will see the side of market manipulation ...again ..don't get me wrong the markets are much too vast to say it is done to any affect ..just at cetain times when low volume and slow trading occurs.

Not paranoid ..yet


TTT

Rob said...

WHR is not a Dow component.

Gary said...

Tom,
Sure a little bit intraday perhaps but no way can anybody change the long term or intermediate term trend of the market. Heck after what happened on Feb. 27 I don't even believe anyone can change the daily trend appreciably.

yuri said...

I often listen to Bloomberg radio late at night, and it make me chuckle at times - like last night when a couple of English guys were discussing the American consumer (with obvious disdain in their voices). Let's face it, many consumers are tapped out financially - they have re-financed their homes (in some cases, several times), they have run up their credit cards, they have bought too much house for too much money, and on bad terms (e.g. interest-only and other creative financing). It's like that game, Musical Chairs - the music IS going to end and somebody's going to realize all the chairs are taken.
But to finish the story - these English guys have decided that the American consumer is a train wreck waiting to happen.
Google, which I just rode up for 30 points from it's long-term trendline, is a train I jumped off today only to see it drop 10 points ($1000/contract) pretty quickly. It formed a nice inverted hammer, and if confirmed, I guess could be ridden back down to support - 20 points down. And that is just the point - 30 points up and only 20 down, because the slope of the uptrend is so severe. And if it first moves sideways a while, that 20 points may only be 10. Seems like a loser's game, playing these counter-moves. Think I'll be better off waiting for the fall to support, and then get right back on that train.

ericbolling said...

do not delete my post timmy. be a man and take the criticism please.

downosedive said...

Gary
Im with Tom on the lastest posts here. Yes a multi trillion market IS manipulated, every day in fact. Just look at each opening in the DJA and you see for the first 20 to 30 mins the prices are massively marked up (and sometimes down) on no meaningful volume. These are the shares dealers reacting to anticipating demand at the start of each session. By react as they do it can and doea simulate pure speculative buying (and very occasionally selling) based purely on a gut reaction to what is een on the screen, and that data is eactly what the dealers decided it will be. If the market wasnt manipulated and genuinuely based on pure supply and demand, then each trading session would open at the previous close price (DJA indicies example) and the market direction would then be driven on the buying vs selling volumes. Same can be said at end of day when the shorts are delibertely squeezed by the bulls just buying irregardless and in the certainty that bears ill be forced to buyback at ever higher prices and so fuelling the indicies upwards. In the UK the dealers are called marketmakers, or as I affectionately call them 'scum of the earth'. As I now type the futures for today is up 30 - and this will mean that the start session is rammed up on little meaningful volume right from the outset

Thomas said...

To Downosedive--the action of the market in the aggregate is not manipulation. If the monolithic "bulls" want to squeeze the "bears" because it makes them money at the end of the day, how is that "manipulation?" It can be called by different names--herd behavior, fast follower effect, et. al. but not manipulation. Oh, and "irregardless" is not a word.

To Tim: The fusion analysis presented by many of your readers doesn't rise to the level of commentary. The postings are peppered with fundamental reasons why the market should go down but few technical reasons. Once in a while, you are guilty of this mixed thinking as well. Many first world markets (EU, U.S., Canada, Japan, Australia) have technically strong trends, volume, and structure. I think your readers would welcome a reminder why you believe the market is so technically weak and why you are bearish (technically speaking, of course). BTW, Mary Ann Bartels of Merrill Lynch has done innovative work on margin debt, short interest, and hedge fund exposure that you need to see...part of her thesis why markets are so strong and why she is predicting further market gains is because of wide breadth of shorts and hedging exposure on stock markets. Best, --stealthelephant

newequity said...

hey tim,
New Equity here just checking in on your blog. We made that bet for the quarter and it looks like you may lose. I hope you don't back out of your promise in which you stated the blog would be pulled. However, knowing that you are a BEAR in this BULL market I understand if you don't live up to your end of the bet.

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