Friday, June 29, 2007

Are the Bulls Losing Their Grip?

Dedicated bulls should worry about this: the market is starting to make sense to me. Last week was a really good week. This week was a really good week.

Now, if we were at the tail end of a two-year long bear market, it would be easy to shrug this off. "Oh, yeah, Tim the permabear has been doing well because everything has been falling non-stop." But you know that's not the case. The Dow was at its highest level in human history earlier this month, and it still has over 98% of that value. So I've been able to score big profits trading virtually entirely bearish positions in a market which has been in anything but a free-fall.

So it's making sense. Leading up to this month, I was starting to lose my mind with how nonsensical, bizarre, and random the market seemed to be. It would be like living in a town where cars stop at green lights 80% of the time, pedestrians occasionally walked along the middle of the highway, and baby carriages were parked on the roofs of buildings. After a while, you start to lose your mind in that kind of environment and question your own sanity.

But the town I live in suddenly makes sense. People stop at red lights and go on green. Baby carriages are safe. And pedestrians remain on the sidewalks. And the market goes up when I think it's going to go up. And it goes down when I think it's going to go down. It's a nice change. Let's keep those buggies off the roofs for a while, shall we?

If you read my post from earlier today, you know I spent a little time this morning at the Palo Alto Apple store watching the crowds line up for the JesusPhone iPhone. If you didn't see the post earlier, check it out. It's got a cool little video I made.


I'm trading the Russell 2000 options actively, both intraday and on swing trades. A tight stop on the IWM ETF is at 84.19 right now, which was the high for both Thursday and Friday.


There's really no good instrument for trading the MidCap 400 ($MID), but it's a fascinating graph to me. The markets seem to be revving up to be in swoon mode.


I haven't traded the NASDAQ (either index or hardly any stocks) for a while. It's been relatively defiant of the recent weakness in the market. But I have a feeling this group is going to start joining the downdraft party.


Side note, now that I mention NASDAQ - congratulations to RIMM owners, particularly call owners. I see some of the calls were up literally quadruple-digit percent levels today!)

Oil services are looking terrific for shorts/puts. HES is particularly well-formed and liquid.


McKesson (MCK) is another beautiful stock. One of the best examples of exploiting Fibonacci fans that I've ever seen.


RadioShack (RSH) has been on an enormous upswing of late. (Rumor has it that AJC has joined the Battery Club multiple times to keep her bedside electronic accouterments fully-powered, thus the earnings spike). But - - just like JC Penney is JC Penney - - Radio Shack is Radio Shack. And that's all you need to know. I've got puts.


Next week should be relatively quiet with a big fat holiday right in the middle of it. Have a safe one (most of you, at least), and I'll see you on Monday.

Late breaking news!
I was there for the Big Event (the 6:00 opening of the doors at the Apple store). It was a madhouse. Police, news crews, and hundreds of people (half of which were taking pictures).


You know the funny part? People waiting three days to be near the front of the line. And one hour later....one hour......I was able to just walk right in through the front door without a wait. Great use of three days (and nights), fellers. Anyway, here are my two iPhones perched on the kitchen bar:

30 comments:

Dennis said...

First, hat off to Steve Jobs. He is a marketing genius. I am convinced that he can sell ice to Eskimos. I will never short AAPL as long as he is running things there. I don't know what AAPL will do next week after the iPhone hype dies down but if it corrects substantially, I will get in.
Now off to the market, I should have known better that the government inflation data will never show inflation that we experience in everyday life. Such is the case with today's data. It is too hard to bet against the market when it is setup against the bears. Tim can do it but I can't.

AssetStrategists said...

Humm...I heard that there was a limit of one iPhone per person. Either you 1) took your wife, 2) took the cute little crumb-cruncher, or 3) they let you get two because demand wasn't as wild as they hoped. If three is the answer then shorting AAPL may be sensible.

Off to the mountains for two weeks for me. Have a safe and sane 4th and prop the market up a bit so I can enjoy the tumble with you when I return!

Tim Knight said...

No, it's a limit of 2 per customer.

Demand was wild, but like I said, after one hour, you could just stroll right in. But it was a madhouse.

KC Equity Trader said...

A limit of one? A company limiting you on how many products you can but doesn't make sense. You will probably see them on ebay pretty soon.

kevin said...

For trading $MID short ,use "MZZ" Ultra Proshare.
Nowadays I use ultra shares more than options.
$ NDX- QLD, QID
$DJIA-DDM,DXD
$SPX- SSO,SDS
$RUT-UMM,TWM
Intraday wild swings can be captured easily.
Kevin

harald said...

Hi Tim

Jphone is already taken (and it ain't Jesus)

http://deb.vox.com/library/post/jphone---it-was-inevitable.html

Hal

beanie11111 said...

You don't got an iphone and you're a lazy arse who don't want to drop by the store? No problem, you can now buy one at Ebay for $2,650. Hurry! Only 6 hours left! http://cgi.ebay.com/Brand-new-APPLE-iPHONE-8gb-8-gb-AT-T-cell-phone-PDA_W0QQitemZ190127674661QQihZ009QQcategoryZ64355QQrdZ1QQcmdZViewItem

roflmao

Geoff said...

Tim,

So how is the "JesusPhone" after all? Is it worth all the hype?

Tim Knight said...

"So how is the "JesusPhone" after all? Is it worth all the hype?"

It's fantastic. I am dumping Spring at once.

But it does have its shortcomings. Next generation stuff, if they do it right, should have:

+ camera zoom

+ g3 network

+ games

+ full-blown YouTube as opposed to the "best of" thing that seems to be there.

In any case, I'm even happier with it than I anticipated.

harald said...

Tim,

be careful

New Threat to iPhone Discovered!

http://tinyurl.com/2zuq2s

Hal

beanie11111 said...

There are no threats to iphone.

It will dominate in this space.

The only reason your boss would buy you a blackberry is so you can read your godd darned emails so you can work like a dog and get things done.

Iphones in the future will be able to:

-do gps tracking

-download and upload music and video wirelessly

-full blown Utube and everything else porn

-replace digital camcorders with hi-def video recording

-retrieve and send corporate emails

-camera zoom to large distances (to accomadate the peeping toms)

-replace the videophone

-night vision

-control your household appliances remotely



As you can see, AAPL is the next Microsoft.


Strong buy.

wincity said...

AAPL didn't become the first Micro$ and it won't be the next.

Tim Knight said...

Apple will be the next Microsoft?!?!? I hope you understand that would be like a curse, not a blessing.

There is nothing for Apple to become like. And, judging by your specific mentioning of web-based porn and "peeping Tom" zoom features, I gotta wonder.....

newequity said...

Tim, You buy puts and then go out and buy a pair of iPhones. Go figure.

Tim Knight said...

"Tim, You buy puts and then go out and buy a pair of iPhones. Go figure."

There's an old saying: don't confuse a STOCK with a COMPANY (or its products, for that matter). Besides, my purchase of iPhones isn't going to help or hinder the stock. It's a spit in the ocean.

Make no mistake, this product is brilliant and will sell billions of bucks worth of product. But my assessment of Apple's chart remains the same.

Momo Fader said...

Anyone who is an Apple affecionado will have to admit, no matter how grudgingly, that AAPL never gets the first generation correct.

I'm most curious about the size and the battery life. Can this phone fit in the front pocket of a pair of well-worn jeans? If I am running it like those commercials, how long will the battery last? Seriously. Not talking standby time, I'm talking crunching time.

Why is nobody making a phone for me? I don't need cameras and I don't need multimedia, and I don't need fancy ringtones. All I need is one that goes around my wrist with a bluetooth headset. HELLO ... HELLO. Am I the only one who would pay for a phone that fits this category? Shit, make it big and bulky like those 1980s calculator watches ... I'd buy one in a heartbeat. Is Casio still in business with wristwatches?

On the Road said...

I need some education Tim - and I hope you give me a short but good
definition of:

But before we go into it - doesn't it look like QQQQ just completed a "reverse head and shoulders" on Friday?

So, Tim if you will, when is a head and shoulders not a H & S?

2nd Question "what is a double top and what just looks like one?

I'm a big fan, now - Tim - I check in when the weather is bad and when the weather is good...

How about it?

Thanks, peachin

Deric O. Cadora said...

All these folks buying iPhones are just crazed Apple turd-brains (no offense, Tim. With your wealth, you can afford to play). For the rest of us middle-classers, the new Mogul, available from Sprint as of last week, blows away the iPhone. It has 3G, WiFi, a larger screen, a slide out keyboard (the kind a person with fingers can actually use), games, much more 3rd-party software (the user is not limited to Safari or even IE), a decent camera, a wonderful Contacts interface, a long-lasting battery, and a few other bells and whistles for ease of use. And guess what? I get a nice phone plan with unlimted data (at 3G speed, I remind you) for $75/mo.

beanie11111 said...

deric you fool, go get an iphone! Only $600, or you can get one at ebay for $21 million.
http://search.ebay.com/iphone_W0QQ_trksidZm37QQfromZR40QQfsooZ2QQfsopZ3QQsbrsrtZl


Spend as much as you want (like a fool) or spend msrp. Either way, go get the iphone!!!!!!!! Everything else is so yesterday.

yuri said...

Apple has always had it's true believers - like my mother-in-law, who bought a few thousand shares back in 2001 when the price was effectively $12. She has steadfastly refused to sell even a single share. When your up 1000% maybe you expect another double.
Seems to me the i-phone is an inspired product, and I have to question whether or not I want to wait 2 years for generation 2.
As to the chart, it seems coiled and ready to explode - any rally should accelerate as the shorts are squeezed. Dangerous to short here unless it breaks down below $115 on good volume. Barring some bad news, don't see that as likely. Also, there are a ton of people who missed this one and are itching to get in on the next pullback.
And if you consider AAPL in the context of the NASDAQ, the market trend may lift it. Take a look at a weekly chart of the COMPQ - nice sustained uptrend for the last 4 months. What may look like a top, could be only a consolidation before it moves higher. We bears have to be concerned that the NASDAQ is not showing more weakness, because if we are headed lower, it is without our leader at this point - like going to war without a general.

b.healed said...

fascinating and convincing statements yuri

Tim Knight said...

To the form factor question.....for all its power, the iPhone is slim and light.

I picked up my Treo 650 this morning ad it felt like something invented in 1987. Thick. Bulky. Awkward. And it was state of the art 2 years ago!

Controlled Trader said...

Market is choppy and its very hard to predict what it will do next (as if it was easy before :-)) It's wild swings on friday are no exception. NAZ was down and QQQQ was up. I've my power dry and waiting to go one way or other. If QQQQ goes 47.70-47.80 I'm going to short it.

BTW enjoy very funny comercial of iPhone.

Gary said...

Yuri,
very good observation. The Nas is not leading a decline. That is what almost always happens prior to an intermediate decline. The speculative QQQQ's will start to weaken and eventually the rest of the market will follow. I would not be itching to pull the trigger on the short side with the Nas showing this kind of strength.

Controlled,
You demonstrate something I've never understood about many bears. You say if the Q's get up to $47.80 you will short??? Why would you do that? The market will be going against you. Markets don't go up the same way they go down. If the Q's are rising it will cause optimism to take hold thus bringing in more buying. Buying the dips works in rising markets but selling rallies only works in declining markets. This market is in no way declining yet. Pull up a 3 year chart of the market and you tell me what direction the market is moving. Heck the 200 DMA is still rising strongly and the 50 is above the 200. Shorting the Q's when they are rising is still trying to pick a top. How many times must the bears make this mistake before they learn to be patient. Once the market starts to decline you will have plenty of opportunities to short and the trend will be in your favor.

Controlled Trader said...

Gary: My holding period is very short. Couple of Hours to couple of days (max 5 days usually). If I get my target profit price in minutes, I close position and wait for other opportuniy. By shorting at 47.80 I would bet for 30-40 cents profit. If you see daily chart 47.80 has been resistence on 9 days. Stock hits that range and then closes lower.

I play both sides of market and even at 47.80 I might not short if it does not feel right.

What is your avg holding period?

Gary said...

The average COT trade has been about 6-10 months. I've never been very good at short term trading and I just hate paying Ameritrade $1000's in commissions when I can acomplish the same thing with 2-3 trades a year. That's just me though. I have no need for the excitement of always doing something. I did when I first started and found for the most part when it came down to it the overtrading was costing me money. Perhaps you have a system that gives you an edge for the short term trades. I've just never found one that produced profits for me over the long haul.

beanie11111 said...

Get the iPhone, Jack, and you'll never go back!

Serious. Throw away all the junk cell phones you ever bought, including the LackBerry.

JJ2000426 said...

The stock100.com prediction of SWC looks pretty impressive. Double in 30 days:
http://www.stock100.com/charts/200-30-SWC.gif

Don't you think it is time for next rally. Do you have any idea what is palladium?

You can reasonably expect a 2000% return. No kidding it is next AAPL! The fundamental is incredibly good. Just research palladium.

JJ2000426 said...

Hi, Tim:
Just discovered your blog. Looks impressive. I added link to your blog from my blog. Welcome to have a look:
http://stockology.blogspot.com

2sweeties said...

Tim,

I had a look at a weekly chart of the S&P 500 from 23.3.2003 to today and I have traced a linear regression trendline.

It looks like EVERYTIME the price took off from the line, it then came back down by magic...

It seems to be exactly what is happening again in these days, we are actually way too far from that regression line.

Did you have a look at this type of chart with this indicator?

I'd like to know what do you think about it.

It is also possible to trace a trendline under the price line, that could potentially show the bottom of the coming downmove.