Wednesday, June 06, 2007

The Less We Say About It, The Better

Two good days in a row. I won't get used to it. The crapola bull-filled last 11 months has left me bitter and disillusioned. But seeing a bunch of green over the past couple of days has been nice. I was prepared for all the pointless "Buy the dips!" and "Get in now to ride to Dow 15,000" nonsense in the comments section. It's what you can expect.

The S&P 500 over the past couple of years was in a giant, upward-sloping channel. The highlighted area is the "above even the top" chunk. The madness exceeding the madness. At a minimum, I would expect us to at least re-enter the aforementioned channel.


The $VIX, understandably, has shot higher, given the approximately 200 points blown off the Dow 30. Fear is on the rise. Finally.


AutoZone is one of those nice shorts which has a tight stop but plenty of potential downside. It's one of those charts that could represent a major trend-shift but doesn't make you pay through the nose to see if you are right or wrong.


Bunge (BG), mentioned here many times already, is on its way to its target price. This is a short position (obviously).


A thoughtful reader sent me a suggestion of symbol CEG. This is a handsome looking short. I have no position in it, but I'll follow it from now on.


Big Blue, good old IBM, really got smacked today. I've got puts on both IBM and Honeywell (HON), both of which pushed much higher on the day.


I am showing NVR again simply because it is such a "Fibonacci friendly" stock, to use a phrase I coined a while back. The way it bounces off these retracement lines is really a sight.


I've unsuccessfully owned puts on Sears Holding (SHLD) in the past, and it has never worked out. Once more into the breach, dear friends.


Since I'm feeling a little better, I'll keep throwing the goodies your way. Here's the marvelous Naive Melody from you-know-who.

37 comments:

Dennis said...

The key to the market is bond yield. I think the market will deal with a yield of 5.25% but if the yield breaches 5.5% then the market maybe in trouble. I am shorting some home builders (TOL, KBH).

TOMTHETRADER said...

Hey ,

We belive we knocked this one out of the park and the naysayers will be at it again but the fact is the past year our market timing has been nothing short of PERFECT !!!

What will happen next ...we have to see if the change in character continues and if the oversold short term indicators get bounced back tomorrow but for now I am enjoying my 1st year on the web and another perfect call to make our funs up 11x in 12 months beating every other investment free or paid into the ground. Next we will see if we can call a double on a stock that will get taken over next week !!!

Tom



http://www.ttthedgefund.blogspot.com

ctkwtk said...

Interesting looking little gap on SPY @4/13/07. If I said IF, we rollover.

Controlled Trader said...

Tom: Nice call. What is your current position and short term predicion? I closed most of my shorts today (Only 10% remains) so I'll have powder dry tomorrow morning.

sam said...

25 years of S&P DSI data, there has NEVER been a SINGLE day where the DSI was 88 or higher when the NYSE A/D was 3:1 down or up (which it was yesterday), what this means who know's. Tim, what do you think of AEO chart, looks to be in a free fall. Sammy.

Prometheus said...

Good call on HON. I picked up some puts as well. I figured if the Dow was going to dive I would try to profit from it. Through some research, I've found that HON has a fairly high correlation with the Dow when compared to others. I'm no permabear, but I have enjoyed waking up and seeing some red on CNBC in the morning. I like to see the market do well, but it has just been insane lately. Let's see what happens overnight.

http://prometheussays.blogspot.com

JakeGint said...

Oh yes, Talking Heads! You have totally totally redeemed two days of Carlin blah blahs with this "remember when?" from my early high school days. One of my favorite songs from one of my favorite bands (are they even still together??). Still tugs at the heart. (And it looks/sounds like you cut "And she was..." from the end of this?).

Geez I am old...

bh_prop said...

Sam:

I see you are an EWI subscriber as am I. Adv/Dec was more like 4:1 negative today, was 3:1 yesterday.

FYI the last time they made a comment about the market needing to hold ground or it would trainwreck was March 5.

Holdem or Foldem 德州牌手 said...

First thanks Tim, then thanks god. Tomorrow we keeps down more, that is fighting back to the parabolic...

Tim Knight said...

"One of my favorite songs from one of my favorite bands (are they even still together??)"

They broke up SIXTEEN years ago! How can you say they are a 'favorite band' if you don't know that? Anyway.

newequity said...

I was writing to ttt, why you delete my post and not his blatant advertising is beyond me.

Edwardo said...

The market is toast, folks. Reality always intrudes despite flabbergasting attempts by fantasists from Wall Street and elsewhere. And it doesn't matter one jot if you are quiet or not about the market, Tim. I'm sure you know that anyhow.

I expect that the market will find a low in the next few weeks (mark my words, I'm not being premature acting as though a top is in-it is) or possibly later this summer. Following on that there will definitely be a rally attempt which may even make a new high. Not to put too fine a point on it, but that rally will be a huge sell.

There are many reasons why this market is a goner and the recent action by the long bond is just one of many.

Controlled Trader said...

Edwardo: so market will down then up and then down and then up ! Interesting, never heard it before.

Gary said...

Not sure why the perma bears would want to fight the odds against them. First off odds number 1 the COT is showing the most bullish signal since 2000. If you take away the short signals then the odds of a profitable trade from a COT long signal are almost 9 to 1. Those are pretty hefty odds to fight against. Next every intermediate rally so far in this bull has lasted 21-32 weeks so far. This rally is only 11 weeks old. Again pretty rough odds to fight. Next, every intermedite rally has topped out with major momentum and money flow divergences on the weekly charts. There are none yet. No help there. The historical data for the last 110 years show an average gain of 34% for final legs up in bull markets. 3 days ago the S&P was up 12% for this leg out of the Mar. bottom. Still a bit short. The final legs up last on average 6 months and 6 days this rally is only a little over 2 1/2 months old. Quite aways to go yet before we even get close to average. Sorry I'm not helping yet. The third year of a presidential cycle has on average produced a 26% gain in the markets. As of 3 days ago the market was only up 9% for the year. Hmm still not what we're looking for. As of today the S&P is down a whopping 1.23%. It is possible that you have caught the exact top in this bull market but I think I've shown that the odds are way against you. I prefer to trade with the odds and I certainly won't be fighting the kind of odds I've just laid out for you.

tommy t said...

Good call TTT, you earned it, I even made a little with ya. The internals fell apart and price now catching up. Mc Osc especially.

Holdem or Foldem 德州牌手 said...

Gary,

About cot data, change in commercial long all: -1677, change in commercial short all: 5459 from last friday report.( except the data isn't correct from COT).

Max said...

a bear.

with an AXE.

Gary said...

holdem,
I'm not sure what you are asking me.

george-swanson said...

I am not a forcaster. I do not use an Almanac. But, when it rains.... I use an umbrella! Here is a post I put on OX after Mondays close. I was kind of defending TA, as you may tell. You can check in OX's message boards. If I did call it right, I got it to the penny on the Q's! Just pointing out that TA hasn't lied to me, it proves itself in hind site. Other data is open to interpretation. The post read as follows:

I use candlesticks for confirmation and timing. I am a big TA fan. Realistically, most fundamentals, and news for that matter, can be interpreted in either direction to explain a markets behavior. Technical analysis study (ie. price and volume action, trendlines, channels, patterns, etc.) are the only consistently repeatable events in the market, at least in my opinion (take that for what it's worth). Most of these signals and trends, admittedly, are seen in hind-sight. This is where the "art", not science, of TA comes in. I base my trades purely on TA. With propper analysis, you can often "fortell" a securities release of news, earnings, etc. How many times have markets gone up without definable, clear-cut reason? Or down? A security reports stellar earnings (EPS) yet plummets. Why? Typically their channels limits were reached. News is for the uncertain type to interpret. How do 2-3% of people make 90-95% of all the money? Confuse the average investor (speculator). Keep fresh money coming in for the profit of those who know the game. It is a universal game known by few. Think of it as a puzzle, analyze and analyze once again, the big picture eventually lays out in front of you. It takes time, persistance, and an open mind. Do not be a permabull or permabear. Play the bounces, sell into a buying crowd, buy from a selling crowd. The MM's are the buyers of last resort. Do you think they'll hang out to dry? Note most individual volume spikes on a chart. Were do they occur? Breaksouts? Not the majority. The majority are on the turn, hiding buying volume to look like a selling frenzy and vice versa. I apoligize for the lengthy comments, as you can see, I do not get many opportunities to post. Candlesticks, I use for secondary confirmation of the primary price action. I also use RSI Wilder, MACD, and Money Flow as secondary confirmation. May wisdom be your guide in trading, until then, use virtual trade!

As a side note, watch for the market turn tomorrow. DIA, SPY, QQQQ, and IWM are all bouncing off their upper or internal trendlines/channels. Hate to be a forcaster, I also do not use a Farmers Almanac! Just tread carefully if bullish, tighten the stops.

george-swanson said...

And by the way Tim. Good book. My wife bought it for me on my birthday! My wife's the best!

george-swanson said...

Tim,
One last thing. Check your email you published in "Chart Your Way to Profits". I sent a little bit of a different interpretation of the SPX channels.

TOMTHETRADER said...

Tim and company ...just wanted to add that we went long today and now are 100% long
NDAQ
GILD
CSCO
IAI
SMH
QLD

Couldn't hold back my enthusiasm of being a BULL again after 7 sessions !!!!

TTT

http://www.ttthedgefund.blogspot.com

plunger said...

Jake,
yeah your rightabout Caddyshack, it was a classic, so I'll give him a pass, Vacation [the original]was a classic as well, but carlin is still alltime near the top IMO. As for Monty P, don't get me wrong, I loved The Holy Grail, Jabberwocky and most, The Life of Brian, but the show [flying circus] was just simple minded humor, and typical english wit not so much original.
Benny hill was another of that english genre, funny but simple.

BTW, fletch 2 was called Fletch Lives. and yeah he's in it.

You redeemed youself being a Talking Heads fan tho, so we'll forgive your Carlin slight.

Life during Wartime , baby

Edwardo said...

"Controlled trader", you twit, I've just told you that we are a few months, at the outside, from a savage bear market.

nonsumdignus said...

How are your positions now, Tom? Are you still as enthusiastic about

NDAQ
GILD
CSCO
IAI
SMH
QLD

?

newequity said...

Tom is up 5% on the day, pay him 75 bucks and you can get rich too. F$%& that scam artist. I went long a few dow futures for the swing back up in the next few weeks.

downosedive said...

gary
Why were thbulls buying every little pullback, but now theve completely stopped the market is in effect in free fall with no support level at all? Every single attempt to rally fails. Presumabley they are prepared to let it continue to plunge, in which case we are in fact in a bear market. I think the COT stands for COT death syndrome as it appears to count for sweet FA

downosedive said...

gary
Time to switch to the trend and that trend is down

newequity said...

You said you went long the other day and now you are short downnose? You are the typical daytrader who is so emotional when the market is choppy. During the summer this stuff always happens and you get chopped around. Make up your mind and stop asking Gary about everything. The long term trend on my charts are still pointing upwards.

newequity said...

You said you went long the other day and now you are short downnose? You are the typical daytrader who is so emotional when the market is choppy. During the summer this stuff always happens and you get chopped around. Make up your mind and stop asking Gary about everything. The long term trend on my charts are still pointing upwards.

Gary said...

Nose dive,
New equity is right you are going short right when the market is getting severely oversold. Never a good bet. If you took your leverage down like I suggested yesterday then you are only down maybe 1.5%. Is that really all that painful. If you jump ship now then you will be shorting right as conditions are ripe for a good bounce and of course emotion will take over again and you will sell out for another loss. You've got to stop trading emotionally and more importantly control your position size so you have a chance in the markets. If there was a fundamental change in the market I believe it will show up in the COT tomorrow. If there is a change I will post it on my blog.

Tim Knight said...

I gobbled up a bunch of $RUT calls about 30 minutes ago. Definitely time to hedge my shorts. I think we're in for a sizeable bounce up.

newequity said...

Welcome aboard TIM and you will make a nice profit with us. I knew you were a smart guy.

Tim Knight said...

Don't be so sure :-) I sold the calls (at a very nice profit) and went back into puts again.

Some people never learn, eh?

downosedive said...

gary
I didnt close any positions. Err, I actually added a heap yesterday and now of course its plunged. Losses are enormous and Ive had to put up yet more margin. Im crucified

damarketman said...

TTT, can't wait to see how you will spin it this time around. I just hope you will not say that u are up 5% on the day after going 100% long yesterday. LOL! Oh well, I did get back long also today but only about 50 points above the close. In preparation for next week big bounce.

Gary said...

Dive,
If you don't stop trading emotionally I guarantee you will blow out your account. The market needs to test the lows before it can contiune up again. We had panic selling Thur. You don't recover from that without some consolidation. If you are leveraged to the max you won't be able to hold on thru the normal market volatility. If you want to survive you've got to stop swinging for the fenses.