Thursday, July 12, 2007

Melt-Up

Well, it finally happened. We broke out of the consolidation that's been grinding along for six weeks now. The action was just bizarre. I suppose shorts were getting squeezed left and right, and bulls were jumping in with both feet. It was like an orgy of buying.


Based on traditional technical measures, the target for the Dow at this point would be 14,100. I'm not saying it will necessarily get there, but this has been a really clean consolidation, and it seems a sensible conclusion. Particularly given the strong psychological import of the Big Round Number 14,000.


My index-of-choice for puts, $RUT, wasn't as strong as the other indexes, and luckily I was kicked out of my puts the moment the market opened (sparing me most of the day's strength). The high price of 856.39 is awfully close.


Looking at a long-term S&P 500 chart, you can see the index is approaching its lifetime high reached nearly eight years ago.


Now, a moment about the comments section. I totally expected the bulls to rip off their bras and swing them over their heads today - - that's fine, because I would be just as obnoxious if the Dow was down 283 points. There's one particularly poster who doesn't crawl out from under his rock very often, but when he does, his posts are little more than hate and vitriol (he is hiding behind a screen name, but his name is Ryan and he lives in Phoenix). I look forward to being on a new blog platform where I can block sub-humans like this.

In the middle of 1999, Newsweek proved once again the "cultural saturation" rule by having the cover below. The market still had six more months of climbing before it started eroding (not going into full bear mode for another six months after that), but it definitely was a signal of a looming top.


A new best-seller reminds me of the same cultural phenomenon. I actually picked up this book a few days ago and am looking forward to reading it. I guess I'm a frustrated sociologist.


The $VIX has been beaten back into submission again. I'm surprised how cheap puts are these days. I am seeing lots of November puts that are priced no higher than August puts - - - time premium seems to be about zero for some stocks. In most cases, I am seeing in-the-money puts that are barely higher priced than their intrinsic value. So they're basically giving them away.


Apache (APA) is a pretty promising bullish pattern.


And Blockbuster (BBI), which I've mentioned before, also looks bullish.


I think JC Penney (JCP) is at or near its full retracement today. I'm ready to jump into puts on this one again.


There are three stocks that look surprising flaccid given today's action. The first is Baidu (BIDU), which is part of beanie's bombast.


The second is CROX - - I admit, I see the shoes everywhere (ahem - I only wear Eccos, in case you were going to send me some shoes) but I still think it's a fad stock.


And finally, Google (GOOG). For a stock like Google to go up 0.16% on a day like this is pretty lame.


Today's rally was supposedly prompted by strong consumer spending. For a real view of American Consumerism, enjoy this clip from George Carlin - - the portion on consumers starts at the 4:00 minute mark.

46 comments:

BB said...

I remeber Money magazine in 1999 (approx) had cover about how to become a millionaire - listen up all you mom and pop investors. This month they have a cover 'how to marry a billionaire' - not exactly the same but also a huge jump. "B" not "m"

Vic said...

Seemed like another liquidity driven rally. IWM weakness increases odds that the market pulls back tommorow.Then its buy buy buy for we are blessed with the beginings of a "global economy." The Fed printed so much money today that the dollar fell below its lower channel. Tim the new graphs are cleaner and its nice to not have to scroll around.

b.healed said...

*sitting down to take off my eccos* I received a recomendation from a friend a couple of days ago who has been very successful in the market for EDGR. I decided to buy a small position in it to see how it ends up He says that he really likes it technically. I haven't had the chance to discuss with him why he really like the TA on it, but I wanted to see what people here thought. all comments welcome, i only have a small position so i am not worried too much about it. I won't take anything anybody says as a personal recomendation so feel free to post candidly and honestly on it.

JakeGint said...

Completely agree w. regard to CROX, by the way... what a crocks o'shcite.

But wading through four minutes of that tired old man to reconnoiter your point?

That's asking too much.

_______________

Vic-- welcome to the global economy, for now... hope you've covered. The blog site is Gary's.

DirtyTed said...

B. healed,
EDGR is making new lows and trending downward in the midst of a bull market. your betting on the slowest horse buddy

2sweeties said...

Does anybody think this sharp market move up today is anyway related to the dollar falling all of a sudden at historical lows in the last 3 days?

Compare a Daily S&P500 chart with a Daily EURUSD chart since 2002. There are a lot of evident correlations with market ups and downs.

Some BIG ones here (China) are selling dollars to put it down and at the same time buying euros and the now very cheap american stocks (Tim, they are cheap now, it's true!!!).

Until they do it, the market goes up.

This way they will own at one point enough stocks to crash the american market (if they want) and they already own enough dollars to send the American economy in misery.

The crash does not have to happen, but there's a USA-China war going on out there.

Why do you think Paulson is flying to China so frequently?
Because he loves cantonese spring rolls?

China is taking America for the balls and can squeeze them if she wants.

On 27th February 2007, for the first-time in history, Wall Street dropped after a foreign market (Shanghai) fell.

A bit strange don't you think?

Maybe the Chinese were selling on Wall Street that day...

Call it a general rehearsal of what
China can do.

The 21st Century power people are very subtle, not like Korea or Iran still trying to build WWII-like nuclear bombs.

And America can do nothing about controlling China, because Chinese markets are closed to foreign investors (they're smart, eh?) and the currency is not free floated.

And also the american economy desperately needs asian manufacturers, otherwise it's like a head with no hands.

CHECKMATE, I would say, if we were playing Chess.

A very good Chinese plan to control the world economy.

What's next?

Who knows, but have always a look at the dollar: if it rise again as it did in april, the bull market will cool down...

bear said...

you seem to share TTT's knack of getting stopped out of your puts just at the right time. Is it skill or hindsight?

Brian said...

Just out of curiosity, what made you bail on the RUT options at the open? Good move btw.

Tim Knight said...

Bear and Brian,

I tend to keep my stops relatively tight. The market opened up strongly higher (but went on to much, much higher). It's no mystery (or revisionism on my part).

Make no mistake, it was a losing trade. But at least the pain was assigned at the opening instead of grinding on through the day.

Tim Knight said...

Good comment, 2sweeties - love the Paulson remark :-)

Locster said...

Continuing George Carlin's theme, check out this link (I picked up from another blog)...

Idiocracy...

http://www.youtube.com/watch?v=fAYnc_-ddlw

Oneway said...

The Fib.Extensions we used to talk about have proven correct.

Once the djia broke out of that 7200-11750 trading range, a 50%-extension would mean a move up to djia-14,025.

A 61.8% extension = djia 14,562.

A full 100% "measured move" would bring us to djia 16300.

Pretty cool. We're only a 17.6% move away from that djia 16300 target right now.

thedocument said...

With personal biases set aside, the market becomes a bit more predictable. I, too, think the market is primed for a crash, but there is simply too much bearishness in the retail world (retail traders, that is... not retail stores) for a top. We just witnessed the beginning of the squeeze that will choke the life out of bear plays. While sentiment may not actually change, dollar commitment to the short side will be forced out, thereby setting the stage for a turning point.

This ramp will also complete the head of the mother-of-all HS patterns. I suspect that the end is not far away time-wise, but price-wise, it could occur 5% or more higher than current levels.

Glen said...

There were so many negative divergences yesterday it's hard to know where to start. New lows expanded on a gonzo up day, a BIG BIG negative. Tick could hardly get out of it's own way, languishing around + - 200 most of the day, with the occasional burst to 800 or so. That's a pathetic, BIG BIG negative. Program trading by member firms for their own accounts was the LOWEST since 2001 at 29%, huge negative. The move was almost all short covering, primed by the WMT sales numbers early, ie. there wasn't much true buying. Volume was miserable for such an up day. TRIN ended at 0.39 which is a major fade signal. I could go on. I'm selling this market any hour now and selling big.

Edwardo said...

The liklihood is that this is all going to be over in a matter of days, OR this is the beginning of a massive blowoff in enough sectors and names to take the senior averages up in parabolic fashion until, as per the estimable Terry Laundry's work,
http://www.ttheory.com/ late fall, when a really nasty grizzly Bear emerges.

In short, the sucker has, at most, If Mr. Laundry is correct, and he is very good at what he does, about four months left.

Gary said...

My God the bears are again trying to rationalize their negative postion. I just can't believe what I'm seeing. I believe I asked Andrew the other day if he had a death wish by loading up on shorts. Do all of you have a death wish. Quit trying to rationalize these stupid little excuses they are killing you. Look, just pull up a 5 year chart of the S&P, then have a child stand on the other side of the room and have them tell you which way the market is moving. I suggest having a child do it because apparently you guys are not competent enough to do it yourself. If ever there was a case of crying wolf this is it except its been like 20 times instead of 3.

Tim Knight said...

Gary,

I think you're starting to lose your composure :-) Hang in there.

- Tim

Gary said...

Tim,
You're damn right I'm losing my composure. I just can't believe people keep doing this to themselves. It's like watching a mouse caught in a maze and he keeps running down the same wrong turn every time thinking he's going to get a different result. I've now had two examples of investors blowing out their account in one of the nicest bull markets in history. Can you blame me for being frustrated that people just refuse to listen to common sense?

Tim Knight said...

Maybe you are too empathic for your own good. After all, it's not your account. Why get so flustered?

JakeGint said...

I know we're cool as long as Eddie's still predicting Armageddon.

You keep an eye on those horsemen for us "suckers" now, hear?

JakeGint said...

Maybe he actually cares about the fortunes of the folks that read his blog?

(Also, to be fair, he has a subscription service (albeit a pittance) and so probably feels a higher responsibility to his subs/readers)

_____________

"Empath"... nice one.

Live long, and prosper.

DirtyTed said...

Gary is right, yesterday was a pretty clear-cut buy signal. I think the feelings of missing out on a major move like this are clouding yall's minds. Don't load up on shorts to play catch up.

beanie11111 said...

Solar stocks are still en fuego!! You don't want it now? Well, you likely will end up buying from me eventually.

For option playas:

TSL july 45 calls @ 2.2 already a 11-bagger (headed to 15 bagger by next friday?).

SOLF aug 15 calls @ .40 or less traded as high as .95 today. 10-bagga anyone?

---

and finally for today,

CSUN aug. 15 calls @ .40 (or less) has the makings of another 10-bagger.


Solar Flare!!!

beanie11111 said...

SPWR earnings is next week. If it they impress, solar stocks marches on.

newequity said...

Giving back all your gains and some bears. I would hate to have more than 10% of my account short right now. Ouch.

DirtyTed said...

Beanie, what and how much solar stock do you own? I suspect you don't actually own any.

newequity said...

beanie is not buying solar, just touting solar on his father's computer. He only has a few hundred in trading capital built up.

beanie11111 said...

dirtyted,

you must be outta your mind shorting stocks and shorting solars especially.

i dont come around pumpin and bumpin for over 2 months now just so i don't own it and doin it for a pleasurable experience.

Solar stocks are going be huge is my opinion. I'd like to share it with you devastated permabears so you might might still be around this time next year.

Oh man, just don't tell me that you don't own them solars.

beanie11111 said...

CSUN is gonna fly, JASO-style.

http://biz.yahoo.com/prnews/070712/cnth014.html?.v=27

DirtyTed said...

Beanie, what would make u think i'm short solar or other stocks?? Honestly, I have been heavily long JASO and FSLR for about 2 months now. I have 400 FSLR and 600 JASO. What do u have?

newequity said...

Wow, so you bought in right before the huge run-up on both stocks. Man I love the internets where everyone gets rich and no one has any losses. Get real.

beanie11111 said...

funny dirtyted, this is the first time i hear ya sputin solar stocks. lol... That's ok... spread the love!

Anyhow, CSUN has amazing volume today. I'm feelin this thing is gonna blow thru the roof in days to come.

beanie11111 said...

FSLR is the next GOOG?

beanie11111 said...

STP:

another great opportunity to buy today.

I am confident this will see $60 this year.

beanie11111 said...

TSL:

this turkey is going to $100! (sooner than later)

beanie11111 said...

RIMM:

the mother of all rocket rides. Should see $300 by end of Sept.

newequity said...

AAPL to print $200 by year end. This market is unpredictable and going higher.

DirtyTed said...

new equity,
honest, i did! I'll explain since your interested. During bull markets I constantly watch stocks making 52 week highs, and especially all-time highs. So jaso and fslr had been "on my radar" for some time before i bought them. Then (I trade a somewhat trend following mechanical system) I bought both stocks as they broke out to new highs after basing, and pyramided early. I did take some early losses trying to buy FSLR at the proper time, but around my third attempt, FSLR broke out and never looked back. I bought JASO around mid-june on the breakout, pyramided up and was never stopped out. By the way, what i have described is the proper way to trade bull markets. As evidence, check out the trading styles of Livermore, Darvas, and O'niel

Frank said...

Hey Tim, Gary

Past 3 days sure feel like the good old days are back! Close your eye and pick anything it sure will go up and up and away! Gary, you're the man, just let me know when Commercial start unload! Bulls all over the place! Look at AAPL, last couple hours, parabolic ON TOP of parablic move! Everything is UP, AND even Mark Hulbert from MarketWatch.com says "There's no irrational exuberance in sight"! What can I say...? I'm just going start dumping my money in!

Frank

JakeGint said...

Not to pile on too much, but geez, this guy Carlin is terrible.

I mean I tried, tried to get to that promised 4 minute mark, but geez, the clip is over nine minutes, and painfully so.

But I think I figured out why the bears like him. He's a bear's comedian after all. He's convinced himself he's smarter than everyone else, and dammit, he's p-ssed (to a bitter, cardiac turn) about the world being slow to recognize it.

Gary said...

The COT is even more bullish this week than last if you can believe that. The most dangerous thing you can do right now is to not be in the market. The indexes just broke out. The consolidation that we just saw normally signals the half way point of the total run. We should have roughly another 1600 points to go on the Dow. You can either chase now or you can chase 1000 points later. Whatever you do don't lose your position or you might not get a chance to get back in. The blow off finale is just getting started.

Geoff said...

Beanie,

I'm curious to know how you pick your targets for stocks? Do you just pick a round number or is there some kind of system behind it?

beanie11111 said...

geoff,

Interestingly, most big boys do go for round number targets because they tend to be strong resistances.

I do that too. But i give targets based on what their competitors making similar earnings/revenue have gone to. So i'm pretty big on market cap.

Putting everything together, for instance, BIDU is sittin at 7 billion market cap. It is the dominant search engine in China and it should be big unless GOOG can dethrown them. I don't care if GOOG dominates the world but if BIDU gets most of China, i give them at least 1/4 to 1/3 the size of GOOG's market cap. GOOG has 160 billion market cap, so i give BIDU 30 billion market cap. So BIDU should go to $1,000. And i stick by that.

beanie11111 said...

oh, by the way, BIDU is flying!!!!

JakeGint said...

What's BIDU's cash flow compared to GOOG's?

beanie11111 said...

BIDU has the same profit margin as GOOG. http://finance.yahoo.com/q/ks?s=BIDU

I like that.

$1000 is in the bag.