The Case for a Double Top
It wasn't a bad week. The bulls wanted this to be The Week of New Highs, but it was not to be. The more we can take away a new prize for the bulls, the more discouraged they will get. Which, let's face it, is all they deserve.
Oil is tantalizing close to an all-out breakdown on OIH. Within pennies, really. I like what I see.
As I look at the major U.S. stock indexes, I see some pretty big double tops. Could they be rendered moot by a pierce through to new highs? Of course. But if the earnings season, starting in early October, disappoints, we may have already seen the highs for quite a while. Here's the Dow, which got within spitting distance of a lifetime high this week.
The oft-ignored but still important Dow Utilities (interest-rate sensitive) likewise has a double top, although not quite as clean.
The S&P 500 is of particular interest to me since I own so many puts on it. I'm feeling pretty good about where this index is positioned.
Here are all the positions I've got that will fit onto on screen. I manage four accounts, two of which are shown here. Every one of these has a sizeable put position. God help me. (As always, since these images can be illegible, click on 'em to see a bigger, more readable version, then click your Back button on the browser to return to this lovely little blog).
26 comments:
Tim
I'm a fellow bear in waiting at the moment (I picked up 400 puts on the QQQQ on May 8th for my best trade of the year -- just wish I would of held it longer than I did).
Question: With the markets so correlated these days, why carry put positions on so many different issues in related industries? I don't see the benefit to the pseudo-diversification, only a lot of time involved to manage so many positions.
You're obviously a busy guy -- what's the theory behind your strategy?
Thanks for sharing your work.
PC
Just spreading the risk. You never know when one particular company is going to get bought out or have surprise earnings.
Tim:
Regarding the OIH, what is the textbook target for the head and shoulders bottom? i.e where would you consider covering the short position?
Thanks,
Alan
Oh, $112 or so for the first lurch down.
Tim, check out the sweet chart for WYNN. I got short at $78. I've already covered a bit, but this thing looks like a monster.
Yeah, I have followed that for a while. Hasn't really grabbed me yet, but it's interesting.
Sept. 25 (Bloomberg) -- Crude oil fell to a six-month low in New York after Iran's President Mahmoud Ahmadinejad said his country may consider discussions on its nuclear program, easing concerns that supply will be disrupted.
What if there is no resolution to the problem? Will oil spike back up to 70+. Is this the drop before we see oil go to record levels????
Mike
My Small Cap Swing indicator moved to a SHORT signal early on 9/19/06. Bad news on 9/21 in the Leading Indicators and the Philly Fed Index was actually seen as “bad news” (wonder of wonders) – same for Existing Home Sales on 9/25. The current SHORT signal is at -59 on 9/25 @ 11:15am ET.
Here are the recent values of my Small Cap Swing Indicator for the last four switches.
. . . . . .Small
. . . . . . Cap . . . . . . . . .Russell
. . . . . .Swing . . . . . . . . .2000 . . . Cumulative
Date . . . Ind . .Signal . . % Chg . . . . % Chg
08/28 . . +05 . .LONG . . +1.1% . . . . +1.1%
08/29 . . +23 . .LONG . . +1.2% . . . . +2.3%
08/30 . . +39 . .LONG . . +0.8% . . . . +3.1%
08/31 . . +48 . .LONG . . +0.0% . . . . +3.1%
09/01 . . +52 . .LONG . . +0.1% . . . . +3.2%
09/05 . . +62 . .LONG . . +0.8% . . . . +4.0%
09/06 . . -19 . .SHORT. ..-2.1%. . . . . -2.1%
09/07 . . -43 . .SHORT. ..-0.8%. . . . . -2.9%
09/08 . . -61 . .SHORT. ..+0.3% . . . . -2.6%
09/11 . . -72 . .SHORT. ..-0.1%. . . . . -2.7%
09/12 . . +18 . .LONG . . +2.4% . . . . +2.4%
09/13 . . +41 . .LONG . . +0.8% . . . . +3.2%
09/14 . . +54 . .LONG . ..-0.4%. . . . . +2.8%
09/15 . . +65 . .LONG . . +0.2% . . . . +3.2%
09/18 . . +70 . .LONG . . +0.0% . . . . +3.2% (short triggered)
09/19 . . -06 . .SHORT. ..-0.5% . . . . -0.5%
09/20 . . -05 . .SHORT. ..+1.2% . . . .+0.7%
09/21 . . -13 . .SHORT. . .-1.0% . . . ..-0.3%
09/22 . . -37 . .SHORT. . .-1.2% . . . ..-1.5%
09/22 . . -39 . .SHORT. . .-0.1% . Intraday @ 11:15am ET
Normal LONG target: . . +65 to +75 (max: +95)
Normal SHORT target: . -65 to -75 (max: -107)
I remain 100% invested in SHORT positions as Friday’s close, 9/15/2006, when the trigger was close to switching.
I see more down days than up days this week.
Joe B is still bearish, f*&k.....
give it up guys, the market will keep on goin up.
just keeps going up, sh#t
You know what they say... It's only when the last bear gives up, that the market will tank...
Don't des-bear.... Sooner or later, we'll be right... ;)
"give it up guys, the market will keep on goin up."
The market isn't up that much this year.....and the indices haven't done anything special yet this month but trade rangebound......
This feels artificial today though...the trading. I suspected last week that we may go up again hard this week but look at brcm, akam....MOMENTUM.
Tim,
On the SPX what Month and how far out do you go since these tend to be expensive (low intrinsic value)?
MS
C'mon BEARZ!!! Let's start fukkin' selling already!
don't freak out! thats how you lose your money. Just like Sanjay said, just forget everything else. IT IS UP, we know that, but if you were to play the long side, I have a feeling that you've pretty much missed the boat. Things are really overbought (obviously), and I think you would be safe holding on for a little bit for the pullback.
Unless of course, you're individual stocks have already violated resistnaces, then yes, you should be changing up your strategy.
Look at the individual stocks, don't just get phased by a 100+ dow movement, becuase I still see so many good stocks poised for downfall - and that means something has to give soon enough.
Stay calm, always.
I admit to being very confused.
I keep reading that we are most likely headed for/or already in, a recession. The falling commodity prices and interest rates would confirm this, if true.
Yet the new breakout industry group is ...retailers.
Now, one of the above things has to be incorrect.
which is it?
look at the chart for Target for instance...TGT ...up like a rocket
Carl's turning bearish. If you don't read this guy check him out. He's good.
carlfutia.blogspot.com
R41
PB,
Patience.
9800 on the DJIA after the top.
Patience.
R41
Huge reversal in the oil sector. If oil turns around, it will be the cataylst for new highs in this market.
Is it a good time to short AKAM? Indicators seem to be overbought.
Anonymous said...
Huge reversal in the oil sector. If oil turns around, it will be the cataylst for new highs in this market.
1:56 PM
WHAT??? NO IT WONT.....
"Anonymous said...
Huge reversal in the oil sector. If oil turns around, it will be the cataylst for new highs in this market. "
Typical bull.....
I thought that it going down was the catlyst....for the market going up..... now the bulls will say that it going up means the economy is booming...nonsense. I still smell COmplacency.
I'm ignoring this weeks acting and staying away from the market....markups-end of the quarter.... careful.
What an interesting day, wake up to see the futures up, market opens up then turns down around 10am. I stepped away for a few hours only to see market up about 1%. Then I took action, went long QID at $61.30. Dropped a bit afterwards, but think it heads back to $62.50-$63 sometime this week.
This whole markup at the end of the quarter is starting to bother me, if this is the case this time around, at end of December I will be going very long.
Trader 2006.
talk about having your head so far up your ass you can almost see the light again, you guys are ridiculous, are you traders or just someone who only wants the market to go down no matter what? trading to make money is the game, is it not ? open your eyes and trade technicals not fundamental shit, when patterns are proven , supports violated, resistance broken act accordingly, only then, not what you think it should do, but what it does is all that matters.
ok lets see what the smart guys know...... why are there so many divergences in the market???? Have they confirmed the move???
Fundamentals don't mean anything??? Yes they do to me. When they are bad as they are now, they add risk to the trades.... now that is great that so many of you are so confident in your trades...but I'm not and I would rather protect my gains this year. Until I get confirmation that this move is for real....
Let me ask again, are earnings going to lead the market to new highs, or is the idea to throw cash at the market....just to see it up.
This is an irrational market right now. and perhaps just maybe some will get a rude awakening when people start realizing oh my we need to realize that companies don't deserve these multiples.....
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