The Price of Tea in China

I am writing this Wednesday morning, a few minutes into the opening bell. I stayed up until 2 going through charts and resumed at 5:20 this morning. So this is a late post, but it is in the context of Tuesday's mini-crash.

It has been a long, long time since I have awakened to such a beautiful sight on Tuesday morning:


In the end, Tuesday turned out to be the best of times and the worst of times. It was the best of times since it was spectacularly to finally see a real fall, just like I had hoped for the previous day (see my Monday post). It was the worst of times since, for my index options, I closed them out when the Dow was down just 120 points. I made money on all my options, but there was a huge amount left on the table. Deeply disappointing, but nice to see the smart bears beat the dim bulls for a change.


A few interesting notes from yesterday:

• I had a record amount of blog traffic. It's weird, because usually my traffic is very steady. Maybe my regulars came back repeatedly to see what crazy Tim was going to say. Or maybe those who visit me occasionally figured it would be a better post than most.
  
• A number of people wrote me emails to thank me for the profits they made. I appreciate that, but the credit goes to you! I'm just here sharing my thoughts, for better or worse. What you do with them is up to you.
  
• Quite a few people keep asking about the sales of my book (especially, strangely, my detractors). I have no idea! I do track its rank on Amazon, and it briefly made the "Best Sellers" list on the business books/investing section, but remember, this thing hasn't even hit any stores yet. It is just off the press. Only time will tell, but I'm pretty proud of my book. I think it's a good read!
  
• On a personal note, I've been waiting for the perfect opportunity to use the subject I chose for yesterday's post ("I Am Become Death"), a reference to Animal Mother in Full Metal Jacket. I felt it fitting!

I think few stocks better represent the broken promises of this fraudulent bull market that Google. What a snoozer this thing has become! Just look how it's been doing a whole lot of nothing since November. This is a relatively blue chip high tech stock, but you can just hear the air coming out of the tires.


If you look at the NASDAQ over the long term, you can see we might have a loooong way to go before we reach bottom.


Looking at the same index with a shorter time horizon, we plainly bounced off the upper resistance line.


The Dow Industrials were just crazy yesterday. I was - - and this is further proof of just not God, but a Cruel God - - trapped in my car virtually all of yesterday, taking dangerous glances at my Treo. The market was down 200 or so for the longest time, then it was suddenly down 500. I honestly thought the president had been killed or something. But it was just this orgy of sell orders all at once, I suppose.


Looking at the long term industrials, one could easily argue that yesterday was an anomaly. There aren't any major trendlines broken here. Just some very shaken bulls.


The Russell 2000, which I've mentioned quite a bit as a good index to buy puts on, took a better tumble than most yesterday.


And just look at the QID (and its volume!) It's pretty clear there is a growing interest in this double-inverse funds!


Looking at the $SPX, you can see a brief pause about half an hour into the trading day. This is the point where I - shame on me, shame on me - did an "ad hoc" close (which I had forbade myself from doing). Pure idiocy.


But here is perhaps the most interesting chart I have for you today - the SPX on a daily basis. Take a good long look at those trendlines that made up the channel, above which the index had broken out. And to which point did the index fall yesterday? That's right - almost precisely at the same trendline! If any bulls are ready this, you can take that as an encouraging sign.


The volatility index went stark raving mad. This almost certainly cannot sustain itself.


A close look at the $VIX shows the amazing breakout. This borders on unbelievable.


I had no position on the $XAU, but I wish I had puts on this bad boy. The plunge in China had a profound effect on metal prices.


Oh, and the Dow Transports breakout I mentioned last week as great news for the bulls now is rendered moot. The pattern has been shattered.


Continental Airlines has broken its trendline. I've pointed out the target on this. I own puts on this (which I bought prior to the breakdown), and I have high hopes for this position.


One other stupidity on my part - I closed out my CME puts yesterday at a fantastic profit. But the profit became much more fantastic as the CME kept falling. These expensive stocks can make for fantastic puts, especially when volatility is low (as it was not long ago!)


Lastly, Goldman Sachs - - whose puts I've been derided for owning - - is another winner. I'm hanging on to this, although I sold my MER just to trim my investment bank exposure. But you can see by the trendlines there's plenty of room left to fall.


I apologize again for the late post, but I hope I made up for it by the size of this one! Thanks again for all the congratulations and pats on the back. I'll let you know if any bullish Australians have left any cowardly voicemails for me.

Crossroads

Greetings from the snowbound tundra of the California Sierras. To me, the definition of civilization is anywhere with an Internet connection, so I'm still quite content.


Today was a good day, but I can't help but be concerned that we will have, yet again, another swing up. I'm not saying it's going to happen. I am saying that it seems to keep happening, and the most polite word I can think to describe this wave-like action is "annoying."


What we need, of course, is a clear, obvious, idiotic-comments-suddenly-cease kind of break in the market. Until then, I have reduced my exposure somewhat with the worrisome anticipation that this stupid market might find its legs once again. The $NDX at least had a nice bearish engulfing pattern today.


The $OEX shows a wonderful example of just how monstrous the divergence is between the price action and the RSI. This market is running on fumes. But there are a lot of people who like sucking those fumes. The bulls always radically outnumber the bears. We are a lonely bunch, aren't we?


The S&P 500 is just another example of this higher highs/higher lows market. In fact, to make matters worse, the lows don't seem to be dipping as low. There are some bright spots, of course. The investment banks are starting to weaken. Some issues (like the CME) are finally making some real progress downward. But others - like RIMM and MSTR - have surprised me with their incredible strength (obviously I got stopped out on these - I may be dumb, but I'm not an idiot).


The Dow Transports, which I've pointed out should be providing comfort to the bulls, is at risk of breaking its inverted head and shoulders pattern. This could be nothing more than a pullback. But if it falls much more, the very clear bullish pattern will have been neutered.


I mentioned Continental Air (CAL) before. The head and shoulders pattern on this is forming nicely. We could be seeking a neckline break in a day or two.


And although CRDN as a whole isn't an exciting chart to me, I was blown away at the size of this bearish engulfing pattern. This is like the John Holmes of these patterns - I rarely see them this big.


Accept my good wishes that the higher highs/higher lows pattern be broken in the coming weeks. The bulls must be conquered, and breaking the pattern is the first step in breaking their spirit.

Yep

Thus ends another week. Now c'mon, folks, throw me a bone here - - I mentioned CRR just a few days ago as a bullish play ("For a bullish play, CRR looks like it is beginning to turn northward after a long slide.") and it climbed 40% in just a few days. That isn't bad, and it shows this isn't just an all-bears blog.


The Gold and Silver index is looking like a potential short.


Although the Transports broke above their descending trendline, the shooting star candlestick today is a little encouraging. The markets are sky high and simply seem able to propel higher each week.


The $OEX (S&P 100) is matching a recent high. This means either a double top or, with more strength next week, more kudos for the bulls.


I like the Morgan Stanley Tech Index ($MSH) as a place to buy puts. It's pretty risky, and the puts aren't that thickly traded, but the potential for a big reward is there.


The Dow 30 lost a little ground today, and it remains clearly beneath its broken trendline.


Check out NVR versus the Fibonacci retracement. I'd say it's ready to turn tail.


China has been going absolutely hyperbolic in equities. GCH is a short play on this. But what's more fascinating to me is how well it has played against its own Fibonacci lines. I've highlighted the "bounce points."


Cabot Oil and Gas (COG) looks like another relatively low-risk place to buy puts.


I sold my Cummins (CMI) puts at a profit a while back. The stock has recovered since then, and it's so close to a double top at this point that I'm ready to leap in again.


Good weekend to one and all.........

Finally....

Wow, I have never been so late with a blog posting before! I am a day late but, thanks to my NZD/USD trade, far from a dollar short. I've been up since 3 a.m. catching up, and I am at long last going to do the post I wanted to do last night! (Technical Note: Blogger seems to be having major issues recently. I can't view comments, and I imagine none of you have been able to post. The lateness of this post is my fault, but the technical problems are not!)

If you saw the news last night, you should recognize what a scoop I provided with my bizarre BillyWitchDoctor.com post a week or so ago. That clip was from Aqua Teen Hunger Force and - wouldn't you know it? - they were the top story yesterday. No, I'm serious. There was a huge bomb scare in Boston, and it was due to a publicity stunt from our french dry/milk shake/meatball pals. Nice going, Frylock.



OK, back to charts. Today's entry is a little weird because I start pulling charts for it at 4 in the morning and was still doing so just 90 minutes before the close of the market. So this isn't a typical end of day commentary.

Kudos to those of you who took my NTRI suggestion seriously. This was a beautiful chart. It had a lot of good elements.....a major ascending trendline that had been broken.....a clear area of resistance.........a (sloppy) head and shoulders pattern. And it positively fell to pieces subsequent to my suggestion to check it out.


For those who didn't mind the risk, the rewards were handsome. Check out the action on this NTRI put - - up thousands of percent in just a few days!


Bulls in the stock market can take heart from the Transports. It looks like this has broken its clear bearish pattern. And, as I'm typing this, it looks like the market is headed to another solid close higher.


The S&P 500 is at the very, very top of its ascending channel. Any higher, and it's going to break above resistance.


Another cheer-up for the bulls is the MidCap 400. This is about as good a cup with handle pattern as you're ever going to see (my lame rendition of the pattern, in green, notwithstanding).


The Dow 30 seems to be headed for yet another closing higher today (the market's got another hour and a half open as I type this). But it's still below the ascending trendline is broke early last month.


For a bullish play, I like Genentech (DNA). The saucer shape and the volume both look positive.


CNX for a short idea.


Bank of America (BAC) is another good short idea. I closed my puts a couple of days ago at a profit, and it looks like it might be time to re-enter.


Sun Microsystems (SUNW), mentioned a month ago (or so) as a bullish play, is doing well. This is a gigantic saucer - just massive.


No one has commented on my FOREX suggestion (maybe there are only equity players here), but it's been doing amazing things. I've doubled my account balance in just a week based on this one currency.


I had never charted MWP before, but this is another good short idea.


McDonalds (MCD), shown here with Bollinger bands and the RSI, is a pretty safe bearish play.


And Google (GOOG), which announced earnings last night, is doing something really interesting - specifically, it's acting like a normal stock. In the past, whenever they had earnings, there were these massive gaps (highlighted here in green). There was no gap today - - although it's somewhat bearish for GOOG that yet another quarter of blow-out earnings is actually producing a down day (so far) for the stock.


My apologies to any of you wondering what took me so long to do the post. It's been nuts!

Remark on Comments: I think the geniuses at Google (Blogger) are busy counting their billions of dollars, because their site is sure a mess tonight. People can't even post comments. 90% of the reason I do this blog is to read people's comments, so please try again later. I want to hear what you have to say, and others do too!