Just a quick intraday post.
Oil and gold are having a pretty big up day, which is no surprise considering how badly they've been pummelled in recent weeks.
Oil - more precisely, OIH, which I consider a proxy for the major oil services stocks - is doing a textbook retracement to its neckline. The bolder among us may want to short aggressively here. This is a gorgeous head and shoulders pattern. It's always scary shorting at a time like this, naturally, because there's a lot of strength. But retracements to necklines often represent the lowest-risk time to go short, since you've got a crystal-clear stop loss level in case you're wrong.
http://photos1.blogger.com/blogger2/945/1439/400/0918-oih.jpg
Gold ($XAU) is murkier. It was forming a head and shoulders pattern, but it didn't get back down to its neckline. In addition, the price has pushed its way to a major Fibonacci retracement level, which implied the selling was over for now. So I'm steering clear at this point.
http://photos1.blogger.com/blogger2/945/1439/400/0918-xau.jpg
At the moment, the stock indexes are showing a skosh of weakness in spite of earlier strength. Let's hope it continues until the close!
at 9/18/2006 6 insightful comments
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Labels: fibonacci, gold, head and shoulders, oil
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Friday, September 15, 2006Friday Follies
Greetings from downtown Palo Alto, heart of all things technical and headquarters of the world's wildest bear blog. Your host: Tim Knight.
Since July 18, the markets have been on a tear. A bullish tear. The kind we don't like. The Dow is up over 8%, as is the S&P 500. The NASDAQ Composite is up even more, over 13%. Not a pretty picture, people. And, except for the recent softness in gold & oil, it's been a really nasty market for us ursine types.
The $VIX has ground down to almost never-before seen levels of complacency. I'm just waiting for Wired to publish another "40 Years of Prosperity" cover stories again.
http://photos1.blogger.com/blogger2/945/1439/400/0915-vix.jpg
If you look at the VIX relative to the SPX, there's a pretty strong inverse relation. Not foolproof, certainly, but it's clearly there.
http://photos1.blogger.com/blogger2/945/1439/400/0915-vixspx.jpg
The Dow is within spitting distance of its lifetime high. Astonishing. The bulls have shown amazing strength.
http://photos1.blogger.com/blogger2/945/1439/400/0915-indu.jpg
If you look at the $OEX, and many other indices today, you'll see that it formed a shooting star candlestick. It's not an amazing one, and option antics probably had a lot to do with today's volatility. Hey, at least it didn't close at the highs! I'll take what I can get!
http://photos1.blogger.com/blogger2/945/1439/400/0915-oex.jpg
Oil, which has been very kind to us the past couple of weeks, paused for a rest today. The H&S pattern is complete, and it's in a position to get really clobbered. But it's resting right now, deciding whether to recover some of its losses or resume the swoon.
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Oil, which has been very kind to us the past couple of weeks, paused for a rest today. The H&S pattern is complete, and it's in a position to get really clobbered. But it's resting right now, deciding whether to recover some of its losses or resume the swoon.
http://photos1.blogger.com/blogger2/945/1439/400/0915-oih.jpg
Looking at the $SPX, we are right at the median channel line. In the past (circled red areas) it has been able to cross above this and push higher. If it can't manage to do it this time, they could provide us some much-needed relief.
http://photos1.blogger.com/blogger2/945/1439/400/0915-spx.jpg
Even more exhausted than the OIH is the $XAU (gold/silver index), which has beautifully come back to its Fibonacci retracement. This could be a reversal area. On the other hand, a massive H&S pattern has formed. I am steering clear of this at this time, although there might be some fireworks here next week.
http://photos1.blogger.com/blogger2/945/1439/400/0915-xau.jpg
The $XMI, like several other indices, also formed a shooting star. This has, however, broken out of a nice dish pattern (which is good for the bulls).
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The $XMI, like several other indices, also formed a shooting star. This has, however, broken out of a nice dish pattern (which is good for the bulls).
http://photos1.blogger.com/blogger2/945/1439/400/0915-xmi.jpg
Let's look at some of my favorite short positions right now. Allegan (AGN):
http://photos1.blogger.com/blogger2/945/1439/400/0915-agn.jpg
Apache (APA):
http://photos1.blogger.com/blogger2/945/1439/400/0915-apa.jpg
Carnival Cruise (CCL):
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Carnival Cruise (CCL):
http://photos1.blogger.com/blogger2/945/1439/400/0915-ccl.jpg
Express Scripts (ESRX):
http://photos1.blogger.com/blogger2/945/1439/400/0915-esrx.jpg
Lehman (LEH):
http://photos1.blogger.com/blogger2/945/1439/400/0915-leh.jpg
NutriSystem (NTRI):
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NutriSystem (NTRI):
http://photos1.blogger.com/blogger2/945/1439/400/0915-ntri.jpg
Sears (SHLD) which, I know, is a gorgeous cup with handle pattern - - but I've just got a hunch.....
http://photos1.blogger.com/blogger2/945/1439/400/0915-shld.jpg
UPL:
http://photos1.blogger.com/blogger2/945/1439/400/0915-upl.jpg
That's it for me. This week was pretty much a wash. Someday the market's going to get whacked. When it does, I'm well positioned. In the meantime, I'm playing a defensive game. Have a good weekend, and best of luck in your trading next week!
at 9/15/2006 36 insightful comments
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Wednesday, September 13, 2006Bulls, You are SO Good!
Luke: "I'm not afraid!"
Yoda: "You will be. You will be."
Well, the oil/gold plunge took a day off, and the markets were strong overall. Feh! It wasn't such a bad day for me. I've moved a lot of positions into cash and lightened up the gold/oil yesterday. I'm still 100% in puts, however, on those positions I do have (and there are something like 60 of them). Plenty of cash on the sidelines ready to deploy into more puts.
For your masochists out there, here are a few suggestions for shorts (or, more aggressively, puts) to consider. I've included contingent stop prices (e.g. the position gets closed if the stock closes above the cited value).
Black & Decker (BDK, $84.85)
http://photos1.blogger.com/blogger2/945/1439/400/0913-bdk8485.jpg
Capital One Financial (COF, $82.22)
http://photos1.blogger.com/blogger2/945/1439/400/0913-cof8222.jpg
Morgan Stanley Tech Index ($MSH, $525.00)
http://photos1.blogger.com/blogger2/945/1439/400/0913-msh525.jpg
Perennial favorite NutriSystem (NTRI, $65.75)
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Perennial favorite NutriSystem (NTRI, $65.75)
http://photos1.blogger.com/blogger2/945/1439/400/0913-ntri6575.jpg
NASDAQ (QQQQ, 40.19)
http://photos1.blogger.com/blogger2/945/1439/400/0913-qqqq4019.jpg
Russell 2000 Index ($RUT, $742.26)
http://photos1.blogger.com/blogger2/945/1439/400/0913-rut74226.jpg
Lastly, I was so irked at the champions of censorship (and their 19th century sensibilities) coming down on me for my video that I wanted to post another one. The difference is that this one is just plain funny. I don't think it will offend subscribers to Readers Digest, purchasers of Metamucil, or occupants of corn-growing states. All the
at 9/13/2006 43 insightful comments
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Wednesday, September 13, 2006Come On, Toshi!
This market is now pushing the upper boundaries of all the lines. Check out the $OEX and see just how high it is:
http://photos1.blogger.com/blogger2/945/1439/400/0913-oex.jpg
If you look close, we are at the resistance level both from the trendline perspective and, though you can't see it, the long-term 50% Fibonacci retracement perspective.
http://photos1.blogger.com/blogger2/945/1439/400/0913-oexclose.jpg
Bold souls might want to short aggressively at these levels. This is bananas!
at 9/13/2006 10 insightful comments
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Monday, September 11, 2006Thank You, Commodities!
It was a sweet trading day. Gold and oil, mentioned as shorts here many times, got completely trashed. Looks like there may be plenty more trashing to come. Here's the latest chart on OIH, which has plainly broken its neckline, along with some possible support levels on the way down.
http://photos1.blogger.com/blogger2/945/1439/400/0911-newoih.jpg
Funny enough, since oil peaked in the first half of May, there was a scramble to generate financial instruments based on this once-again hot commodity. Some web ads can be awfully ironic.
Here's the $XAU, which got nuked. I see a lot more potential downside here. Today was an extraordinary gap down.
http://photos1.blogger.com/blogger2/945/1439/400/0911-newxau.jpg
The S&P 500 ($SPX) has until recently made a series of higher highs, which is what a bull market is made of. I think the trend may have changed. I've illustrated the "chain" of higher highs and what I think might be the first link in a new chain of lower highs, which is what a bear market is made of.
http://photos1.blogger.com/blogger2/945/1439/400/0911-newspx.jpg
The $OEX, bless its heart, broke under its trendline, and it's struggling to mount it again. I think it will fail. Which means we here will succeed.
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