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Friday, September 15, 2006
Friday 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.

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.

The Dow is within spitting distance of its lifetime high. Astonishing. The bulls have shown amazing strength.

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!

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.

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.

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.

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).

Let's look at some of my favorite short positions right now. Allegan (AGN):

Apache (APA):

Carnival Cruise (CCL):

Express Scripts (ESRX):

Lehman (LEH):

NutriSystem (NTRI):

Sears (SHLD) which, I know, is a gorgeous cup with handle pattern - - but I've just got a hunch.....

UPL:

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!
at9/15/200636 insightful comments  Links to this post
Thursday, September 14, 2006
Quickie
Hi Folks,
I might have time later this evening for a regular posting, but as it is now, I'm being pulled in about five different directions.
As bearish as I've been on gold, I wimped out yesterday and closed my positions. Profitably, to be sure, but gold continues to be really weak. It is basically a complete H&S pattern at this point, and it's massive. Just massive. If it follows through on this pattern, the gold bugs are going to get totally squashed. Sure wish I held on to those $XAU puts! Ouch.
I'm still very short oil, however, and that's looking sweet for tomorrow from a pattern perspective.
Today was relatively boring (Dow down 16 after noodling around most of the day). September sure isn't providing the kind of fireworks we bears would like to see! But it's all in the charts, not the timing.
If I don't have time to post later, I'll see you Friday.
at9/14/200686 insightful comments  Links to this post
Wednesday, September 13, 2006
Bulls, 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)

Capital One Financial (COF, $82.22)

Morgan Stanley Tech Index ($MSH, $525.00)

Perennial favorite NutriSystem (NTRI, $65.75)

NASDAQ (QQQQ, 40.19)

Russell 2000 Index ($RUT, $742.26)

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 same, click at your own risk.
My blog. Your decision.
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at9/13/200643 insightful comments  Links to this post
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