Archive for 2006

Checking Our Charts

I'm trying to read the market tea leaves and get a sense of direction.

While I think the markets are still in great shape and on their way to 15,000 I have also noticed that many of you do operate on a much shorter time horizon than I do so we need to clarify our positions before we get into the new year.

I may be bullish but I'm 80% cash right now and waiting for a buying opportunity.  Like October, when we let a lot of good ones get away from us, I'd rather chase a breakout late (and we did recover well) than have my positions cut down because I overstayed my welcome.

The first thing we need to do to look at the markets is to let go of our conventional view of time, because your stocks really don't know what day it is and they really don't care when you bought them.  I know that seems obvious but the whole concept of the "Santa Clause" rally just goes to show you how even the big boys still like to believe!

I'm using for this so you'll have to open each one to see what I mean:

The Dow is up 2,000 points from it's previous channel at 10,500 that it stayed very tight in since rising to that level in early '04. 

It is easy to see how most people feel this is a logical top since the prior move was also 2,000 points. 


Prior that 28 month consolidation at 10,500, it had bottomed out at 8,500 (and I'm a statistician, not a chartist so I throw out aberrant data points) in the aftermath of 9/11 when it fell from that same 10,500 median.  Taking an extra step back, to a 10 year view, we can see we actually were in a consolidation along the 10,500 line since the market topped out in 1999.  We know 9/11 was an unusual event so we can toss those data points too, making a very tight range.

But a tight range from what? 

So it is easy to see how the markets haven't actually done anythng in over 7 years and finally they take off (ironically (or NOT) on 9/11)…
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Weekend Reading – Unfinished


This is a chart from Bill Rempel, a.k.a No DooDahs, who gives us an annotated 4-year look at the S&P (click for larger image).. 


What strikes me the most is the equivalent of what I was feeling on Friday Morningthe RSI indicator flew down on very little movement while the VIX remains fairly tame (but up 10% yesterday) AND we remain pinned along the top of a very bullish channel!  I love good chart guys, they really can make a picture say a thousand words:..



Rather than get into it here and start a full-on war between "bloggers" and "jounalists,"  I will just mention that the "Mainstream Media" in the guise of Ziff-Davis (no relation) and the WSJ have both decided ’tis the season to call an end to this "blogging fad."


Gartner (who gets paid by the media) predicts that, in 2007, the number of bloggers will peak out at around 100 million.  Aside from the fact that that’s a stunning number in and of itself, they are basing this on the logic that 2 out of 3 people who start a blog quit.

Since 9 out of 10 new businesses fail, I suppose by that logic that the number of businesses has peaked too and that we should shut down all the business schools before people waste more money on them (wait, we might be onto something there!).

The WSJ, on the other hand, was much more direct in their attack and, in fact, downright insulting but we said our piece over at Information Arbitrage (check out my comments if you want to see me a little less nice than usual) and I won’t get into it here as I could literally go on all weekend I’m so pissed!

To say Gartner is off by a mile would likely be the understatement of the centrury – of the 300M people who’ve started blogs, 100M are still in use.  There are over 2Bn people with access to the Internet and, so far, just
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Wobbly Weekly Wrap-Up

Berkshire giveth and Berkshire taketh away!

We started the week watching BRK.A as a leading indicator and they immediately showed us where to top of the market was on Monday morning as they dropped half a point at the open.

That put us on full-time canary watch by Monday night but I will say that the DIA $123 puts I picked up Monday are only up 16% so how bad has the week really been?  Tuesday seemed like we might have a recovery but FDX scrapped the Transports on Wednesday, a move from which they were unable to recover.

On Wednesday morning, I called the dollar as stabilized (for the moment) and decided that would be trouble for gold and oil, which it certainly was as things got so bad later in the week that even GS had to downgrade the energy sector!

In comments, Zman and I were the only two oil analysts in the country who saw that 6Mb draw in crude in this week’s inventory as bearish for oil and immediately advised everyone to short energy stocks – a move that gave us a week of winners.

Oil did indeed finish the week just 1 cent over my Wednesday target of $62.40.

By Thursday morning, following our three canary rule, I said:" I still don’t want to hold much over the holdiays unless it is well covered so I will be reducing naked positions across the board and knocking out the underperformers.."

Thursday did indeed give us an ominous "thump" in the markets and we noticed that Mr. Buffet had jumped ship and it had, indeed, been a good day to cash out.  This was superb timing as we walked away at the top (or pretty close) and left us able to watch the carnage on Friday with amused detachment.

I reduced most positions to token amounts, rather than kill them entirely so there are still a lot of open positions on our spreadsheet but not too many serious commitments, even our oil puts mostly came off the table but I still feel there is enough underlying strength in the market that I’d rather keep tracking 59 short-term plays with the new system we worked out in comments than take them all off my screens.

We fully closed 28 positions this week with a stunning 110% average
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Somebody is coming to town!

Where's our Santa Clause rally?

I don't know why our long positions are suddenly turning into lumps of coal but we'd better get on top of this thing quick!  Like a wave that is cresting, you don't want to get caught in the undertow of the markets as all that money starts flowing the other way.


I can see what's happening out there – Paxios just pointed it out in comments this morning – some of you Grinches are turning a little bearish out there!  The bullish percent indicator, which we already said was at a very unsustainable level, has turned sharply down this past week.  It looks like close to 10% of you turned bearish in the past 7 days.

Much like the Grinch though, the bears' bark is worse than their bite as the S&P has only dropped 13 points from it's highest high, still not an actual percentage point (.0091%) -  If that's the sound of 10 bears leaving then Elvis has not yet left the building!  I think the fundamentals are still there and many top economists agree with me

To test that bold theory let's look at some other indicators: 

  • We have the put/call ratio, the last time it dove like this (and we participated yesterday as we dumped a lot of calls!) was around 11/27, when we gave up 300 points in the market – so far we've over half of that drop with just 1/6 of the drop.
  • The advacne-decline line is still through the roof!  While December has turned choppy, a fact we were on top of way back on the 6th!
  • The vast majority of Nasdaq stocks are still A LOT closer to their highs than their lows - so any money you are losing is some kind of fluke!  ;-)


So I remain bullish but cautious, I'm sure I'm not the only person who thinks – "Gee, we're so far ahead, why risk gains when 6 out of the next 10 days the market is closed."  These are not strong volume moves that we are getting and the last time the bears were able to get the upper hand was our last holiday…
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Thursday Thump

Uh oh!  We've seen this movie before…

Just when we thought things were going so nicely, all of a sudden there's a terrible sound and we bump into something.

Let's not worry until we contact the captain and see what's going on…   Captain, Captain Buffett, hello?  Uh folks – remember when I told you to keep an eye on Berkshire Hathaway?  Well, they… uh… jumped!  While we are flying around way up at Dow 12,400, BRK.A dropped 4% since Monday's open!  It is never a good thing when the captain is 4,000 feet below the plane!

That's OK folks, he's an old man, perhaps he just went out for some fresh air – let's just take a look at our canary and —- uh oh!  That is one sick looking canary!

We did A LOT of selling today as we didn't like the looks of this market from the open and, now that I've had a chance to step back, I'm still not so excited about it.  But I'm not really worried yet either, despite losing our captain and maybe an engine or two…

Sure, you may say, it's easy not to worry when you just cashed out but why should we, who still have open position not be worried?  Oh I'm sorry, when I said I'm not really worried I meant me – not you.  If you are still in the market you should be very worried, but not panicked.  It isn't time to panic yet.  Maybe soon but not yet.

The last time I wrote an article about a thump was also a Thursday, December 7th (Pearl Harbor Day).  We had pulled off a nice run at 12,400 but we failed it 3 days in a row and dropped all the way down to 12,233 before closing at 12,278.  The next day we opened even lower (but still above 12,250) but broke 12,300 at the day's end, on the way to a pretty good week (last week).

On that day we got off to a pretty good start but (and I am now reprinting that day):

By 11:45, we had pretty much crossed to the opposite side of
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Thrill a Minute Thursday

Lots of stuff going on today!


We get a lot of data but I think the Final Q3 GDP is the trump card today.  Our year is already set as the real GDP grew at a blazing 5.5% in Q1, causing the Fed to overtighten just a bit and Q4 is traditionally lower.  We’ve already had preliminary Q3 reports and this one is just a formality.

These are huge numbers!  If we average 3% for the year (and it will be hard not to) it means this country created $390B more goods and services than it did last year.  It means that someone (and it can’t all have gone to Exxon and Goldman) made $390Bn more than last year and that almost 40% of the new dollars we printed up were legitimate!

To keep this in perspective:  $390Bn is larger than the entire GDP of Belgium who, at $371Bn, is the 17th largest economy in the World!  Saudi Arabia, you may be surprised to know, has a GDP of just $309B with our "arch enemies" Iran at $192B and North Korea is (estimated) $40Bn.  As I mentioned last week, the entire GDP of Iraq is (or was before we showed up) $89B – the US has spent more money ($600Bn) fighing in Iraq than that country makes in 7 years!  You broke it, you bought it 7 times over suckers!

Meanwhile the Presdent vowed to stay the course yesterday and I know I resolved to be less political after the elections but it’s not the new year yet but the man actually went on TV yesterday and said we have to make a "sustained commitment" for "success in Iraq and the BROADER war on terror" – what?  Is he looking to expand this thing or is he putting it in context?

He is calling for a permanant increase in the size of the US army and "additonal sacrifices."  You know, I don’t need to say a thing about this – just listen to the man himself!


We have jobless claims and corporate profits before the bell today and lots of data around 10 so if we can get of to a good start we may get just the thrust we need as the day goes on, especially if the Philly Fed numbers are good…
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Wednesday Wrap-Up

Another ho-hum Wednesday.

Just like last week, same as it ever was…  Nothing much happened, we could have gone shopping (some of us did!).

Our levels did nothing so we’re not going to discuss them, there was a bit of excitement in the morning but the VIX was quickly sedated and slipped back down to 10.3  for the day.

Oil jumped a dollar on a 6M barrel draw but then Zman and I alerted the markets that the number was, in fact, a major disappointment as we are now in day 7 of the Houston Ship Channel shutting out 80 ships and tankers which have failed to deliver over 16M barrels of oil since last Wednesday.

The new contract finished at $63.72, down .75 from Friday’s close.  Let’s look for $60.80 as our downside target with $62.40 as our nearest waypoint resistance.  On the upside, breaking above $64 would be bad and $65.60 would signal a new uptrend.  No current oil contract has seen $64 since October 1st.

So, although CNBC was "shocked" by the draw in oil, we calmly continued to buy puts today while all the oil roaches bounced around in their little traps.  As millions of barrels of oil kept piling up in storage:

  • There are 303M barrels on order for February (vs. 77M needed in January).
  • OPEC has been sending (they claim) 1M less barrels per day for a month now
  • 16M barrels are backed up in the Gulf
  • Demand is falling due to the weather
  • Millions of SUVs have come off the road
  • Airline consolidation means less flight using less fuel
    • and the less economical planes get scrapped first!
  • Our 2 MILLION BARREL A WEEK war may actually end one day
  • The Democrats are coming!

The reason the global economy runs on oil is because it is cheap!  For over 100 years we used oil because, if you make a hole in the ground where there is oil, it comes "gushing" out and all you had to do was scoop it up and pour it into something that could burn it for energy.

There are many, many, many other ways to
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Will It Happen Wednesday?

Can we turn this thing around already?

That was hardly a dip in retrospect and we are getting to be very experienced astronauts, able to ignore those little shakes and rattles as the market ship lurches forward into uncharted territory.

This is the one week anniversary of our physics lesson where we talked about how difficult it is to break orbit and, more importantly, about the periapsis – the point at which the market, no matter how high the orbit, comes perilously close to reentering the atmosphere of bearishness!

Ironically, the larger the Apogee (the point at which the market is furthest above "normal") the more terrifying the drop back to the Perigee (underperformance) will seem, even though there are literally trillions of astronomical bodies that go through this cycle every single day without crashing!


In fact, in order to break an orbit, a spacecraft may purposely throw itself into a very close orbit around a planet in order to utilize the gravitational pull to its advantage as it picks up speed for that final thrust into deep space.  This is what the Nikkei did today as it dove down to 16,776 yesterday, perilously close to a breakdown before "slingshotting" back over 17,000 this morning!

As we said last week in the parachute article, the perigee is a good time to eject excess mass (nervous investors) as you prepare to leave them, and previous market highs, behind.

All of Asia had a pretty good rebound, led by Thailand which jumped 11% (yes, in one day) as investors poured back into the market – proving once again that a sincere, quick apology is the best way to save a relationshipI'd love to see the VIX for that exchange!  "Yesterday, after the market closed, we got together with stock market brokers and the private sector to discuss how to prevent flows from the stock market to bond market instead," Finance Minister Pridiyathorn told The Wall Street Journal in an interview.


When in doubt, let Goldman Sachs run your economy…  What kind of crazy little banana republic would come up with that solution?  — Oh, never mind!

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Testy Tuesday Wrap-Up

See – no problem!

It was a little scary at first but we had our nice puts to protect us but by 9:45 we were already swiching to DIA $124 calls as the market began to turn.

We picked up a lot of bargains (we hope) on the morning dip and dumped a lot of oil positions as that sector took off on us.  At 9:58 I said about the oil sector: "a 1.66% bounce is expected and meaningless" and the OIH closed up 1.56%, XLE closed up 1.7% and the OGX closed up 1.39% so no worries there either!

We held almost every single one of our levels!

  • The Dow took a neat bounce right off 12,400
  • Transports missed by 2,580 by 1.41
  • The S&P went above and beyond at 1,425
  • The NYSE came out of it’s coma and flew to 9,140
  • The Nasdaq also made a remarkable recovery ending at 2,430
  • No help from the SOX, who dropped all the way to 469 (still not good!)
  • The Russell actually did pull out of its power dive right at 775!

So on the whole we held up very well today.  The VIX threatened but dropped back down to a nice, relaxing 10.30, just 10% off its lows.

Oil made a nasty .94 gain on the last day of January trading with just 33.7M barrels left open at the close of the contract.  Crude bounced off our $61.69 mark and flew back up to close at $63.15 (+1%).  More importantly, the bloated February contract (with 300M barrels open) closed at 63.46, just .31 ahead of the January contract.

We were very surprised in comments today at the very low expectations set for tomorrow’s inventory report as "analysts" are looking for just a 1.8M barrel draw in crude despite:

  • OPEC cutbacks (that they made a big deal about last week)
  • The Winter!
  • A .7% increase in refining (time 23Mbd = 1.2Mb for the week)
  • The fact that 2.6Mbd has been shut in for 6 days at Houson!

Drawing only 1.8M barrels would be a true Hannukkah Miracle!  ZMan even had a copy of the Houston shipping schedule!

After a 7Mb draw 2 weeks ago and a 4.6Mb draw last week, with 12Mb of tankers…
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Tested on Tuesday

Now that wasn’t so bad was it?

Thank goodness we took those puts becuase that early drop would have been hard to stomach without a safety net but we recovered so fast it was hardly worth the bother!

Here’s a sample of some of the comments made during the day:

  • 9:27 – (market plunging) "may be a huge recovery tomorrow but that doesn’t help us this morning!"
    • That changed already at 9:38 as we started grabbing calls! 
  • 9:46 – (market bottoming) "Rather than sell my DIA and SPY puts, I’m going to buy some DIA $124s"
  • 9:57 (Kustomz) – "Let the stocks fill the gaps from yesterday’s close, then see what they do."
  • 9:58 - (about oil stocks) "a 1.66% bounce is expected and meaningless."
    • That’s just what we got on the day
  • 10:33 – "Watch the RUT very closely at 780, that’s the canary we really can’t lose!"
  • 10:41 (Zman) – "Oops – maybe something just blew up somewhere because oil is perking up pretty quick."
  • 11:00 – "Ouch, Goog (puts) stopped me out nice and quick, apple moving up a touch, this could be a recovery if it holds!"
  • 12:20 (Soccer_f1) – "EBAY heading lower as well. I wonder if I should buy more at $0.95"
    • Bottom Call of the Day – 180 seconds later it took off!
  • 1:09 – "NYSE making a nice comeback at 9,100"
  • 2:03 (Soccer_f1) – "I’m considering CC April20 calls for $1.20"
  • 2:05 – "I’m out of my DIA puts/calls and SPY puts all about even as I think we’ve put the worst behind us."
  • 2:27 – "DIA/Dow – this was the test we wanted! The markets seem to be passing…"

It was also the test I wanted for the new site!  I am very proud and happy with the quality of people and the great sharing of information and experience we are able to bring to the table and I thank every single person who contributed today – this is exactly what I wanted to accomplish with a private site!

This was a very tough market day and we rode it out like a group of professional
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Zero Hedge

Auto Shares Surge As Fiat, Renault Confirm Merger Talks

Courtesy of ZeroHedge. View original post here.

With President Trump in Japan for a state visit and most of Europe headed to the polls to vote in the quinquennial EU Parliamentary elections, there was enough news to keep market watchers occupied during what was supposed to be a quiet holiday weekend in the US. 

But on top of these political headlines, on Saturday afternoon, the news broke that Italian-American carmaker Fiat Chrysler had approached France's Renault with a merger proposal that would leave the shareholders of each carmaker with half of the combined company, in a tie-up that would create the world's third-largest au...

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Phil's Favorites

Trump and the problem with pardons


Trump and the problem with pardons

Courtesy of Andrew Bell, Indiana University

As a veteran, I was astonished by the recent news that President Trump may be considering pardons for U.S. military members accused or convicted of war crimes. But as a scholar who studies the U.S. military and combat ethics, I understand even more clearly the harmful long-term impact such pardons can have on the military.

My researc...

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Insider Scoop

Jefferies Sees 60-Percent Upside In Aphria Shares, Says Buy The Dip

Courtesy of Benzinga.

After a red-hot start to 2019, Canadian cannabis producer Aphria Inc (NYSE: APHA) has run out of steam, tumbling more than 31 percent in the past three months.

Despite the recent weakness, one Wall Street analyst said Friday that the stock has 30-percent upside potential. 

The Analyst

Jefferies analyst ... more from Insider

Kimble Charting Solutions

DAX (Germany) About To Send A Bearish Message To The S&P 500?

Courtesy of Chris Kimble.

Is the DAX index from Germany about to send a bearish message to stocks in Europe and the States? Sure could!

This chart looks at the DAX over the past 9-years. It’s spent the majority of the past 8-years inside of rising channel (1), creating a series of higher lows and higher highs.

It looks to have created a “Double Top” as it was kissing the underside of the rising channel last year at (2).

After creating the potential double top, the DAX index has continued to create a series of lower highs, while experiencing a bearish divergence with the S...

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Chart School

Brexit Joke - Cant be serious all the time

Courtesy of Read the Ticker.

Alistair Williams comedian nails it, thank god for good humour! Prime Minister May the negotiator. Not!

Alistair Williams Comedian youtube

This is a classic! ha!

Fundamentals are important, and so is market timing, here at we believe a combination of Gann Angles, ...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control


Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...

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DNA as you've never seen it before, thanks to a new nanotechnology imaging method

Reminder: We are available to chat with Members, comments are found below each post.


DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University


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More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...

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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism


The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...

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Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>