Slope of Hope with Tim Knight

Just One More Day!

OK, the past couple of days made up for the recent crappy market we've been in. It was another good day, and we can take comfort in the fact that bubble-like mentality is riding high. The latest is a price target of $600 on AAPL. Seems like old times, doesn't it? I wonder if 2008 will be the new 2000, since 2007 seems to be the new 1999. No, no, you're right. I'm sorry. Facebook really is worth $15 billion. Just think what it'll be worth when they make their first dime in profits!

I consider the blue tinted area below to be pivotal with respect to what the market does in the new year. Absolutely pivotal. If we break above the blue area, the bulls will get to party a little longer (errr, sort of like they did from January to mid-March in 2000). If we break below the blue area, well. You know.

It takes tremendous testicular fortitude to be a bear in a market like this one. But, with a mere single trading day left in 2007, I can say with confidence this will close out my best trading year. And I'm pretty excited about where I think the NASDAQ is about to go.

The very important Broker/Dealer index ain't lookin' so hot for our bullish buds either.

Back to soon-to-triple-in-price AAPL. I dunno. Just like everyone hated this thing at $6, everyone loves it at $200. I think the bloom is coming off this rose.

Back when AZO produced blow-out earnings, I lost out on my puts. I jumped right back in though, with the stock near $132, and my gains so far have more than made up for prior pain.

Sothebys is a terrific broken trendline play.

Baidu has been bad to me this year. Once more into the breach, dear friends. A double top, perhaps? There's a ton of juice in this, should it soften.

Although I have a preternaturally superior sense of direction, my wife got me a Garmin for Christmas. Feh. I've got puts on this bad boy.

IBM is one of the nicest broken trendlines I've seen in a while.

I entered LVS a while ago as a long shot, since it was so strong, but it's been doing fantastic.

I got into MMM earlier this week. This is shaping up nicely.

I'm not sure if I showed this one, but Morgan Stanley (MS) is sporting an excellent head and shoulders pattern, and it has already saved you the trouble of waiting for the retracement.

I'm heading to San Francisco with the wife and kids. I'll see you on the final trading day of the year, my friends!

To the Penny (Again)

Oh, Fibonacci. When will you ever cease to amaze?

Nice Clean Open

This morning, the indexes gapped higher (I guess major assassinations only affect bulls for one session in this insane market of ours). I wasn't nervous, though, because it didn't violate my "line in the sand" I had drawn from yesterday's activity. I've circled the high point from today's open, which was comfortably below the aforementioned line.

Of course, the real fun started when the home sales data came out. The consensus was 720,000 houses. The data came in at 640,000. It's pretty clear to see where the home trend is going.

My Most Valuable Lesson from 2007

Wow. What a day. After an absolutely miserable series of trading sessions, where I fear the Dim Tim moniker might be foist upon me again, I had a terrific trading day. Of course, as I predicted, I sold my index positions far too early. But, all the same, it was a great day. This is the kind of screen that's a site for sore eyes (every single position in the green on the day).

I guess, as JakeGint stated, if you ever see me making bullish recommendations, that's probably a very bearish sign. Because only when I'm in full-on despair mode does the market make a top.

The IWM held very firmly at the 38.2% level for a very long time today. After I sold my RUT puts, I repurchased them.......twice!.......only to lose a small amount each time as it seemed the IWM was firming (I was concerned it was going to rush up to around $79 again). Third time's the charm - - I entered the $RUT position and, at last, the IWM cracked that line and started falling. The blue tint indicates the 'free fall' area until the next retracement is reached.

A lot of my positions are gold and oil related, and I'm banking on what I see as a pretty nice dome top on the $XAU.

Before I get to my 'valuable lesson', here are my current holdings (55 total). Some of them are carefully reasoned. Others are just nutty long shots (like AAPL).

OK, so now for the lesson learned.......

2007 will end pretty well for me in terms of investment return. However, I would have wound up with a lot more cash in my pocket if I had the following insight a year ago: "Make it, then Take it."

To explain: I need to start regarding trading as a source of income, not as a growing business. In other words, my hope was to grow my account bigger, and bigger, and bigger, and bigger. It hasn't worked out that way.

Instead, my account will get bigger. For the sake of argument, let's say it goes from $100,000 to $200,000. Then I will trade more aggressively, and the market will turn against me, and the account will shrink to $110,000. Then I'll start up again, $110,000 to $210,000 (again, these are just hypotheticals to make the point). Then I'll start sucking again, having the account fall back down to $120,000. And so on.

I've decided that, from now on, as I'm banking profits, I'm going to withdraw the money and shove it in my pocket. Banking profits will help reduce the account size when it is at its most vulnerable (that is, when I've been doing really well). Smaller account, smaller risk. And the profits get put somewhere safe (my pocket) instead of remaining at risk.

This isn't some brilliant portfolio management advice for the world. It is driven by two things: (1) my personality; (2) the nature of the market these days, which tends to be moving in large up-and-down swings.

In any case, whether it works for you or not, that's my takeaway for the year. Make it, then take it. I hope it helps a few of you in some way.

Chicken Little

I am a chickensh*t. I admit it. I just closed out my SPX, RUT, and NDX puts (all at good profits) since I have been so completely shell-shocked since December 17th. It's stupid, and it's wrong, and I'm only doing it because it feels good. I'm sure I'm going to regret this. :-(

Bhutto Assasination

If you ever want to see how swiftly the volunteer editors at Wikipedia are (and, yes, I'm a cash contributor to the Wiki Foundation - I think it's great, and I hope Google Knols falls flat on its face), just look at this. Information about the life (and untimely death) of Benazir Bhutto was updated within moments of the news hitting the wire.

I know very little about Pakistani politics, although what little I know indicates Bhutto wasn't a Gandhi-like saint. But she certainly seemed better than the government in power, so it's saddening that this strong woman (plus the 15 other individuals killed by the explosion) was struck down.

Shrivel Up

One of the perplexing things to me lately has been that financial markets are supposed to be predictive about economic direction, yet this market seems to be floating on helium while the macroeconomic picture in the U.S. is looking increasingly dim. (Falling housing prices, a looming shift to the left politically, dramatically slowing retail sales, etc.)

A few minutes ago, the latest indicator - durable goods orders - hit the wires. This index actually fell 0.7% in November, but a surge in civilian aircraft for the month exceeding 20% helped edge the durable goods orders up by a breathtakingly robust 0.1%. And God knows civilian aircraft manufacturing is the backbone of the American economic system.

For the moment, at least, pre-market quotes on the indexes are soft based on this news. Even the QQQQ, which was well into the green before durable orders hit, is down about a third of a percent right now.

Half an hour into today's open, another critical number - consumer confidence - will hit the wires. I'm disgusted with this momentum market lately, and it would be a nice change to see some red.

UPDATE: Consumer confidence came in higher than expected, but the market got somewhat disturbed at the fact that Pakistani candidate Benazir Bhutto was assassinated.

Boxing Day Blues

Well, I guess the old saw about the market rising the day after Christmas held true for a 10th year, albeit at a gain of two hundredths of a percent on the Dow. Today was insane on the IWM. It started as pretty normal, gently easing down. It formed a little dish pattern, then all hell broke loose. I don't normally see action like this except on Fed days.

Needless to say, I find the run-up as we approach the end of the year distressing. I'm not sure how much of it is window dressing, and I'm also not sure how much air is going to be let out of the tires when the new year (ahem, new tax year too) rolls around and people can dump out of high-fliers with delayed tax consequences. The run-up has been far faster than anything I've seen in a while. Not good.

As a sign of my despair, I have nothing but bullish charts today. I've picked out a series of stock charts that have been so pummeled that I think they've got a fair chance of a bounce. These are, on the whole, related to the highly troubled mortgage mess, but one wonders if they've been sold so far down that they represent real value yet.

Welcome Back

Welcome from the land of leftovers. I hope, for those who celebrated Christmas, you had an enjoyable one. We're down to the final 4 trading days of the year. Andrew Crowder commented on this blog a few days ago:

According to the Stock Trader’s Almanac (makes a great Christmas gift) the week after triple witching the Dow has finished higher 12 out of the last 15 years. Furthermore, the trading day following Christmas has been higher nine years in a row.

It'll be interesting to see if both of these historical precedent pan out today and this week. In the meantime, unless something really interesting happens, I'll see you after the close.

Merry Christmas!

I took a picture of one of the gifts from the missus this morning.