Slope of Hope with Tim Knight

There Will Be Blood

Nothing caused more grievous harm to me this week than the recurring theme of trying to play "the bounce." Because, as we all now know, the bounce never came. The only thing that did come was this creepy headline from MarketWatch:

At least they didn't transpose those two nouns. That would be really creepy.

So although this was one hell of a week, today was my worst day in a long, long time. I have trimmed back to a mere 18 positions: 17 of them are equity puts (small sized) and one of them ($NDX) an index call (big).

As much damage as the "bounce" idea has caused, I still believe it. People were panicked this week. I think between the subsidence of that panic, the almost-assured hefty interest rate cut on the 30th, and other touchy-feely talk by Washington, some confidence will return. Ironically, as bears, we desperately need for there to be a bounce. To be buying at these levels is very risky and very expensive. To my point of view, the VIX spike finished up today.

The rest of this post is similar to last night....a rundown of charts that I think all speak to the notion of some short-term strength in the market.

I'm blown away by how active comments has become (Thanks, Disqus!) I used to bellyache about how we'd only have 15 or 20 comments, if that. These days, it's measured in the hundreds.

Have a good, long weekend. In the spirit of MLK, I Have a Dream that we will get a good, hefty bounce and we can reposition ourselves again at attractive, rational levels. Thanks for visiting, and I'll see you again Tuesday morning.

Tomorrow Never Knows

Turn off your mind, relax
and float down stream
It is not dying
It is not dying

Lay down all thought
Surrender to the void
It is shining
It is shining

That you may see
The meaning of within
It is being
It is being

That love is all
And love is everyone
It is knowing
It is knowing

That ignorance and hate
May mourn the dead
It is believing
It is believing

But listen to the
color of your dreams
It is not living
It is not living

Or play the game
existence to the end
Of the beginning
Of the beginning
Of the beginning
Of the beginning
Of the beginning
Of the beginning

I Think It's Ready

Hell, if I can embarrass myself in front of 12,000 people singing, I can make an intraday pronouncement.

I think the market's finally in a position to move higher (I am writing this at 11:15 PST, 1 hour and 45 minutes prior to the close). Lots of false starts so far. But I think maybe it'll pull it together between now and then close.

Now I'm going to pretend to drive around in the Mercedes 55CL AMG that I could have bought with all the money I've wasted on index calls so far......

UPDATE (15 minutes later). Forget it. This market sucks. I think people are going to sell right into the close. This is simply insane.

Beartard

I cannot freakin' BELIEVE this market.

I have been waiting since Abraham Lincoln was in office for a market like this, and I'm stumbling all over myself. I sold my $RUT puts immediately at today's opening for a small loss. Then I loaded up on NDX calls and promptly threw $8,500 into the fire on that.

I need to embrace my old doom-and-gloom self. This market is doomed, and I keep getting infected with little bits of bullishness. Shame on me. Shame on me.

Here's the part driving me nuts. The $INDU has nailed the target price today. NAILED IT. Fibonacci level is 12,025.97. The low as of this writing is 12,032.40. That is 99.95% almost on the button! If we pierce this level, wow, I'm out of things to say.

Too Much, Too Soon, Too Fast

You would have thought that yesterday would have been fantastic for me, but it was only OK. After all, it was the worst trading day (for bulls) so far this year. And it marks the worst start for the trading year in the entire history that the Dow has been calculated. But it was only OK.

The reason it was only OK is because I have, for what seems like forever now, been buying into the idea of some monster bounce that was just around the corner. So only several occasions I entered into sizable index call positions, only to lose each and every time. But the losses were nothing terrible.

In retrospect I think I'd say I did one generally smart thing and one generally dumb thing. The smart thing I did was recognize that selling was acting pretty climactic, and I made an elegant exit from about fifty equity put positions. I also, just minutes before the close, exited my $NDX put position. The generally dumb thing I did, besides trying to work with index calls, was to buy a $RUT put fairly late in the day and hang on to it. I guarantee you that sucker is going to be down hard at the opening bell, since current indications (it's 90 minutes before the opening right now) point to a very strong open for the bulls.

And it's about time. I want a bounce. I want several days of green. The year so far has been great, but this is just too much. I firmly believe we're in a bear market now, but these entry points stink right now, and I am mostly in cash at this point. Having been burned badly on call options, I think I'll just sit things out, by and large.

Some people have been asking about the VIX. That actually, probably more than anything else, was what compelled me to get out of those NDX puts shortly before yesterday's close. Because prior VIX peaks (and market nadirs) have been at lofty, lonely levels, and this one sure looked to be the same.

So, there you have it. I'm looking for a general market bounce to last - I dunno - a week or so - I'm really not sure. What I feel more sure about is the levels I want to see before I get excited about puts again. Until then, I'm going to tie my hand to my chair and away from the Buy button. Here's how I see the indexes:

Oh, there's one more thing (my tip of the hat to Steve Jobs........) I have been going through old posts (you should look back at the October archives; fascinating stuff). On October 19th, when the Dow was at 13,522, a commenter whom I shall not name wrote this:

OK, ITS OFFICIAL!!

Elaine Garzarelli called the 1987 crash with a 9/100 on her rating 

system. Over 65 is a buy, under 30 is a sell. Today, we are at 75--"a 

major buy signal and if Fed eased again we are going over an 80 buy 

signal" per Elaine.

I actually remember reading that post and being worried. But her "major buy signals" seems to have, well, sucked. This only deepens a long-standing distaste I've had for curly-hair.

Oh, and I've received enough pleading to strap on a pair and put my singing back on the air. This takes courage, so if you feel compelled to criticize, please send me a sample of your own singing first.

Sulk-Free by the Morning

I'm going to hop into bed for a manege a trois  - - me, the Wall Street Journal, and the New York Times. If I get up early enough, I'll do a post with a look at what might be next in these insane markets. What a day. I've had enough. Good night........

Acapella

UPDATE: Well, I had posted what I thought was a funny little video I made of a song that I wrote (and sang - acapella, no less!) but some of the comments are so mean I'm going to sulk for the rest of the evening. Analyze yer own damned charts. {Tim covers his face and runs off stage.......}

In case you're still interested, here are the Tim lyrics, sung to the tune of "I Don't Know How to Love Him" (from Jesus Christ Superstar). Humph. I still bet I sing better than you. Grumble.

I don’t know how to trade it

What to short, when to close it

I’m a bear. A mean old bear.

In these past few years, I’ve fought

The bulls

And now my time is here.

I don’t know how to trade it

I can’t tell where’s the bottom

Prices fall. They all just fall.

And I’ve had so many puts before,

On top of all the rest

Here’s just one more.

Did we reach a top?

Should I set my stops?

Should I close them out?

Let the bulls all shout?

I never thought I’d win so long

With the bulls so strong

Don’t you think it’s rather funny?

Worried ‘bout all these positions

I’m the one who always been

So calm, so cool, no Motley Fool

Waiting for the drop

On RIMM and COP

I never thought I’d come to this

When do I get out?

Yet, if the trend reversed

I’d be freaked, I’d be frightened

I’d get stopped out. And roll about.

I’d hang my head. I’d back away.

I couldn’t change to bull.

There’s too much pull.

It scares me so.

I want the dough.

I love downticks so.......

How Low?

Well, I thought I'd get real cute and buy some index calls. That work well for a little while, but a few thousand bucks in losses later, I'm out of them (more worrisome is the fact I cleared out of virtually all my equity puts; fantastic profits, but I wonder if that was hasty). So - - being a permabear isn't so bad when you're actually in a bear market.

Bernanke's testimony clearly was uninspiring to the bulls. A price base is trying to be made today, but it's having a hell of a time. The best case scenario for the bears is shown below. I've tinted whatever support is left in blue and the Fibonacci-based target in green.

Buy the NDX?

I am going to go WAY out on a limb - - and it's been a great, profitable day so far, trading RUT and NDX index puts, so don't get me wrong - - but I am considering buying NDX calls. Not for the long haul, by any means. But if the market does manage to get any strength at all, this one seems most likely to lead the way. Just a thought. This post could be rendered moot within minutes, considering the swoon today. Perhaps my ulterior motive is to get the quantity of comments beneath 100 for any given post!

Midpoint

Good  morning, everyone.

Hot of the press is the analyst report from Citibank (heard of them?) saying owners of Harley Davidson should Sell (that's the rating they just gave) their shares. Professional fundamental analysts have once again saved the day for investors.

As long as we're on the subject of falling markets, I haven't mentioned China lately, but during their wild times last year, I kept wondering to myself just how many middle class Chinese citizens were emptying out their piggy banks to go "all in" to their soaring markets. Think there might be some pain in China now? I suspect so.

You can imagine how many completely naive new investors dumped everything they had into speculative issues. I daresay many of the losses were much greater than the overall 20% average. And that isn't to say the fall there is over by any stretch.

But most of my readers are in the U.S. of A., so let's focus on that a moment. We are once again that exasperating middleground of Fibonacci-land where the distance between the Fib lines is about the same. It makes it awkward to take a position.

Some people have pointed out the Dow 30 looks like it has made a huge head and shoulders topping pattern. Perhaps they see something like the chart below, with a projection of about 10,900 on the Dow.

You might think I'm the sort who has never met a bearish chart he didn't like, but I'm actually more discerning than you might think. I actually don't think this is an H&S pattern - - certainly not a clean one - - so I don't put a lot of stock (doh!) into the aforementioned conclusion. My view of the Dow is more along these lines:

.......which suggests more of a short-term bottom than an imminent collapse.

But the market is rife with contradicting information right now, hence days like yesterday when it's absolutely insane. It's not that the point moves are especially large. But the flopping around from red to green can make you seasick.

The market is opening in about 20 minutes as I'm typing this, so I'll sign off for now. In spite of the housing start data  being the worst in 14 years, the market looks like it is headed for a decently strong opening bell. Plus our main man Shalom is speaking to Congress this morning. Should make for an interesting day. I only hope it's not too interesting.