Slope of Hope with Tim Knight

The Week Ahead is Huge

This almost seems too easy.

And the fact I am feeling that way scares me. Because this is supposed to be hard. Maybe the easy times are supposed to balance the hard times. I'm not sure. But I do know that I can't remember a time when I've felt so confident in my positions and so confident in the direction of the market.

I will say that, in the sensational 4-day trading week that just closed, I had two grand screw ups, both of them related to NDX options. The first screw-up was buying a ton of NDX calls on Friday. I don't have anything against holding positions overnight per se, but having such a large position was simply irresponsible. So shame on me for getting too enthusiastic.

The second screw-up was simpler. I overslept on Friday - - which is highly unusual for me, since I have extraordinary circadian rhythm, but I went to bed at 3:30 and my body just didn't wake itself up until 7. By that time, I realized my NDX puts had too tight a stop, and they were blown out at the worst price of the day. So shame on me for not setting a freakin' alarm clock and having too tight a stop.

OK, shamefest is over. Otherwise I kicked butt this week and was totally in tune with the market. I have 54 positions, all of them puts, and 26 more I'm seriously considering. Three of my existing positions are large index puts (but not irresponsibly large, as was the aforementioned NDX call position).

I get the sense from a lot of what I'm reading that the public thinks the market has bottomed, and we've paid for all our sins with a "bear market" that lasted all of 2.5 months. I don't think so. This might take years. And although I think within that span of time we could see a really meaningful surge up by the bulls lasting for months, by and large I feel this is finally "my" market.

I'll start off with my current holdings.

As this post's title states, the upcoming week is huge. Here's what I've jotted down:

Monday: New Home Sales report. Earnings from AXP, MSTR, FLP, VMW
Tuesday: Durable Goods Orders report. Earnings from MMM, CAH, PCU, X, YHOO
Wednesday: GDP report and FOMC announcement (!) Earnings from AGN, AMZN
Thursday: Personal Income/Outlays report. Earnings from ICE, ISRG, MA, MCK, GOOG (!!!)
Friday: Jobs report and ISM Manufacturing Index. Earnings from CMI, XOM, CVX

What I see in chart after chart after chart is a topping pattern made from about May 2007 to December 2007, and then a structural failure afterward. This isn't a correction. This isn't a dip. This is a sea change in the market's direction for years to come.

I won't bother with the zillions of charts that all look the same. Just a handful. Just look at this perfect retracement on the MDY.

I've tinted one possible target for the $MSH. I think there's more stuffing to be beaten out of this one.

Here's a gigantic bearish engulfing pattern on the NDX. Nothing like it recently at all.

SPX options aren't very efficient to trade, but with a pattern like this, I don't care. This is one of my big put positions. A triple play here - -  (a) broken channel (b) retracement to the neckline (c) retracement to the Fibonacci. Luscious.

I've also dipped my toe back in FX waters, just for the hell of it. Talk about the power of leverage! I put in a teeny little $5,000 position. It climbed to $8,000 overnight. Then down to $700 (!!!!) And that $700 climbed back to $5,100. Sheesh!

Here are a couple of individual stocks. I love BHI's pattern and retracement here. This is the kind of low risk/high reward trade I seek.

GOOG's pattern isn't especially clean, but there's a ton of juice in this due to its lofty price (how many stocks do you know that can lose over $200 in the span of weeks?) I have no clue what GOOG's earnings are going to be. But can you imagine the sh*tstorm that would take place if GOOG, the company that can do no wrong, blew their earnings? Oh my Lord. Get me a fresh pair of underwear.

But I write this on Saturday morning, and it's time to attack the snow. This is the scene from my place. I'm going to go join my fellow bears - - the real ones - - and will return to you on Monday.

Cramer vs. Cramer

Polar Bear

Hi Everyone,

You've probably become accustomed to frequent posts. No such luck today. I'm going to brave a hellacious winter storm and head up to my places in North Lake Tahoe. I am delighted - DEEE lighted - to see that the MSFT-based pop in NDX lasted for about 3 seconds and we're nicely in the red (it's three hours to the close, so don't point and laugh if we end up in the green; as of this writing, the indexes are down).

Anyway, I'm going to be on the road, and I'll do a post early Saturday morning. Sorry to deprive you of any wit 'n' wisdom I might have to offer, and pray for me not to become a Timsicle on the way up through the tundra.

Child Care

Bouncing Blog

Well, this is a Slope of Hope first. I am cramped in the back of a taxicab in downtown San Francisco bouncing my way home. Hardly comfortable, and definitely not an environment amenable to lengthy discourse. This is going to be a short one tonight, folks! It's like using a computer in a 9.5 earthquake.

Here are the key ETFs and what I consider the "uh-oh" levels. I am thinking/hoping the retracement is done or near done.

Current holdings, all of them puts.....

Hangin' Tough

I remain perversely delighted at the triple-digit gain currently on the Dow, adding to yesterday's 300 point gain. Marvelous! Thanks again, Abby! Thanks, "I'm a bull, no I'm a bear, no I'm a bull" Cramer! Thanks all you senior citizens on the Barron's Roundtable! I appreciate it! I really do!

As you might gather, I'm seeing retracement opportunities all over the place. So I'm a put pig. Oink.

How comfortable do you think people are going to be hanging onto positions over this weekend? We'll see. Anyway, I've got a series of meetings this afternoon, so I'll be posting relatively late. See ya then.

Waves, 2008-2012

I don't pretend to know much of anything about Elliott Waves, but I have always found them intriguing.

Over the weekend, I tremendously enjoyed this blog I discovered (thanks, Harry Boxer!) where the author Tony wrote, in part:

This bear market should take five years to unfold. A Primary wave A down in 2008, a Primary B wave up (that will look like a new bull market) into 2009, and then a gradual deteroriation for three years into a lower low in 2012. This first leg down is obviously sharp and swift, should unfold as an ABC, and find support near Primary wave IV: SPX 1061. This level also represents a fibonacci 61.8% retracement of the entire bull market. Posting a chart below illustrating the first two parts of this scenario, and applying the EW pivot points which have worked quite well.

The chart is below. I find this work interesting, and I appreciate Tony's kind permission in reprinting his work here.

Wall Street Analysts==Useless

Here's the latest gem from the multi-million dollar/year professional fundamental analysts on Wall Street. I hope it helps.

Tipping Its Hand

Regular readers of this has probably glimpsed at my Why I Am a Bear post. But something dawned on me a few days ago that probably begs that the aforementioned page be updated.

See, I wrote that page in the midst of a full-blown bull market, so it comes off as kind of an excuse and apology. But now that we're in an honest-to-God bear market, I realize the real reason I'm a bear - - at least the reason I'm a bear during favorable markets! And it is this.......

In bull markets, prices are pushing into unchartered territory. It's just open air. When FSLR was $10, how could you tell if it was going to $15, $50, or $200?

In bear markets, all the lower prices have been traced out already. The support is there. The gaps are there. It's all laid out on the table. In other words, the market has totally tipped its hand, so I personally find it much easier (and more comfortable) to trade.

The past week has been anything but comfortable for most people. You need to be specially equipped to handle this kind of volatility. Today had - what - a Dow point range of 630? Something like that. Astonishing.

When the market opened this morning, it was in a free-fall. I was a little surprised. I was up until about 2 in the morning (PST) and saw the GLOBEX go reasonable into the green at one point, in spite of AAPL's crush. In any case, by the time the opening bell rang, it was another hailstorm.

After the plunge, there was a pretty strong recovery (happily, I sold my RUT puts the instant the market opened). I did ad couple of index calls on a day-trade and made a few bucks there. And I entered a huge RUT put position later in the day and was delighted to see the market start to plunge again. As the market approached Tuesday's lows, I decided to sell half the puts at a nice profit and a tightened up the stop on the other half. That other half got blown out at a loss, so in the end a six-figure put position threw off just a few hundred bucks in profit. Quite a bit of risk for such a minuscule reward.

The exciting part - - and I'm thrilled with it, believe me - - is that a rally finally took place. And not just a hundred point rally. But a big, kick-ass 300 point rally. Bulls, I love you! Abby, I love you! Jim Cramer, I love you! Maria with your cute hat, I love you! Push this market up, my bullish friends! You are my favorite people! (I had RUT calls during this surged and closed them out shortly before the close, even though I think there could be more upside).

The reason I want the bulls to absolutely rock & roll is to get this market back to levels that are attractive to short. I've put my toe in the water with a RUT put position, but I'm not convinced this is all the juice the rally has to offer. There might be 200-300 more points to lift the Dow.

Here's a close-up of the S&P 500. Maybe 30 more points here.

Here's a daily view, instead of minute bars.

The cubes are, to my way of thinking, pretty close to their retracement point.

The Russell is between its retracements. I've got about a $50k position on these puts. But if it pushes up to the tinted area, I am going to pig out like Roseanne Barr at Arby's.

And the Transports - heavens, Nevins - just gorgeous. Beautiful.

Investment banks exploded higher today. This intraday recovery might represent all the recovery that's in store for them.

The four horsemen are getting their jewels kicked in. AAPL broke a major trendline.

As did former $750 stock GOOG.

I gobbled up puts on various investment banks near the close. Here's one.

And another. Love it.

Two days ago I bought up a bunch of real estate and lenders. I sold them off today for nice profits, since I think the bounce-back is petered out on these.

I'm having a ball in this market. I hope you are too. It takes grace to trade this market profitably. May grace be upon you.

FINALLY!!!

OK, half an hour to the close. and it seems pretty sure the market will close up for the day. GOOD!

It has been one hell of a day (and one hell of a week, and one hell of a month). There's a LOT to talk about. I am terribly busy this afternoon and will probably not get to post until a few hours after the close.

Fear not; I shall return! I hope most of you did all right today!