Slope Of Hope with Tim Knight

Weekend Update

In contrast to the week before, last week was kind of a dud. Equities really didn't go much of anywhere, and oil alternated between new highs and tantalizing dips. All in all, pretty much of a snoozer.

From a retracement perspective, most of the indexes are very close to their 23.6% levels. A failure to take out the recent lows from May would ruin any short-term bear case. 

I have taken a particular interest in the NASDAQ, including the very similar $MSH graph, shown below. Last week was quite strong for this index, but it is approaching May's high. If it falls away from that level (about $625) and takes out May lows, this could be an excellent example of a retracement to a broken trendline. The head and shoulders pattern that I was tracking on this index has long been rendered moot.

The dynamics in the high-tech area are easier to see in the broader $COMPQ. The thick purple line is critically important resistance.

I don't have my puts in $XAU anymore, although I do have puts in a couple of gold equity stocks like ABX. This graph is intriguing and, as I've mentioned before, any weakness here could send this easily to the $160 level.

As you've probably noticed, I've turned pretty cool to my former favorite $RUT (Russell 2000). My favorite index put right now is the $SPX. My stop is not set at the highs of May; instead, it is set to the prior high of May 2, which is 1422.72.

Now on to a few individual equities, all of which I am either short or on which I own puts. The first is CAT, which quickly failed its breakout attempt.

I've been a little disappointed that CEPH has shown its recent strength, but I'm still hoping that this "tilted" head and shoulders, shown here...........

.......results in the same kind of plunge that befell a very similar pattern, HSY, several years back.........

Coach is looking good, with a very plainly defined resistance line.

I had taken my profits on FSLR a couple of days ago, but I re-entered the position Friday when it was up about $25. A break beneath Thursday's low price would be ruinous for the price, in my opinion.

The transports have been wild lately, in spite of $130 oil. Ryder's explosive rise looks due for a rest to me, especially because of the shrinking volume lately.

BIDU puts are very expensive, so I've only got one of them. The line of resistance speaks for itself; in addition, just check out that withering volume.

I got OSTK puts on Thursday, and the stock took a nearly 10% tumble the next day.

CERN's pattern is working really nicely, with our old buddy the horizontal line doing its job.

And CHTT, mentioning in its own post on Friday, seems to have completed a relatively clean, if a bit complex, head and shoulders pattern.

I'll be doing some business travel on Monday, so I'll probably be rather quiet. Have a good weekend!

Gift Guide

I've had a folder full of weird clippings I tore out of the SkyMall catalog, but the market, until recently, has been far too interesting to talk about to make room for such things.

But with things in a apparently permanent state of waiting, I thought I'd crack open the folder and share with you some of my favorite morsels. Father's Day is coming up, so here's plenty of fodder for gift ideas. And this is just a small sampling from my stack.

First up is the SkyRest, which they describe as a "miraculous, wedge-shaped travel pillow." I frankly find air travel troubling enough without the prospect of (a) sitting next to someone snoring away on one of these; or (b) embarrassing myself by doing the same. To my eyes, the effect of using such a pillow is to look positively soused.

We then have the Marshmallow Shooter which "shoots sweet, edible miniature marshmallows over 30 feet........marshmallows not included." What a relief to know that inserting the marshmallows into this tube does not render them inedible. I can only think that the novelty of such an item - - even with the prospect of firing marshmallows into the mouth of a willing partner, Blue Man Group style - - would wear off in a few minutes, which hardly justifies the $25 price tag.

For you lonely ladies out there, a vibrating device........except one with copper prongs sticking out of it. This Vibrating Head Massager, merely $23.95, "gently stimulates millions of nerve endings on the scalp." There is, happily, the ability to remove the spider-like prongs and replace it with a "Pressure Point Massager".

For the truly inept in your life, we now present a DayClock, which offers, at a glance, the day of the week. It is, according to the catalog, both a "conversation piece" and a "fun gift." In my opinion, it's probably neither, although I'm sure its presence in your household would make an impression to visitors.

Lastly - and most appalling - is the $59.95 Color Pattern Clock. This "unconventional timepieces displays a series of LED-illuminated color patterns" to reveal the time. Normally one only needs a fraction of a second to glance at a digital clock to know the time. With this device, however, you actually have to stop and translate the damned thing. So, looking at the picture below, we can see there's 1 light, then, let's see, 2 lights...........and then, counting carefully, three more..........and, finally, let's see, 1, 2, 3...ok, that's 9 lights. So we concatenate the decimals which yields............1239, which is 12:39. Whoops, in all the time it took you to figure that out, the lights have changed. Better start over.

Chattem

CHTT has edged nicely below its neckline. This one looks like a very clean head and shoulders pattern with a target around $45 or so.

Sell in May and Go To Sleep

God Almighty, this market is boring. All right, I confess, this post is just a comment cleaner so you folks chatting can get a fresh start. But I've got nothing to say about the market today except that it's snoozetastic.

Oil Helps Out

Crude oil, which is on the nation's mind like never before, softened up enough today do my puts some good. I am generally short most major items related to oil, gold, and agriculture. We had similar dips in crude oil in late March and late April, both of which were followed by pushes to new lifetime highs, so I am not saying the past few days are game-changing. But at some point this bull trend will be broken.

I mentioned yesterday that I closed out my XAU puts. That was obviously early, and it's a shame that the huge bid/ask spread was the major reason for my wanting to close them out. Oh, well. I could see this easily heading to $160 and maybe even lower.

My NASDAQ puts are pretty deeply in the red. I am watching $MSH closely. If it pushes past 625, this trade is shot.

Crude's weakness translated into strength for the transports. This index is within a hair's breadth of a new historical high.

Apple remains one of my favorite puts, particularly in light of its relative weakness to the broad NASDAQ today.

CNQ is just one example of the formerly hot ag-related securities that are softening up.

I mentioned $250 as a key breaking point for FSLR (which has fallen am amazing 65 points in just a couple of weeks). We're very close.

Both Baidu (BIDU) and Google (GOOG) are also tantalizing at these levels.

Baker Hughes (BHI) is a pretty sweet short with a stop at $90.

The broad OIH has had an amazing run this year. A true tumble in crude might bring this down to the $150 level.

I don't know if I've ever trade OSTK before, but I entered a new position in it today (short).

Another new position for me is VMI, which is forming a broadening top.

I also entered AGN today based on its push higher today, since the risk is lower at these levels. My stop is at $58.

CERN is falling away nicely from the horizontal line you see here.

And Fastenal (FAST) was a new short for me today, again based on the lower-risk entry point. There is a lot of resistance in the $50-$52 range.

Finally, a couple of steel-related issues on the short side.

While I am encouraged at crude oil's weakness, I gotta say, if Friday isn't a down day on the indexes, I'm going to be pretty disappointed with this week. Today's firmness in equities are disquieting, although at least a portion of it was lost in the final 90 minutes of the trading day. See ya Friday!

Rude Crude

On the whole, my puts and equity shorts are doing pretty well in the face of a softening crude oil market, but my index puts are doing definitely not-so-hot. I've still got puts on the $RUT and $NDX, but I get could stopped out of those in a day or two if things remain strong. So far this morning I've been stopped out of ABT, ALB, BLK, MON, RJF, and ACL.

Here are a few of my holdings that I'm feeling pretty confident about:

Stops

The last couple of days have been kind of disappointing on the short side, so this post will be simple and to-the-point: I just want to show the major index charts and my "uh-oh, this isn't going to work out very well" points. A violation of these price levels would be pretty detrimental to the bearish argument.

Oh, and for those of you not in California, let me give you our latest neighborhood gas prices. Only 9 years ago, my friends and I would make a game out of how cheaply we could find gas - - I think 79 cents a gallon was the record. My, how times have changed. 

Re-entering NDX Puts

I am re-entering my NDX short position this morning, using 2015.23 as my contingent stop. I've taken a stab at the Elliott count below (learning, learning........)

Weaker Oil Provides a Bounce-Back

As I mentioned on Friday, I took my profits on my index puts and decided to bow out and wait for a bounce. The equity markets were pretty strong today, aided in large part by the weakness in oil. I never thought I'd refer to $128 oil as "weak", but everything is relative.

Gold was weak as well. I had puts on $XAU, but I sold them (at a profit) for two reasons. First, I hate being in these things. The bid/ask spread is atrocious, and even though the spread is so wide that you could drive a truck through it, I always have to take the bid price, so I always feel ripped off; and second, the price was touching that Fib fan line, and I was happy enough with my profits (up about 40% on the trade).

All the indexes marched higher, and what's crucial, of course, is that they don't push past the highs set a little over a week ago. I'll be re-entering index puts as this climb continues, with stops set at the aforementioned highs.

Interesting, the S&P 500 closed at precisely its Fibonacci line. This suggests this line may represent resistance, whereas before it was support (the oft-mentioned 1385 level).

I have a smattering of long positions on issues that had been battered to pieces. Some of them are doing pretty well, such as symbol CPY.

I don't focus much on the FOREX, but my conclusion from this chart is that the U.S. dollar is going to get a lot stronger soon, which is going to punish oil accordingly.

I'm off the "nothing but options" bandwagon and have a mix of (a) puts; and (b) short equity positions. I've been pushing increasingly into straight short positions of a larger size, since a lot of these downdrafts are taking a while to unfold, and I'd rather not risk the time premium loss. You can see all my holdings, as always, on the right column of this blog, but here are a few selected items; as you can see, I am hoping to take advantage of the softening-up of the formerly red-hot commodities and agricultural sectors.

I don't have much else to say, since I've returned to "wait and see" mode with respect to the broad index markets. All three remaining days this week feature an important economic release one hour before the opening bell, so there may be some interesting fodder forthcoming.

Lights Out on Solar

The solar stocks fad - - and that's what it was, a fad - - is becoming a gerund with an "-ing" suffix. If FSLR, already weak, cracks below $250, look out below.