Slope Of Hope with Tim Knight

Ample Parking Day or Night

My "two hours of sleep a night" bit is getting to me, so this won't be an especially long post. Let me just hit the highlights.

First, I'm intrigued by the newfound strength in the $IRX. It is very near the top of its range since the 9/15 gap, which suggests a (relative) sense of calm and ease is returning. Now, with a VIX nearly at 40 I realize that people aren't kicking back in their lounge chairs. But, let's face it, the Dow shooting up nearly 500 points probably calmed a lot of very nervous bulls out there, and as I've said repeatedly, a big surge is precisely what we bears need to see.

I'm not optimistic that we're going to get another turkey shoot where the VIX is at 18 and everyone thinks a full-blown bull market is back. But give me another day that's similar to today, and it'll be time to load the rifles again.

I've see a lot of smart folks pushing for a bull market in gold. I don't get it. Gold looks really sick to me. I have a reasonable number of bearish positions in gold, although I did close out my bearish silver positions today in order to wait for a hopefully better entry price.

As for oil, this is a bit of a tough one. The topping pattern is pretty huge, but the prospect of a large, very time-consuming right shoulder on this pattern is very real. It could be months before we see a real collapse. So I trimmed way back on my energy-related shorts, taking profits and stocking up on cash for our next golden opportunity. (Those following me on Twitter will recall that on the 19th I declared it the "selling opportunity of the year." Boy, was I right about that!) Anyway, if the $OIX got back to, say, 750-775, that would be pretty intriguing.

Looking at the equity markets, I'd say they easily covered at least half the ground they need to cover in order to create some great bearish opportunities. I actually got into a respectably-sized SPX put position near the end of today, although I might be early on that. I was dead spot-on getting QQQQ calls last night (and, thank God, getting out of my index puts yesterday), although, as is so often the case with my bullish positions, I sold them way too soon.

I likewise did a lot of trimming in my commodity positions. The $CRX is hugely broken, but there could be a substantial retracement at these levels.

The view from the $XAU is a head-scratcher. $130 seems to be an important support level. I think it's possible we just noodle around this area for a while. There's a pretty big range from 130 to 155, and as you can see for 2006 and most of 2007, XAU just boinged back and forth within that range.

I've tinted in green the progress QQQQ made today back to its retracement line. Like I said, we're a little more than halfway there is just one trading session. I think what would goose us up to the victory line would be the passage of the government failout.

As for the $SPX, it could be argued that we've already achieved the retracement. That bold Fibonacci line is a major one. If there's more strength to be had, I would think 1205 would be about the next stopping point.

 Finally, just for fun, here's an update from the steps of the Capital building.

Yay, Bulls! Go, Go, Go!

This rally is just what we need. A day like this, and one more just like it, will get us ready to rock and roll again. I'll be waiting.

Cause For Concern

Let me be clear. Nobody wants a rally more than me. Nobody. I would love to see another 1000 points tacked on to the Dow. I have a huge list of stocks that, if they can retrace, represent the shorting opportunity of a lifetime.

However, I'm wondering if today's rally is "feebing out" on us. I have closed my QQQQ and SPX calls for small profits. What I see is today's rally bumping up against some pretty big Fibonacci levels.

Again, if anything, I have a bullish bias right now. But I'm really wondering if there's any more juice left here.

Any More Strength in $INDU?

I'd be sort of flabbergasted if the entire countertrend rally was over, but just as an FYI, note that the $INDU has stopped short at its 78.6% retracement level. In fact, the high today matches this level virtually to the penny.

On Concurring in Senate Amendment With An Amendment

I am making no rush to the exit after all. In spite of the Dow being up over 200 points early in the session, my positions are holding strong. I am watching $UTIL in particular to see if a full exit makes sense, or merely half the position.

Graph after graph of the indexes indicates they are reach to bounce from their supporting Fib level up to their resistance Fib level.

What Makes Sense

We are living through insane times, but I think this is generally what's going to happen over the next month:

ONE: The markets will bounce higher. The reasons for the bounce will be an extremely oversold condition, the eventual passage of some kind of "bailout" bill, and the sense that the worst is finally behind us. I imagine indexes would spring, for example, back to the area I've tinted below.

And, at the same time, the $VIX will lose its unprecedented froth and sink down to "only" the mid 30s or so.

TWO: There will be a huge, huge supply of charts which had been severely beaten which do a substantial retracement back up to either broken horizontal support or, more commonly, broken trendlines. I am already amassing so large a watch list of these prospective "bounce backs" that it's ridiculous.

THREE: The new catalyst for a downturn will be Q3 earnings, as those start to emerge in earnest three weeks from now. It's going to be sort of like RIMM (although not necessarily to that extreme) for hundreds and hundreds of different stocks. At that time I plan to go hog-wild buying puts on or shorting the aforementioned "bounceback" issues.

Having said all of the above, obviously I intend to scramble out of the majority of my present positions. As of this writing (more than two hours prior to the opening), there is no "big news" yet. There's no surprise interest rate cut, although that could change at any moment, and the GLOBEX on equities have been in the green all night. I am (with the usual caveat - "as of this writing") relieved to have closed out my index put positions. I am hoping that at least the initial bounce isn't so big that it takes too meaty a bite out of my current profits.

We are living in an absolutely unprecedented era, so laying out what I think is going to happen over a month - - which in current market conditions is like predicting what's going to happen over the next fifty years - - is highly speculative. But that's the general theme I'm running with for now.

Oui Hours

My kids outrank you. I've got books to read. I'll be back in the wee hours of the morning to write up a post. Until then, g'nite.

New Target for $UTIL Trade!

As regular readers know, I've been ga-ga over the short position in $UTIL.

I have examined this chart with fresh eyes, and I have decided it is time to take profits on this position.

The head and shoulders on this pattern has always been a bit sloppy. The retracement back to 8/29/2008 is my new neckline (shown as the purple horizontal line, below). The math is pretty simple. 8/29's high was 486.64; the ultimate peak on 1/8/2008 was 555.71; the difference is 69.07. Subtract this from the neckline value, and you get 417.57, the new target price.

Today's low was 420.25, which is extremely close to the target.

Importantly, I took a fresh look at the long-term chart back to 1929. My retracement goes from 4/28/1942 until 4/20/1965, and the extensions of this retracement are pretty remarkable. The 261.8% extension and the high price reached in December 2008 are virtually identical at the value of 418.25.

So, as you can see, there is a convergence at these levels. I will probably re-enter this trade on a serious bounce higher, but I am planning on liquidating my entire SDP position which has provided a nearly 20% return in a very short amount of time (and constitutes my entire retirement account right now!) I also intend to sell my XLU puts in the morning.

I wanted to make a special point of updating this trade as I have been so vocal about it.

The Best Is Yet To Come!

Hello Fellow Slopers!

I hope you made a lot of cash today. I think the collective group here has helped each other so much. I am especially grateful to Evil Spectulator (molecool), Moon Trader, Gary, Gagelle, and Master Shake - - I'm probably forgetting some names, but this is just a quickie post.

September 29th was said to be the "biggie", and I'd say we got what we bargained for. I have a couple of important appointments I need to attend, so I won't be doing a post until tonight. But I will share a few quick thoughts:

• The risk/reward on my index puts got so extreme that I sold all of them a few minutes before the close.
• I believe the indexes have been pushed to such deep levels that the opportunity for a substantial bounce is before us. Being the type that puts his money where his mouth is, I bought 100 November QQQQ calls shortly after the close today (you can get these for an extra 15 minutes after the regular closing time).
• I think the juiciest bearish opportunity is actually in the future; perhaps weeks out, or perhaps months out. I'll talk about this more tonight.

Today was the best trading day of my entire life, and, again, the terrific community here is a major part of that. I hope that, in turn, millions of dollars in profits were made amongst the audience here. Thanks, everyone, and I'll write more later today!

Taking Profits on Index Puts

We have pushed the market to extremes. I'm getting out.