Slope Of Hope with Tim Knight

The 770 Zone

There's been a lot of fuss about the 800 level, but I think the 770 level on the /ES is even more important.

To my way of thinking, if the market moves to around 770, stabilizes, moves higher, and then pushes past 830.50, that's a very good sign for the bulls. It basically indicates whatever extra "air" had lifted the market quickly from 666 to 830 has been released, and the strength continues. The overhead supply from 800 to 870 is going to take a lot of work to push through, but if and when that work is done, there's going to be a lot of power behind the bulls. A 2009 high of ~1050 is, I think, still in the cards. I sure hope so. It's going to be a total bear-fest if we can get that high.

On the other hand, if the /ES keeps weakening, particularly if it moves below 761.50, that's pretty bearish. The rapid rise has very little support beneath it. There's pretty firm support around 700, I suppose, and I would be completely shocked if it made new lows at this stage of the game. I am presently short 10 /ES at 805 and have a stop above 807.

One thoughtful Sloper emailed me a picture of the good life during his Costa Rica vacation. Click on the link to see it (I am hyperlinking to largish pictures these days out of consideration of your bandwidth).

I'll close by saying that the bulls got to have some fun last month at the expense of the bears (see below). We can expect plenty more of that in the months to come. That's OK, keep at it. Have your fun. Bears have long memories.

Great Minds Think Alike

One of my regrets in life is that I majored in marketing in college. See, I went to an old Jesuit school, and the kinds of subjects which intrigue me (and in which I do well) are religion and philosophy. My belief now is that, unless you're going to become a classic "professional" (like a doctor), taking vocational classes in higher education is ridiculous. I mean, Steve Jobs is one of the greatest marketers who ever lived. How do you think he would have done as a marketing student? Those who can't do, teach.

I still find the realm of advertising interesting, so the following little event made an impression on me. About a week ago, I got the latest issue of Futures Industry magazine. This usually goes straight into the recycling bin, but I flopped it over and immediately had a WTH moment. Before showing you this ad, I will point out the following:

• It is a full-page, 4-color ad on the back cover. This is the most expensive position in most magazines.
• It is from the Intercontinental Commodity Exchange (ICE), a company with basically an infinite amount of money to produce the finest marketing materials possible.
• The focus of the ad is not only a woman's head, but the back of a woman's head. This will be pertinent when you see the ad itself.
• The intent, clearly, was to show ICE with a stylized shape around it. The effect is terribly unfortunate.
  

So here, without further ado, is the advertisement, which I have thoughtfully scanned in for you.

Doesn't anybody look at this stuff before it's shipped off?

Bullish Plays (3 of 3)

Bullish Plays (2 of 3)

Bullish Plays (1 of 3)

The Trader's Mind

Prompted by Burger King's flameout and decision not to trade, a lot of folks in comments have been talking about, for lack of a better term, the Trader's Mind.

This is an important topic to me, since I think it's vital to successful trading. The first two books listed on my Recommended Reading page are directly related to trading psychology, and I would say that the part of me which has improved the most as a trader in the past couple of years has been my mindset toward the markets.

Although I am well-off by some measures, I am most decidedly not a wealthy man, so losing or making a lot of cash in a given day should affect me emotionally. I confess, it does a little bit, but probably only 5% as much as it would for most people. Sure, I get a little excited when things are really going by way, and I feel somewhat irked when they don't, but by and large I have divorced my mind from the real-world meaning of those dollar figures bouncing around the screen.

The real challenge is dealing with other people. I've explained to Mrs. Bear (and Mrs. Bear-in-Law) that I'm not going to talk about my trading P&L except on an occasional, pre-determined basis. It has nothing to do with hiding anything. It has everything to do with me staying in my own private space. If I make a lot of money, I don't want to announce it and create a lot of excitement (and/or spending). And if I lose a lot of money, I don't want to be put in the position of explaining myself and why I didn't close out positions at precisely the right moment (in retrospect).

Exposing myself to the readers here is different for a few reasons. One, there is no personal relationship. Two, there aren't hard-dollar figures involved. And three, by and large the folks who are active in comments tend to be real traders themselves, and we all speak the same language. I'm not going to feel compelled to explain myself to any of you except in terms of errors I've made in charting and judgment. For that reason, interactions on this blog are constructive.

Discipline, clear-headedness, a well-defined plan, a predictable trading environment, and a Spock-like lack of emotions all add up to better trading. We can hoot and holler after the trading day is done. In the meantime, keep your game face on.

Line in the Sand for ES Short

Good Night, and Good Luck

I am starting to feel the effects of my DTAP shot that I had to take after my weekend adventure, so enough posts for the day. I'll see you Tuesday morning, same Slope time, same Slope channel. Good night.

Between the Scylla and Charibdis

Today was one of those days where 95% of profits or losses are established within the first hour of the day. Besides that, the market just noodled around.

I hung on to virtually all of my shorts, although I took profits on my OIH puts (about 35% gain) and a handful of other items. Most of all, I added new long positions. As things stand now, I've got about 100 longs, 100 shorts, and 50 options (all puts). So as you can, I'm very hedged, but somewhat tilted to the bearish side. Neither a big up or big down day is going to hurt me badly or make me a lot of money.

It's becoming clear to me that.....

• The way to make a lot of money slowly over time is in a bull market;
• The way to make a lot of money quickly is in a bear market

This fact is a bit depressing, since I think it'll be a half year or more before we can rock 'n' roll to true bear market behavior again. I'm going to miss it! Waiting is the hardest part.

In the meantime, I'm straddling both rowboats, bullish and bearish. My goal, as I've said, is to make money most days, but not nearly as much in percentage terms as if I had a pure bullish (on up days) or bearish (on down days) portfolio. To put it another way, today the S&P was down 3.48%, yet in spite of my bearish tilt, I was up only about 1% (this percentage got squished pretty badly by the big percentage dips my high-flying IRA picks took).

Most of us have been talking about the dip to the 770-780 area on the S&P, and today we got it. This is not the most gorgeous, rock-solid base I've ever seen in my life. It's actually pretty messy; a dip below 760 would really put any move upside at risk. But I'm thinking 750 or so is a pretty firm support zone for the market, so as stocks lose some of their air, I'm looking to buy more of them.

Selling These, Buying Those

Shorting (with stops)
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BBBY 27
CHDN 32.51
DIOD 11.51
DPL 23.20
UNP 44.64

Buying (with stops)
-----------
ACI 11.76
BJS 8.67
CY 5.99
FII 19.65
HES 49.48
INFY 24.29
MT 16.27
NFX 21.92
NOV 27.62