13 years ago – Slope of Hope with Tim Knight

Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Slicker Than Snake Oil (by Trade Flight Plan)

By Trade Flight Plan - 13 years ago (22, Nov 2010 7:16:22 PM)

Irish whiskey, inventory levels, currency wars, and FOMC – whoopee!

Other than that, crude oil has been light, sweet, and volatile. As a quick followup to our prior post, we continue to watch the net positions of commercial entities on CL (now trading the CLF1 contract). Imagine our surprise when we see the commercials are actually increasing their net short positions to record levels based on the latest weekly Commitment of Traders (COT) info. These are airlines, producers, transportation companies, and other big hedgers.

Same rules apply as last time:
Red=commercial traders, yellow=small spec traders, blue=large non-commercial traders.
Green vertical lines show relatively high COT readings by the commercials. Red vertical lines show relatively low COT readings for these slick oil hedgers.

Just for kicks, we highlight with nice blue circles what happened previously when commercial net short positions hit new lows.

We cannot short at lows, and the snake oil salesmen haven't made it easy to get short, doing things like initiating the moves during Asian or European session hours at some crazy-o-clock in the middle of the night, blaming it on a supply disruption in Irish Whiskey as an excuse. But boy, any micro bull intraday retracements sure look interesting, especially if we can get some confirmation on smaller intraday time periods.

Even if all else fails, oil bulls would have to believe that somehow, this time things will be different and nearly 200,000 oil contracts net short of the nastiest, slickest, smartest traders in this business are just kidding. The best part is, an increase in the yellow line representing small speculators tells us that retail traders have been buying it.

Of course, in these markets anything is possible. In October/early November they marked price up by nearly $5/barrel before selling off, just to prove they could. The entire time, the commercials just kept establishing even larger net short positions. Someone's either going to get taken to the cleaners or make a fortune. Just stay alert if you're trading stuff based on oil, like USO, RIG, BP, XOM, etc. If CL sells off, they stand to make a nice profit. If not, end of year could get interesting.

Long-Term Analog Update

By Tim Knight - 13 years ago (22, Nov 2010 3:23:09 PM)

I haven't taken a good look at the 1937-1942 analog lately, so I thought I would do something a little different this time and back it up – way up – to a larger timeframe.

First, here is the chart from 1928-1943. I have numbered the major turning points. For those not acquainted with my work, let me drive home the point that this has absolutely nothing to do with anything resembling Elliott Waves, which in my experience have proved to have zero predictive value. These are just plain old numbers. Nothing more.

(As usual, if you click on either of these images, you will get a larger version of it.)

My belief is that we are at approximately point #25. There has been a huge amount of noise the past several months in the markets, making the identification of our "location" quite difficult, but based on this interpretation, I think the "grind it out" slow descent has begun, and there won't be any big drop until sometime in the middle half of next year – – – let's call it April, give or take a month.

The notion that the market isn't going to make any big moves in either direction for a while sort of makes sense, given:

+ QE2 is obviously kind of a pile of wet kindle right now; a $700 billion joke that's already been fully taken into account;

+ Earnings clearly aren't falling to pieces; they might not get hit with Reality until Q1 2011 reports come in, which would coincide with a "shock event";

+ What's the best or worst news that could happen in the short term? The market has been buffeted by a lot of news lately which, in normal markets, would be cataclysmic, but with the Permanent Fed Backstop, all moves are muted.

Now any time I mention this analog I hear the same tired old excuses: "It's different this time. We are in a totally different world than the 1930s. Everything has changed." If you seriously believe a historical chart cannot inform your present-day decisions, I don't know what your interest in technical analysis is in the first place. To my way of thinking, historical analogs are an important premise for the entire realm.

The good news for bulls and bears alike, I think, is that a steady market is a chartist's market. I have plenty of beautiful long and short positions that I really like, and I'll be happy to acquire more. This kind of "smooth sailing" really reduces my bias, and I'd prefer to have a mix of bullish and bearish charts that I really like instead of having to tilt hard in one direction or another.

Psychotic Cereal Killer

By Tim Knight - 13 years ago (22, Nov 2010 1:01:03 PM)

My family shops at Whole Foods, and has done so for years, so I've pretty much lost touch with mass-market food products, particularly cereals.

On rare occasions, I need to pop into a Safeway, and I've noticed something pretty shocking – – – the sea-change that has taken place in children's cereal art.

When I was a young bear, the images on cereal boxes were colorful, but still fairly simple and friendly. Here's my old friend Lucky Charms:

Compare this with the psychotic, meth-crazed lunatic currently appearing on the same product:

The above is not a bizarre exception. Cast your eyes on the sweet, simple white rabbit on Tim's Trix from many years ago (and the charmingly naive homage to the U.S. Government):