Long-Term – Page 102 – 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.

For Clarity’s Sake

By Tim Knight - 16 years ago (22, Dec 2009 4:12:54 PM)

As we amble our way toward Christmas (and, yes, it is "Christmas" – – – not "Holiday") things are getting progressively more quiet here on the blog; I don't expect traffic to pick back up until January 2nd. But I'll say this……….

Yes, I'm enthused about a large number of bullish patterns (for me, anyway), and I'm talking about plenty more long setups than I usually do. But, just to be clear, my multi-year view is still aiming for the target you see below:

My belief in certain techniques (and gurus) has definitely been shaken this year, but my long-term viewpoint has not. So, in case it isn't abundantly clear, I just wanted to say so.

Continued good luck with your wrapping and dinner preparation duties. We're hosting Christmas this year, so it's going to be a big one. Oh, and thanks for the beautiful Christmas ornaments, which I just received today.

Escape Velocity

By Tim Knight - 16 years ago (12, Dec 2009 6:19:19 AM)

More Drivel (by Nathaniel Goodwin)

By Tim Knight - 16 years ago (09, Dec 2009 7:01:35 PM)

I've been wasting most of the day browsing perezhilton.com and was about to check out some of my favorite adult sites, but then I thought my time would probably be better spent looking at some charts.

Something I like to keep in the back of my mind right now is called the Fan Principle.

In corrective / intermediate trends, which many think we have been in since March (if you believe in the new "bull market", just skip this post), where the advance has pretty much been a straight-line orderly return; the Fan Principle might be a good tool to gauge when the correction is over.

First we need to find three good trend lines to make our fan, ones that contain the price action. After fan 1 is broken, prices come back but does not penetrate it. Then fan 2 is broken, price comes back but does not penetrate it. Now we are looking at fan 3. Once fan 3 is broken decisively usually on higher volume, the top has probably been seen according to the Fan Principle. The move creates some sort of "rounding top".

Just like anything, there are exceptions to this rule and it doesn't mean we can't have more strong rallies over the next few weeks. Just one more thing to keep in mind as we move sideways here. "Long-term" investors should really take note of this; it is giving us warning signals.

I told my mom to speak with her financial adviser, and maybe pull some of her money out of the market (I've been telling her that since June-July and she says I sound like a real douche when I say this). Mom never listens to me, but at least she agreed to meet with him again.

ISEE Red Candles

By Tim Knight - 16 years ago (27, Nov 2009 6:13:24 PM)

Hello Slopers – Mole here from Evil Speculator.

The following post was actually written on Thursday morning during which I was blissfully ignorant of the deep hurting experienced globally and on the index futures side. The reason I'm re-posting those charts here is that I believe the ISEE data collected and put into proper context is incredibly accurate and should prove to be extremely valuable going forward.

Okay, so I lied. I was planning to completely forget about trading during the long Thanksgiving holiday but then I ran into this chart this morning and just couldn't help myself:

This is the equities only portion of the ISEE chart. In response to some of the pitfalls in the traditional put/call ratio the International Securities Exchange (ISE) publishes their own modified version called the ISEE index. Unlike the old school p/c ratio the ISEE filters out trades from both market makers and broker/dealers. The ISEE further differentiates itself by using only opening long trades in it's tabulations.

As such the ISEE presents a much clearer picture of how retail options traders are positioned. The ISEE also uses a different equation than the regular p/c in calculating their index. To formulate the ISEE, the exchange takes the modified call volume, divides it by the put side and then multiplies the result by 100. Hence the ISEE is always a whole number.

With a normalized p/c equation a higher reading symbolizes greater put activity to calls while the ISEE formula generates higher readings if call buyers outweigh put buyers. So while a traditional p/c ratio of .75 would mean more puts than calls an ISEE value of 75 is the exact opposite. Like the CBOE the ISE also offers updated calculations of their p/c index several times an hour.

Okay, now that we're all on the same page you might get an idea where I'm going with this. The high spikes I highlighted mark extreme ISEE readings above 230, which just so happen to precede turning points by a few days. Now, let's correlate these spikes with daily candles on the SPX:

As you can see the ISEE spikes precede turns by a few days, but they are very reliable. Hey, I prefer a few days early than a few days late. What's particularly notable is the 247 reading last Tuesday, which is the highest as far as I can see back. It was followed by a 241 close on Wednesday, which would be a strong reading on its very own. So, chances are that a significant market decline is imminent, and it is most likely only a few days away [again, I had no idea what was happening while I was typing this – LOL]

We now again find ourselves at highly overbought conditions coupled with wide-spread divergences across various averages. Gold and other precious metals were up, with oil and natural gas down as well as the dollar down. The inverse correlation between the dollar and equities are beginning to soften as new extreme down moves in the buck are not accompanied by equally strong up moves in equities. I think Chris Carolan said it best:

"The accelerating nature of the dollar decline and gold rally may finally have reached the point where any international earnings positives for stocks are outweighed by the downside of the obvious increasing monetary instability. The markets look like they’re about to get scared again."

In other words – the dollar carry trade is running out of oxygen. I believe Karl 'No Slave To Fashion' Denninger made the same point just two weeks ago, and you might want to take a look at his latest update on the subject. Another strange new phenomenon is the VIX rising and falling in line with equities, which confirms Carolan's point that fear is creeping back into the market. All this suggests that conditions are now favorable for a market decline. You have been warned.

I have been quite verbose on the notion that the thinly traded rally of past few days was designed to further discourage the bears and to shake out weak hands. I'm sure that many traders simply gave up and cashed out as to not to suffer from further theta burn throughout the long weekend. I myself was very tempted but did not yield to my emotions.

After posting the above I got a bit excited and as I was too lazy to head to the gym during turkey day I decided to finally put together a proper ISEE chart on my own:

A little update – I got fascinated with the ISEE and worked all day to import the data into Excel – here are some follow up charts for you guys:

Now, isn't that a lot nicer? I have also highlighted all spikes above 135 and all drops below 100 in the past year.

Here is the ISEE 10-day MA version – the focus here is twofold: First we have divergences which seem to indicate that a medium term trend is running out of steam. Then we also have a pretty obvious channel to the upside, which seems to also be a precursor for turning points lately – it's actually more timely than the pure data as of late. You might have noticed that we have not pushed into the upper channel line this time around, so perhaps more upside is a possibility.

Now, before you complain that I only peddle my lukewarm charts from yesteryear here on the Slope – here's one I just posted over on ES. This is one of my own chart contraptions which shows me the NYSE A/D ratio during the daily session. It actually closed nearby at 1.79 today but what you might not be aware of is that it was at 0.05 earlier this morning, not that's not a typo. After the opening bell the futures went completely ape-crazy (damn, I can't really curse properly on this PG-13 blog) and traversed 20 ES points in a matter of 90 minutes. All the while the NYSE A/D ratio never pushed above 0.2, that's right.

Sorry folks – I just can't take today's snapback seriously. Of course there is a good chance we fill the gap on Monday – it's quite obvious that the boyz have become quite brazen and outright complacent when it comes to putting a floor underneath the market, at least compared with their Asian or European counterparts. However, long term – my dear Slopers – long term I'm looking at a market that's curling over. And you really don't need all these fancy tools above to see what's happening – a good old fashioned volume chart speaks volumes:

Quite obvious what's happening but I highlighted the pertinent parts for you guys – sideways or caving volume on up trends and rapidly rising volume during sell offs.

The events in Dubai are completely meaningless and should be faded – remember, the market never follows the news, it's the other way around. What happened in Dubai is merely symptomatic of a much larger problem which is not merely limited to the gulf region. As a matter of fact after a one year reprieve the U.S. mortgage industry is now again looking at a huge number of monthly mortgage resets (which will trigger defaults) in the CRE and private real estate sector. Which brings me to my last chart and perhaps the one you might enjoy the most:

The CS portion of this charting monstrosity shows what the freight train that's heading for the real estate market. I took the liberty to extrapolate the data with my own wave count. Print it out and keep it handy – either it will by my chart of shame (i.e. I was wrong) or it's the chart evil Mole will be remembered by.

Enjoy the rest of your holiday weekend.

Cheers,

Mole

Metal and Miners (by Steve)

By cccactii - 16 years ago (11, Nov 2009 9:18:17 AM)

I was trying to write this up yesterday before GSS reported but I was called out on a trip. I have a full time job and am not always actively trading.

Trying to write something that may be helpful to you all or even to some of you is a real challenge for me, as I came to this site to try and learn from more active traders and especially to try and incorporate technical analysis into risk management skills. Trying to write a quality post is forcing me into a Baptism by Fire scenario and I will keep it simple as that is what has worked for me.

Lots of great posts once again preceding this one on precious metals. I have had at least 50% of my net worth in metal and miners off and on for the past several years, and this is not a suggestion, but something that I slowly became more and more comfortable with over time as events unfolded validating my views. I view it as insurance in a sense and I try to trade around core mining positions and SLV, nearly always from the long side.

I have no idea on the next 10-20% and I don't much care one way or another. That may sound flippant, but if I had confidence that I could capture that move, I would do so. I need to see greater enthusiasm in a spike like fashion for me to do much selling of my trading positions right now. Remember that I am trying to emulate the quote from the Livermore book,in the earlier post about making most of his money in the sitting, not the thinking. I rarely looked at a chart the past two years and it could have been very helpful had I done so.

Silver really seems to be the poor man's gold as the coin store keeper tells me they loved it at 20 and sold it back to him at 16 last year. They have not been back. Continuous higher prices always bring them back it seems. I will buy more at 15 and lower. Here is a view on silver, when owning a full position around this time last year felt like this.

Three of the major gold miners (NEM,GG,AEM) reported last week and the stocks had different reactions to "the news" initially. I own GG and AEM and mentioned that I was buying the initial break the next day at 58 area just above the trend line. Further opportunity followed on day two of "sell the news".

Here is a one year view of GG

Last year was gut check time for those of us too long metal. I had made a great sale of GG at 50 and trimmed some other gold stocks and I was looking to buy it back lower. I had roughly 10% long puts and long precious metal and I was feeling loaded for bear. I started buying GG back at 38, 33,28 23. Arms,legs and torso gone. I spent some hard time thinking it through and believed that my thesis was still intact and that the pricing was a good old fashioned "sell everything" liquidation.

I had bought a small amount of GSS at 1.50 and 1.20 on the way down and then I started putting in bids in all my accounts and wound up with nearly 70,000 shares bought between .41c -.68c. I had similar fills in smaller size on some other juniors. This was not planned but acting on the fly. I had much larger orders not filled below these levels. Looking back it would have been great to have liquidated my metal and had fresh eyes into the plunge. I did not sell on the rally and bought more from 1.20-1.80 and some Jan -Feb calls. I still have the bulk of my GSS position and have only sold 5k shares in the mid 3's.

Last post I showed the FCX Pref M as the one that got away. So far GSS is one that did not get away, and it has been very difficult to keep the position to this point. I can have 50k swings daily, but that is reflective of the volatility in the precious metal stocks. Use it to your advantage short or long.

Here is a view of GSS long,med,short term.

So far I have done well under some seriously adverse pricing. Now that pricing is more favorable I am not dancing on the clouds. I am trying to manage my way through these times and I was fortunate to have bought some things right. I will need to sell it right as well. It now feels more like this ride – – especially after writing this post.