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Precarious Position Again
December 15th, 2007 by Corey Rosenbloom
The US Equity markets are in another precarious position, where price has reached a key inflection point, and a line in the sand has been drawn.
I mentioned earlier that the Index (particularly the Dow Jones) should find support at the confluence of key moving averages, and they did, but they are re-testing that support zone which usually is a negative development.
We should expect support levels to hold when tested and then price to inflect off these zones to higher levels.
If price tests support, rallies weakly, and then immediately re-tests support, one could assume the ‘buyers’ in this case are losing the battle between supply and demand, and we lose initial confidence in the support level to hold.
Let’s look:
http://blog.afraidtotrade.com/wp-content/uploads/121507-1757-precariousp1.png
Price carved out a “measured move” from 12700 to 13300 and then had the smallest of ‘bull flags’ (if it can even be called that) and then completed a measured move from the 200 period moving average (and the 20) at 13300 to (almost) 13800.
Price found resistance at the top of the 20 period Bollinger Band and then reflected off that level to retest the confluence of moving average support (from the 50, 20, and 200).
From that level, price began its inflection up (following a harrowing “Fed Day” surprise) and actually almost retested the highs of the Fed Day debacle immediately (with a gap) but the gap failed and price could not find support at the 50 day MA (though the close was above that level for the two previous days).
Now, Friday’s action took price beneath these levels and we see that the 200 period MA is the ‘last line of defense’ for the bulls.
Should price break this level definitively, we should expect a retest of the August and November lows, despite the possibility of a “Santa Claus” rally, which also could factor into equity prices.
The NASDAQ actually looks a bit better, but only because the 200 period moving average is a bit beneath the current index value:
http://blog.afraidtotrade.com/wp-content/uploads/121507-1757-precariousp2.png
In both the NASDAQ and the Dow Jones, volume has been creating a ‘non-confirmation,’ meaning that volume has actually declined as a whole during this recent market rally phase.
It’s a precarious time for the market, and the bulls have a more difficult time defending their territory now and the possibility that they’ll lose the battle appears to be increasing.
Time â
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Triangle Break in Goldman Sachs
December 13th, 2007 by Corey Rosenbloom
Goldman Sachs today breached a triangle consolidation pattern to the downside, which has potential ominous implications for the broader market.
http://blog.afraidtotrade.com/wp-content/uploads/121307-1657-trianglebre1.png
Not only did price break beneath a triangle or coil formation, but price violated the significant “200 day moving average” which often is viewed by those with little technical analysis knowledge as the “line in the sand.”
The momentum oscillator also formed a coil or triangle and momentum (black line) also has breached to the downside.
It must be noted that the $205 price level has held as support, and I may need to redraw the triangle to a more ‘right angle’ triangle should this level hold as support, and as always price could breach beneath temporarily, drag in short-sellers (and trigger stops) and then eject back to the upside.
There’s no way to know for sure which direction price will eject from a consolidation point, but often price moves can lead to strong temporary momentum (directional) moves.
In this case, it appears the move could be to the downside, which would have negative implications for the broader market, especially if financial stocks tend to lead the market.
Keep your eye on this and other charts from major financial companies.
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Head-spin, Tail-spin
December 12th, 2007 by Corey Rosenbloom
I must say I was quite surprised by the ferociousness of the sell-off following the announcement from the Federal Reserve to cut rates .25 basis points. Typically, the market rallies in three pulses on those days but it appears the market discounted the expectation for a .50 point cut and was slammed instantly when expectations failed.
However, this morning, it seems that traders reassessed their initial thoughts and decided the rate cut wasn’t so bad, or that there could be future cuts in the works, that the Fed will support global central banks to avoid a global credit crisis, or whatever news-related data they wanted.
Nevertheless, the screaming price action of the last two hours of yesterday and the first two hours of today make for some interesting ’spinning heads’ (instead of talking heads) on TV and in the trading world:
http://blog.afraidtotrade.com/wp-content/uploads/121207-1632-headspintai1.png
“Oops! Price fell off a cliff!”
This was the view from the 5-minute chart on yesterday’s cut. There wasn’t even a counter-reaction like there usually is.
And today’s action so far:
http://blog.afraidtotrade.com/wp-content/uploads/121207-1632-headspintai2.png
There was almost a 300 point overnight gap in the Dow (something extremely rare, it would seem) which is now being faded, and has now reached the 50% level (half-way point).
This is a “gift from the gods” for the gap faders, as many stocks gapped higher and are coming off those highs, some forming picture-perfect “gap fade” candidates, while others exceed the percentage filter I like to use when fading gaps.
Nevertheless, these are absolutely interesting times we live in for those who live on the ‘thrill of the hunt’ or the ‘journey for instant profits.’
For me, I prefer more stable, ’swinging’ markets with clear targets and stop levels (aka support/resistance, prior highs, swing levels, etc).
“Make hay while the sun still shines” if you love these high volatility, mega-momentum environments.
If not, don’t try to force it. Step back and wait until your patterns appear and your strategy is ‘in favor’ for the day (or week).
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Fly-By of the Dow
December 11th, 2007 by Corey Rosenbloom
Before the Federal Reserve announces their decision, let’s take a very quick look at the current technical picture of the Dow Jones Industrial Average:
http://blog.afraidtotrade.com/wp-content/uploads/121107-1754-flybyofthed1.png
[*]Price is just under 400 points away from all-time highs.[*]Price made a new momentum high (annotated NMH in the bottom oscillator)[*]There is a convergence of support from all three key moving averages and a horizontal trendline which should thwart selling pressure (unless the Fed actually raises rates)[*]Price is above all key moving averages[*]Price carved out a new swing high[*]Price is still in a confirmed downtrend on the daily chart, though very close to switching back to an uptrend[*]We see Non-Confirmation by Volume, as higher prices have been met with lower volume. This is temporarily bearish.[*]Price is at the top of the daily Bollinger Band (bearish to neutral)Of course, all this could change when the Federal Reserve announces their rate policy later.
A cut of .50 should cause price to rocket through the Bollinger and potentially make new all-time highs by the end of the week.
A rate increase will likely take price beneath key support, though this is highly unlikely and would surprise about 90% of traders/investors.
It looks like the market has already discounted the expectation of a .25 basis point cut by the Fed.
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Link: Never Bet Against the House
December 11th, 2007 by Corey Rosenbloom
The staff at Minyanville posted a thought provoking article entitled “Never Bet Against the House,” in which the author discusses some of the consequences and unintended effects of the increasing willingness by the government to “bail out” risk-seeking investors.
In the opinion piece, Malcolm states:
“Not only have risky investments been deliberately supported by government policy, but less risky paths have been infected by overspill from the risk-taking activities; worse yet, my very own government is treating me as a sucker. I mean openly, which is kind of new.”
“The increasing role of federal intervention in stimulating certain segments of the economy and bailing out risk-takers has made it increasingly clear that the choice to be a conservative investor was not only foolish, but is being deliberately singled out for punishment by our own government.”
Furthermore,
“The net effect of these bailout activities is to reward the people who took wild risk and ignored generations of wisdom about debt and gambling.”
Read the entire piece for complete insights.ÂIt really makes you wonder, especially to the traders who continuously refer to the “Plunge Protection Team” which always seems to sweep in and save the market at its absolute worst moment.
What will be the consequences in such policy when many investors ‘catch on’ that their risks will be rewarded in the end?
And what will happen when a new administration or a new policy is adopted that is more akin to the ‘old way’ of thinking?
It’s worth a few minutes of your time to ponder such possibilities.
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Swing Charts of the Indexes
December 8th, 2007 by Corey Rosenbloom
Let’s take a look at the current “Swing Charts” of the major US Stock Market Indexes:
First, the Dow Jones Daily:
http://blog.afraidtotrade.com/wp-content/uploads/2007/12/120907-0031-swingcharts1.png
[*]Price is nearing the Upper Keltner Channel[*]The recent upswing is greater than prior upswings, but failed to create a new momentum high[*]Price is above all key moving averages[*]Price is in a more bullish formation than otherwise could be[*]Price made a new swing high relative to the prior upswingDow Jones Weekly Chart:
http://blog.afraidtotrade.com/wp-content/uploads/2007/12/120907-0031-swingcharts2.png
[*]Price is still “in the middle” of a clear broadening formation[*]Momentum is in a clear downtrend channel[*]The momentum oscillator carved out a new momentum low of the past two years[*]Price formed two negative divergences[*]Price swings are clearly overlapping, indicating supreme indecision in the broad marketplaceUS Dollar Index (Weekly):
http://blog.afraidtotrade.com/wp-content/uploads/2007/12/120907-0031-swingcharts3.png
The US Dollar Index has been in a clear downtrend since 2006 (and before).
Price made new (relative) momentum lows along with price
The recent price swing lower was far larger than the prior swings lower, and could indicate capitulation or continuation.
US Dollar Index (Daily):
http://blog.afraidtotrade.com/wp-content/uploads/2007/12/120907-0031-swingcharts4.png
[*]The most recent downswing in price created a positive momentum divergence which has clearly resolved strongly to the upside[*]Momentum made a new relative high, but price is far from making new highs.[*]Price formed a new swing high, taking out the prior swing high which is the first step towards a new uptrend[*]Price appears to be facing resistance at the key declining 50 period moving averageNASDAQ Weekly:
http://blog.afraidtotrade.com/wp-content/uploads/2007/12/120907-0031-swingcharts5.png
Despite all the volatility in the market, the NASDAQ composite index remains the picture of bullish strength.
The most recent downswing (correction) created a higher low, supporting at the key 50 period moving average.
The Momentum Oscillator registered a new momentum high, signaling that odds favor new price highs are yet to come.
There is no glaring sign of weakness in this chart, but rather strength on the side of the buyers.
Typically, when the NASDAQ leads the market, higher broader index prices are yet to come.
Always keep in mind the possibility of the “Christmas Rally” ahead at the end of December.
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Link: When Trading Performance Falls off a Cliff
December 8th, 2007 by Corey Rosenbloom
Congratulations to Dr. Steenbarger at the TraderFeed blogspot for its two year anniversary!
Dr. Steenbarger’s site was one of the first blogs I discovered and have read almost every day, and I have gained so much insight from reading his posts, and I wanted to extend an extra word of thanks for his support of this site and for the amazing posts he provides each and every day.
He provides insights and challenges not found in the larger trading community, and his mantra “comfort the afflicted and afflict the comforted” is extremely unique in this field.
It’s been said before, but I still don’t know how he does it! As a blogger, it is difficult work to communicate effectively and intelligently each and every day, yet Brett does so extraordinarily well.
I wanted to call special attention as well to his recent post entitled “When Trading Performance Falls off a Cliff.”
In it, he discusses reasons why traders who have been doing well suddenly experience unexpected or sustained drawdowns, or periods of significantly lower performance.
Not only does he discuss reasons why this experience may happen (it might not be 100% performance related), but he provides six suggestions from his work with traders that can help you overcome such periods of negative performance.
Go give Brett a note of congratulations and check out this post if you have been experiencing a period of sub-par performance, especially in this environment of heightened market volatility.
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Triangulation Action in Gold
December 7th, 2007 by Corey Rosenbloom
Gold prices appear to be in the middle of forming a consolidation pattern that resembles a standard triangle pattern.
This seems reasonable, given the immense run-up in gold prices following September (there was a minor triangle pattern â
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[ 本帖最后由 hefeiddd 于 2009-3-23 10:27 编辑 ]
Ford Completes Head and Shoulders
December 4th, 2007 by Corey Rosenbloom
Ford Motor Company (F) recently completed a compressed Head and Shoulders pattern that exceeded the price projection inherent in the pattern.
The Head and Shoulders pattern in Technical Analysis consists of an initial swing (left shoulder) that results in a second higher swing (head) and terminates with a failure swing (right shoulder) that takes price beneath the support zone known as the “neckline” which can be absolutely horizontal or slightly slanted.
Although this head and shoulders pattern in the Ford example is not a classic or textbook pattern because we normally expect these patterns to form AFTER a sustained uptrend, as these patterns are often of the major reversal type.
Let’s look:http://blog.afraidtotrade.com/wp-content/uploads/2007/12/120407-0537-fordcomplet1.png
The initial condition â
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[ 本帖最后由 hefeiddd 于 2009-3-23 10:32 编辑 ]
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Link: Checklists
November 27th, 2007 by Corey Rosenbloom
Dr. Bruce Hong at the TraderPsychology Blogspot recently called my attention to a few of his excellent posts and I wanted to highlight some of them.
Make sure you read his post entitled “Checklists” which not only is an excellent list, but addresses a topic rarely covered in the jubilant financial or trading media: redundancy of services/access.
For Dr. Hong and many other traders, he had just entered a trade and his ISP (service provider) went down temporarily. It doesn’t have to be the ISP… it could be the software you’re using, access to the exchange on which you are trading, telephone/internet lines, power outage, or any number of unforseen events.
I remember a story by Linda Raschke at her home office when she was placing trades and all the sudden she was unable to access the outside world through the internet. She checked everything and then found out that her neighbor was improving his yard and a digger had uprooted Linda’s underground cables in the process! Talk about unforseen consequences!
Either way, the price you pay for redundancy (back-ups, dual-methods for accessing your broker/software, dual computers, battery back-ups, etc) will pay off in the rare event you need it. Think of it as insurance, if nothing else.ÂIf you aspire to become a professional, full-time at home retail trader, the question will become when will you need back-ups, not if you will need them.
Dr. Hong not only addresses the topic of access redundancy (back-ups), but continues his thoughts into other areas, such as guarding against trading biases, commenting on indicators, writing plans down, etc.
Use his checklist as a guideline to developing your own structured routine, which should include some aspect of ‘worst-case scenario’ planning.
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Google Plays the Fibonacci Card with Measured Move
November 26th, 2007 by Corey Rosenbloom
Perhaps it’s more of an esoteric thing when a stock plays to the exact tune of the expected Fibonacci Retracement, but these instances are absolutely worth mention.
Today, Google found daily resistance right at the daily 61.2% retracement (of the recent down-swing) and found support (closed) right at the 38.2% retracement. Both levels halted (contained) intraday price movement.
It may help to draw your own Fibonacci grids if you find my chart hard to read:
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I began the initial ‘downswing at approximately $740, the most recent swing high and drew the lines to $620, the most recent swing low to see how far of the downswing may have been retraced with this most recent price swing up.
For fun, here’s a look at Google’s intraday action:
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/goognov26i.jpg
Of educational note, notice the triangle consolidation that took place and was resolved forcefully to the downside.
Also, notice the rising trendline that was penetrated around 1:00 EST where price encountered a ‘throwback’ pattern following a break. Such ‘throwbacks’ are often opportune chances to establish an extremely high probability position (in this case, short) and play for a larger target. The measuring rule (which I have drawn in light blue) would have us project a downside break of the triangle to last about $7, which the break (measured move down) did.
Of course, price became noticeably weaker in the final hour of trading, but my guess is that no technical indicators could have forecast how severe the decline would be. The highest probability trade would have been to enter at the throwback to the triangle and then play for the measured move (which was achieved instantly).
On a side note, did anyone else find it odd that Google (GOOG) closed exactly at $666.00 today? Perhaps there’s some ‘otherworld forces’ at work in the stock market. It’s a strange coincidence worth noting.
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Link: 12 Things My Account is Thankful For
November 25th, 2007 by Corey Rosenbloom
Bill Luby at the VIX & More Blogspot recently posted an excellent Thanksgiving-style article entitled “Twelve Things my Account is Thankful For” which includes practical tips for aspiring beginners and experienced market professionals.
Without listing all twelve, consider the following:
“ETFs â
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Dow Tests Support while Financials Break it
November 21st, 2007 by Corey Rosenbloom
As I mentioned was a possibility in a previous post, the Dow Jones Industrial Average tested the closing lows from August at 13,800, and has found temporary support there. Whether buyers will hold this level is yet to be determined, but they have a chance at these levels.
The pre-holiday periods usually are bullish days, but today’s price action so far has violated that notion. Price sends a strong signal when it violates a tendency or expectation that has built historical patterns.
Let’s drill down from the top:
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/112107-1731-dowtestssup1.png
The weekly action paints a bearish technical pattern, in that price has formed a divergence (examining the most recent swing highs in price with the swing highs in the bottom panel oscillator) and has potentially formed a quick double top. Of key note from other technical structure is that price attempted a test of the weekly 50 period moving average, got a bounce, found resistance at the falling 20 period MA, and now has broken through the 50. Weekly volume has also been clearly higher on sell weeks than buy weeks. The good news is that we’re above the price that began 2007, so we’re still positive for the year.
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The daily chart shows price testing support at the August closing lows. We may get a bounce here but it likely will be short-lived, and only rise to 13,200 at best. Price would shift the technical picture into a more bullish posture if it takes out 13,200.
The 20 period MA seems likely to cross beneath the flattening 200 period. The convergence of the 200 period and the 20 period MA should serve as significant resistance for bulls to overcome.
It would scare me (from a bullish perspective) if we were to take out the low of the key reversal day carved out in mid-August (12,500).
On to the Financials (the XLF SPDR):
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/112107-1731-dowtestssup3.png
XLF (Financials) not only have broken their August lows, but they have decimated them. There’s little to offer in the way of bullish comments for the Financial Sector ETF. We have a confirmed downtrend with price having recently made “three pushes” lower. Perhaps the “three push” pattern exhausted a great deal of selling, but because the trend is still down, it is unsafe to trade against them.
The moving average orientation is in the most bearish position possible (20 beneath the 50 with both beneath the 200â
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Dow Hovering, Threatening, Teetering
November 19th, 2007 by Corey Rosenbloom
The Dow Jones Industrial Average, along with the broader S&P 500, is hovering dangerously close to full-bear technical territory.
The daily chart is in a confirmed downtrend (as defined by moving average orientation and series of lower highs and lower lows), and is threatening to test the lows made in August which carved out a Key Reversal pattern. Two cuts from the Federal Reserve may not have been effective in saving this market, at least from a technical analysis standpoint.
The major US Indexes are in precarious positions with little technical relief in sight:
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/112007-0133-dowhovering1.png
The chart may appear ‘busy,’ but let’s break it down. I have drawn two parallel declining trend channels since July. Separating the channels is an upwards swing in price due to the reaction to the Federal Reserve’s Interest Cut Bonanza.
From a quick TA perspectiveâ
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Classic Trend Day Helps the Bulls
November 13th, 2007 by Corey Rosenbloom
The strength of today’s upwards action may have shocked some people, but let’s look at some factors that let us know today’s action wasn’t so surprising indeed.
First, we were deeply oversold by most oscillator indicator readings (RSI, Stochastic, etc) on the US Index Daily Charts.
Second, we experienced a large volatility, high momentum move down and there (almost always) must be a reaction against that initial momentum impulse at some point in a relatively normal ’swinging’ market.
Third, some sentiment readings were showing extreme levels, meaning that the market was almost certainly due to ‘correct’ this excess.
Today’s action was certainly fueled by certain ’short covering,’ and the entire rally may be deemed to be short covering only, but we still play one swing move at a time and so the ‘easiest course of price direction’ is up for the brief moment.
Let’s look at the strength from the intraday perspective of the Dow Jones:
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/111407-1532-classictren1.png
This shows a classic (and textbook) “Trend Day” which you should save, annotate your own way, and catalog for future reference.
It was more clear in most stocks and especially the DIA, SPY, and QQQQ, but there was a large impulse (gap) at the open that could not be ‘faded’ or closed suddenly. When an initial gap cannot be closed, especially in the Indexes, then odds favor a large trend move will take place and you should go with leverage in the direction of the initial impulse. That strategy would have worked wonders today.
Again, I suspect the day started with a large buying move on the good retail news which triggered an ‘oozing short-covering’ rally that lasted virtually all day unabated.
The Dow Jones Daily chart shows a decisive victory for the bulls that’s been tainted by lighter volume than two previous ‘distribution’ or sell-days:
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/111407-1532-classictren2.png
Here are a few intraday highlights and clean trend day patterns from some equity leaders:
Goldman Sachs (GS):
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/111407-1532-classictren3.png
I could really say much more about this ideal stock behavior, but annotate it for yourself and learn valuable lessons about a trend day.
Apple (AAPL):
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/111407-1532-classictren4.png
Bottom line, when a stock moves up (or down) $16.00 in one day, pay attention. Catalog the intraday development for further study.
The initial impulse and failure to close the gap clued you in to the major possibility for a large trend move.
Research in Motion (RIMM):
http://blog.afraidtotrade.com/wp-content/uploads/2007/11/111407-1532-classictren5.png
The same story remains. Expect trend day from large impulse open. Do expect some sort of reaction against the gap first, though.
There was solid support at the convergence of the 20 and 50 period 5-minute moving averages which set up a sort of “Super Buy” trade (Impulse Buy, First Cross Buy, Dual Support Buy, Gap Fade Failure, etc etc etc) that set-up a trade with a potential target being the 200 period MA. A sort of sloppy bull flag formed and as price situated comfortably about the rising 50 period MA, the break of the flag setup the “Bull Flag” entry which played for a “Measured Move” target which was achieved.
Classic, textbook stuff!
I’m very happy for the bulls today, and for the clean patterns that emerged following the large impulse in most major stocks. You really only need to maximize your gains on a few such days per year to do very well as a trader.
The problemâ
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The Nasdaq Index:
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[ 本帖最后由 hefeiddd 于 2009-3-23 10:45 编辑 ]