taking place ahead of the open at 1522.5. It took awhile, however, for the bears to really take hold. The market fell into a range out of the open and it was not until the third test of intraday lows on the 5 minute time frame that the selling finally began to take over. This corresponded to the 10:45 ET - 11:00 ET reversal zones.
The Dow and S&Ps led the sellers into mid-day. They barely paused at the support from the gap closure and continued into a very strong test of their 15 minute 20 simple moving averages. At 11:30 ET the selling slowed and at 11:33 ET I had my first buy setup of the day in the NQ (EMini Nasdaq 100). The Dow and S&Ps rallied strong into the 5 minute 20 sma into noon, while the Nasdaq moved all the way back into the prior breakdown price level before stalling.
http://tradingfrommainstreet.com/images/FocusLetter/20071024sp.gif
The market became very choppy once again into the early afternoon as volume dropped off a great deal. The indices crept higher until 14:00 ET. At that point the RIMM news hit. Since by this point the market had held the support for too long to favor a strong break lower, the bulls were given the freedom to rally once again. The S&Ps and Dow quickly moved back into the morning highs, while the Nasdaq was soon retesting last weeks highs. The Nasdaq hugged those highs while the S&Ps and Dow pulled back off 14:30 ET. When the last reversal period of the day hit at 15:30 ET it pushed the Nasdaq to new yearly highs and took the S&Ps and Dow to new intraday highs. The market was rounding off on the smaller time frames into the close, however, and, as I mentioned earlier, the sellers again took over afterhours.
http://tradingfrommainstreet.com/images/FocusLetter/20071024dow.gif
For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or http://www.icechat.net. The room name is #mainstreet.
posted by Toni Hansen @ 11:20 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, October 22, 2007Market Shrugs Off Concerns, at Least Temporarily
Good morning! The market established a wide trading range in Monday's session after a sharp decline on Friday marked the 20th anniversary of Black Monday when the Dow fell 508 points in a single day. For those of you who checked out my Market Action Video in yesterday's newsletter, this response was not unexpected since the market had been selling off into Friday's decline and in the past such a move is typically unable to continue with a second strong day of selling. Some continuation early in the morning is not uncommon, however, and the market had sold off a great deal in afterhours trading. Even though the indices opened higher off those premarket lows, they still experienced a fairly strong downside gap to kick off the new week.
http://tradingfrommainstreet.com/images/FocusLetter/20071023nas.gif
The gap in the market took it smack into the upper end of the congestion area from the price range of late August and early September. These upper price levels were also whole number support levels in the DIA and QQQQ, which are the index exchange traded funds for the Dow Jones Industrial Average and the Nasdaq Composite. It was the $134 level in the DIA and $52 level in the QQQQ. The selling into the previous day's close and the gap into Monday morning extended the trend move enough to allow the market to pull back up into the range from Friday, just as it had in nearly every single one of the examples covered in my video.
The morning gap filled very quickly in the indices and that zone served as resistance in both the S&P 500 and the Dow Jones Industrial Average. It hit at the same time as the 5 minute 20 simple moving average as well, providing additional resistance. The Nasdaq Composite, on the other hand, regained its relative strength lead and, while it stalled for a few minutes at its own 5 minute 20 sma, it was not long before it was at new intraday highs and back to testing the price resistance from Friday's mid-day congestion zone. These resistance levels struck with the onset of the 10:15 ET reversal period and selling once again took over. Most of the best short setups in individual stocks took place at this time.
http://tradingfrommainstreet.com/images/FocusLetter/20071023sp.gif
While the mid-morning downside was decent and on the strong side, the rounded lows in the premarket and sharp upside out of the open were more significant and the market was pushed into a trading range with a second low coming out of the 11:00 ET reversal period. As the market initially moved off the 11:00 lows I was not certain we were going to actually end up holding our range very well without another wave of selling intraday first. The correction began gradually and with declining volume, but the momentum soon began to build and turn over before finally holding at 12:30 ET and again kicking off another wave of buying on the 5 minute time frames. The buying accelerated into 13:00 ET, creating an equal move on the 5 minute time frame which took the Nasdaq into the zone of the prior highs intraday as well.
After hitting resistance, the indices began to round off at the highs, establishing slightly higher highs, but without really breaking the resistance zone. The bulls finally gave way off 13:30 ET highs and fell into the 5 minute 20 sma support with the onset of the 14:00 ET reversal period. At this point the market based along the support zone on declining volume. This creased a strong Avalanche short pattern, which in this case was also an inverted cup-with-handle pattern. The selloff which followed too the market back into the mid-day congestion at 15:00 ET. It again slowed at this support, but it was not until around 15:30 ET that the buyers truly returned once again. This late day buy setup took the indices higher well into the closing bell and then beyond on afterhours trading.
http://tradingfrommainstreet.com/images/FocusLetter/20071023dow.gif
By the closing bell the Dow Jones Industrial Average ($DJI) had gained 44.95 points (+0.3%) and closed at 13,567.0. The S&P 500 rose 5.70 points (+0.4%) anc closed at 1,506.33. The Nasdaq Composite experienced the strongest percentage gain by rising 1.1% (+28.77 points). It closed at 2,753.93. Apple Inc. (AAPL) was once again at the forefront of the gainers list, rising $3.94/share on Monday. Another gainer, Wynn Resorts (WYNN), will remain of upside interest throughout this week and has potential for an upside swingtrade. In the indices themselves, key resistance levels to watch for in the S&P 500 Emini futures contract will be the 1,528 zone. The 1540 level will also be strong resistance. In terms of support, look for the 1497 zone and then 1593.5. The chances are higher now, however, that the market will continue to react somewhat off this support and congest before it decides to either gain momentum or fall through the support and back into the congestion from mid-August.
For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or http://www.icechat.net. The room name is #mainstreet.
posted by Toni Hansen @ 8:55 PM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Panics and the Anniversary of Black Monday
NEW ADDITION: TONI'S MARKET OUTLOOK VIDEO OF THE WEEK:
Good morning!!! Beginning this week I will be adding a new feature to my site: an audio/video look at the market focusing on several aspects of the current market's development and upcoming expectations based upon the market's current action. You can view today's video at http://www.tonihansen.com/marketactionvideo/
I hope that you enjoy it!!!!
All my best,
Toni Hansen
_____________________________________________________________________
Market Panics and the Anniversary of Black Monday
Good morning! The market took quite a plunge on Friday on the 20th anniversary of Black Monday after teasing about such a move for several weeks. On both Wednesday and the previous Thursday the markets had experienced sharp intraday selloffs, but in both cases the indices managed to recover rather well. On Friday, however, the downside pace increased dramatically and key daily support levels gave way. The Dow Jones Industrial Average led the decliners by rounding off at the daily highs over the course of the past several weeks and then slowly beginning to sell off with last Thursday's steep reversal. At the same time, the Nasdaq Composite had managed to hang onto most of its gains and base at highs, but it was unable to sustain any of the intraday momentum on the upside. Even though it continued to hold the 20 day simple moving average support into Friday, it has broken the uptrend channel line from the buying which had been in place since mid-August.
http://tradingfrommainstreet.com/images/FocusLetter/20071022nas.gif
Heading into Friday's session, things became rather dismal early on. The 1540 level in the ES, which was the initial 15 minute support zone, broke around 9:00 am ET, just prior to the open. Then it fell into the 1536 zone, which was the second support level we were looking for heading into the day. This zone held initially for a couple of minutes, but the momentum into the support level was simply too strong and it soon gave way to more selling. The continuation pushed the Dow and S&Ps through Wednesday's lows to trigger a larger short setup on the daily time frame. The Nasdaq, which had held up a lot better overall had found initial support at Thursday's lows, but as the Dow and S&Ps moved to new lows on the week, the Nasdaq fell into the lows made earlier in the week and that support helped stall the price decline into noon.
http://tradingfrommainstreet.com/images/FocusLetter/20071022sp.gif
It was 11:00 ET when the market pivoted off mid-day support initially. The Nasdaq held this level, but the weaker S&Ps and Dow managed a very slightly lower low into 11:30 ET. A pull off those lows created a form of double bottom trap called a 2B. The Nasdaq also formed a bullish pattern on the 5 minute time frame. In this case it is a pattern I termed the Phoenix, although in this case it didn't rise very far from the ashes before it got a bit scorched again! The market rounded off at mid-day highs, just under the 15 minute 20 simple moving average, and by 13:00 ET the bears had already begun taking charge once again. The afternoon trading was smooth to begin with, but as panic set in the action became a lot more choppy and volatile.
http://tradingfrommainstreet.com/images/FocusLetter/20071022dow.gif
Although the Dow did not quite hit the -508 point loss of Black Monday, it gave it a shot in terms of the absolute point value of Friday's decline. Alll 30 of its index components closed in the red. The Dow closed lower by -366.94 points (-2.6%) on Friday at 13,500.02. It's biggest loser was 3M (MMM), which lost 8.6%. Of course, in today's market, the drop of 20 years ago would have had to have been about 3,000 points to truly compare, so we still faired well in that regard! Meanwhile, the S&P 500 fell 39.45 points (-2.6%) and closed at 1,500.63 on Friday and the Nasdaq Composite also lost 2.6%. In terms of points, this amounted to a 74.15 point drop. It ended the day at 2,725.16.
As we head into the new week, this bearish phase of the market looms. In the past, most days which are led by selling and then experience a sharp decline such as this will recover to some extent into the next session. There are exceptions though, such as July 13th and 14th of 2006 where the Dow had begun to sell off just over a week earlier but then accelerated coming out of a downside gap on the 13th. The session closed nearly lows and then went on into the prior daily low in the next session. In the Dow Jones mini-futures this amounts to the 13200 to 13400 zone and 1450 to 1475 in the S&Ps, which is a rather large range. The lower end of that support zone will tend to be the strongest. I believe that we can see one more wave of upside on the weekly time frame, however, before this larger uptrend really reverses. Should the market correct off support, the 1525 level would be S&P Emini resistance. Right now that is not looking too likely though!
For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or
taking place ahead of the open at 1522.5. It took awhile, however, for the bears to really take hold. The market fell into a range out of the open and it was not until the third test of intraday lows on the 5 minute time frame that the selling finally began to take over. This corresponded to the 10:45 ET - 11:00 ET reversal zones.
The Dow and S&Ps led the sellers into mid-day. They barely paused at the support from the gap closure and continued into a very strong test of their 15 minute 20 simple moving averages. At 11:30 ET the selling slowed and at 11:33 ET I had my first buy setup of the day in the NQ (EMini Nasdaq 100). The Dow and S&Ps rallied strong into the 5 minute 20 sma into noon, while the Nasdaq moved all the way back into the prior breakdown price level before stalling.
http://tradingfrommainstreet.com/images/FocusLetter/20071024sp.gif
The market became very choppy once again into the early afternoon as volume dropped off a great deal. The indices crept higher until 14:00 ET. At that point the RIMM news hit. Since by this point the market had held the support for too long to favor a strong break lower, the bulls were given the freedom to rally once again. The S&Ps and Dow quickly moved back into the morning highs, while the Nasdaq was soon retesting last weeks highs. The Nasdaq hugged those highs while the S&Ps and Dow pulled back off 14:30 ET. When the last reversal period of the day hit at 15:30 ET it pushed the Nasdaq to new yearly highs and took the S&Ps and Dow to new intraday highs. The market was rounding off on the smaller time frames into the close, however, and, as I mentioned earlier, the sellers again took over afterhours.
http://tradingfrommainstreet.com/images/FocusLetter/20071024dow.gif
For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or
posted by Toni Hansen @ 11:20 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, October 22, 2007Market Shrugs Off Concerns, at Least Temporarily
Good morning! The market established a wide trading range in Monday's session after a sharp decline on Friday marked the 20th anniversary of Black Monday when the Dow fell 508 points in a single day. For those of you who checked out my Market Action Video in yesterday's newsletter, this response was not unexpected since the market had been selling off into Friday's decline and in the past such a move is typically unable to continue with a second strong day of selling. Some continuation early in the morning is not uncommon, however, and the market had sold off a great deal in afterhours trading. Even though the indices opened higher off those premarket lows, they still experienced a fairly strong downside gap to kick off the new week.
http://tradingfrommainstreet.com/images/FocusLetter/20071023nas.gif
The gap in the market took it smack into the upper end of the congestion area from the price range of late August and early September. These upper price levels were also whole number support levels in the DIA and QQQQ, which are the index exchange traded funds for the Dow Jones Industrial Average and the Nasdaq Composite. It was the $134 level in the DIA and $52 level in the QQQQ. The selling into the previous day's close and the gap into Monday morning extended the trend move enough to allow the market to pull back up into the range from Friday, just as it had in nearly every single one of the examples covered in my video.
The morning gap filled very quickly in the indices and that zone served as resistance in both the S&P 500 and the Dow Jones Industrial Average. It hit at the same time as the 5 minute 20 simple moving average as well, providing additional resistance. The Nasdaq Composite, on the other hand, regained its relative strength lead and, while it stalled for a few minutes at its own 5 minute 20 sma, it was not long before it was at new intraday highs and back to testing the price resistance from Friday's mid-day congestion zone. These resistance levels struck with the onset of the 10:15 ET reversal period and selling once again took over. Most of the best short setups in individual stocks took place at this time.
http://tradingfrommainstreet.com/images/FocusLetter/20071023sp.gif
While the mid-morning downside was decent and on the strong side, the rounded lows in the premarket and sharp upside out of the open were more significant and the market was pushed into a trading range with a second low coming out of the 11:00 ET reversal period. As the market initially moved off the 11:00 lows I was not certain we were going to actually end up holding our range very well without another wave of selling intraday first. The correction began gradually and with declining volume, but the momentum soon began to build and turn over before finally holding at 12:30 ET and again kicking off another wave of buying on the 5 minute time frames. The buying accelerated into 13:00 ET, creating an equal move on the 5 minute time frame which took the Nasdaq into the zone of the prior highs intraday as well.
After hitting resistance, the indices began to round off at the highs, establishing slightly higher highs, but without really breaking the resistance zone. The bulls finally gave way off 13:30 ET highs and fell into the 5 minute 20 sma support with the onset of the 14:00 ET reversal period. At this point the market based along the support zone on declining volume. This creased a strong Avalanche short pattern, which in this case was also an inverted cup-with-handle pattern. The selloff which followed too the market back into the mid-day congestion at 15:00 ET. It again slowed at this support, but it was not until around 15:30 ET that the buyers truly returned once again. This late day buy setup took the indices higher well into the closing bell and then beyond on afterhours trading.
http://tradingfrommainstreet.com/images/FocusLetter/20071023dow.gif
By the closing bell the Dow Jones Industrial Average ($DJI) had gained 44.95 points (+0.3%) and closed at 13,567.0. The S&P 500 rose 5.70 points (+0.4%) anc closed at 1,506.33. The Nasdaq Composite experienced the strongest percentage gain by rising 1.1% (+28.77 points). It closed at 2,753.93. Apple Inc. (AAPL) was once again at the forefront of the gainers list, rising $3.94/share on Monday. Another gainer, Wynn Resorts (WYNN), will remain of upside interest throughout this week and has potential for an upside swingtrade. In the indices themselves, key resistance levels to
I hope that you enjoy it!!!!
All my best,
Toni Hansen
_____________________________________________________________________
Market Panics and the Anniversary of Black Monday
Good morning! The market took quite a plunge on Friday on the 20th anniversary of Black Monday after teasing about such a move for several weeks. On both Wednesday and the previous Thursday the markets had experienced sharp intraday selloffs, but in both cases the indices managed to recover rather well. On Friday, however, the downside pace increased dramatically and key daily support levels gave way. The Dow Jones Industrial Average led the decliners by rounding off at the daily highs over the course of the past several weeks and then slowly beginning to sell off with last Thursday's steep reversal. At the same time, the Nasdaq Composite had managed to hang onto most of its gains and base at highs, but it was unable to sustain any of the intraday momentum on the upside. Even though it continued to hold the 20 day simple moving average support into Friday, it has broken the uptrend channel line from the buying which had been in place since mid-August.
http://tradingfrommainstreet.com/images/FocusLetter/20071022nas.gif
Heading into Friday's session, things became rather dismal early on. The 1540 level in the ES, which was the initial 15 minute support zone, broke around 9:00 am ET, just prior to the open. Then it fell into the 1536 zone, which was the second support level we were looking for heading into the day. This zone held initially for a couple of minutes, but the momentum into the support level was simply too strong and it soon gave way to more selling. The continuation pushed the Dow and S&Ps through Wednesday's lows to trigger a larger short setup on the daily time frame. The Nasdaq, which had held up a lot better overall had found initial support at Thursday's lows, but as the Dow and S&Ps moved to new lows on the week, the Nasdaq fell into the lows made earlier in the week and that support helped stall the price decline into noon.
http://tradingfrommainstreet.com/images/FocusLetter/20071022sp.gif
It was 11:00 ET when the market pivoted off mid-day support initially. The Nasdaq held this level, but the weaker S&Ps and Dow managed a very slightly lower low into 11:30 ET. A pull off those lows created a form of double bottom trap called a 2B. The Nasdaq also formed a bullish pattern on the 5 minute time frame. In this case it is a pattern I termed the Phoenix, although in this case it didn't rise very far from the ashes before it got a bit scorched again! The market rounded off at mid-day highs, just under the 15 minute 20 simple moving average, and by 13:00 ET the bears had already begun taking charge once again. The afternoon trading was smooth to begin with, but as panic set in the action became a lot more choppy and volatile.
http://tradingfrommainstreet.com/images/FocusLetter/20071022dow.gif
Although the Dow did not quite hit the -508 point loss of Black Monday, it gave it a shot in terms of the absolute point value of Friday's decline. Alll 30 of its index components closed in the red. The Dow closed lower by -366.94 points (-2.6%) on Friday at 13,500.02. It's biggest loser was 3M (MMM), which lost 8.6%. Of course, in today's market, the drop of 20 years ago would have had to have been about 3,000 points to truly compare, so we still faired well in that regard! Meanwhile, the S&P 500 fell 39.45 points (-2.6%) and closed at 1,500.63 on Friday and the Nasdaq Composite also lost 2.6%. In terms of points, this amounted to a 74.15 point drop. It ended the day at 2,725.16.
As we head into the new week, this bearish phase of the market looms. In the past, most days which are led by selling and then experience a sharp decline such as this will recover to some extent into the next session. There are exceptions though, such as July 13th and 14th of 2006 where the Dow had begun to sell off just over a week earlier but then accelerated coming out of a downside gap on the 13th. The session closed nearly lows and then went on into the prior daily low in the next session. In the Dow Jones mini-futures this amounts to the 13200 to 13400 zone and 1450 to 1475 in the S&Ps, which is a rather large range. The lower end of that support zone will tend to be the strongest. I believe that we can see one more wave of upside on the weekly time frame, however, before this larger uptrend really reverses. Should the market correct off support, the 1525 level would be S&P Emini resistance. Right now that is not looking too likely though!
For intraday updates, come join us in my free trading chatroom on Othernet. You can access the room using mIRC or
Friday, October 19, 2007Nasdaq Leads, but Dow and S&Ps Refuse to Follow
Good morning! It comes as no surprise that on Thursday trading was again mixed as the daily range continued. The Dow Jones Industrial Average ($DJI) fell 3.58 points to close at 13,889.0. American Express Co. (AXP) was one of the top losers, falling 2.4%. The S&P 500 ($SPX) also lost a bit of ground, dropping 1.16 points. It closed at 1,540.08. A large factor in the NYSE underperforming has been the returning weakness in the financial sector. Citigroup Inc. (C) fell another 1.9%, while Bank of America (BAC) lost 2.4% The Nasdaq Composite ($COMPX), on the other hand, posted a gain of 6.64 points, or +0.2%. It ended the day at 2,799.31. In other markets, the dollar sunk to to record lows against the euro, down 0.7% at 77.595.
http://tradingfrommainstreet.com/images/FocusLetter/20071019nas.gif
Thursday was interesting in that even though the market spent most of the day in a narrowing triangle pattern on the 15 minute time frame, there were still a lot of strong names to provide ample opportunities for stock traders. Callaway Golf Co. (ELY) was one of three stocks I focused on in Thursday's session. Early in the day it had a strong breakout from the range at $16.50 and from that point onward it was a steady climb to my target at $17.50. The daily pattern was a trap, whereby the stock had gapped significantly higher after a close near the day's lows on Wednesday, hence trapping the bears since a weekly short pattern had just triggered three days earlier. My other positions were CSX Corp. (CSX), which I'd had since the previous day, and Baxter Intl Inc. (BAX), which was another trap pattern plus a daily range breakout, which also went strongly into the $61 target I had set. If you get a chance to pull up the daily charts on each ot these you will notice how the gaps played a significant roll in their success, ELY and BAX based upon Wednesday's gap and CSX based upon the gap the day before. Even when simply daytrading a stock, it is very important to pay attention to where the intraday setup takes place on the daily time frame to offer the highest probability for success.
http://tradingfrommainstreet.com/images/FocusLetter/20071019sp.gif
The indices themselves, while sloppy on the 15 minute time frames, still had some strong scalp setups which made it active throughout the day. Ahead of the open, the jobless claims data hit the wired. A 28,000 increase in claims made it the largest since February. Those collecting state unemployment benefits rose by 19,000 in the week ending on Oct. 6th. The morning began with a slight downside gap, but it opened at support, creating a bit of a base or congestion zone before triggering a short coming out of the 9:15 ET reversal period. This initial move lower intraday then took the indices into what would become the lower end of the intraday trading range at about 10:00 ET. Momentum slowed and the Nasdaq found support at its 15 minute 20 simple moving average at this time and the 10:00 ET economic data helped provide a bit of a boost. The Conference Board stated that its index of leading economic indicators rose 0.3% in September. While slow, growth remained steady and the market quickly moved higher, attempting to close the morning gap. It fell just a tad bit short in the Nasdaq and S&Ps, but accomplished the feat in the Dow.
http://tradingfrommainstreet.com/images/FocusLetter/20071019dow.gif
The morning trading gave some solid back and forth moves, particularly in the Nasdaq, which experienced the least amount of overlap from bar to bar and the clearest setups. The gap zone was strong resistance on the 5 minute time frame and the market fell off that level. It then formed a base for about 30 minutes along the 5 minute 20 sma zone before triggering an Avalanche short setup into the 11:00 ET reversal period. After that the momentum began to turn. I took another continuation short in the Dow into noon, but the Nasdaq was forming a Phoenix at the same time. Hence I ended up treating it as a scalp.
The market began to climb again going into 12:30 ET, but the pace was still on the slower side. I took another scalp off the upper resistance in the Dow into the 13:00 ET reversal period thinking that the slower momentum would create another flush lower, but got out just in the nick of time at 13:11 ET when the volume failed to confirm, wondering at the time if I was being too aggressive. One tick lower, however, was all the YM had before it triggered a momentum reversal and shot higher at about 13:15 ET.
The Nasdaq stalled for a couple of minutes at the intraday highs just after 13:30 ET, but that was the only continuation pattern it offered before rallying to new highs on the week. The S&P 500 and Dow formed a nice three-wave trend with one continuation at about 13:30 ET and a second just prior to 13:00 ET. Both indices held resistance perfectly from morning highs and then the previous afternoon highs. While the indices had a steady reversal off the upper resistance and trend exhaustion, once support hit at the 15 minute 20 sma in the Dow and S&Ps and the 5 minute 20 sma in the Nasdaq at about 15:00 ET, that was it. There was an initial reaction off the support, but the remainder of the session was incredibly sloppy and I ended up calling it a day a bit early to avoid the mess.
The upside pattern from Thursday afternoon left room still for the market to continue higher into Friday. Unfortunately, a lot of this movement came soon after 4:00 am ET in the premarket trading. It took the Nasdaq into its measured move level between 2215-2220 in the NQ, but I was looking for the 1555 level in the ES. Due to a strong decline in that index afterhours, it has only made it back to the 1544 zone afterhours and upside resistance on the 15 minute time frame is now at 1547 if it can manage to break higher out of this new range it has been forming at premarket highs in the 1541-1542 zone. 1540 and 1536 are the main 15 minute support levels. On the daily time frame there has not been much change. The range remains in tact in the Dow and S&Ps, while the Nasdaq broke more quickly as I had suggested when we first began to see the range form.
posted by Toni Hansen @ 6:15 AM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, October 17, 2007Market Scared of its Own Shadow
Good morning! I have this cat named Bonnie, but from the time she was a kitten she earned the nickname "Boo", which she now thinks is her actual name. She received this name because she is afraid of everything! Everything, that is, except what cats are supposed to be scared of! Vacuum cleaners, water, hyper-active 3 year olds don't faze her, but if she sees a nail file she will freak out. The same thing happens if a gust of wind fluffs her fur the wrong way or a book is laying on the counter that wasn't there before. She will jump halfway to the ceiling from standing position, which is quite a feat given our high ceilings. Lately, the market reminds me exactly of my cat. It has brushed aside poor news or lack-luster news, but if you so much as look at it the wrong way it freaks out. This happened last Thursday when late-day panic left many scrambling to find the news, when there was none to be had. The same thing happened again in Wednesday's session.
http://tradingfrommainstreet.com/images/FocusLetter/20071018nas.gif
The session began on a happy note, following through in the afterhours trading on the bullish bias we saw heading into the close on Tuesday. Unfortunately, the gap into the open was much larger than average, and hence more difficult to hold. Typically the extreme gaps in the indices themselves have a greater tendency to fill. It did not help that the gap was also into strong price resistance. This came at Monday's opening levels in the Nasdaq Composite ($COMPX) and the closing highs from Monday in the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI).
Right away out of the open the bears took over. The momentum on the downside was pretty decent initially, slowing as the 5 minute 20 simple moving average approached in the Dow. An area of congestion followed and then led to a second wave of intraday selling into the 10:45 ET reversal period. This corresponded to the 5 minute 20 sma in the Nasdaq and the market began to correct again off support. The Nasdaq held, but the Dow and S&Ps established a slightly lower low just after 11:00 ET before they joined the Nasdaq in correcting off the support zone. The slightly lower lows brought them into stronger support due to the 15 minute 20 sma.
http://tradingfrommainstreet.com/images/FocusLetter/20071018sp.gif
The indices slowly climbed into noon, but volume sharply declined, indicating a lack of conviction on the upside move. When the 12:00 ET reversal period hit the volume was at its lightest levels of the entire session. At the same time, the market was hitting strong price resistance from previous congestion on the 5 minute charts in the S&Ps to the previous highs in the Nasdaq. The result was a very rapid return of the bears once the lower end of the trend channel gave way. The volume had been so light just prior to the breakdown that it took very little for the market to create its strongest momentum move of the session thus far.
Within half an hour the S&P 500 had closed its morning gap, the Nasdaq had fallen into its 15 minute 20 sma, and the Dow was hitting the previous afternoon's lows. All of these support levels led to a minor correction, but the market just hugged the support on light volume again and when the 13:00 ET reversal period hit the market rapidly plummeted to new intraday lows.
The second strong wave of selling in the afternoon finally took the Nasdaq back into its closing prices from Tuesday. This was another strong level of support, much as it had been on the S&Ps and Dow. As in the S&P and Dow, however, the momentum into the support was extreme, which meant that any rapid correction off the support level was unlikely. Since we only had two waves of selling, it also meant that the market still had room for a third wave of downside. Volume did spike coming off the second low, but it dropped again as it corrected. When the upper end of the downtrend channel hit it kicked off that third decline, taking the Nasdaq back into Tuesday's lows and yet another very strong 15 minute support zone.
http://tradingfrommainstreet.com/images/FocusLetter/20071018dow.gif
At 14:00 ET the Fed's Beige Book came out. 14:00 ET is typically a reversal period to begin with, but combined with the strong market support and the trend exhaustion, it came at a very pivotal time for the market. The indices popped and then based into about 14:30 ET. Volume was light on the more gradual pullback off the 5 minute 20 sma zone. The momentum again increased as the resistance gave way and when the 15:00 ET reversal period hit the market took off. Within only about 15 minutes the indices were back to their 13:00 ET breakdown prices. This served as resistance, but a small correction was all it took before the market again shot higher into the close.
The market closed with a 20.40 point loss (-0.1%) in the Dow Jones Ind., a gain of 2.71 points (+0.2%) in the S&P 500, and a gain of 28.76 (+1.0%) in the Nasdaq Comp. The buying then continued afterhours and the S&Ps and Dow flew into their 12:00 ET price resistance, while the Nasdaq continued into its premarket highs before stalling and falling into a congestion heading into the next day.
It is still going to be easier for the Nasdaq, which has held up very well thanks to technology stocks lately, to break to new daily highs. Meanwhile the S&Ps and Dow have more significant resistance at last week's highs. Due to earnings season and a great deal of uncertainty in the markets, moves such as Monday's and Wednesday's are likely to occur on a much more frequent basis right now than we have seen in the last 6 weeks. I am also now suspecting that by the time earnings season begins to wind down we will once again be experiencing another larger correction on the weekly time from in the overall market.
posted by Toni Hansen @ 10:59 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, October 16, 2007Markets Continued to Slide Lower, but Lacked Conviction
Good morning! Trading was very choppy throughout much of Tuesday's session. After continuing to move higher afterhours on Monday, the market ran into price resistance. In the Nasdaq Composite this resistance was the price congestion zone at noon before the indices dropped lower into the early afternoon. The market was unable to push past those highs and at almost exactly midnight the bears returned with a sharp decline in the wee hours of the morning. At 4:00 am ET the indices began to stabilize, but the market bias remained mixed. The rounded lows on Monday's 15 minute charts left a bullish bias in the market that, despite afterhours buying, had yet to play out long enough for any real bearish action to take over.
http://tradingfrommainstreet.com/images/FocusLetter/20071017nas.gif
The bears tried to regain control out of the opening bell, pulling the indices lower for the first 15 minutes of the regular trading day, but the 9:45 ET reversal period held and the market turned higher. The Nasdaq led the upside, nearly closing the morning gap, whereas the S&Ps and Dow could not even push through the 5 minute 20 simple moving average resistance. A second wave of intraday selling followed this resistance and the market fell sharply into 10:15 ET where it rounded off into 10:45 ET, triggering another upside move into 11:00 ET.
For a brief span of time, the bulls were allowed to try their luck once again, but they were forced to deal with a horde of resistance levels. The 5 minute sma was again the first one for the Dow and S&Ps, whereas the Nasdaq moved into its upper channel resistance at the same time. The indices hugged the resistance into about 11:30 ET and then broke to continue higher on a second wave of buying. The Nasdaq once again hit premarket highs and the mid-day congestion from the previous session before turning over, while the S&Ps found resistance at those mid-day lows and the Dow found intraday resistance at the earlier 5 minute highs.
http://tradingfrommainstreet.com/images/FocusLetter/20071017sp.gif
The early afternoon action in the indices was still not too difficult yet. The mid-day resistance held perfectly and the selloff which followed moved perfectly into support from the 11:15 ET zone and then formed a nice little Avalanche on the 5 minute charts before falling again into the 13:00 ET reversal period. This took the market into the 10:30 ET price zone and a second level of 5 minute support.
After the market reversed at about 13:15 ET and again headed higher, the indecision became magnified. Among the first of the major earnings announcement of the season, Yahoo (YHOO) was set to announce their results after the closing bell. As I pointed out in my free chatroom, while the 5 minute bias remained bearish, the 15 minute charts were still bullish! In the end both of these biases had a chance to play out, although the bulls had to wait until after the closing bell. At about 14:15 ET the bears took over and brought the market back to prior 5 minute lows, but it lacked the interest (as displayed by very little change in volume) to break the support level.
A slightly lower low formed soon after 15:00 ET, but the lower intraday support held. This created a reversal pattern in the indices known as a 2B. I had hoped to see a third slightly lower lows to flush things out a bit better, but instead the market rolled over and then popped to the upper end of the trading channel. It then held up along that resistance until after the bell when earnings announcements propelled the indices higher. The Dow and S&Ps returned to their opening price levels and the Nasdaq managed a higher high on the day.
http://tradingfrommainstreet.com/images/FocusLetter/20071017dow.gif
At the time of the closing bell, the Dow Jones Industrial Average was down 71.86 points (-0.5%) after hitting a triple digit loss earlier in the session. The Dow ended the day at 13,912.90. The S&P 500 fell 10.18 points (-0.7%) and closed at 1,538.53. The Nasdaq Composite came in in the middle with a loss of 16.14 points, (-0.6%). It closed at 2,763.9.
A lot of the top winners on Tuesday were under $15/share. Bell Microproducts Inc. (BELM) rose 8.4%, breaking out of a second wave of selling on the daily time frame after stating that on a preliminary basis, Q3 revenue was up about 30% from the prior year. China Precision Steel Inc. (CPSL) rose 9.9% after it showed a 55% revenue growth for fiscal 2007. Lululemon Athletica Inc. (LULU) had a really great daily setup with a strong bear trap after it raised its Q3 same sales growth target to over 30%. Another very strong setup on the daily charts was in Robbins & Myers Inc. (RBN), which had originally triggered on Monday, but then offered a strong continuation play on Tuesday morning thanks to a strong base at highs following the opening gap. The gap itself was caused by earnings for its fiscal Q4 which were nearly double from the prior year.
On the losing side, one of the stronger daily and weekly short setups was on Domino's Pizza (DPZ). It had been stuck in a range since August and fell through the lower end of the range with a gap due to a Q3 net income decline of 55%. A similar setup occurred in Keycorp (KEY), which also broke lower out of a weekly base at lows after its Q3 income fell 33%. Both of these are now open for even further downside as a result.
The intraday momentum is still more bullish because the upside moves within this congestion have been very strong, even though they have been afterhours. The daily charts, however, remain more extended, which still makes it easier for the bears to take hold quickly if the momentum turns over intraday. I think that this week the easiest trading is going to be in individual stocks moving on earnings news while the overall market remains choppy.
posted by Toni Hansen @ 5:13 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Experiences Strong Selling as Range Holds
Good morning! The market has fallen into a decent corrective stage on the daily time frame as the week begins. The indices whipped strongly back and forth at the end of last week, and then reversed a third time on Monday after rounding off at all session highs heading into the day to trigger a short almost immediately following the open despite a minor gap higher. This went contrary to what I had been expecting the previous evening since I was originally looking for strength into the morning and had to change my bias rather quickly. The Nasdaq held up the best to begin with, finding support at the 5 minute 20 simple moving average while the Dow Jones Ind. Ave. and S&P 500 dropped right through them, but after congesting along the support for about half an hour the indices had all formed Avalanche continuation patterns and the next level of support gave way to further selling.
http://tradingfrommainstreet.com/images/FocusLetter/20071016nas.gif
The downside move out of about 10:30 ET was the strongest move of the day on Monday. Selling continued until the Dow and the S&Ps had both made their way back into Thursday's afternoon lows. This served as support initially, but the momentum into the support level was too strong to allow the indices to rapidly retrace. Instead they fell into trading ranges along the support and volume dried up as the 5 minute 20 sma approached. This previous support level now served as resistance and the indices broke down again into 12:30 ET. The market moved to lower lows but did not break by as much as the previous selloff.
http://tradingfrommainstreet.com/images/FocusLetter/20071016dow.gif
Soon after 13:00 Et the market bounced again. This time the momentum was a bit stronger, but the 5 minute 20 sma remained resistance. It was the beginning of a momentum change, however, and the indices continued to round off at lows with only slightly lower lows before popping higher into the close in the final 30 minutes of trading on a 15 minute momentum reversal pattern. The upside took the market through the 15 minute 20 sma resistance, but it was not enough to hold off the bears in afterhours trading and selling resumed to kick off Tuesday's premarket trading at mid-night.
http://tradingfrommainstreet.com/images/FocusLetter/20071016sp.gif
Monday session ended with a loss of 108.28 points in the Dow ($DJI) for a closing price of 13,984.80. The S&P 500 ($SPX) lowest 13.09 points and closed at 1,548.71. The Nasdaq Composite ($COMPX) lost 0.01% more than each of the other two indices, falling 25.63 points and closing at 2,780.05. Oil-related stocks were among the strongest, while General Motors (GM) was one of the weakest. I had expected Monday's closing prices to be followed by a lot more upside that ocurred. I think it is still possible that this can come in for the morning, however, and my bias is again bullish in the morning but the prior highs from Thursday remain very strong resistance.
posted by Toni Hansen @ 12:00 AM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Recovers Sizable Losses
Good morning! The market made quite a recovery on Friday after selling off sharply in the previous session. Given the extent of Thursday's decline, it was rather remarkable that the overall market still managed to post gains for the week as a whole. By the end of Friday's session, the Dow Jones Industrial Average ($DJI) had reclaimed 77.96 points (+0.6%) from the previous day's losses to end the session at 13,093.1. The gain on the week amounted to +0.2%. The S&P 500 ($SPX) took back 7.39 points (+0.5%), adding 0.5% to the week with a closing price on Friday of 1,561.80. The Nasdaq Composite Index ($COMPX), led by strength in the technology sector, rose 33.48 points on Friday (+1.2%) and added 0.9% on the week by closing at 2,805.68.
Despite the gains, however, the upside volume in the market was rather light compared to the past several months. On Friday volume on the New York Stock Exchange came in at about 1 billion shares. Advancers outpaced decliners by 5 to 3. On the Nasdaq a little under 2 billion shares exchanged hands and advancers beat out decliners by 9 to 5. Since Friday was a trend day with primarily higher highs and higher lows, this showed a bit of hesitation. The fact that the trend weakened dramatically as the day wore on, as we will soon see, also made it more difficult for the bulls, although they refused to give way to another afternoon of selling and finished strongly.
Several economic reports were released on Friday which played a bit of a roll in the intraday trading activity. The first, and most influential, of these ws the 8:30 ET producer price data. The Labor Department reported at this time that U.S. producer prices climbed by a greater-than-expected 1.1% in September, while core inflation increased 0.1%. This meant that the greatest gains were in higher energy and food prices. The overall PPI increase was the largest since this past February with energy prices moving higher by 4.1% last month and wholesale gasoline prices jumping 8.4%. Food prices rose by 1.5%. One the the areas where prices declined was when it came to passenger car prices, which dropped 1.8%.
At the same time as the PPI data was released, so was additional data on September retail and food sales. U.S. retail sales rose 0.6% in September, beating expectations of a 0.3% increase and putting a damper on expectations for aggressive rate cuts on the part of the Federal Reserve. The result was that the Treasury bonds fell on Friday, sending yields higher. The 10-year Treasury bond fell 11/32 to 100 17/32, yielding 4.683%. The 30-year bond shed 21/32 to end the session at 101 14/32 with a yield of 4.908%.
Additional data released later in the session showed a 0.5% increase in retail inventories as reported by the Commerce Department. On the other hand, Reuters and the University of Michigan reported a drop in consumer sentiment from 83.4 in September to 83 this month, whereas analysts had expected the consumer confidence rating to climb to 84.5. This is the lowest it has been since August of 2006 and reflects concerns over the rising food and higher energy costs in particular.
http://tradingfrommainstreet.com/images/FocusLetter/20071015nas.gif
After just chopping around in the premarket and going virtually nowhere, the indices began to move higher following the 8:30 ET data. While the Dow and S&Ps stalled out of the open, however, after just a few minutes of indecision the Nasdaq was making its way higher. The Dow and S&Ps joined in following the 10:00 ET data and the market continued higher into the 10:15 ET area. The Nasdaq had a bit more trouble pulling back off the highs, but all three indices made their way into the 5 minute 20 period simple moving average zone on declining volume. It hit at about the 10:45 ET reversal period and by 11:00 ET the market was again moving higher.
http://tradingfrommainstreet.com/images/FocusLetter/20071015sp.gif
As the morning progressed, the indices hit higher highs intraday. This continued until the S&Ps hit Wednesday morning highs around 11:30 ET. A second correction on the 5 minute time frame followed into noon. The selling on this second pullback was a bit stronger than the first in the Nasdaq, but still comparable to it in the S&Ps and Dow. Once again, however, the volume dropped off as the pullback formed, indicating that the bears were still not feeling that aggressive. Often trends such as this will form with three waves of upside before the lower channel breaks. This meant room for the third high to form into the early afternoon. It hit highs with the 13:00 ET reversal period and the pullback took the indices into support at the 15 minute 20 sma and a lower low intraday.
In order for a trend reversal to confirm, not only must it have a lower low, but a lower high as well. The market had a more difficult time with this second part of the criteria. The buying off the support at 13:30 ET was simply too strong to begin with and the indices quickly returned to the mid-day highs. The momentum did attempt to turnover again into the final hour of the day by slowing at the mid-afternoon highs as the indices held prices resistance from intraday highs on Wednesday, but the final move lower still had no volume confirmation.
After just a few minutes of rapid selling the momentum again stalled into the 15:30 ET reversal period and this slowdown again led to another more rapid move off support, which in this case was the previous 5 minute lows. Essentially, even through there were some very slightly higher highs, the market spent the afternoon in a trading range, but pushed through the upper end of that range into the close and into afterhours trading.
http://tradingfrommainstreet.com/images/FocusLetter/20071015dow.gif
Despite the upside in the indices, most of the top gainers on the session did not get there by trending higher throughout the day and most of the top percentage gainers in the Nasdaq were not stocks I run into very often. The top ten symbols in my Nasdaq % gainers scan at the end of the day were BEAS, TIBX, GIGA, IFON, JASO, HLYS, INNO, URRE, MBLX, and CALM. BEA Systems (BEAS) made the list thanks to a buyout proposal by Oracle Corp. (ORCL). It gained 5.20 points, or 38.2%, by the end of the day. Most of this upside was in the form of the gap. Innovo Group, Inc. (INNO), which is not a stock I can recall ever hearing of, is a cheap little apparel and accessory company that announced plans for a merger with JD Holdings. It rose $0.14 (+8.7%).
Some more popular names topped the NYSE gainers list. These included GM, RIO, STV, AMR, EK, FXI, GRA, SWY, TDC, and TRA. General Motors Corp. (GM) was one of the few stocks to trend strongly throughout the entire session. It gained 2.65 points, or 6.6%, by the end of the day. Companhia Vale do Rio Doce (RIO) came in at a close second with gains of 1.82 points, or 5.3% gains.
Among the day's losers were Coldwater Creek Inc. (CWTR), which fell 28.1% after it lowered its forecasts; CalAmp Corp. (CAMP), which lost 11.2% following earnings; and Beazer Homes USA Inc. (BZH) after it reported that it will be required to restate financial results due to an independent internal investigation. Other top losers were ATI, CAPA, SHRP, CHS, LDK, LEN and LDK.
I am not feeling very strongly about either side of the market at this point for longer term potential, other than the fact that Friday's buying has held off the bears for the time being. The bulls triggered a 15 minute buy setup into the close and I expect this to play out into Monday morning, but the highs from Thursday will serve as some strong price resistance and it will be very easy for the market to fall into a longer congestion with Thursday's highs and lows holding as resistance and support. The Nasdaq will have an easier time making a slightly higher high on the 60 minute charts next week than the Dow and S&Ps will.
At this point the market has not developed enough in terms of the momentum within that potential range to indicate the most likely direction for it to break. I was feeling a lot more bearish heading into Friday's session, but quickly reversed my bias intraday early on in the session. Given the extent of Friday's bounce, there is no immediate sell pattern forming yet intraday, but we can still easily see the bears return during Monday morning's trading for another decent intraday decline off Thursday's highs.
Economic Reports and Events This Week
Monday, October 15, 2007
8:30a.m. Oct NY Fed Manufacturing Index. Expected: 13.25. Previous: 14.70.
Tuesday, October 16, 2007
7:45a.m. ICSC Chain Store Sales Index. Previous: unch.
8:55a.m. Redbook Retail Sales Index. Previous: +0.3%.
9:00a.m. August Treasury International Capital Flows. Previous: -$3.0B.
9:15a.m. Sep Industrial Production. Expected: +0.1%. Previous: +0.2%.
9:15a.m. Sep Capacity Utilization. Expected: 82.1%. Previous: 82.2%.
1:00p.m. Oct NAHB Housing Market Index. Previous: 20.
5:00p.m. ABC/Wash Post Consumer Conf. Previous: -13.
Wednesday, October 17, 2007
7:00a.m. MBA Mortgage Application Survey. Previous: +2.4%.
8:30a.m. Sep Housing Starts. Expected: -3.9%. Previous: -2.6%.
8:30a.m. Sep Consumer Price Index. Expected: +0.3%. Previous: -0.1%.
8:30a.m. Sep CPI, Ex-Food & Energy. Expected: +0.2%. Previous: +0.2%.
Thursday, October 18, 2007
8:30a.m. Initial Jobless Claims For Oct 13 Wk. Expected: +7K. Previous: -12K.
10:00a.m. Sep Leading Economic Indicators. Expected: +0.3%. Previous: -0.6%.
10:00a.m. DJ-BTMU Business Barometer. Previous: +0.3%.
12:00p.m. Oct Philadelphia Fed Business Index. Expected: 8.0. Previous: 10.9.
Friday, October 19, 2007
There are no economic indicators scheduled for today.
Key Earnings Announcements This Week:
Monday:
Before: SCHW, C, ETN, MAT, EDU, JNC, GWW
After: ADTN, BMI, DNA, JBHT, RBN, SONC, STLY
Tuesday:
Before: AOS, DPZ, FRX, JEF, JNJ, KEY, MNI, PII, RF, STT, SVU, USB, WFC
During: CBSH, DAL
After: AMB, CHB, CCK, CSX, ELS, EXFO, FSII, HBHC, INTC, LCBM, LLTC, PHHM, PNFP, RLRN, STX, SPSN, STLD, USNA, YHOO
Wednesday:
Before: ABT, MO, APH, ASML, BLK, CIT, KO, CMA, DSL, FCFS, GCI, ITW, JPM, LCRY, LUFK, MAN, MI, MTG, NCI, NTRS, PJC, RLI, UTX
During: AMR
After: ADS, ALL, ATR, ARNA, AVCT, CTXS, CBST, DTLK, ETFC, EBAY, GKK, HWAY, ILMN, RX, ISIL, KNX, KNL, LRW, LEG, LOGI, MOGN, MGI, NE, NVEC, PKG, PLCM, SOV, SPTN, SYK, TER, UFPI, VLY, WM, WDFC
Thursday:
Before: SHLM, AMFI, ASD, AME, ARB, AVCI, BAC, BK, BAX, BBT, BGG, BBW, CDWC, CHZ, CBH, CAL, CORS, CY, DHR, DJ, LLY, ENDP, FCS, FCSX, FHN, GPC, GAP, HSY, HNI, HBAN, IEX, IUSA, IIIN, IONA, JAKK, JRC, NITE, KVHI, LSTR, MCD, MHP, MMR, MEG, MOT, MSM, NOK, NVS, NUE, NVR, PH, PFE, PNC, BPOP, PPG, RS, SAP, SEIC, SIFY, LUV, STJ, SPWR, STI, TXT, TRAD, UTEK, UNP, UNH, USAK, WSO, WCC, WYE
During: HTLD
After: ACMR, AMD, AMLN, AZPN, BCR, CAMD, COF, CERN, CTHR, CHRT, CPSS, CREE, CYBC, CYT, EXAR, FNB, FCF, GILD, GOOG, IBM, ICUI, INFN, INFA, PODD, IBKR, ISRG, KMP, LDSH, MHK, MOLX, NYB, OO, OMCL, PKTR, PLL, PMCS, PGI, QXM, RIMG, RHI, RUSHA, SNDK, SSW, STAR, SYNA, TTGT, TPX, UB, VFC, VASC, VMSI, WERN, WSTL, WIT, XLNX, ZHNE, ZION
Friday:
Before: MMM. ACO, ACI, BSX, CAT, FITB, HOG, HON, KNSY, OSTK, SLB, SON, WB, WL, XRX
Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!
posted by Toni Hansen @ 12:08 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, October 11, 2007Market Plunges Off Record Highs
Good morning! Thursday's session began on a strong note. The major indices all gapped higher, but the move was too much and left the market exhausted after nearly a week of upside already. Things were not looking great for the bulls heading into the day on, but then quickly began to deteriorate even further as the day progressed. The gap move took the Dow into price resistance from Tuesday's highs, while the S&P 500 and Nasdaq Composite both broke to new highs on the year. An extended period of congestion then followed, leaving the indices rather unexciting throughout the morning. An upside breakout took place in the early afternoon, but it failed to gain any momentum and the bulls began to become rather worried.
http://tradingfrommainstreet.com/images/FocusLetter/20071012nas.gif
Although the S&Ps and Dow broke through the earlier highs, the Nasdaq languished. It made a lightly higher high, but the pullback around 11:00 ET helped change the momentum in the Nasdaq. Without another pivot low to break the channel that began around 11:15 ET, the market simply crept higher on the 15 minute time frame. Volume was very light during this time, which meant that while there was still predominantly buying pressure, most market participants were not that excited about the prospects.
Despite the action in the market as a whole, a number of stocks experienced some very strong intraday momentum moves. These included popular names such as Wynn Resort Ltd. (WYNN), JA Solar Holdings (JASO), Gigamedia Ltd. (GIGM), General Motors Corp. (GM), as well as others such as Hingli Green Energy Holding (YGE). Due to the earnings season, there will be a lot more of these types of play likely in coming weeks.
http://tradingfrommainstreet.com/images/FocusLetter/20071012sp.gif
As I expressed in yesterday's column, I was not at all impressed with the upside in the market had was beginning to be on the lookout for strong reversals to create rapid downside moves on the 15 minute time frame. Boy did we see that happen or what! Wow! The sell signal came at about 13:30 ET, but once the selloff began there was no stopping it! The bulls, who had become wary of the upside, were now tripping over themselves to pull out. The fear is that another strong correction on the weekly time frame is lurking.
http://tradingfrommainstreet.com/images/FocusLetter/20071012dow.gif
This market had a secondary move lower beginning just prior to 14:30 ET. This next drop took the market past many of the nearby support levels, until finally, at the 15:30 ET reversal period, they had enough . They bounced somewhat higher into the close, hitting the 5 minute 20 simple moving average, but remaining on the weak side afterhours as well. The Dow lost 64.57 points (-0.4%) and closed at 14,198. The S&Ps shed 8.06 points (-0.5%) and ended the day at 1,554. The Nasdaq Composite was the hardest hit. It fell 39.41 points (-1.4%) and closed at 2,772. Some of the main perps were AAPL (-2.7%), RIMM (-5%) and VMN (-4.1%). Although the market will experience intraday corrections off support levels, I don't expect any strong movement past this week's highs for quite some time. Even a slightly higher high would probably just fail to hold, so be prepared for selling. Ideally it will wait for a 30 minute base at lows before doing so. We shall see how it goes!
posted by Toni Hansen @ 10:15 PM 0 Comments
Wednesday, October 10, 2007Market Mixed as Light Volume Continues
Good morning! While the Dow Jones Industrial Average ($DJI), S&P 500 ($SPX), Nasdaq Composite ($COMPX), and Russell 2000 ($RUT) all turned and held intraday support and resistance levels at the same time throughout Wednesday's session, the strong difference between the gainers in the Nasdaq and the losers in the Dow returned. This is similar to what happened in Monday's session, right down to the morning selling and late day reversal off lows.
By the end of the session the Dow had shed 86.8 points and closed at 14, 078.7. The S&P 500 was less committed either way and lost only 2.68 points. It ended the session at 1,562.47. The Russell 2k had the least change, falling 0.53 point to end at 845.19. The Nasdaq Composite, on the other had, posted a modest gain of 7.70 points. It closed at 2,811.61.
http://tradingfrommainstreet.com/images/FocusLetter/20071011nas.gif
I missed out on most of the trading day, but overall there was quite a bit of chop, with the exception taking place mid-day. There were still some decent triggers, however, to offer nice trading ops, but the stakes were higher since the added choppiness meant larger potential stops compared to the potential gains.
Following the open, the market headed lower. This smaller 1 minute trend continued into the 10:15 ET reversal period. The reversal period combined nicely with the 15 minute 20 simple moving average support and price support from the prior session to allow the selling to come to a halt and a decent reversal trigger to form.
The Nasdaq quickly moved to new intraday highs, while the Dow barely budged. A second pullback into the 11:00 ET reversal period faired a bit better. A third intraday high was made in the Nasdaq, taking it back to Tuesday's highs, and the S&P 500 retested its morning highs. Slower momentum into these resistance levels and lighter volume on the buying then allowed the indices to roll over and fall into the 12:00 ET reversal period.
http://tradingfrommainstreet.com/images/FocusLetter/20071011sp.gif
The decline into noon was the strongest downside action of the day up until that point. This continued shift in momentum was followed by a slower correction off the support at the previous intraday lows in the S&Ps and Nasdaq and prior morning's lows in the Dow. This correction continued to move higher into the 13:00 ET reversal period and the 5 minute 20 simple moving average, but it did on on weak volume, indicating a lack of eager participants in the upside move. A second wave of selling hit quickly out of the reversal period and off the resistance, taking the market into a second afternoon low at 13:30 ET, which is yet another reversal period.
The break in the trend channel of this second decline gave a nice buy trigger, but I had expected initially that it would only be a scalp trade into the 5 minute 20 sma again. The Nasdaq was forming three highs on the 60 minute charts and creating the risk of a larger correction, at least in the form of a lower trend line break. This meant that a bear flag was possible into 14:30 ET. As this next correction off lows developed, however, the momentum increased on the upside and even though the indices flushed quickly off the 5 minute 20 sma, it busted through that level going into 14:30 ET. The main trend of the day was now well underway.
http://tradingfrommainstreet.com/images/FocusLetter/20071011dow.gif
This last major move of the session was not a pretty one for weak hands. The trend continued nicely until the last 30-40 minutes of the day, but the channel was rather wide with a great deal of overlap from one bar to the next on the 5 minute time frame. The best course of action in such a situation is to draw a lower trend channel line and when it breaks looks to get out, paying particular attention to the larger time frame resistance levels. In this case it was the previous afternoon's highs in the S&Ps and the morning lows in the Dow coming together at the same time. The risk, of course, is that since the channel is wide, you do end up giving a nice chunk of your gains if you are wrong. After holding the resistance at highs, the indices then corrected off the highs into the close, but did not get far and held up well into the wee hours of the next morning.
I am once again very cautious on upside action. I think the market is at a point now that a larger correction for a few days at least is imminent, but since the move did not take place on Wednesday, and the buying into the afternoon was still strong, it may take another day or so to turn over. At this point, however, I would not suggest being aggressive on the upside other than in daytrades, since the slowing momentum on the 60 minute charts into each new high opens the door for rapid downside flushes on the 15 minute time frame.
posted by Toni Hansen @ 10:20 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, October 9, 2007Market Rallies with Record Closing Highs in S&P and Dow
Good morning! The market managed another day of strong gains on Tuesday, but the session started out rocky. The indices gapped higher in the morning, but the gap was large enough that the initial buying took the ES (S&P 500 EMini) right into that 1570 level we had tagged as resistance earlier the previous evening. The absolute morning high was 1569.25. After hitting that level, however, the market needed a chance to rest and the gap soon began to quickly close coming off the 9:45 ET reversal period. The 5 minute 20 simple moving average and gap closure were the support levels on this same time frame. The 10:15 ET reversal period held for about 15 minutes, but then the market tested the support level more securely before pulling back higher into 11:00 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20071010nas.gif
After the market popped, the momentum began to shift, but unlike the previous day, the indices had been pretty much in sync all day and this remained true into the afternoon as well. The market fell into 11:45 ET when the 5 minute 20 sma stalled the selling. It congested along the moving average as volume declined to indicate a lack of motivated buyers. A nice sell setup triggered into 12:30 ET and took the S&Ps back into the zone of their morning lows. A second correction into the 5 minute 20 sma created the opportunity for a third mid-day decline. It triggered quickly and took the Nasdaq back into morning lows, whereas the S&Ps and Dow fell into negative territory.
http://tradingfrommainstreet.com/images/FocusLetter/20071010sp.gif
By this time market participants were beginning to hedge their bets. The FOMC minutes were due out at 14:00 ET, but some eager players began to push higher ahead of the report. After it hit the S&Ps and Dow shot back into the intraday highs and the Nasdaq back into mid-day highs. A nice two-wave correction on the 1 minute time frame followed and formed an upside continuation pattern into 14:30 ET. The larger change of momentum helped the market then break to new intraday highs. This momentum continued nearly into the close. I got a short trigger on the NQ into 15:30 ET and that index flushed into the 5 minute 20 sma gain, but was not able to take the Dow and S&Ps with it.
http://tradingfrommainstreet.com/images/FocusLetter/20071010dow.gif
By the closing bell, the Dow Jones Industrial Average ($DJI) had added 120.80 points (+0.9%) and it closed at 14,164.5. The S&P 500 ($SPX) rose 12.57 points (+0.8%). It closed at 1,565.15. The Nasdaq Composite was a weaker thanks the earlier extension from the previous day. It gained 16.54 points (+0.6%) and closed at 2,803.91. Alcoa (AA) helped by gaining 3.75%). This momentum still has room to continue into Wednesday morning. There is no strong exhaustion showing up at this point intraday, but resistance should hit early on in the morning. 1583 is the next 60 minute resistance zone. in the ES
posted by Toni Hansen @ 7:43 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Remains Split
Good morning! We have seen a lot of examples lately where the Nasdaq Composite ($COMPX) has been greatly at odds with the rest of the market. Whereas a few months ago the Dow Jones Industrial Average ($DJI) was often the strongest upside mover intraday, recently it has been the Nasdaq Composite that has led the bulls intraday. On Monday this divergence was even more pronounced. The Nasdaq futures trended higher throughout most of the session, while the Dow, S&P 500 and Russell 2k all closed lower. To put it in perspective, the Nasdaq gained 7.05 points on Monday (+0.3%), while the S&P 500 ($SPX) lost 5.01 points (-0.3%) and the Dow lost 22.28 points (-0.2%). The Russell 2000 ($RUT) fell 4.74 points (-0.6%).
http://tradingfrommainstreet.com/images/FocusLetter/20071009nas.gif
This split in the market was apparent right away out of the open. While it is normal for the market to show some differences in terms of one index leading the other, usually they begin to fall in line within the first few minutes of the day. On Monday, however, the Dow gapped lower and immediately continued south, albeit slowly. The Nasdaq, on the other hand, opened lower by only a few ticks and then began to climb. The S&Ps and Dow fell into a low-level trading range while the Nasdaq broke to new 6-year highs. The momentum slowed and turned over into 11:00 ET. At the same time, the S&Ps and Dow broke lower out of their trading ranges after coming into the 5 minute 20 simple moving average resistance.
One of the primary factors contributing to this unusual market activity was the incredibly light volume. Monday was Columbus Day and apparently many market participants assumed that this meant they could take the day off! Sheesh! On the New York Stock Exchange about 851 million shares exchanged hands with decliners outpacing advancers by 2 to 1. On the Nasdaq there were almost 1.5 billion shares traded with decliners coming in at about half of that on the NYSE by outpacing advancers by the narrower margin of 4 to 1.
http://tradingfrommainstreet.com/images/FocusLetter/20071009sp.gif
After the indices began to sell off the Nasdaq quickly dropped into the previous 5 minute lows while the Dow and S&Ps slid into the zone of the intraday lows from the previous session. The momentum slowed into this support and the indices all began to favor a bullish reversal over noon. Some slightly lower lows on the 5 minute time frames served as traps to new shorts and flushes for weak-handed bulls and by 12:30 ET
most of the uncertainty was shaken out and the market began to gain momentum on the upside into the early afternoon. This was most pronounced in the Nasdaq, which had been leading the market, and the least pronounced in the Dow, which crept higher at a slower-than-average pace into 13:30 ET. The earlier congestion from the morning served as resistance and at 13:30 ET the market again began to correct.
http://tradingfrommainstreet.com/images/FocusLetter/20071009dow.gif
Since the Dow and S&Ps experienced a lot of overlap in their move higher into the afternoon, this made them more susceptible to another flush. The whole market pulled back into 14:00 ET, but the Dow and S&Ps broke the prior low by a hair before triggering one of my favorite setups of the day around 14:15 ET. The double bottom in the two weaker indices allowed the market to quickly retake the prior 5 minute highs, but they S&Ps and Dow had a much more difficult time continuing that momentum. The Nasdaq trended incredibly well into the close, but even though the Dow and S&Ps had rounded off very nicely at the intraday lows, they were not able to pick up any momentum of their own.
My bias is that the market can still pick up this momentum into the morning on Tuesday, but the upside is becoming more and more extended and hence and more risky in terms of the potential to be flushed lower. The 1570 level will serve as resistance in the ES (S&P 500 EMini), while the next major support level if the 1560 level breaks is going to the at about 1552. Either of these zones should lead to a correction off them on a 15 minute time frame or greater.
Economic Reports and Events This Week
Tuesday, October 9, 2007
7:45a.m. ICSC-UBS Chain Store Sales. Previous: Unch.
8:55a.m. Redbook Retail Sales Index. Previous: +0.3%.
5:00p.m. ABC/Wash Post Consumer Conf For Oct 7. Previous: -12.
Key Earnings Announcements This Week:
Tuesday:
Before: CMN, CBSH, MTB, OXM
After: AA
Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!
posted by Toni Hansen @ 3:54 AM 2 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, October 7, 2007Market Rallies on Jobs Data and Range Breaks Higher
Good morning! The market had a really strong day on Friday to finish up the week. The 60-minute buy setup we were watching heading into the day followed through famously. The day began with a nice upside gap after the September employment report was released and showed increase of 110,000 payrolls. This was in line with expectations, but the report was accompanied by an upward revision of August's data, which had originally showed a decline of 4,000 payrolls. This number was tossed aside when the revisions to August's report showed an 89,000 increase of payrolls instead.
http://tradingfrommainstreet.com/images/FocusLetter/20071008nas.gif
Following the larger-than-average gap, the market took a bit of time to catch its breath. The gap had taken the indices into price resistance from several days earlier when the Dow Jones Industrial Average closed Thursday's morning gap. The Nasdaq remained the upside leader, attempting to move up out of 10:00 ET, but quickly pulled back in so that the overall correction from the gap lasted until the 10:45 ET correction zone. At that point the market broke cautiously to new intraday highs and then began a steady climb into noon.
http://tradingfrommainstreet.com/images/FocusLetter/20071008sp.gif
The Nasdaq Composite stalled first just after 11:30 ET, but the S&P 500 and Dow Jones Ind. Ave. continued into the 12:00 ET reversal period before stalling. As on Thursday, the volume in the marketplace began to dry up over noon. The indices fell into a narrow trading range which lasted until about 13:30 ET. The Nasdaq, which had the best performance earlier in the day had a more difficult time on the breakout, whereas the Dow and S&Ps, which were not as extended as the Nasdaq, experienced another steady move higher throughout most of the afternoon. The S&Ps led the move this time around.
The greater degree of overlap from bar to bar on the 5 and 15 minute time frames in the S&Ps and Dow opened the door for a flush in the late afternoon. When the market climbs on the same momentum as the 20 period simple moving average, whether it hugs it exactly or not, you will always have this risk. When the S&P 500 hit the prior daily highs that gradual uptrend move finally broke. The selling hit at the same time as the 15:00 ET correction period. The 5 minute 20 sma served as some initial support, but the market broke lower again into the final correction period of the session at 15:30 ET after congesting along that level on declining volume.
http://tradingfrommainstreet.com/images/FocusLetter/20071008dow.gif
There were few securities which missed the boat on Friday. For the most part, the market left investors rather happy. The Dow rose 91.70 points by the close, but made record highs intraday of 14,124. The S&P 500 gained 14 points, while the Nasdaq rose 46 points. News in the financial sector kept things busy. Washington Mutual, Inc. (WM) and Merrill Lynch & Co. (MER) both made well over 2%. Alcoa Inc. (AA), which kicks off earnings season on Tuesday, gained 3% on Friday. Another top gainer was Research in Motion Ltd. (RIMM). It rose 12.8% after it doubled its bottom line in the second quarter this year. AAPL, BOBJ, and LAMR were also among the leaders.
posted by Toni Hansen @ 10:34 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, October 4, 2007Trading Remained Mixed Ahead of Friday's Jobs Data
Good morning! The market barely managed to post gains in Thursday's session after yet another day of choppy action. The Dow ($DJI) added 6.26 points, the S&P 500 ($SPX) added 3.25 points, and the Nasdaq Composite ($COMPX) added 4 points. The indices initially followed through on the bullish sentiment I had heading into the day by gapping higher, particularly in the Dow Jones Industrial Average. The market was hitting upper trend channel resistance with the opening prices, however, and almost immediately began to sell off. The selling was rapid and steady into 10:00 ET when the August factory orders data was due out. As that data release approached, the S&P 500 and Russell 2000 began to round off at lows. They triggered reversal patterns right away following the release from the Commerce Department that new orders for U.S.-made factory goods dropped 3.3% in August, which was the largest decline in seven months.
http://tradingfrommainstreet.com/images/FocusLetter/20071005nas.gif
The Nasdaq Composite again took the lead as it has in many of the recent sessions and quickly rallied first to the 5 minute 20 simple moving average resistance and then past it into 10:45 ET and into the morning highs, which served as price resistance. Early morning highs also hit in the S&P 500 at about the same time heading into 11:00 ET, but the Dow had an extremely difficult time and dragged its feet while the rest of the market climbed. While the S&P and Nasdaq were testing the day's highs, the Dow had barely managed to take back half of the morning's losses.
Trend channel and price resistance both worked together to halt the mid-morning rally. Due to the sharp upside momentum, the reversal off the highs began slowly, but the pace continued to turn over on the 1 minute time frame and by 11:45 ET the selling had increased, particularly in the Russell 2k. While I don't have a chart posted here, it formed a great Avalanche reversal pattern by pulling back off highs a bit, basing into 11:30 ET, and then quickly pushing through the support and back into the zone of Wednesday's close. It was the cleanest reversal pattern to take place mid-day.
The drop continued nicely into noon when it came into price support from earlier congestion and pivot levels on the 5 minute time frame and the 15 minute 20 sma. The indices again bounced, but while the momentum on the bounce was strong, the indices were now firmly in the grips of a trading range and I quickly warned those in the chatroom I hang out in to expect choppy trading and a narrowing range over the next two hours, which would take the market into 15:00 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20071005sp.gif
As that 15:00 ET correction period approached I found myself rather uncertain as to which bias to favor. The Dow was triggering a short setup on the 15 minute time frame, while the Nasdaq was forming a strong buy setup. While I favored the upside move, I could not completely disregard the Dow. It is unusual for the major indices to move in two contradictory directions during the primary trading session after the first few minutes of trading, but this is exactly what happened on Thursday afternoon.
The Dow fell into its first major support level at the morning lows which hit heading into 15:30 ET, while the Nasdaq was on its way to its first resistance level at about the same time, hitting the mid-day price resistance and first target on the long side as the Dow hit the first target on the short side. Of course, such divergence rarely hold for long, so given the relative strength of the Nasdaq, I took its side into the close.
http://tradingfrommainstreet.com/images/FocusLetter/20071005dow.gif
On Friday all eyes are on the morning's jobs data. On Thursday the Labor Department reported that first-time filings for state unemployment benefits rose by 16,000 to 317,000 in the previous week. On Friday it issues its employment report for the month of September. Economists are expecting an increase in new jobs by about 115,000. From a technical standpoint, the market is forming a nice bullish pattern still on the 60 minute time frame. The indices rounded off at support in Thursday's session and this will make it very easy for bullish follow-through to play out into Friday. Monday's highs will be the first zone of resistance to watch out for , but can still break more easily in the Nasdaq and S&Ps than in the Dow.
posted by Toni Hansen @ 6:31 PM 2 Comments
Market Holds Price Resistance
Good morning! The market didn't get very far on Wednesday. After peaking Monday afternoon, the major indices have been in corrective mode. Tuesday's trading range broke lower as the weakness we were looking at in the Dow Jones Inv. Ave. followed through Wednesday morning and all three of the major indices moved lower in premarket trading. This selling pressure continued throughout the first 30 minutes of the day. The stronger Nasdaq Composite found support in the zone of Tuesday's lows, but the Dow and the S&P 500 continued into price support from Monday's mid-morning congestion (shown below).
These morning support levels hit at the same time as the 10:00 ET ISM Services data. Even though the number was slightly weaker-than-expected, coming in at 54.8 instead of 55, it was still close to consensus. More importantly, however, was the fact that the employment component of the report jumped from 47.9 to 52.7. The market latched onto this number and immediately began to climb.
The momentum was the strongest on the initial reaction to the 10:00 ET data. After hitting the 5 minute 20 simple moving average resistance that momentum began to slow. The indices attempted to push through the moving average at 10:30 ET, but they had not corrected enough to the resistance and fell back for about 15 minutes before continuing out of the 10:45 ET reversal period and moving to new intraday highs.
http://tradingfrommainstreet.com/images/FocusLetter/20071004nas.gif
The second wave of buying in the market intraday was a great deal choppier than the first. After about 5-10 minutes the prices began to overlap quite a bit on the 5 minute time frame and even though the market continued to push higher, they were never able to sustain another decent move on the 5 minute time frame and began to have a more and more difficult time pushing to new intraday highs. The stronger Nasdaq closed its morning gap, but while the Dow and S&Ps came close, they were not quite able to make it. The 12:00 ET reversal period held and the market quickly began to turn over into the afternoon, giving way to a more orderly trend move in the opposite direction.
Unlike the previous uptrend intraday, the downtrend began rather gradually as the market rounded off at the highs. The indices pulled back steadily into earlier congestion, hitting support at about 12:30 ET. A very gradual upside move on significantly declining volume followed into 13:00 ET. The strong drop in volume despite the buying showed a genuine lack of interest on the side of the bulls and when the 5 minute 20 simple moving average hit at the same time as the 13:00 ET reversal period the dam broke and sellers flooded the market.
http://tradingfrommainstreet.com/images/FocusLetter/20071004sp.gif
The 13:00 ET move intraday was the strongest downside move of the session. It took the Dow back into the zone of its morning lows and brought the S&P 500 into support from the 10:45 ET lows. It took a third wave of selling, however, to bring both the Nasdaq and the S&P 500 back to their own morning lows and this took place heading into the 14:00 ET reversal period. The Dow broke to new lows with that same bout of selling. (That's a lot of "lows"!)
The Nasdaq began to have a much more difficult time as the afternoon progressed. The waves of selling remained intense despite waning bearish action in the S&Ps. The Nasdaq was able to mount a fourth rapid flush to new lows at 14:45 ET while the S&Ps broke the lows by only a hair to create a 2B buy setup and the Dow held the earlier lows. Instead it favored a base under the 5 minute 20 sma resistance before breaking higher into 15:00 ET.
The fact that the Nasdaq was able to create that fourth move and break to such a large degree back into Monday's lows was a bit unusual, since action such as in the S&Ps is more common on such a trend. Nevertheless, while all three indices bounced into the last hour of trading, they only returned to their prior 5 minute highs before pulling back again and congesting into the close.
http://tradingfrommainstreet.com/images/FocusLetter/20071004dow.gif
The Dow ($DJI) posted a loss on Wednesday of 79.26 points and closed at 13,968. Less then 2/3 of its components closed in the red, however, with Home Depot (HD) and General Motors Corp. (GM) among the blue chips which outperformed. The S&P 500 ($SPX) also fell as a whole with a loss of 7.04 points to end the session at 1539.59. The Nasdaq Composite ($COMPX), thanks to its late day reversal, lost 17.68 points and closed at 2729.43.
The market tends to move in waves of two and three. Right now the 60 minute charts has established two waves of buying and the correction over the past two days is now equal in terms of time development as the one from the 27th-28th. All three indices are at lower trend channel support, which hit mid-afternoon on Wednesday. The correction off the highs was stronger, however, than the last correction, which was more of a base compared to this correction, which is more of a price retracement. This is mainly a problem for the Dow since it leaves the prior highs in that index as strong price resistance intraday on any upside attempt.
Friday's jobs data has everyone's eye, but the market currently suggests that we still have room for one more test of highs before a larger daily correction. Although I admit that I would have liked to have seen more of a volume decline on Wednesday to help support a lack of over-eager sellers. This, combined with the stronger price decline and prior daily highs, are the main cons the bulls have working against them. So this basically leaves me bullish, but with greater reservations that may easily have me changing my mind once the intraday data begins to play out.
posted by Toni Hansen @ 1:30 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, October 2, 2007Market Retraces Off Record Highs
Good morning! After a strong showing on Monday, the indices continued to pull back after reversing off highs Monday afternoon. This created the larger intraday correction we were looking for in the morning due to the slowdown in the buying the previous afternoon and intraday trend extension. It was another choppy day, however, and the market displayed quite a bit of overlap in prices from one bar to the next on the 5 and 15 minute time frames.
Following the open on Tuesday, the market immediately began to selloff. At 10:00 ET it popped a bit following August's pending home sales data. Pending home sales are down 22% in just the last 6 months. 6.5% of the decline was in August alone. Those of us in the south were hit the hardest with a decline of 9.5% in August whereas those in the west only experienced a 2.7% decline. As we saw with the last housing data though, the market pretty much expects bad news on the housing front and had no immediate negative reaction. In fact, the indices nearly made it back to the morning highs before turning around again with the 10:15 ET reversal period and heading lower once again.
http://tradingfrommainstreet.com/images/FocusLetter/20071003nas.gif
The indices first showed signs of support at the 10:45 ET reversal period, but they managed one more flush into about 11:10 ET before they finally bounced. The Nasdaq was again the strength leader and pulled back up into earlier morning congestion rather quickly. All three of the major indices rebounded nicely though. At 11:30 ET they began to congest along the 5 minute 20 period simple moving averages. They showed signed of strength initially, but eventually gave way to further selling at 12:30 ET. The Dow, which had underperformed throughout the session, fell to new lows on the day very quickly. The S&Ps took a bit longer but still also made new intraday lows. The Nasdaq, however, held them and didn't even quite make it back to the lows at all.
http://tradingfrommainstreet.com/images/FocusLetter/20071003sp.gif
The markets parted ways for a bit into the early afternoon. While the Nasdaq climbed steadily, the S&Ps attempted to do the same, but the Dow held lows for another base and eventually broke once more to new lows into 13:30 ET. The S&Ps also put in a very slightly lower low at this time, but all it did was flush out bulls and trap a few bears because the break was superficial and the market turned quickly back up into the range. The Dow even broke higher, clearing the downtrend line that had been in place since the early morning. All three indices held this third low and spent the rest of the day trying to move higher.
http://tradingfrommainstreet.com/images/FocusLetter/20071003dow.gif
The Nasdaq made the most progress in the afternoon. The indices exhausted themselves a bit just prior to 15:00 ET, but the pullback was slower than the overall rally and took place with a lot of overlap and choppy trading, which is favorable for the bulls. The market turned higher again when the 15:30 ET reversal period hit. It continued higher until just prior to the close, but pulled back into the bell, continuing into the afterhours market.
When the closing bell rang, the Dow Jones Ind. Ave. ($DJI) was down 40.24 points (-0.3%) and closed at 13,047.3. Ford Motor Co. (F) was among the leaders, gaining 4.1% on Tuesday. General Motors Corp. (GM) also moved higher, gaining 2.8% on the day after posting a slight increase in September sales. The S&P 500 was relatively unchanged when the session ended. It lost a mere 0.41 point and closed at 1,546.63. The Nasdaq Composite rose 6.12 points. It closed at 2,727.11. Compared to the average of the past two months, the volume on Tuesday was rather light.
The markets still seem rather uncertain heading into Wednesday. The Dow is looking lower, but the Nasdaq has some decent support still at these levels and can still more easily push to new highs on the day. It will likely be another one of those days where it will be best to not push too hard. Nearly all of my best positions this past week or so have been in individual stocks since the market has some nice pockets of strength and has been giving us some very strong setups in things such as Wuxi Pharmatech Cayman Inc. (WX) from yesterday where the stocks have been breaking out of nice 4-7 day pullbacks into support on the daily time frames and then following through into the next day. Kookmin (KB) on Monday was another great example. Hmm... a lot of ADRs on the move!!!
posted by Toni Hansen @ 9:25 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, October 1, 2007Dow Closes at Record Highs
Good morning! The weakness we were looking at over the weekend in the indices began to turn around at 3:00 am ET Monday morning. By the time the opening bell rang the indices had taken back all of the afterhours losses and even gapped very slightly higher. Within a matter of minutes the overall market was back at Friday's highs. These resistance levels stalled the weaker Nasdaq Composite ($COMPX), but the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) had very little difficulty at those prices and pushed well past them within the first 45 minutes of the day. Even a lower-than-expected manufacturing index reading had little impact upon the buyers. The Institute for Supply Management registered an index reading of 52.0% in September, which is the lowest reading in 6 months and is down somewhat from the 52.9% level in August. Anything over 50% indicates expansion, while under 50% indicates contraction in manufacturing.
http://tradingfrommainstreet.com/images/FocusLetter/20071002nas.gif
The indices pushed slightly higher following the ISM data, but began to turn over into 10:15 ET. The Nasdaq was the most bearish on this correction and it even hugged the 5 minute 20 sma to create potential for a breakdown into 11:30 ET, but the S&P 500 and Dow held up very well and the 5 minute 20 simple moving average held up the three indices and eventually led to a break to new intraday highs around 11:30 ET.
This second wave of upside was slightly more gradual than the first. This was particularly true in the Dow, which had posted substantial gains already on the session. The rally lasted into noon when a small base formed before breaking higher again around 12:15 ET and into the 12:30 ET zone. At this point a second larger correction began on the 5 minute time frame. The 5 minute 20 sma once again served as support as volume declined into the 13:00 ET reversal period.
http://tradingfrommainstreet.com/images/FocusLetter/20071002sp.gif
A third wave of buying followed the mid-day base at highs, but once again the momentum declined and the upside was a lot more gradual than each of the prior upside moves from the morning and early afternoon. As the trading channel contracted and overall momentum slowed, the market began to become more choppy. Typically the market turns over following a third wave of buying, but this tends to work the best when the length of the correction time between each wave of buying is comparable from one to the next. When that does not hold true, then a trend can continue with additional flags and continuation patterns.
This is what happened at about 14:30 ET. The S&P 500 and Dow both had three waves of upside already in on the intraday time frame. Nevertheless, the corrections were all of different lengths and another wave of buying followed at 14:30 ET when the market again pulled into the 5 minute 20 sma zone. This time, however, the buying was minimal and the indices turned over well enough to break the 5 minute 20 sma and uptrend in the last hour of the trading day.
http://tradingfrommainstreet.com/images/FocusLetter/20071002dow.gif
Monday's session ended with a gain of 191.92 points (+1.4%) and closed above 14,000 at 14, 087. The S&P 500 rose 20.29 points (+1.3) and closed at 1,547. The Nasdaq Composite rose 39 points and closed at 2,741. The strongest gainer in the Dow was McDonald's Corp. (MCD). It added yet another 1.54 points (2.8%) and closed at $56.01. Other top gainers on Monday included FCX, EEM, MBT, GS, AAPL, GOOG, SHLD, WYNN, and DRYS. Not everything managed to have some decent gains on Monday. Among the losers were WAG (earnings), CVS, AU, MHS, MXIM, GRMN, IDTI, and RVSN.
From a technical point of view there is still room for more upside early this week. As I mentioned yesterday, however, I am leery of further upside past the first half of the week since this earlier move will leave the market more vulnerable to the previous daily highs in the Dow and S&P futures. I am also expecting a bit of a correction early on in the day on Tuesday due to the intraday trend extension.
posted by Toni Hansen @ 8:46 PM 2 Comments
Friday, November 30, 2007Market Remains Mixed Since Wednesday's Rally
Good morning! Over the past two trading days the action has been very typical of the type of activity one would expect following such a monumental rally as that which took place on Wednesday. The range narrowed as anticipated, and volume was also slightly lighter overall. The upside in the morning was a bit more than I had been looking for, but the strong opening gap merely served as stronger exhaustion to help turn the market around and pull it back into the 15 minute trading range from the previous session.
The afterhours buying had begun in the late evening in the futures market with a sharp upside spike into 20:00 ET, but the spark of buying was short-lived and the market congested into the early hours of the next morning. At about 3:30 am ET the bulls once again materialized and the indices slowly climbed higher ahead of the open. By the time the opening bell had rung the Dow was back at previous daily highs, while the Nasdaq Composite and S&P 500 also hit price resistance on the daily time frame.
Extreme gaps, such as the one on Friday morning which take place in the direction of the trend heading into the gap, have a very difficult time sustaining themselves and are more readily prone to failure. Often the highs are made within the first 15 minutes of trading, just as they were this time around. The tech-heavy Nasdaq had the most difficult time holding onto gains out of the open. Dell Inc. (DELL) had not faired well on earnings and a diminished forecast. The outcome was a significant gap lower into the open, while August's lows serving as price resistance after the Dow dropped under that level into the open to establish a new 6-month low in the process. This offset some of the gains attributed to the hope that continued indications of a weakening economy will leave to a Fed rate cut this month.
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After moving lower into 10:00 ET, the indices congested for about half an hour before the selling resumed around 10:45 ET. The trend was steady as the S&Ps and Dow made their way into the previous 15 minute highs and 15 minute 20 period simple moving average support. These hit at the 11:15 ET reversal period, but the market had a difficult time rounding off at the support and only managed to pull slowly higher into the 5 minute 20 sma before again breaking lower out of a 5 minute bear flag at noon. This took the Nasdaq back into Thursday's lows and slightly lower lows on the 5 minute time frames created a form of double bottom which trapped sellers.
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Despite the reversal pattern, the momentum was unable to shift intraday. The upside remained substantially weaker than the downside within the early afternoon trading. This created more of a strong range along support than anything else before the indices gave way to selling at the 15:00 ET reversal period, increasing in momentum into the 15:00 ET one. The lower end of that 15 minute trading range in the Nasdaq we have been looking at held as support in that index, while the gap closure in the S&Ps and Dow served as support in those markets. The S&Ps and Dow, which had held up rather well compared to the Nasdaq, built up momentum for a strong push higher into the close, leading to gains in those two indices, while the Nasdaq closed lower.
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The Dow Jones Industrial Average ($INDU) rose 59.99 points on Friday, closing higher by 0.5% at 13,371.7. For the week as a whole it rose 2.9%, although it remained 4% under the closing prices from the end of the previous month. 2/3 of the Dow's components posted gains on Friday with JP Morgan Chase Co. (JPM) as was one of the strongest. It closed higher by 4.5%. The S&P 500 ($SPX) rose 11.42 points, or 0.8%. It closed at 1,481.14 with a gain of 2.7% on the week and a loss of 4.3% on the month. The Nasdaq Composite lost 7.17 points, or -0.3%. It was trading at 2,660.96 into the bell. It had risen 2.4% throughout the course of the week, but had a rather extreme loss of 6.9% on the month as a whole.
In Friday's morning column I had made a reference to the late afternoon action in the indices as a whole and compared it to the daily time frames. The follow-through on it had been the choppier upside into Thursday's close. While the momentum is slightly stronger on this setup on the daily than on the 5 minute version, I am still expecting a very similar follow through with a great deal of the more choppy daily sessions with stronger overlap from one day to the next in terms of the index prices. I am also watching for a slightly higher high in the S&Ps and Dow on the weekly time frame to continue to create the conditions that would be favorable for a stronger price reversal and correction into the early half of 2008. We are still a number of week out, however, so we shall have to wait to see how this continues to play out as the market tries to pull higher into that upper trend channel resistance on those larger time frames.
posted by Toni Hansen @ 10:16 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, November 29, 2007Market Takes a Breather, but Remains Bullish Short-term
Good morning! After Wednesday's stellar performance, the market took the day to catch its breathe on Thursday. You can think of market rallies much the same way you would a person who has taken up running. They can go for longer distances without a rest if they set a steady pace to begin with, but if they decide to sprint, they will become more easily exhausted and will either need to slow down more quickly or stop for a bit to recover. On Wednesday the market was at full sprint in the morning, slowed the pace somewhat into the afternoon and then decided to sit on the bench for awhile going into the next day.
Volume was the lightest of the week in Thursday's session, and the indices overall chopped around quite a bit on the 5 and 15 minute charts, but a number of opportunities still presented themselves intraday in individual issues, as well as the market itself for those who either went for the very minor scalps or else held through the chop on the moves off the larger 15 minute support and resistance levels.
Among the best-trending stocks on the upside on Thursday were top names such as Apple Inc. (AAPL), First Solar Inc. (FSLR), Nucor Corp. (NUE), and Biogen Idec Inc. (BIIB). Zoltek Cos Inc. (ZOLT) and MGI Parma Inc. (MOGN) were also huge movers. Leading stocks on the downside were Lehman Bros (LEH), CIT Group (CIT), Aeropostale (ARO), Jo-Ann Stores Inc. (JAS), Wynn Resorts Ltd (WYNN), and F5 Networks Inc. (FFIV).
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Despite the handful of market movers, the overall market's exhaustion made itself apparent almost immediately into the open. After gapping slightly lower, the morning gap filled within the first 15 minutes of the session. When the 9:15 ET reversal period hit, the Nasdaq Composite ($COMPX) was also running into resistance. It was hitting Wednesday's highs, while the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) were at their 5 minute 20 simple moving average resistance levels. The market turned quickly at that point, heading back to the congestion from mid-day on Wednesday before again flipping over into the 10:15 ET reversal period.
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After 10:15 ET the indices climbed steadily back into the highs of the trading range that were established the previous afternoon. The buying was choppy with a lot of overlap from one bar to the next on the 5 minute time frame until the last leg up at 11:30 ET. Mid-day, beginning at this time, was really the only time where the action was smoother in the indices. The market rounded off a bit at highs at noon and then a solid price decline began off the upper resistance zone. The 5 minute 20 sma served as support and volume declined as the market reacted to this support level before giving way to a second wave of selling into 13:00 ET.
The momentum began to slow again into 13:00 ET and the choppy market action returned once more. Even though the market reacted to the 13:00 ET reversal period, the bounce was short-lived. The market chopped lower into 13:45 ET and the lower end of the trading range on the 15 minute time frame before moving higher into a third test of the range's highs at the 15:00 ET reversal period. This last leg of upside was the most choppy move of the day on the 5 minute time frame. The overlap was very pronounced from one bar to the next and it was more difficult to time setups in the indices themselves. The 15:00 ET reversal period did hold well, but the choppy trading also held and the market accomplished very little in the final hour of trading.
http://tradingfrommainstreet.com/images/FocusLetter/20071130dow.gif
The market managed to close higher on Thursday, but barely. The Dow climbed 22.3 points to close at 13,311.7. The S&P 500 rose only 0.7 point and closed at 1,469.73. The Nasdaq Composite gained 5.22 points. It ended the day at 2,668.13. I expect that the range will widen somewhat on Friday's session, but that we will again see a lot of overlap in prices on the 15 minute time frame. Volume is also likely to be lighter than on Thursday. Heading into next week, however, I expect the upside to resume, but on a much more muted scale than on Wednesday. It is highly probable that the action we saw on Thursday afternoon on the 5 minute time frame is going to repeat itself on the daily time frame in the indices going into the end of the year.
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Wednesday, November 28, 2007Market Finally Launches a Strong Recovery
Good morning! We've been watching the markets for a short-term recovery over the last couple of weeks, but the indices had a difficult time getting off the ground. On Wednesday, however, that upside finally materialized to follow through on the rounded lows on the 60-minute charts. We didn't get another correction intraday like I had been watching for, but the market broke higher out of the range ahead of the opening bell and this created a very clean break in the daily downtrend channel from the last several weeks.
After gapping higher, the market continued to rally throughout the remainder of the day with a solid uptrend on decent volume. The upside follow through was so monumental in this recent market volatility that the Dow Jones Industrial Average ($DJI) actually managed to post its largest percentage gain of the year to date. This translated as a 331 point move, or 2.6%. The Dow closed at 13,289.5 with all 30 Dow components showing positive closing prices. Citigroup (C) gained 6.5%, while American International Group (AIG) rose 5.9%, and Bank of America (BAC) climbed 4.5%.
The S&P 500 ($SPX) rose by an even larger percentage than the Dow. By the closing bell it had gained 40.79 points, or 2.9%. It closed at 1,469.02. The Nasdaq Composite, however, usurped both by climbing 82.11 points, or 3.2%. It closed at 2,662.91. This was the second largest gain of the year in the Nasdaq, following the tech rally on November 13th. Adding fuel to the fire in Wednesday's rally was the Federal Reserve's Beige Book, which highlighted slowing economic growth. This raised hopes that the Fed will go ahead with further rates cuts next month. At the same time, crude-oil futures continued to fall on Wednesday. January delivery dropped $3.8 to $90.62/barrel on the NYSE.
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Following the gap, the market congested for about 15 minutes and then broke to new intraday highs. The continuation paused heading into the 10:00 am ET housing data, but displayed very little reaction overall to the news that sales of existing homes fell by 1.2% in October, while the supply of homes on the market hit 22-year highs. The market had also shrugged off the premarket durable goods data, which revealed that orders for U.S.-made durable goods had fallen yet again in October.
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The most rapid move intraday on Wednesday took place out of the 10:15 ET reversal period. The market continued to move sharply higher until the 10:45 ET reversal period hit. The indices then fell into a nice consolidation over noon with a solid bullish bias thanks to moderate downside on declining volume and 5 minute 20 simple moving average support. Although the breakout was fairly solid, the pace was a great deal more lax than in the morning as the bulls continued to push into the afternoon. The 5 minute 20 sma zone held in the S&P 500 and Dow until the final 30 minutes of trading. The Nasdaq had established most of its gains in the morning, so it broke the 5 minute 20 sma when it pulled back out of the 14:00 ET reversal period, but it still held the earlier breakout level as support and made new highs out of the 15:00 ET reversal period before it also corrected more strongly just prior to the close.
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I do not expect the market to be able to maintain this momentum on the upside for long, but I am still leaning for that retest of the previous highs zone. Should the S&Ps and Dow establish a very slightly higher high, then the door will be wide open for a much larger correction off highs into the early half of 2008.
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Market Recovers Partial Losses
Good morning! After a choppy session, the indices managed to post modest gains by the end of the day on Tuesday. The Dow Jones Industrial Average ($DJI) recovered 215 points (+1.7%) out of the 240 points it shed the previous day to close at 12,958.44. Citigroup (C) was one of the top gainers following a cash infusion from the Abu Dhabi Investment Authority. It rose by 1.7% (+0.52) to match the overall Dow's performance. JP Morgan Chase & Co. (JPM) faired even better, however, rallying 4.67% (+1.89). Other key gainers in the Dow included Merck & Co. (MRK) (+1.35, +2.34%), American Express Co. (AXP) (+2.08, +3.88%), and Altria Group, Inc. (MO) (+1.91, +2.67%).
In addition to the Dow, the S&P 500 and Nasdaq Composite also did rather well on Tuesday. The S&Ps ($SPX) rose 21.01 points, or 1.5% during the session. The oil sector was a bit of a drag on the S&Ps, despite upgrades by Bear Stearns on BP (BP), Chevron (CVX), and Marathon Oil (MRO). The slight gains in BP and CVX, however, were still better than the oil sector as a whole. Crude futures dropped $3.28 to $94.42/barrel. The Nasdaq ($COMPX) rallied 39.81 points, or 1.6%.
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The morning began on Tuesday with a decent upside gap into the opening bell. Continued upside followed, but the momentum waned into the 10:00 ET consumer confidence data. When the report was released the reaction was quite swift. U.S. consumer confidence had fallen in November to 87.3 off the previous level of 95.2. This was significantly less than the 90.2 level that had been anticipated. In other news, homes prices fell 4.5% nationally over the past year according to Standard & Poor. Even cities which had held up well earlier in the year gave way over the past couple of months.
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Although the market was disappointed by the data, after about 15 minute of selling the indices began to turn around and regain the earlier upside momentum. Prices climbed into 11:00 ET when some initial resistance hit at the 15 minute 20 simple moving average in the S&P 500 and previous highs in the Nasdaq Composite. The indices diverged a bit over mid-day following this initial upside. All three indices tested these highs once again soon after 11:30 ET, but the S&P 500 and Nasdaq only broke them by a few ticks, creating a reversal pattern, while the Dow made a stronger higher high with a nice bull flag on the 5 minute time frame. The 5 minute 20 sma then held as support on the Dow for another bull flag out of 12:30 ET, while the weaker S&Ps and Nasdaq broke their 5 minute 20 sma support and the morning highs served as resistance into the 13:00 ET reversal zone. The indices then realigned as the market rounded off at highs and gave way to strong selling into 14:00 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20071128dow.gif
After reversing from the highs of the day and breaking the 5 minute 20 sma, that support level became resistance and held as the market formed a 5 minute bear flag into 14:30 ET. The declining volume and slower momentum into the 5 minute 20 were some of the key ingredients for the mid-afternoon continuation to the downside which took place at 14:30. The earlier congestion from the morning, however, held as support and the indices slowly began to roll over into the final hour of trading, regaining upside momentum once again as the closing bell approached. The recovery was strong enough at the end to lead to a close just shy of the day's highs despite having look rather dismal only 90 minutes earlier.
While the market had pulled back some afterhours, the indices are still holding up decently into Wednesday's premarket trading. I am leaning for more upside now on the 60 minute charts due to rounding lows on that time frame, but it will be easy to continue to swing back and forth within a range for another day. In order to confirm the upside bias I would like to see some slower selling or congestion zone on the 60 min. The weekly charts are at support, but the difference in time frames leaves the market open for a lot of wiggle room at this support until the momentum turns higher on the smaller time frames.
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Monday, November 26, 2007Reality Sets in as Holiday Euphoria Fades
Good morning! The market took a fall on Monday as the Thanksgiving holiday trading faded into the background. Volume was lighter than the average in recent weeks, but the bears were undeterred. The Dow Jones Industrial Average ($DJI) lost 237.44 points (-1.8%) to close at 12,743.44. Citigroup Inc. (C) (-1.00, -3.1%) and JP Morgan Case & Co (JPM) (-1.49, -3.5%) were among the hardest hit within the index. The S&P 500 ($SPX) had a more difficult time, however, than even the Dow. It fell 2.3%, or 33.48 points, to close at 1,407. The Nasdaq Composite ($COMPX) came close. It shed 55.61 points (-2.1%) and ended the session at 2,541.
Top gainers on Monday included NTRI, SINA, SNDA, SOHU, and SKIL in the Nasdaq and RIG, VIP, GME, ART, DE, and OSG on the NYSE. James River Coal Co. (JRCC) also had a very strong session after reaching shipping agreements for coal at an average prices of $54.76, which was much higher than expected several months ago. Top Nasdaq losers were ISIL, GOOG, BIDZ, DRYS, ACAS, SHLD, IDCC, and JRJC. The main NYSE losers were EEM, EWZ, GS, CIT, PBR, VMW, PRU, and LVS.
In other markets, the 10-year Treasury bond rallied 1 17/32 to 103 18/32 with a yield of 3.816%. Gold futures rose $1.80 to $826.50/ounce, while crude-oil futures fell 48 cents to $97.70/barrel after record highs in the prior session. They had been down as much as $1.68/barrel earlier in the session. Meanwhile, the euro continued onward to new record highs as the dollar fell to $1.4864 against the euro. Intraday it reached $1.4885 per euro.
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Monday's session did not begin on such a dim note. The indices were actually still trading higher as the day began and they continued to climb early on. Between 10:00 am ET and 10:15 ET that buying began to roll over. The selling then began to kick in more quickly than the buying in the S&Ps and Dow after the Dow closed its Wednesday morning gap. The 5 minute 20 sma was a bit of support, but the downside was fairly steady into the 11:15 ET reversal period. At this point the indices were back at support from congestion in the previous week and the 5 minute 200 simple moving average intraday in the S&Ps, Dow, and Nasdaq Composite.
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The momentum continued to turn over as the day progressed. The upside off the late morning support was very gradual. It picked up a little bit once a shallow Phoenix along the 5 minute 20 sma broke higher, but volume failed to confirm the move. When the 13:00 ET
reversal period hit, the bears once again returned. The afternoon selling stalled at the 5 minute 20 sma and again at the 5 minute 200 sma, but the downside pressure continued to build and the market broke sharply lower into the last hour of trading with a free fall in the final 10 minutes of intraday trading.
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Monday's downside holds off any correction off support at the moment. It leaves the door open for even more selling this week as Monday's breakdown follows through. The 100 week simple moving average and prior weekly lows from August are the upcoming support zones. The harder they hit, the slower the correction off the support will likely be. Any rapid upside will be difficult unless the momentum rounds off at lows with slower selling beforehand.
posted by Toni Hansen @ 10:02 PM 0 Comments
Sunday, November 25, 2007Key Earnings Announcements This Week:
Monday:
Before: SKIL
After: CTRN, DCI
Tuesday:
Before: ACM, AEO, JTX, SHMR, SPLS, TLB, TECD
During: THO
After: ADI, CENT, DBRN, LTON, MRVL, PBY, SMTC, SNDA, LNUX, UTI, VRGY
Wednesday:
Before: ARO, BECN, BWS, CBRL, DLTR, NRGY, IGLD, SCMR
After: ATW, CWTR, JAS, MW, SIGM, TIVO, WEDC
Thursday:
Before: AMWD, STST, BZH, BONT, BF.B, CMRG, CTR, CONN, DLM, DSGX, FLOW, FRED, GMTN, GCO, HNZ, HSOA, LULU, MESA, NUHC, SBH, SHLD, SFD, SOLF, SMRT, SMA, TTEC, TIF, VIP, WMG, WTSLA
During: LDR
After: AXCA, BRCD, CPWM, DLIA, DELL, JCG, LTRE, MENT, NINE, RSTO, SEAC, UNCA, ZUMZ
Friday:
Before: BIG, KIRK
During: VLCCF
Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!
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Economic Reports and Events This Week
Monday, November 26, 2007
8:30a.m. Oct Chicago Fed Natl Activity Index. Previous: -0.45.
Tuesday, November 27, 2007
7:45a.m. ICSC Chain Store Sales Index For Nov 24.
8:55a.m. Redbook Retail Sales Index For Nov 24.
10:00a.m. Nov Conference Board Consumer Confidence. Previous: 95.6.
10:00a.m. Nov Richmond Fed Manufacturing Index. Previous: -5.
10:30a.m. Nov Dallas Fed Mfg Production Index. Previous: 10.6.
5:00p.m. ABC/Wash Post Consumer Conf.
Wednesday, November 28, 2007
8:30a.m. Oct Durable Goods Orders. Previous: -1.7%.
10:00a.m. Oct Existing Home Sales. Previous: -8.0%.
Thursday, November 29, 2007
8:30a.m. Initial Jobless Claims For Nov 24 Wk.
8:30a.m. 3Q Prelim GDP. Previous: +3.9%.
8:30a.m. 3Q Prelim Corporate Profits.
10:00a.m. Oct New Home Sales. Previous: +4.8%.
10:00a.m. Oct Help-Wanted Index. Previous: 24.
10:00a.m. DJ-BTMU Business Barometer.
Friday, November 30, 2007
8:30a.m. Oct Personal Income.
8:30a.m. Oct Personal Spending.
9:45a.m. Nov Chicago PMI. Previous: 49.7.
10:00a.m. Oct Construction Spending. Previous: +0.3%.
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Market Sees Glimmer of Light with Holiday Complacency
Good morning! Over the past couple of weeks we have been watching for the market to at least show some modest enthusiasm for a bounce since the indices have fallen into some fairly strong support on the monthly time frames. On Friday it finally took a chance, although the risks were low with market participants growing complacent on holiday leftovers.
After gapping modestly higher into Friday's open on the shortened trading session, the market stalled and pulled back. Volume did not increase at all on the selling, however, and this relieved the bulls who then began to cautiously position themselves for a Black Friday shopping spree. While many were out taking advantage of the early morning retail sales at their local department stores, those more inclined to look for a great deal in the market instead of at the market were beginning to gain encouragement.
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At about 10:00 am ET the bulls began to really take over. The buying picked up at 10:15 ET and after that the corrections were on light volume and at a more modest downside pace than compared to the upside. This created a second buy setup on the 5 minute time frame in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) out of the 10:45 ET correction period and into the one at 11:00. It culminated in a strong breakout higher in those two indices.
The Nasdaq Composite ($COMPX) significantly lagged the other two indices throughout the morning, beginning with greater weakness out of the open. The 15 minute 20 simple moving average held the congestion, however, and it managed to round off at lows intraday so that it was also breaking higher when the Dow and S&Ps formed another bull flag on the 5 minute time frame heading into 11:30 ET. This late morning rally was the strongest one of the session up until that point. It took the S&Ps into Tuesday's highs and the Nasdaq past its morning highs, allowing it greater upside potential into the afternoon.
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The rolls did change to some degree with the afternoon session. The Nasdaq gained a stronger lead and a strong final push higher took place shortly after noon. This moved the Nasdaq into its 15 minute 200 sma resistance, which held well at 12:30 ET, and it closed the S&P's gap from Tuesday's close into Wednesday's open. This resistance also corresponded to Wednesday's highs in the Dow Jones Ind. Ave., so it made it very difficult for the market to continue higher into the final half hour since all three of the major indices were running smack into strong resistance on the 15 minute time frame. The result was a very choppy end to the session. The market held the 5 minute 20 sma as support and the 15 minute resistance for the highs into the early close at 1:00 ET.
While volume was light throughout the session, the retailers performed well. The market was hopeful that Black Friday's holiday sales would provide a nice economic boost and many of the stocks which had been very beaten down in this sector had strong showings into the weekend. Circuit City (CC) was one of the strongest, rallying 19.5% for a gain of $1.06. Home Depot Inc. (HD) added 3.2%, or $0.90. J.C. Penney Co. (JCP) rose 3.1% (+$1.23), while Wal-Mart Stores (WMT) added 1.9% (+$0.87). I find it very difficult to become too excited about these gains given the larger picture though. Sure, many of these could use an upside correction on the monthly time frames at some point, but other than perhaps for daytrading, I'll be staying clear of them for the time being.
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In the market as a whole, the Dow gained 181.84 points on Friday to end the session at 12,980.88. The S&P 500 rose 23.93 points (+1.7%) and closed at 1,440. The Nasdaq Composite climbed 34.45 points (+1.3%). It closed at 2,596. The market has a lot on its plate in terms of economic data in this coming week. Existing-home sales and durable-goods orders are just two to watch out for on Tuesday and then Wednesday, respectfully. There is a strong debate as to whether or not the Fed will again slash rates in its December meeting, but at this point I still consider it rather a moot point, since I am continuing to lean towards the likelihood of a larger market correction on the monthly time frame into the new year regardless of the Fed's decision. I will only be looking for the market to bounce on the daily and weekly time frames, so any buying I'll be doing over the next few weeks will be aimed at the short-term only.
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Tuesday, November 20, 2007Market Whips Around into the Holiday
Good morning! I hope you are having a wonderful trading week so far! I just got back from the Las Vegas Online Trading Expo where I've been getting a ton of exercise walking back and forth from the hotel to the conference center for the past week. (Oy! My feet still hurt!) It was wonderful meeting so many of you there! The industry has certainly changed a great deal over the years! The forex and options markets have been gaining in popularity over the past year or so and held a heavy presence at this fall's exhibition. With more and more professionals taking advantage of their new-found ability to trade in the "off-hours" thanks to the nearly 24-hour markets of the emini futures and forex, this trend is likely to continue into the foreseeable futures. I'm personally a fan or trading the ES (EMini S&P 500) afterhours and had some fun winning one of the FX trading competitions at the expo. (I scored a new mouse, which was perfect since mine has been on the fritz lately!)
Speaking of the index EMinis, let's take a look at the current market action as we head into the holiday trading. Volume and volatility were both quite heavy in Tuesday's trading. On the New York Stock Exchange the declining issues narrowly outnumbered the advancers with 4.74 billion shares exchanging hands, up strongly from the 4.01 shares traded on Monday. The Dow Jones Industrial Average ($DJI) closed higher by 51.70 points (+0.4%) after trading within nearly a 270-point range. It ended the day at 13,010.1. The S&P 500 ($SPX) climbed 6.43 points (+0.5%). It ended the session at 1,439.7. The Nasdaq Composite ($COMPX) did not hold up quite as well. It managed to gain 3.43 points, but that only amounted to a 0.1% increase in price before it closed at 2,596.81. The Russell 2000 fell 1.00 (-0.13%) and closed at 749.33.
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The major news events of the session centered around mortgage-related concerns and the FOMC minutes, which came out at 2:00 pm ET. Freddie Mac (FRE) was particularly hard-hit, falling nearly 29% after reporting a $2 billion quarterly loss and announcing that it might cut its Q4 dividend. Other mortgage investors also felt the heat. Countrywide continued to slide on a downgrade, losing 2.7% on Tuesday to close at $10.28.
In other markets, the euro has once again hit a new high this week, breaking out of a two week trading range. Crude-oil futures rose to new record highs with January delivery at $98.03/barrel, while gold also followed in quick pursuit. Government bonds also rose on predictions of a slowing economy into the new year. The yield on the 10-yr Treasury note (which moves inversely to its price) fell to 4.05%, while the 10-yr yield rose to 4.09%.
http://tradingfrommainstreet.com/images/FocusLetter/20071121sp.gif
From a technical perspective the market is still running smack into support on the daily time frame from congestion levels back in August and early September. The market attempted to climb early in Tuesday's session, but each new high was made on lighter volume and with easing momentum. By the 11:15 ET reversal period the highs had rounded off enough into resistance from previous highs and congestion on the 15 minute charts that the bear were able to begin to regain a foothold.
The initial reversal was nothing spectacular as the indices pulled back into their 5 minute 20 simple moving averages intraday, but after hugging that support on light volume, which displays a lack of willing bullish participants, the market began to pick up speed, selling off into opening lows into 12:00 ET. Choppier selling into the early afternoon was then followed by another strong downside push into 13:00 ET. This took the Dow and S&Ps to new lows on the month, but brought the Nasdaq into its third test of lows on the same time frame.
http://tradingfrommainstreet.com/images/FocusLetter/20071121dow.gif
The market held the 13:30 ET support zone pretty well to begin with. The market pulled higher into 14:00 ET, but the buying quickly waned ahead of the 14:00 FOMC minutes and the pace of the buying also decreased significantly, turning the reversal into a bear flag. The market then broke lower after the Fed failed to given any stronger clues as to whether or not it would decrease lending rates yet again in the December meeting set to take place just a couple of weeks from now. The market flushed lower, but as it turned out, the larger daily support zone held and the market rounded off at the lows. The Dow and S&Ps both popped into the 5 minute 20 sma and then gently slid lower along the resistance to form Phoenix buy setups. Meanwhile, the Nasdaq established a very slightly lower to to create a double bottom trap pattern called a 2B. The market followed through by takng back a huge chunk of the day's losses in the final 30 minutes of trading.
After taking a look at the indices today, I am not inclined to change my opinion from a few weeks ago as to how the current price action is likely to play out. The market is still poised for a third bounce higher on the daily and weekly Dow and S&P 500. There is also a very strong chance for a much more substantial breakdown on the weekly time frame. So far nothing has yet to chance my opinion on this matter, although I continue to monitor it closely. Don't forget to expect trading to become very light on Wednesday afternoon and continue into Friday due to the Thanksgiving holiday. This means it will be very important to not fall into a trap of boredom and "trading just to trade!"
Wednesday, November 14, 2007Market Turns Higher, but is it Sustainable?
Good morning! On Tuesday the Dow closed with its largest single-day gain in two months after having just closed under its 200 day simple moving average for the first time since July 2006. Over the last couple of days I'd been expecting very slightly lower lows and more overlap from day to day before the market headed higher. The Dow ($DJI) managed this, but it is a bit difficult to see without dropping down to the 60 minute time frame. The Nasdaq Composite ($COMPX) also slowed its downside since Thursday, but the the market bounced more quickly than I had anticipated heading into the day.
Originally, I had been looking for upside and then another swing lower on the 30-60 minute charts on Tuesday with room for slightly lower lows. Instead, the indices gapped strongly higher and then fell into congestion along the 15 minute 20 simple moving average intraday. As the market congested, it still edged higher, creating a very difficult market for many pattern-focused traders.
It often frustrates many traders when on the strongest trend days, they are more likely to lose money. The main reason for this, of course, is that trend days that just creep higher are the exception rather than the norm and if you keep trying to time reversals or waiting for flags on the 5 minute times frames, which work well on most trading days, you'll just get chopped up. This is where it becomes very important to step back and focus on the larger intraday time frames like I suggested yesterday, such as a 15 to 30 minute chart. This way you don't get too lost in the smaller time frame chop.
http://tradingfrommainstreet.com/images/FocusLetter/20071114nas.gif
If you take a look at my charts for today's column, what you will notice right away is that I've highlighted very few patterns and price levels. After congesting with a slight upside bias out of the open, the indices stalled just after 11:30 ET as the Nasdaq ran into price resistance from previous highs and lows on the 15 minute time frame. The correction was a form of a two-wave pullback which found support at the 5 minute 20 sma to begin with before breaking lower into the 15 minute 20 sma around 13:00 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20071114sp.gif
Up until 13:00 ET, the typical market reversal periods were not leading to very decent reactionary price moves. Even at the 13:00 ET one the Dow and S&Ps lagged a bit and established their pivot lows a few minutes later, although the Nasdaq Composite did hold the reversal period well. As this time period hit, so did the 15 minute support zone and the market was able to once again break to the upside intraday. The S&Ps led the way after having the most difficult time making new highs in the morning. Financial shares boosted the index and gold and oil also turned back around to favor afternoon buying. The Nasdaq, which lacks many companies in these sectors, became the laggard and hit and held resistance at the 14:00 ET reversal period while the rest of the market was running past Monday's highs.
From about 14:00 ET to 15:00 ET the market once again became congested. As in the morning, the congestion in the S&Ps and Dow had a slight upward slant to them, which would have made them less obvious breakout candidates. The Nasdaq, on the other hand, formed a strong ascending triangle right into the 5 minute 20 sma. After a third and more gradual pullback within that range, the highs broke. The move took the S&Ps past Friday and Monday's highs and in the final hour of trading all three of the major indices came back into price resistance on the larger 60 minute time frames from several previous sessions. The Dow ($DJI) closed higher by 319.5 points (+2.5%), while the S&P 500 ($SPX) gained 41.87 points (+2.9%) and the Nasdaq Composite ($COMPX) rose 89.52 points (+3.5%) on Tuesday.
http://tradingfrommainstreet.com/images/FocusLetter/20071114dow.gif
Despite the strong showing on Tuesday, I do not expect the buying to be able to continue well into Wednesday. Volume should be slightly lighter than the last several days with higher odds of an inside range bar forming within Tuesday's price range. If we do see higher highs, then I am expecting them to be very minor. This congestion is then likely to continue into the weekend, and probably into next week as well. Should the congestion hold Tuesday and Wednesday highs during that time, then the market will continue to favor a third test of highs on the weekly time frame.
Online Trading Expo in Las Vegas
I will be out of town attending the Online Trading Expo in Las Vegas later this week, so I will not be writing this column from Wednesday night through Monday night. I return home on Monday, so the column will resume on Tuesday evening. For those of you attending, I'll be speaking for the expo at 8 a.m. Vegas time on Sunday and for Real Tick at 10:15 a.m. Sunday. I hope to see you there!
Economic Reports and Events This Week
Monday, November 12, 2007
There are no economic indicators scheduled today.
Tuesday, November 13, 2007
7:45a.m. ICSC Chain Store Sales Index For Nov. 13. Previous: +1.0%.
8:55a.m. Redbook Retail Sales Index For Nov. 10. Previous: -0.4%.
2:00p.m. Federal Budget. Previous: +111.56.
3:00p.m. Sep Pending Home Sales Index. Previous: -6.5%.
5:00p.m. ABC/Wash Post Consumer Conf For Nov. 13. Previous: -15.
Wednesday, November 14, 2007
7:00a.m. MBA Mortgage Refinancing Index. Previous: -3.2%.
8:30a.m. Oct Producer Price Index. Previous: +1.2%.
8:30a.m. Oct PPI, Ex-Food & Energy. Previous: +0.1%.
8:30a.m. Oct Retail & Food Sales. Previous: +0.6%.
8:30a.m. Oct Retail & Food Sales, Ex-Autos. Previous: +0.4%.
10:00a.m. Sep Business Inventories. Previous: +0.1%.
10:30a.m. Crude Inventories
Thursday, November 15, 2007
8:30a.m. Initial Jobless Claims For Nov 10 Week. Previous: -13K.
8:30a.m. Oct Consumer Price Index. Previous: +0.3%.
8:30a.m. Oct CPI, Ex-Food & Energy. Previous: +0.2%.
8:30a.m. Nov NY Fed Manufacturing Index. Previous: 28.75.
10:00a.m. DJ-BTMU Business Barometer For Nov. 15. Previous: +0.4%.
12:00p.m. Nov Philadelphia Fed Business Index. 7. Previous: 6.8.
Friday, November 16, 2007
9:00a.m. Sep Treasury International Capital Flows. Previous: -$85.5B.
9:15a.m. Oct Industrial Production. Previous: +0.1%.
9:15a.m. Oct Capacity Utilization. Previous: 82.1%.
Key Earnings Announcements This Week:
Monday:
Before: BX, DISH, HEW, NSSC, NVAX, TSN
After: JOBS, BOBE, CNK, ESE, HINT, LINE, OWW, FACE
Tuesday:
Before: GTLS, ERJ, FIG, FOSL, GILT, HD, IAG, NAFC, PPC, SCHS, TJX, USBE, WMT
During: LNY, RAME
After: CNTF, IMOS, DIET, EXM, GUID, LZB, OMPI, OCNW, STEC, XFML
Wednesday:
Before: APU, MT, ARM, CSIQ, DAKT, DWSN, DSX, ESLT, GIGM, M, MSTH, VIVO, PCS, NUAN, UGI
After: ANST, AMAT, CHIC, HSOA, LDG, NTAP, PETM, RAH, TTEK, WGOV
Thursday:
Before: BIG, CTR, CHINA, CPA, DKS, DHT, FCSX, GMTN, GSOL, GMCR, GBE, HP, HB, JCP, KIRK, MMS, NWY, NJR, PTRY, SHLD, SHMR, SCVL, SOLF, SSI, SMRT, SPH, STP, BKE, TDG, TWB, TYC, VSE, WTSLA, ZOLL
After: A, ADSK, STV, CHRD, DDS, DITC, DHOM, EXLS, FL, HMIN, DISK, PODD, INTU, SJM, KSS, MSCC, MTSC, CRM, SINA, SBUX, SNS, TOA, NCTY, UNCA, VRGY, VIMC, WEDC
Friday:
Before: ANN, QXM
Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!
posted by Toni Hansen @ 12:36 AM 1 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, November 12, 2007Stock Prices Continue to Slide
Good morning! The market continued its downward spiral on Monday to kick off the new week with a 55.2 point loss (-0.4%) in the Dow Jones Industrial Average ($DJI), a 14.52 point loss (-1%) in the S&P 500 ($SPX), and a 43.81 point loss (-1.7%) in the tech-heavy Nasdaq Composite ($COMPX). On a positive note, the U.S. dollar managed to post some gains on Monday after hitting record lows against the euro only a few days prior. This resulted in falling prices in gold. The front month contract on gold futures fell $27.00 to $807.70 an ounce. Crude-oil futures, which rallied into, but could not break the $100/barrel mark last week, closed lower as well. They lost $1.70/barrel and ended the session at $94.62.
In securities, ETrade Financial Corp. (ETFC) was the largest percentage loser. It fell by 58.7% (-$5.04) to close at $3.55 after announcing that it was the target of an informal inquiry by the Securities and Exchange Commission regarding its loan on security portfolios. They also stepped back their earnings forecast.
Although not quite close to the percentage shed by ETFC, another top loser was Apple Inc. (AAPL), which has been massacred in the last couple of trading days. After nearly hitting $200 a week ago, AAPL has lost nearly 1/4 of its value in the last 4 sessions. It went from highs of $192.68 on Wednesday to a low of $150.63 on Monday and closed at $153.76. It still has room for more downside as well as it tests the $140-$150 price support zone more securely.
On the opposite side, the financial sectors continued to experience a bit of a reprieve from the recent selling. These include banking and broker/dealers. The moves were not extreme, however, and most still turned over off intraday highs, giving back a lot of their gains before the close even though they still managed to hold onto some of those gains. Goldman Sachs (GS) rose $3.38/share to close at $214.71. Citigroup Inc. (C) rose $0.47/share and closed at $35.06.
http://tradingfrommainstreet.com/images/FocusLetter/20071113nas.gif
In yesterday's commentary I laid out two scenarios for the market on Monday. On the one hand, the indices were coming into some initial support, particularly the S&Ps and Dow. The intraday time frames, however, were still favoring further selling and the Nasdaq had a lot of room to keep heading lower. The two possibilities I laid out were hence as follows:"...another gap down, followed by a strong bounce and then slower selling into the afternoon would make it easier for the market to hold the current support zone and turn higher. On the other hand, an even open or even a gap higher into the open, followed by slower upside in the morning can more easily be followed by more downside."
Given that the market opened within a few ticks of Friday's close, the stage was set for scenario number two. Within a few minutes of the opening bell the market began to pull higher, but the indices were still feeling the pressure of the stronger-than-average selloff into Friday's close, making any rapid recovery difficult. A retest of the lows zone into 10:15 ET helped slow the downside momentum a little bit, leading to another move off the lows. The selling was still on the stronger side, however, so this helped keep the buyers in check and the momentum on the move higher was on the slow side overall. This confirmed the expectations brought about by an even opening price in the indices and continued to create favor for another round of selling into the afternoon.
http://tradingfrommainstreet.com/images/FocusLetter/20071113sp.gif
The morning's upside first began to turn around off the 11:15 ET reversal period highs. The market then corrected into the 12:00 ET reversal period. After hitting support, the indices began to show some greater divergence. The Nasdaq had a tough time letting go of the support zone, while the Dow managed to move into new highs intraday. Resistance held as the Dow hit Friday morning's highs. The volume had been much lighter on this upside move, displaying a lack of conviction on the part of the bulls.
http://tradingfrommainstreet.com/images/FocusLetter/20071113dow.gif
By 13:00 ET the market was again heading back into the morning's lows. The Nasdaq hit them first at that 13:00 ET reversal period and a small correction into the 5 minute 20 sma resistance led to even stronger downside. An extremely sloppy bear flag on the 15 minute charts came next, but since the market rounded off somewhat at the start of this flag, unless a trader had already been looking out for further selling, the pop higher into 14:30 ET could have been a bit deceptive. As that 15 minute 20 sma and previous 5 minute highs and lows hit for resistance, however, the sellers returned in full force. The market fell sharply in the final hour of trading, leading to the closing bell ringing as the market was in the process of making new intraday lows.
Since the close, the index futures have been gradually making their way higher. There is still plenty of time before the open for this slow climb to reverse, but this just goes towards our expectations that the daily selling would begin to slow as compared to the initial selloff last week and that we will begin to see more overlap from one day to the next even on new daily lows. Use a great deal of extra caution right now since the increased volatility in the indices will continue to make it difficult to keep stops as tight as usual. To compensate, I'd recommend sticking to the larger intraday time frames for identifying support and resistance and only taking positions which favor those larger price levels as opposed to merely focusing on smaller time frames such as a 5 minute chart for a setup. These smaller time frames can still be used for timing though.
International business Machs (IBM), MetroPCs communications Inc. (PCS), Apple Inc. (AAPL), Research in Motion Ltd. (RIMM), Allscripts Healthcare Solution (MDRX), Amazon (AMZN), JA Solar Holdings (JASO), and Google Inc. (GOOG). Notice that out of the top Nasdaq losers, nearly every one of them had recently made new 52-week highs. As the top gainers, you may recall my comment about a week ago, whereby this also meant they would have the most room to fall... and fall they did...
http://tradingfrommainstreet.com/images/FocusLetter/20071112nas.gif
After the large gap lower into the open, the market had a difficult time deciding quite what to do next. The indices had already sold off for two days in a row and most of the larger gaps in the indices themselves attempt to fill on the day of the gap. After so many extreme ups and downs, however, the bulls were less than enthusiastic about trying yet another rally after the one from the previous afternoon was so mercilessly crushed.
Volume remained high out of the open, but the market had a difficult time getting off the ground. Instead the indices fell into a choppy range out of the open. The S&Ps attempted to move higher at 10:00 ET, but the 5 minute 20 simple moving average in the indices held as resistance intraday and the market headed lower into 11:15 ET. This led to new lows on the week, but only by a hair. The very slightly lower lows created 2B reversal patterns in the S&Ps and Nasdaq. The 5 minute 20 sma served as resistance for a few minutes once again, but it broke at about 11:45 ET, taking the indices back to the upper end of the day's trading range.
The momentum then shifted back and forth well into the afternoon. The morning's highs and lows held as support and resistance until 14:00 ET. This is a major reversal period in the market, particularly if a range has been in play up until that point. Volume had dropped into the reversal period and the momentum had again shifted with slower downside as the volume declined. This increased favor for an upside breakout and the market pivoted off the lower end of the range in the Dow and Nasdaq at this 14:00 ET reversal period, taking the indices first back into the upper end of the range and then to new intraday highs.
http://tradingfrommainstreet.com/images/FocusLetter/20071112sp.gif
The S&P 500, with help from the financials, was the only one of the three major indices to close their morning gap zone, coming within about a point of absolute closure. The Russell 2000, however, also came close and performed in a manner very similar to the S&P 500 throughout the session.
Once that resistance level from the gap hit, the market again began to roll over. They indices retested the highs, but at a more gradual pace and without any volume confirmation. This created a 2T form of double top whereby the prior highs broke by only a couple of ticks max before reversing again. The selling immediately turned into panic as market players who had hoped for a rally into the weekend began to trip over each other when the rally failed to confirm in order to get out before the closing bell.
http://tradingfrommainstreet.com/images/FocusLetter/20071112dow.gif
Despite the market hitting strong support levels on the daily charts on Thursday and into Friday, the fact that the indices did not round off at that support leaves the market open for even more downside in the week ahead. I expect the momentum on any further selling to be slower than this past week and likely with more overlap in price from one day to the next. The move has the potential to try to mimic mid-May's activity in the Nasdaq, but the S&Ps and Dow should now continue to hold up a bit better compared to the Nasdaq. It would not take much to bring the Nasdaq back to the 2500 level. 12800 is the Dow's next major daily support, while 1400 is price support in the S&P 500.
I am not going to rule out the possibility of a bounce still off the current support, but to see any strong upside I'd like the market to round off at the support with some slightly lower lows. Otherwise upside will also be more choppy with a lot of overlap from one day to the next to begin with. The Dow and S&Ps would be able to move off this support more easily than the Nasdaq.
While these two scenarios of further selling or a rally seem to leave me hedged, the reason is that momentum on the smaller time frames is still pointing south, but all it will take is a shift intraday to turn it back over since the daily support in the S&Ps and Dow is rather significant. For instance, another gap down, followed by a strong bounce and then slower selling into the afternoon would make it easier for the market to hold the current support zone and turn higher. On the other hand, an even open or even a gap higher into the open, followed by slower upside in the morning can more easily be followed by more downside. So, it is that momentum change intraday that I'll be keeping a close eye on.
Online Trading Expo in Las Vegas
I will be out of town attending the Online Trading Expo in Las Vegas later this week, so I will not be writing this column from Wednesday night through Monday night. I return home on Monday, so the column will resume on Tuesday evening. For those of you attending, I'll be speaking for the expo at 8 a.m. Vegas time on Sunday and for Real Tick at 10:15 a.m. Sunday. I hope to see you there!
posted by Toni Hansen @ 11:20 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Economic Reports Due Out This Week
Monday, November 12, 2007
There are no economic indicators scheduled today.
Tuesday, November 13, 2007
7:45a.m. ICSC Chain Store Sales Index For Nov. 13. Previous: +1.0%.
8:55a.m. Redbook Retail Sales Index For Nov. 10. Previous: -0.4%.
2:00p.m. Federal Budget. Previous: +111.56.
3:00p.m. Sep Pending Home Sales Index. Previous: -6.5%.
5:00p.m. ABC/Wash Post Consumer Conf For Nov. 13. Previous: -15.
Wednesday, November 14, 2007
7:00a.m. MBA Mortgage Refinancing Index. Previous: -3.2%.
8:30a.m. Oct Producer Price Index. Previous: +1.2%.
8:30a.m. Oct PPI, Ex-Food & Energy. Previous: +0.1%.
8:30a.m. Oct Retail & Food Sales. Previous: +0.6%.
8:30a.m. Oct Retail & Food Sales, Ex-Autos. Previous: +0.4%.
10:00a.m. Sep Business Inventories. Previous: +0.1%.
10:30a.m. Crude Inventories
Thursday, November 15, 2007
8:30a.m. Initial Jobless Claims For Nov 10 Week. Previous: -13K.
8:30a.m. Oct Consumer Price Index. Previous: +0.3%.
8:30a.m. Oct CPI, Ex-Food & Energy. Previous: +0.2%.
8:30a.m. Nov NY Fed Manufacturing Index. Previous: 28.75.
10:00a.m. DJ-BTMU Business Barometer For Nov. 15. Previous: +0.4%.
12:00p.m. Nov Philadelphia Fed Business Index. 7. Previous: 6.8.
Friday, November 16, 2007
9:00a.m. Sep Treasury International Capital Flows. Previous: -$85.5B.
9:15a.m. Oct Industrial Production. Previous: +0.1%.
9:15a.m. Oct Capacity Utilization. Previous: 82.1%.
posted by Toni Hansen @ 11:19 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Earnings Announcements This Week
Monday:
Before: BX, DISH, HEW, NSSC, NVAX, TSN
After: JOBS, BOBE, CNK, ESE, HINT, LINE, OWW, FACE
Tuesday:
Before: GTLS, ERJ, FIG, FOSL, GILT, HD, IAG, NAFC, PPC, SCHS, TJX, USBE, WMT
During: LNY, RAME
After: CNTF, IMOS, DIET, EXM, GUID, LZB, OMPI, OCNW, STEC, XFML
Wednesday:
Before: APU, MT, ARM, CSIQ, DAKT, DWSN, DSX, ESLT, GIGM, M, MSTH, VIVO, PCS, NUAN, UGI
After: ANST, AMAT, CHIC, HSOA, LDG, NTAP, PETM, RAH, TTEK, WGOV
Thursday:
Before: BIG, CTR, CHINA, CPA, DKS, DHT, FCSX, GMTN, GSOL, GMCR, GBE, HP, HB, JCP, KIRK, MMS, NWY, NJR, PTRY, SHLD, SHMR, SCVL, SOLF, SSI, SMRT, SPH, STP, BKE, TDG, TWB, TYC, VSE, WTSLA, ZOLL
After: A, ADSK, STV, CHRD, DDS, DITC, DHOM, EXLS, FL, HMIN, DISK, PODD, INTU, SJM, KSS, MSCC, MTSC, CRM, SINA, SBUX, SNS, TOA, NCTY, UNCA, VRGY, VIMC, WEDC
Friday:
Before: ANN, QXM
Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!
posted by Toni Hansen @ 11:18 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, November 8, 2007Market Extends Selloff
Good morning! The market continued to lose ground on Thursday with Wednesday's breakdown continuing into the new session. Although the Dow Jones Industrial Average ($DJI), S&P 500 ($SPX), and Nasdaq Composite ($COMPX) all closed lower, the closing prices were a vast improvement given the day's lows made earlier in the afternoon. By the end of the day the Dow posted a 33.73 point loss (-0.2%). International Business Machs. (IBM) was one the main losers, down 4.5% by the end of the day, while American International Group, Inc. (AIG) continued to fall another 3.3% on the day.
The S&P 500 held up a hair better than the Dow, posting a loss of 0.85 point (-0.1%). The Nasdaq Composite, on the other hand, was extremely hard-hit. Led by declining technology shares, the Nasdaq posted a loss of 52.76 points (-1.9%) by the end of the day. Cisco (CSCO) alone fell 9.5% following earnings the evening before. GOOG, RIMM and AAPL all lost more than 5% of their market value on Thursday.
http://tradingfrommainstreet.com/images/FocusLetter/20071109nas.gif
From a technical standpoint, the continued downside the market experienced on Thursday was expected based upon the activity of the last couple of weeks. It didn't stray much from what I had laid out as a scenario several weeks ago. It was still not a pretty picture though. The volume in the market was the highest it had been since we were at the comparable price development back in mid-August. This meant that it could have been a very difficult day for those not skilled in order execution since prices moved very quickly.
http://tradingfrommainstreet.com/images/FocusLetter/20071109sp.gif
The market began the day by selling off. This extended the downside from the previous afternoon. A 15 minute bear flag then formed to mark the second major correction on this time frame intraday since Wednesday's reversal. The flag had two waves of upside, typical of a continuation pattern forming. Then at around 11:15 ET the indices broke lower. The selling was volatile, but steady. The S&Ps hit our target in the 1460 zone perfectly and the S&Ps also found support from the August congestion we have been watching. In both cases, as well as in the 15 minute Nasdaq and S&Ps, the mid-day move lower nearly equaled previous selling.
The downtrend channel broke just after 13:00 ET. Volatility remained highs as the market attempted to pull higher off early afternoon lows. The 5 minute 20 simple moving average served as resistance and at 14:00 ET the market pivoted and corrected somewhat while holding the 5 minute 20 sma resistance zone. Volume declined on this correction, indicating a greater bullish sentiment into the final hour of trading. The market began to rapidly move higher into the 15:00 ET correction period. The Nasdaq lagged, but the S&P 500 and Dow Jones Ind. Ave. both came closed to positing gains, but ended up holding the 30 minute 20 simple moving average resistance intraday instead.
http://tradingfrommainstreet.com/images/FocusLetter/20071109dow.gif
Volume is likely to remain high on Friday. It is also probable that the indices will continue to correct off Thursday's lows. I have been watching for the potential for the market to set up a third wave of buying in the S&Ps and Dow to slightly higher highs. That is going to now depend upon how the market continues to react to the current support level. As long as the upside momentum is strong, the scenario will hold.
posted by Toni Hansen @ 7:44 PM 0 Comments
Wednesday, November 7, 2007Market Gives Way to Continued Downside
Good morning! Triangle or immediate continuation? That was the question posed over the past couple of days. As the market opened on Wednesday it was obvious that the market had made its choice. In order to hold a triangle pattern and pull back up into the 20 day simple moving average before falling again, the indices needed to have continued higher on Wednesday morning. Instead, the afterhours selling that we had our eyes on heading into midnight on Tuesday picked up strongly in premarket trading.
At about 4:00 am ET the market plummeted after a top official in China urged the country to diversify its foreign-currency holding, such as the euro, which had risen to $1.4730. After the rapid descent, the index futures held a range into the open. The action was extremely close to what occurred in Monday's premarket trading. The initial outcome was also the same. The market consolidated into the early afternoon with gradual upside on Monday, but on Wednesday this gradual upside correction did not take as long. Previous 15 minute highs served as Nasdaq ($COMPX) resistance, while the 5 and 15 minute 20 simple moving average held as resistance in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) on Thursday, leading to a more rapid onset of the breakdown out of the pattern than before.
http://tradingfrommainstreet.com/images/FocusLetter/20071108nas.gif
In contrast to Monday's afternoon selloff, the action on Wednesday was also much more extreme. The 10:15 ET reversal period held and the market began to fall off the intraday resistance. At first it seemed harmless enough, until one stepped back and looked at the 30 minute time frame and noticed that the momentum within the week's trading range had once again shifted in favor of the bears. The 10:15 ET breakdown was earlier than was ideal compared to the extent of the gap, however, and the market fell into another range heading into noon to compensate. Volume declined as the bulls backed off and the bears waited.
http://tradingfrommainstreet.com/images/FocusLetter/20071108sp.gif
At the 12:00 ET reversal period the dam broke and the selling resumed. It was still somewhat hesitant at first, but another congestion level into 13:00 ET was rewarded by a strong downside flush at 13:15 ET. This took the Dow to new lows on the week and brought the Nasdaq Composite into support at Tuesday's lows before attempting to correct again on the 15 minute time frame and not merely on the 5. The 5 minute 20 sma served as initial resistance, but the market congested along that resistance to form a Phoenix buy setup out of the 14:00 ET reversal period. This took the indices back to the 15 minute 20 sma resistance. These two-wave corrections are typical within a larger downtrend and the selling resumed into 15:00 ET, but retraced slightly before it completely fell apart in the final 45 minutes of trading.
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At the time of the closing bell, the Dow had fallen another 360.9 points (-2.6%). Every single one of the companies which comprise the index saw their stock's value decline. The index closed at 13,300.02. American International Group (AIG) was among the hardest hit ahead of its afterhours earnings report. It fell 6.7% on the day. General Motors (GM) came in close with a 6.1% decline following third-quarter losses. American Express (AXP) lost 5.5%.
The S&Ps and Nasdaq also suffered heavy losses. The S&P 500 fell 44.65 points (-2.9%) on Wednesday. It closed at 1,475.62. The Nasdaq Composite lost 76.42 points (-2.7%). It ended the session at 2,748.76. Volume was again on the heavy side with almost 1.7 billion shares exchanged on the NYSE and 2.7 billion on the Nasdaq. In the NYSE the decliners exceeded advancers by 3 to 1, while on the Nasdaq the declining stocks outpaced the advancing ones by more than 5 to 1. The selling did not end there. The market continued to fall in afterhours trading as well. This leaves the door wide open for a retracement in the Dow back to the 13,000 level with the market easily testing the price congestion from August and early summer.
posted by Toni Hansen @ 9:42 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, November 6, 2007Market Pulls Higher while Crude Oil Hits Record Highs
Good morning! The roller coaster ride of the past several trading days continued on Tuesday, but the market overall managed to close with some solid gains. The Dow Jones Industrial Average ($DJI) added 117.54 points (+0.9%) on Tuesday and closed at 13,660.9. American Intl Group (AIG) was the strongest of the Dow's 30 index components, posting a $2.52 gain to close at $62.05. Exxon Mobil Corp. (XOM) came in a close second in terms of percentage gains and led in terms of price, adding $2.72 to close at $90.38. Citigroup Inc. (C) weighed down the index, falling $0.82 to close at $35.08. The result was that the Dow was the weakest of the three major indices and both the S&P 500 ($SPX) and Nasdaq Composite ($COMPX) experienced larger percentage gains on the day. The S&P 500 rose 18.10 points (+1.2%) and closed at 1,520.27, while the Nasdaq Composite rose 30 points (+1.1%) and closed at 2,825.18.
Volume was strong on Tuesday, but somewhat lighter than on last Friday and this Monday. Volume on the New York Stock Exchange fell just short of 1.5 billion shares. Advancers beat out decliners by close to 2 to 1. On the Nasdaq about 2.5 billion shares were traded. Advancing stocks came out ahead of declining ones by about 4 to 3.
One the main news events for the day was the record close in crude oil. XOM soared, as did the rest of the energy related sectors, as oil prices rallied. They made a new all-time high of $97.10 a barrel and closed at $96.70 a barrel. The Energy Department's Energy Information Administration will release this past week's U.S. crude oil inventory report on Wednesday at 10:30 ET. Declining imports, particularly from Mexico as a result of strong storm activity in recent months, has contributed to low inventories. In the previous week crude oil inventories fell to their lowest levels in two years. Wednesday's data is likely to reflect that impact even more with a continued decline, while demand has increased in part to colder temperatures and economic growth.
The euro also hit record highs since its debut in January 1999. At one point it hit $1.4571 intraday, leading to yet further weakness for the U.S. dollar. On Thursday the European Central Bank announces its interest rate decision, which is expected to remain at 4%.
http://tradingfrommainstreet.com/images/FocusLetter/20071107nas.gif
Let's now take a look at the market from a technical standpoint. The session began on Tuesday with a modest gap higher into the open following some premarket buying heading into about 7:00 am ET. The market managed to hold up into the open for the first 45 minutes of the day, but when the 10:15 ET correction period hit the bears took over and the indices began yet another sharp intraday decline. This has been very typical over the last couple of trading days, but this time the market did not make it back into the prior lows and instead the Nasdaq found support at Monday's opening prices while the S&P 500 and Dow Jones Ind. Ave. hit support at their 15 minute 20 simple moving averages and the middle of the congestion from the prior two days of trading.
http://tradingfrommainstreet.com/images/FocusLetter/20071107sp.gif
By 11:00 ET the market was attempting the reversal off lows. The initial ascent was rather slow as the indices moved on choppy trading into the zone from the previous day's close. The S&P 500 made it to its 5 minute 20 sma resistance zone, but the Dow and Nasdaq fell a bit short before they began to pull lower. The market kept an equal distance from the 5 minute 20 sma as it corrected off that zone, however, and this made it possible to break higher on increasing momentum. The initial pop only took the market into the moving average. A minor correction along the moving average itself into noon then allowed it to break through it.
After hitting some earlier congestion and the equal move zone compared to the initial upside, the market corrected for a second time with a pullback on light volume into the 13:00 ET reversal period. The indices moved steadily out of this bull flag and into a strong test of the morning highs. I had initially been expecting a little more of a pullback at 13:30 ET when the market had established another comparable move and began to slow at the S&Ps's morning highs, but the high at the time held and broke slightly higher into the same resistance zone for the Dow and Nasdaq before pulling back with a larger correction into the 14:00 ET reversal period.
http://tradingfrommainstreet.com/images/FocusLetter/20071107dow.gif
Intraday the market action had been pretty choppy throughout the day into 14:00 ET. There was a great deal of overlap again in prices from one bar to the next on the 5 and 15 minutes charts and at 14:00 ET that chop became even more pronounced as the market formed a larger 15 minute congestion zone. Volume again dropped off somewhat and the 15 minute 20 sma held as support, leading to a break higher out of the 15:00 ET reversal period. This was the most pronounced upside move of the entire session and it continued strongly into the final 30 minutes of trading.
This late day breakout took the indices out of the trading range that had been in place since Friday and it also means that the market now has a bit higher odds of forming a daily triangle instead of an immediate continuation lower as had taken place back in August. We will need to see the buying hold into Wednesday, however, for this to show greater confimation and currently the market is pulling back afterhours.
posted by Toni Hansen @ 8:54 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Takes Investors for a Ride
Good morning! The new week kicked off with a bit of a roller coaster ride for market participants on Monday. The morning began with a sharp turn lower following earlier weakness into the day. At 2:00 am ET the index futures began to tumble. The downside gained momentum into 3:00 am ET on falling prices overseas, but then stabilized somewhat into the opening bell. A sharp flush lower at 9:30 ET took the market into the zone of Friday's low and strong price support.
Wider-than-average gaps such as this in the overall market have a decent tendency to fill on the morning of the gap and the market made a nice show out of the attempt. Buying hit within minutes of the bell and, although the indices fell into a bit of a range into 10:00 ET, the market popped following the Institute for Supply Management's nonmanufacturing index. The ISM data exceeded expectations, showing a stronger growth in the U.S. economy than had been expected. The ISM index rose from 54.8% in September to 55.8%.
http://tradingfrommainstreet.com/images/FocusLetter/20071106nas.gif
After pulling back some at intraday highs, the market put in a third wave of buying into the 10:45 ET reversal period. The 10:45 ET highs closed the gap zone in the Nasdaq Composite. Although they did not hit Friday's close exactly, it was still enough to serve as strong resistance and the market rolled over.
The reversal was very slow to begin with. The S&P 500 and Dow Jones Ind. Ave. even went on to retest the morning highs just before noon before they were able to turn over better. From about 12:30 ET to 13:00 ET the market based along mid-day lows and then broke lower soon thereafter. The initial break was comparable to testing the water in your shower or bathtub. The bears put their hand in and yanked it out quickly, but when they realized that the the temperature was just right they all dived in and the market began to sell off very sharply into 14:00 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20071106sp.gif
In order to slow the momentum on the selloff, the market pulled higher out of 14:00 ET. The correction only lasted about 15 minutes, but another wave of downside allowed the indices to begin to roll over at the day's lows. A 2B reversal pattern, consisting of a second slightly lower low on declining momentum, brought the S&Ps and Dow off the lows and the Nasdaq had its own ace up its sleeve when it hit Friday's lows for very strong price support.
The reaction off the afternoon support, while anticipated in terms of its likelihood to occur in some form or another, went beyond what I had been expecting and the indices very quickly shot higher off the lows. The 5 minute 20 sma zone stalled the bulls briefly, but a second and even stronger move took place soon after 15:00 ET. The highs hit the upper end of the morning congestion, creating a second correction and then a third waves of buying into 15:00 ET. This last surge brought the market to the upper end of the daily from Friday as well. As these stronger price levels hit, the market again found itself without solid footing and it slipped slightly lower into the close.
http://tradingfrommainstreet.com/images/FocusLetter/20071106dow.gif
I am still leaning towards continued selling with the 20 day sma serving as resistance in the indices. At the closing bell the Dow ($DJI) has lost 51.70 points (-0.4%) and closed at 13,543.4. Citigroup led the decliners in this index and lost 1.83 points, or 4.8%. The rest of the financial sector remained weak as well thanks to a slew of broker downgrades. The S&P 500 ($SPX) lost 7.38 points and closed at 1,502.17, while the Nasdaq Composite ($COMPX) fell 15.20 points and closed at 2795.18.
posted by Toni Hansen @ 6:37 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, November 5, 2007Market Takes Investors for a Ride
Good morning! The new week kicked off with a bit of a roller coaster ride for market participants on Monday. The morning began with a sharp turn lower following earlier weakness into the day. At 2:00 am ET the index futures began to tumble. The downside gained momentum into 3:00 am ET on falling prices overseas, but then stabilized somewhat into the opening bell. A sharp flush lower at 9:30 ET took the market into the zone of Friday's low and strong price support.
Wider-than-average gaps such as this in the overall market have a decent tendency to fill on the morning of the gap and the market made a nice show out of the attempt. Buying hit within minutes of the bell and, although the indices fell into a bit of a range into 10:00 ET, the market popped following the Institute for Supply Management's nonmanufacturing index. The ISM data exceeded expectations, showing a stronger growth in the U.S. economy than had been expected. The ISM index rose from 54.8% in September to 55.8%.
http://tradingfrommainstreet.com/images/FocusLetter/20071106nas.gif
After pulling back some at intraday highs, the market put in a third wave of buying into the 10:45 ET reversal period. The 10:45 ET highs closed the gap zone in the Nasdaq Composite. Although they did not hit Friday's close exactly, it was still enough to serve as strong resistance and the market rolled over.
The reversal was very slow to begin with. The S&P 500 and Dow Jones Ind. Ave. even went on to retest the morning highs just before noon before they were able to turn over better. From about 12:30 ET to 13:00 ET the market based along mid-day lows and then broke lower soon thereafter. The initial break was comparable to testing the water in your shower or bathtub. The bears put their hand in and yanked it out quickly, but when they realized that the the temperature was just right they all dived in and the market began to sell off very sharply into 14:00 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20071106sp.gif
In order to slow the momentum on the selloff, the market pulled higher out of 14:00 ET. The correction only lasted about 15 minutes, but another wave of downside allowed the indices to begin to roll over at the day's lows. A 2B reversal pattern, consisting of a second slightly lower low on declining momentum, brought the S&Ps and Dow off the lows and the Nasdaq had its own ace up its sleeve when it hit Friday's lows for very strong price support.
The reaction off the afternoon support, while anticipated in terms of its likelihood to occur in some form or another, went beyond what I had been expecting and the indices very quickly shot higher off the lows. The 5 minute 20 sma zone stalled the bulls briefly, but a second and even stronger move took place soon after 15:00 ET. The highs hit the upper end of the morning congestion, creating a second correction and then a third waves of buying into 15:00 ET. This last surge brought the market to the upper end of the daily from Friday as well. As these stronger price levels hit, the market again found itself without solid footing and it slipped slightly lower into the close.
http://tradingfrommainstreet.com/images/FocusLetter/20071106dow.gif
I am still leaning towards continued selling with the 20 day sma serving as resistance in the indices. At the closing bell the Dow ($DJI) has lost 51.70 points (-0.4%) and closed at 13,543.4. Citigroup led the decliners in this index and lost 1.83 points, or 4.8%. The rest of the financial sector remained weak as well thanks to a slew of broker downgrades. The S&P 500 ($SPX) lost 7.38 points and closed at 1,502.17, while the Nasdaq Composite ($COMPX) fell 15.20 points and closed at 2795.18.
posted by Toni Hansen @ 7:51 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, November 4, 2007Market Recovers Following Morning Selloff Led by the Financials
Good morning! The market gave in to a second wave of selling on the daily time frame since the October 11th highs on Thursday. That bias continued into Friday morning with continued downside after a minor gap higher into the open. The financial sector was particularly burdened. In the broker/dealers, Merrill Lynch & Co Inc. (MER) saw its worst intraday decline since February after breaking lower on October 19th out of a multi-month base near 52-week lows. At one point MER was down about $8, but it managed to recoup some of its losses to close down $4.91 (-7.9%). Morgan Stanley (MS) also had a tough day. It fell $3.52 (-5.64%) on Friday after already getting hit hard the day before. Goldman Sachs Group Inc. (GS), which had just hit new highs two days earlier, shed $10.61 (-4.42%). The banks failed to hold up also, with a -7.5% loss in Washington Mutual Inc. (WM) leading the decliners. Only a couple stocks in this sector managed to post gains.
Despite these damages, the overall market did manage to make a recovery as the day progressed and even succeeded in posting gains. The Dow Jones Industrial Average ($DJI) rose 27.23 points (+0.2%) and ended the session at 13,595.10. It had fallen 1.5% from the previous week. The S&P 500 ($SPX) gained just over a point with +1.21 (+0.1%). It closed at 1,509.69 for a loss of 1.6% on the week. The Nasdaq Composite ($COMPX) rose 15.55 points (+0.6%). It finished the week at 2,810.38, which was nearly unchanged from the previous Friday's close.
The sectors which succeeded in posting gains and holding up the overall market were the oil and gold sectors. Nearly all the top NYSE gainers fell into one of these sectors, or one closely related, such as energy. The top symbols were WDC, WCG, ABX, RIG, SLB, APA, WFR, WLT, CF, and FLS. The Nasdaq winners included RIMM, BIDU, GOOG, UTHR, SYNA, RSYS, SBAC, FMCN, CGNX, WMGI, and ONXX.
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After falling sharply lower out of the open on Friday, the market began to stabilize around 10:00 ET. The buyers did not jump back in immediately, but the indices began to round off at the morning lows at that time. The Nasdaq Composite had hit its 20 day simple moving average for support and the S&Ps and Dow were testing support zones from over the past couple of months. After some slightly lower lows, the indices began to ease higher around 10:15 ET. The Nasdaq recovered quickly and was soon in positive territory again, albeit still off the highs, while the S&P 500 and Dow Jones Industrial Average at least returned to Thursday's closing prices. These hit at the same time as the 5 minute 20 simple moving average, which corresponded to the Nasdaq striking resistance at its 15 minute 20 sma. The result was that the buying stalled.
The market retested the morning highs about 90 minutes after the first lows were made. The selling was not as steep as before, nor did it have as far to fall. The larger daily support combined with the support from the morning lows and the more gradual momentum overall on the decline allowed the market to hold those lows and once again attempt another recovery. Resistance hit again at noon, but instead of falling off those price levels, the market held and the indices congested there on declining volume. I had expected the range to hold a bit longer than it did, but it broke out rather quickly around 12:15 ET. The result was that instead of moving quickly into the morning highs, the market chopped higher at a slower pace and with a great deal of overlap from bar to bar on the 5 minute time frame.
http://tradingfrommainstreet.com/images/FocusLetter/20071105sp.gif
The indices hit the zone of morning highs around the same time as the 13:00 ET reversal period. Within minutes they were hugging the lower end of the uptrend channel, suggesting that finally the trend would correct and give way to a pullback. Even though this bias followed through, the trading was even more choppy on the pullback off the highs than the run into them. The market crept lower on somewhat declining volume, but without any real conviction. The pattern for the breakdown was essentially an Avalanche, but the base for the pattern had a downward tilt to it with slightly lower highs and lows until breaking that congestion around 14:30 ET with a bit stronger momentum back into earlier price congestion and the 15:00 ET reversal period.
http://tradingfrommainstreet.com/images/FocusLetter/20071105dow.gif
When the 15:00 ET reversal period hit, the buyers returned. There was a little hesitation again to begin with, but within 15 minutes the momentum had increased. The market first returned to the congestion zone from the Avalanche area and then based, forming another brief range before pushing higher into the close. This time it was the lagging S&Ps and Dow that led the way and the indices all closed with gains. The Nasdaq ended the session approximately where it opened from the gap and the S&Ps and Dow nearly managed to as well.
While the market is at strong support on the larger intraday time frames and stands a decent chance of Friday's lows holding to begin with this week, I expect the gap level from Wednesday's close to serve as strong resistance and my larger daily bias at this time is for further selling over the next couple of weeks. In order for this bias to continue, I want to see a more gradual, choppy correction continue off this support early this week. This would create higher odds for a descending triangle to trigger a short on the daily time frame in the S&P 500 and Dow. It is reasonable to expect the Nasdaq to continue to perform somewhat better than the rest of the market, but when selling does hit, it will then have more room to fall than the others.
Events impacting the week ahead include a continuation of earnings season as well as a couple highly-followed economic reports. As far as earnings season goes, while it has come in pretty close to expectations in terms of how many beat earnings, how many fell in line with earnings and how many fell short, many of the companies that beat their anticipated earnings did so by relatively small amounts. Without a lot of excitement, it opens the door to larger corrections on the monthly time frames. Economic events to keep an eye on will include Monday's ISM Services report, monthly retail sales, same-store sales, and Friday's University of Michigan's consumer sentiment survey.
posted by Toni Hansen @ 6:33 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, November 1, 2007Market Resumes Heavily Selling as Fed News Settles
Good morning! Volume remained heavy on Thursday following Wednesday's quarter point interest rate cut. It wasn't a very promising day for the bulls however. The indices opened significantly lower after rolling over around midnight and increasing momentum on the downside in premarket trading. The ES, which is the S&P 500 EMini futures contract, gapped down by 15.75 points, leading to initial trading intraday at what had been the lows of the week up until that point. The Nasdaq held up a little better and opened into the highs from mid-day Tuesday and the pre-Fed levels on Wednesday, but the selling resumed immediately out of the gate.
http://tradingfrommainstreet.com/images/FocusLetter/20071102nas.gif
After a bit of congestion at lows between 9:45 and 10:00 ET, the indices found support on a third low on the all sessions charts, which include premarket data. This hit at the same time as the 10:15 ET reversal period and price support from prior lows in the Nasdaq Composite on the 15 minute time frame. The Nasdaq moved quickly higher, but the momentum was still more gradual on the upside in the S&P 500 and Dow Jones Industrial Average. The 5 minute 20 sma served as resistance and hit between the 10:45 ET reversal period in the S&Ps and Nasdaq and the 11:00 ET one in the Dow.
Even though the rally itself was pretty decent, the market had a very hard time breaking the resistance, which was also a 38% Fibonacci retracement level from the afterhours highs to the morning lows. The market fell into a solid trading range throughout the rest of the morning and well into the early afternoon. There were quite a few nice pivots during this time, but overall the upside momentum began to slow. This was the most noticeable in the Dow. The third wave of upside within its mid-day congestion couldn't even break free from the lower trend line made when connecting the first two lows. The light volume throughout confirmed a lack of motivated buyers and the market began to break down around 13:30 ET.
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The 13:30 ET breakdown in the indices led to new intraday lows in the Dow and a retest of the morning lows on both the Nasdaq Composite and the S&P 500. They hit at the 14:00 ET reversal zone and a correction off the support followed. Once again the volume declined somewhat, although it remained higher than in recent days. The breakdown level from earlier, combined with the 15 minute 20 sma, served as very strong resistance and an even sharper momentum selloff plunged the indices to new intraday lows into the final hour of trading. A minor correction at 15:30 ET broke 15 minutes before the closing bell and took the Nasdaq past Wednesday's lows.
http://tradingfrommainstreet.com/images/FocusLetter/20071102dow.gif
All three of the major indices closed right at the level of the day's lows. The Dow ($DJI) lost a staggering 362.14 points to end the day at 13,567. Citigroup (C) was one of the worst performers, losing 6.9%, while the index as a whole lost 2.6%. AIG (AIG) came close to Citigroup by shedding 6.1% and JP Morgan Chase (JPM) lost 5.7%. It was not a good day for financial-related securities... The S&P 500 ($SPX) also fell 2.6%, which translates as 40.94 points. It closed at 1,506. The Nasdaq Composite held up a little better. It lost 2.2% (64.29 points) and closed at 2,794.
One of the largest decliners on Thursday was the recent daytrader darling Crocs (CROX). After reporting earnings of 66 cents a share, the stock plummeted due to warnings of potentially slowing growth as it begins selling new products at The Foot Locker. One also has to wonder just how many pairs of these atrociously ugly sets of footwear the average person needs to own in the first place. Given that nearly everyone I know (except myself) has at least one pair, it would seem logical that sales would slow, but hey, sometimes stocks like this defy logic for extended periods of time! (My apologies to offending the 99% of you who read this who own a pair! hehe!)
As we examine the broader market heading into Friday, I am in favor of some continued weakness. Thursday's selling was the action I had hoped to see following the Fed announcement on Wednesday, but it was close enough. The zone of the 20 day simple moving average resistance held in the S&P 500 and Dow and this could be the start of that second wave of selling on the daily time frame that we've been expecting. This means that the larger play for a third high on the weekly time frame for the S&Ps and Dow over the next month or two is still a very plausible scenario, but we still have to see how this selloff and subsequent reaction turn out. The congestion from throughout August and the first week of September in those two indices is strong price support to watch for over the next week or so.
posted by Toni Hansen @ 9:32 PM 0 Comments
Thursday, December 20, 2007Market Inches Higher into the Holiday Weekend
Good morning! As trading wrapped up on Wednesday afternoon the indices were favoring upside into Thursday morning, but without enough of a correction to easily push the ES (S&P 500 EMini) to new highs. I walked through a couple of scenarios in yesterday's column, dealing with the previous 15 min highs as resistance, but neglected to name the one whereby we saw a gap into that level to then allow for that larger intraday pullback I was wanting to see before the market attempted to really break higher again. So, we still ended up with the same outcome, but the pullback came faster than it would have had the market not gapped and instead had to climb throughout the morning.
http://tradingfrommainstreet.com/images/FocusLetter/20071221nas.gif
The gap itself was the strongest in the Nasdaq ($COMPX) in that it busted the index through the highs of the prior several trading days, but it had a higher level base into the close than the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) had. The S&Ps gapped right into Wednesday's morning highs and price resistance, while the Dow gapped into the afternoon resistance. These opening levels held and a small congestion in the first 15 minutes of so of the day gave way to a strong round of selling in the S&Ps and Dow. The Nasdaq also broke lower, but lacked the momentum of the other two indices.
http://tradingfrommainstreet.com/images/FocusLetter/20071221sp.gif
The morning momentum slowed after the S&Ps and Dow closed their gaps. At the same time the Nasdaq came into support from Wednesday afternoon highs and the 5 minute 20 period simple moving average. A bear flag formed at those support levels and the market continued to sell off into noon, although the Nasdaq merely made lower highs and held the lows. The slower selling into noon with a lot more overlap in all three of the major indices created a bullish bias once again for the afternoon. The morning drop also was enough of a flush to make it easier to sustain upside on the larger 30-60 minute time frames, which is what we were lacking heading into the session.
http://tradingfrommainstreet.com/images/FocusLetter/20071221dow.gif
The S&Ps and Dow crept through the upper resistance of the second drop of the morning into noon. The lack of momentum shift on the 1-2 minute charts allowed the indices to flush again on a 2 minute time frame into 12:30 ET. This last flush into the larger 15 minute support at the previous day's lows in the S&Ps and Dow and the 15 minute 20 sma in the Nasdaq was a perfect opportunity for the bulls. The market popped quickly, stalled only a few minutes and then began a steady rally back into the earlier morning price levels. The Nasdaq, which had outperformed throughout the session, easily broke through the morning highs.
Resistance hit again at about 14:30 ET and from that point into the close the market remained range bound, but began forming another buy setup on the 5 minute time frame. It triggered in to the close and continues steadily higher as I write this (2am). At the time of the closing bell, however, the Dow was only up 38.37 points. It ended the session at 13,288. Technology led the move with 1.6% gains in IBM and a 2.1% gain in MSFT. The S&P 500 rose 7.12 points during regular trading and closed at 1,460. The Nasdaq Composite gained 1.5%, outshining the Dow and S&Ps combined. This was a 39.9 point move which closed at 2,640. ORCL and RIMM were two of the other major tech leaders. I am anticipating a slower Friday, but the potential has increased for a trend day or at least for a good chunk of the day as we come out of the range that has been in place since the 17th.
NOTE: I will be taking time off for the holidays while my kids are on winter break. (Very hard to trade with kids running around!) So, my last column of the year will be for Monday's session and then it will resume following the evening of the 4th. I hope you all have a wonderful holiday season!
posted by Toni Hansen @ 11:03 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, December 19, 2007Holiday Trading Sets In
Good morning! The market was incredibly choppy in Wednesday's session. The day began with very hesitant buying following a rather uneventful open. The higher prices climbed, the less sure they became. Volume declined, upside momentum slowed, and when the 10:45 ET reversal period hit the bulls began to head for the side exits. Momentum increased the lower prices fell. Support hit at 11:30 ET, but by that point the selling was so strong that the indices could not easily bounce back and instead formed a small bear flag to take prices even lower into the more substantial reversal period of 12:00 ET.
http://tradingfrommainstreet.com/images/FocusLetter/20071220nas.gif
The slightly lower lows into noon were a first step for a larger correction off the lows in the indices. The market moved higher into the early afternoon and the 5 minute 20 period simple moving average, but then another tug-of-war began. Prices fell, but so did the volume as the indices hugged resistance, sliding lower in a choppy trend channel. A final flush to new lows at 13:45 ET forced out those with stops under the morning lows and allowed the market to pop out of the 14:00 ET reversal period. This reversal was the morning short setup reversed, but on a slightly smaller scale.
The market found strong price resistance as the indices came into the morning's congestion and breakdown levels. The strong buying began to wane and momentum shifted for the third time on the 15 minute charts. Prices again rolled over into the close, holding the day's range on smaller versions of previous price action.
http://tradingfrommainstreet.com/images/FocusLetter/20071220sp.gif
When the closing bell rang, the result of this roller coaster ride was a virtually unchanged market in terms of price. The Dow Jones Industrial Average ($DJI) lost 25.20 points on Wednesday, closing at 13,207.3. Slightly more than half closed with gains. Walt Disney Co. (DIS) led the decliners with a loss of 2.3%, whereas Intel Corp. (INTC) gained 1.1%. The S&P 500 lost 1.98 points. It closed at 1,453. Unlike the Dow and S&Ps, the Nasdaq Composite ($COMPX) gained ground. It rose 4.98 points and closed at 2,601.01. Crude oil futures also rose on Wednesday after a string of steady losses. They closed higher by $1.16 at $91.24/barrel.
As we head into Thursday I am a bit more on the bullish side intraday, but it's not the best action yet. I would have liked to have seen a bit more downside first to flush things out a bit more before a bounce, and that is still possible, but the momentum within Wednesday's congestion has it favoring upside. I want to see it chop in the morning first before an attempt at a break. Otherwise if it just chops higher again into the morning and even into noon then we can see another strong downside flush into the second half of the day fairly easily. This would be the case especially if the 1475 zone holds in the ES (S&P 500 EMinis) on the 60 minute chart with a slower move into that level this time around than when it hit coming off the lows on the 18th.
http://tradingfrommainstreet.com/images/FocusLetter/20071220dow.gif
NOTE: I will be taking time off for the holidays while my kids are on winter break. (Very hard to trade with kids running around!) So, my last column of the year will be for Monday's session and then it will resume following the evening of the 4th. I hope you all have a wonderful holiday season!
FREE ONLINE TRADING CLASSES: Don't forget to join me for this Thursday's free online trading seminar! Adjustments have been made to the login instructions to assist those unable to connect during our first class. For more information and logs to my last session, go to http://www.tradingfrommainstreet.com/TradingClasses.html.
posted by Toni Hansen @ 7:36 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, December 18, 2007Market Post Gains After Weak Morning
Good morning! The market gave us both the lower lows we were looking for as well as the greater price overlap from one day to the next on Tuesday. The session began with a decent upside gap into the open, but such gaps rarely hold in the indices themselves and the selling we had been expecting set in fairly quickly. Opening highs held within a few ticks in the morning. The first continuation lower took place into 10:00 am ET into the 10:15 ET correction period. Another bear flag formed at that point, but the momentum did not increase until the breakdown around 11:15 ET. When the morning congestion gave way to new lows on the day the market plummeted. Sellers took over on increasing volume into the 12:00 ET reversal period.
http://tradingfrommainstreet.com/images/FocusLetter/20071219nas.gif
The 12:00 ET reversal period held very well for the market. The exhaustion move on the 5 minute led to a very slow turnover since the momentum into the lows was very rapid indeed, but the bulls gradually peaked their heads out, encouraged as the day progressed by more news out of the Fed on plans to tighten the lending practices to head off any new lending crisis such as the one that has struck the economy over the last couple of years. The proposal includes tighter rules on prepayment penalties and verification of the borrower's income to keep people from getting in over their heads based upon a wish and a prayer.
http://tradingfrommainstreet.com/images/FocusLetter/20071219sp.gif
The market continued higher throughout the first half of the afternoon at a steady clip before hitting resistance at the 14:30 ET reversal period. At that point the indices had struck the morning highs, which served as strong price resistance. The momentum in the Nasdaq had begun to shift at about 13:30 ET. Although the Dow and S&Ps formed solid bull flags into the 14:00 ET correction period, the Nasdaq made a series of higher highs. With the third high, the Nasdaq had completed the formation of a reversal pattern, which triggered at about 14:30 ET. The other indices followed the Nasdaq in its correction, but while the strength of the Dow and S&Ps helped it retest highs in the final 30 minutes of the day, the Nasdaq hugged the 5 minute 20 period simple moving average and attempted to break lower into the close on an Avalanche short setup.
http://tradingfrommainstreet.com/images/FocusLetter/20071219dow.gif
On Tuesday the Dow ($DJI) closed higher by 65.27 points at 13,232.5 (+0.5%). American International Group Inc. (AIG) led the move, adding 3.1% by the bell. 21 of the 30 Dow components posted gains. Two of the main losers were in the financial sector: Citigroup Inc. (C) (-1.3%), and J.P. Morgan (JPM) (-1.4%). The S&P 500 ($SPX) rose 9.08 points on the day, or 0.6%. It closed at 1,454.98. The Nasdaq Composite ($COMPX) had the strongest showing, with more room to move after the steeper selloff in the previous session. It gained 21.57 points, or 0.8%, and closed at 2,596.03. There is still room for another lower low on Wednesday, but I would expect a bit of upside and continued overlap into the weekend as volume declines.
FREE ONLINE TRADING CLASSES: Don't forget to join me for this Thursday's free online trading seminar! Adjustments have been made to the login instructions to assist those unable to connect during our first class. For more information and logs to my last session, go to http://www.tradingfrommainstreet.com/TradingClasses.html.
posted by Toni Hansen @ 6:24 PM 0 Comments
Monday, December 17, 2007Market Follows Through on Bearish Bias with a Trend Day
Good day! The the market experienced another day of strong losses on Monday to kick off the new trading week. This followed through on the daily continuation short setup that had been forming at the end of last week and into this, which I detailed in this week's Market Action Video (http://www.tonihansen.com/marketactionvideo/). The odds were high for a trend day on the downside on Monday and the market did not disappoint. The day began with a moderate downside gap and continued lower into the closing bell, ending the session at the day's lows.
The Dow Jones Industrial Average ($DJI) shed another 172.65 points, or 1.3%, on Monday, closing at 13,167.2. Caterpillar Inc. (CAT) was one of the largest decliners, falling 3% after a downgrade by Morgan Stanley. Only a couple of the Dow's 30 components managed to post gains. The S&P 500 ($SPX) and Nasdaq Composite ($COMPX) also fell throughout the day. The S&P 500 lost 22.05 points, or 1.5%, and closed at 1,445.9. The Nasdaq, bogged down by heavy losses in technology, landed lower by 61.28 points, or 2.3%. It closed at 2,574.46. Research In Motion Ltd. (RIMM) fell 5.4% on the day, while Micron Technology Inc. (MU) lost 5.7%. Other top losers included, AAPL, DRYS, BIDU, AMZN, GOOG, FSLR, EEM, NOV, IR, and FCX.
http://tradingfrommainstreet.com/images/FocusLetter/20071218nas.gif
Market data and news throughout the session on Monday helped add fuel to the fire to continue to push prices lower, although the volume on the day was not substantial and lacked strong panic or urgency. This suggests that it can easily continue into Tuesday. In fact, the selloff was rather orderly. Ahead of the open the New York Federal Reserve Bank reported a slowdown in factory growth in December. Meanwhile, the Commerce Department pointed to a narrowing current-account deficit in the third quarter. Later on in the day Moody's warned of downgrades in leading bond insurers and former Fed-chairman, Alan Greenspan, warned of a 50/50 chance of a recession. President Bush also spoke of economic challenges during a speech in Fredericksburg, VA. All-in-all, not very hopeful news to a market already on edge.
http://tradingfrommainstreet.com/images/FocusLetter/20071218sp.gif
Following the opening gap in the indices, the market inched lower with a great deal of overlap from one bar to the next, particularly in the Dow and S&Ps. The Nasdaq experienced the most steady selling, so while the slower pace of the S&Ps and Dow actually contributed to a buy trigger around 10:15 am ET on an upside channel break on the 5 minute time frame, the Nasdaq merely fell into a trading range along the day's lows to form a bear flag while the other indices advanced. Both the S&Ps and Dow had their strongest upside on the initial break of the trend channel from the first 45 minutes of the day. They then had a more difficult time breaking to new highs. Finally, after a third attempt, the ascending wedge formation triggered a short setup, which I took at 1473.5 in the ES. This corresponded to the bear flag trigger in the Nasdaq and the indices fell steadily into noon.
http://tradingfrommainstreet.com/images/FocusLetter/20071218dow.gif
The morning lows served as support for both the Dow and S&Ps, while the Nasdaq completed a move equal to the initial decline out of the open, leading to another form of price support which hit just prior to the 12:00 ET correction period. The support zones held in all three indices and the market pulled up very slowly into the 15 minute 20 period simple moving average as volume declined, creating another short setup in the form of a bear flag.
The market turned lower again right at the 13:00 ET reversal period and the strongest wave of intraday selling began. It formed a continuation pattern which took it to lows at the 14:00 ET reversal period. The momentum on this continuation was slower in the Dow and S&Ps, however, and a channel break created a small buy setup on the 5 minute time frame, although the initial resistance zone from previous highs held, along with the 5 minute 20 sma. The selling then continued at a choppier rate into the final 90 minutes of trading. As I mentioned earlier, further downside into Tuesday or even Wednesday is going to be in line with previous price moves of this sort, however, we should expect to see more overlap intraday in prices and lighter volume heading into the holiday.
FREE ONLINE TRADING CLASSES: Don't forget to join me for this Thursday's free online trading seminar! Adjustments have been made to the login instructions to assist those unable to connect during our first class. For more information and logs to my last session, go to http://www.tradingfrommainstreet.com/TradingClasses.html.
posted by Toni Hansen @ 4:25 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, December 16, 2007Utilizing Support and Resistance Levels - Part 1
Excerpt from Dec. 6th's class:
Complete logs available at http://www.tradingfrommainstreet.com/classes/Class_SRPart1.html
Next Class: Thursday, December 20, 2007 at 4:15 pm ET
http://www.tradingfrommainstreet.com/TradingClasses.html
Utilizing Support and Resistance Levels - Part 1
Applying basic price levels to identify support and resistance levels.
OK gang... let's let going... First of all... thanks for coming! This is the first of a 4-part lecture series on support and resistance. For those of you who have purchased my CD series, the material in this series is going to be a bit of refresher. It will cover some of the main points in the S/R segment of that course, but I have completely new charts, etc., so it will help possibly clarify some of the points as well. I will take questions following the class, so please hold off until then since often I find that many of the questions people have mid-way end up answered by the time I am done anyway. :)
Simply put, support and resistance levels are places in the market when the current trend or price move that is in play in the market will either turn or stall. The traits of support and resistance levels apply to all type of markets and time frames, so the concepts in this class will figure into any market you trade.
Now, when thinking of support and resistance levels, it is very common for most people to think of them in terms of absolute price levels. For instance, if they are looking at $50 as a resistance levels, they mean exactly $50. On the other hand, if they are looking at moving averages as a support level, they will check to see what the exact price of the moving average is, such as $50.78.
In reality, support and resistance levels are not exact prices, but rather price zones. So, if the resistance level is $50, then it is actually the zone around that $50 level that is the resistance. The stock may hit only $49.87 or it may hit $50.25 and still hold the $50 as price resistance.
The main factor in determining exactly how much the exact prices are tested by is how quickly or slowly the prices move into that resistance zone. For instance, if the zone hits very quickly on a large momentum surge, then it is more likely to hit that $50.25 level. This is also the case if the stock is a rather volatile one with a wide price range intraday. If the security spikes higher and does not quite hit the price resistance, such as a spike into $49.70, then it may round off into $50 with slightly higher highs and never exactly touch the $50 price resistance zone before turning over due to the slowdown in momentum into that resistance. The larger the time frame, the greater the price zone is as well. A resistance zone at $50 on a weekly time frame may have a range of $1 on each side of $50. Where traders tend to run into trouble is in thinking that because the stock has traded over $50 by more than just 10 cents that the $50 has broken, so we often hear of people "buying the highs" or "shorting the lows" in the case of support.
For today's session I am going to focus on 4 main types of price support and resistance. They are WHOLE NUMBER SUPPORT AND RESISTANCE, PRICE PIVOTS, PRICE CONGESTION ZONES, and EQUAL OR MEASURED MOVES. I will begin with the whole number support/resistance (s/r).
Whole number support and resistance refers to the price levels most of us have in our head when we think of support and resistance right away. They are levels like the 14,000 that we have heard so much talk of in recent months. CNBC does not get excited by the Dow hitting 13,984. We do not hear about oil in terms of the cents per barrel, but rather it's proximity to breaking the whole number level. When a security, or the market overall moves into these larger price levels, rounded to either the dollar in most stocks, or the 10s, 100, etc. people tend to react most often at those levels. It's second nature. My third grader has just spent her first semester in school learning how to average and to round up or down. That is then taken with us throughout our lives.
FIGURE 1 - $DJI Daily
http://www.tradingfrommainstreet.com/images/class/SR_Price_20071206/SR_PriceWholeNumberDJI.gif
http://www.tradingfrommainstreet.com/images/class/SR_Price_20071206/SR_PriceWholeNumberDJI.gif
For futures traders a common level we will notice in the NQ is how that tends to gravitate to moves of 5 points at a time and stall at or about the 5 point increments. In the YM the 10 point increments, and particularly the 100 point levels catch people's attention and reversals or consolidations tend to form at those zones. In the chart of the Dow Jones Ind. Average (Figure 1) we can see how it often moves towards those 100 point increments as well. The 12,000 and 14,000 level are the most pronounced in this case, but many of the places it stalls at are almost exactly at a 100 point price level.
Even though at "D" the Dow technically broke 14,000 in terms of the exact price (yet held the 14,200 securely) when we think of the Dow in terms of a larger time frame move, we have yet to see the 14,000 zone penetrated. At 14,200, the Dow was STILL AT the 14,000 price resistance zone. What I am looking for at this point is a third test of that zone, maybe even a slightly higher high and then a larger correction where we can see a stronger reaction to this price resistance zone on a larger time frame.
... continued at http://www.tradingfrommainstreet.com/classes/Class_SRPart1.html
Next Class: Thursday, December 20, 2007 at 4:15 pm ET
http://www.tradingfrommainstreet.com/TradingClasses.html
© 2007 Bastiat Group, Inc.
NOTE: COPYING AND OR ELECTRONIC TRANSMISSION OF THIS DOCUMENT WITHOUT WRITTEN AUTHORIZATION FROM TRADING FROM MAIN STREET IS A VIOLATION OF COPYRIGHT LAW.
DISCLAIMER: Trading in commodities and securities may not be suitable for all individuals. Consult your broker or other professional to determine your suitability. The discussions provided by Trading From Main Street are for educational purposes only and should not be taken as a recommendation to buy or sell the referenced security. Past performance is not indicative of future results
posted by Toni Hansen @ 10:24 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Earnings and Economic Events This Week
Economic Reports and Events This Week
Monday, December 17, 2007
8:30a.m. 3Q Current Account Balance.
8:30a.m. Dec NY Fed Manufacturing Index. Previous: 27.37.
9:00a.m. Oct Treasury International Capital Flows. $5.8B%.
1:00p.m. Dec NAHB Housing Market Index. Previous: 19.
Tuesday, December 18, 2007
7:45a.m. ICSC Chain Store Sales Index For Dec. 15.
8:30a.m. Nov Housing Starts. Previous: +3.0%.
8:55a.m. Redbook Retail Sales Index For Dec. 15.
5:00p.m. ABC/Wash Post Consumer Conf.
Wednesday, December 19, 2007
10:30a.m. 12/14 Crude Inventories. Previous: -722K
Thursday, December 20, 2007
8:30a.m. Initial Jobless Claims.
8:30a.m. 3Q Final GDP. Previous: +4.9%.
10:00a.m. Nov Conference Board Leading Indicators. Previous: -0.5%.
10:00a.m. DJ-BTMU Business Barometer.
10:00p.m. Dec Philadelphia Fed Business Index. Previous: 8.2.
Friday, December 21, 2007
8:30a.m. Nov Personal Income. Previous: +0.2%.
8:30a.m. Nov Personal Spending. Previous: +0.2%.
10:00a.m. End-Dec Reuters/U Of Mich Sentiment Index.
Key Earnings Announcements This Week:
Monday, Dec. 17:
After: ADBE, QTWW, SEH, EGR,, ASUR
Others: ACIW, CAO, DLPX, EMKR, CLWT, OPTT, PKE, WPCS
Tuesday, Dec. 18:
Before: BKRS, BBY, FDS, GS
After: AIR, APSG, DRI, FSII, HOV, NDSN, PALM, TTWO
Wednesday, Dec. 19:
Before: ATU, KMX, CMC, GIS, JOYG
After: ACN, APOG, HWAY, HEI, MLHR, NKE, ORCL, PAYX, SMOD, SMSC, SCS
Thursday, Dec. 20:
Before: AM, BSC, BRLI, CCL, CTAS, CAG, DFS, FDX, HSOA, MCS, MS, PKE, PIR, PRGS, RAD, SCHL, STEI, SMA, TTEC, WGO, WOR
During: ASFI, PNY
After: COMS, APOL, COGN, CAO, EGLS, JBL, MU, RHT, RIMM, RECN, SHFL, TEK, TIBX, UNCA, PAY
Friday, Dec. 21:
Before: CC, WAG
Note: All economic numbers and earnings reports are in lines with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column. This list is not a complete list of earnings, so always double check your positions!
posted by Toni Hansen @ 10:21 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Fed Fails to Reassure Hesitant Market
Good morning! The market had a rough time on Friday, failing to hold up after it attempted to rebound on Thursday afternoon and again on Friday morning. I had been hoping for a stronger showing on Friday to allow the market to play out this daily correction off last month's lows a bit longer into the end of the year, but things are looking weak heading into the light holiday trading coming up. Friday began with a large downside gap in the indices heading into the opening bell. This took the market directly into support from Thursday afternoon. Stronger-than-average gaps in the indices themselves have a greater propensity for filling than average-sized gaps, which meant that despite the losses, the indices had a bullish bias initially since such gaps usually try to fill within the first half of the day.
Despite the bullish bias, the bulls had a more difficult time actually latching onto that sentiment. There was still a lot of hesitation and the market was quite choppy throughout the first hour of trading. Nevertheless, the indices made their way slowly higher with a great deal of overlap into the 5 minute 20 period simple moving average. When that resistance level hit the market then began to congest, forming a little bull flag as volume dropped into 10:30 ET. At 10:40 ET the market spiked, busting through the resistance and rising quickly to close the morning's gap.
http://tradingfrommainstreet.com/images/FocusLetter/20071217nas.gif
The gap resistance zone hit at the same time as the 11:00 ET reversal period. This corresponded to Wednesday's closing prices in the S&P 500 and Dow Jones Industrial Average and Thursday's highs in the Nasdaq Composite. Having accomplished its goal, momentum slowed in the market at that point and rolled over with increased pace on the downside. An Avalanche pattern emerged in the form of a choppy base into about 11:30 ET, which broke lower into 11:45, providing the first confirmation of a change in the intraday trend. Another low-level base followed into noon, which gave way to further selling into 12:30 ET. This took the S&Ps and Dow back to the opening price zone, which served as a strong support level into the early afternoon.
http://tradingfrommainstreet.com/images/FocusLetter/20071217sp.gif
The market continued to remain weak throughout the rest of the day. The S&Ps and Dow popped for a couple of minutes into 13:00 ET, but failed to hold. As the indices hit the previous breakdown down point from mid-day they held and slid lower into 14:00 ET. Another slow congestion zone formed with very slight upside, breaking strongly to the downside on the 5 and 15 minute time frame into the final hour of trading. The Nasdaq suffered the strongest losses, but all three of the major indices closed within a few ticks of the session's lows.
http://tradingfrommainstreet.com/images/FocusLetter/20071217dow.gif
Friday's session ended with losses across the board. The Dow Jones Industrial Average ($DJI) fell 178.11 points, or 1.3%, and closed at 13,339.8. This added to the earlier losses on the week for a decline of 2.1% for the week as a whole. Two of the top losers were Alcoa Inc. (AA), which fell 3.1%, and Home Depot Inc. (HD), which lost 3.6% by the close. Microsoft Corp. (MSFT) was the Dow's only advancing issue. It only gained 9 cents, however, so it was not exactly a stunning success, although it was at least a survivor!
The S&P 500 ($SPX) and Nasdaq Composite ($COMPX) also failed to hold up on Friday. The S&Ps lost 20.46 points, or 1.4%, and closed at 1,467.95. This was a loss of 2.4% on the week overall. The Nasdaq fell 1.4% as well, which equaled 32.75 points. It closed at 2,635.74 with a 2.6% loss for the week. The Russell 2000, while not shown in the charts here, also closed at the lows of the day on Friday. It had an even worse performance than the Nasdaq, ending lower by 2.02%, or 4.02% on the week.
Given the action over the past week, the chances of seeing the stronger overlap and choppy upside over the next couple of weeks that we have been watching for and had been developing thus far this month has diminished. The odds are higher that we will see continued selling early this week, although we can then easily see the market try to turn back around on Tuesday. We should expect things to start to slow down, however, as the week progresses and holiday trading continues.
FREE ONLINE TRADING CLASSES: Don't forget to join me for this Thursday's free online trading seminar! Adjustments have been made to the login instructions to assist those unable to connect during our first class. For more information and logs to my last session, go to http://www.tradingfrommainstreet.com/TradingClasses.html.
posted by Toni Hansen @ 10:21 PM 0 Comments
Thursday, December 13, 2007Market Lacks Focus Following Recent Fed Activity
Good morning! The market had quite a bumpy ride on Thursday after the Federal Reserve left it rather confused. On Tuesday it had cut rates by a quarter percent and the market took a beating, disappointed that the half point rate cut many had been hoping for had not materialized. Then the indices had bounced back into the open on Wednesdays on news of intervention from the Fed with plans to increase liquidity, but the promise fell mainly on deaf ears and the market sold off throughout the entire session.
On Thursday there was very little focus. The market was oversold and despite attempts to push lower it was unable to. I had been on the side of an afternoon reversal throughout the day but was starting to lack conviction by the time some buying finally did appear. All in all, it was a tough session and while many traders I know were positive on the day, many also felt themselves rather lucky to be so (although luck often has little to do with it!)
http://tradingfrommainstreet.com/images/FocusLetter/20071214nas.gif
Although the volume in the market was pretty strong on Thursday, the trend was not. The session began with a slight downside gap, which immediately attempted, but failed, to fill. After the first few minutes of trading the bears took over again and brought the indices to new intraday lows. A descending triangle was made over the next hour, leading to a breakdown into the 11:00 ET correction period. This low held the one from Wednesday, keeping in tack the larger range action we have been looking for on the daily time frame.
http://tradingfrommainstreet.com/images/FocusLetter/20071214sp.gif
The indices then began to roll over slightly. The momentum remained a little more on the bearish side as the indices held the lower end of the range over noon, but I backed off on shorts after the reversal lower into the early afternoon since the momentum on the downside over the last couple of days had left the market rather extended intraday and the base at low was not strong enough for a steeper decline. I was convinced that the market would trap people and reverse again into the afternoon, but I succumbed to the lure of lethargy after such a choppy and slow morning and early afternoon and missed the ideal reversal trigger at 14:00 ET. Opps!
http://tradingfrommainstreet.com/images/FocusLetter/20071214dow.gif
Once the 15 minute 20 sma resistance broke, however, the buying was fairly steady. It came in two waves of upside, broken by two waves of corrective action from about 14:20-15:15 ET. Then the buying continued again into the close, taking the indices back to morning highs and even beyond in the case of the S&P 500 and Dow Jones Industrial Average. Both finished slightly positive on the day. The Dow Jones Industrial Average ($DJI) gained 41.1 points to close at 13,518. Honeywell Intl Inc. (HON) was a strong gainer on upbeat earnings targets. It climbed 5% on the day. The S&P 500 ($SPX) rose 1.82 points to close at 1,488.41. The Nasdaq Composite ($COMPX) failed to close in positive territory. It lost 2.65 points and closed at 2,668.49.
Despite the Nasdaq's losses, all three of the indices managed to hold those Wednesday lows we were looking for in order to hold the daily pattern we have been following over the last couple of weeks. This means that it is still in line with forming choppy, overlapping action with slight upside continuing into the end of the year. We do need to see this hold better into Friday, however, so that we continue to see that greater daily overlap back up into Tuesday's highs into early next week.
FUTURES CONTRACT UPDATE: For those trading futures, you should switch to the March '08 contract at this time. The symbol is H. I have used December in the charts above for continuity in price action.
FREE ONLINE TRADING CLASSES: Don't forget to join me for next week's free online trading seminar! For more information, go to http://www.tradingfrommainstreet.com/TradingClasses.html. You can also access last week's class logs at this link!
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Wednesday, December 12, 2007Fed Attempts to Redeem Itself, but Fails to Encourage Investors
Good morning! The market went from one extreme to the other on Wednesday. The session began with strong gains on a sharp upside gap on news that the Fed had planned to add liquidity to the markets, helped by several foreign banks, including the European Central Bank and the Bank of England. Right away, however, it became obvious that the bulls were not at all convinced that this was enough. Despite the stronger-than-average gap, the indices were soon displaying marked weakness, with very little suggestion that any intermediate support zone would manage to hold.
http://tradingfrommainstreet.com/images/FocusLetter/20071213nas.gif
As the indices headed lower throughout the morning, all attempts to hold modest support zones quickly failed. Upside momentum simply could not surpass that of the sellers, even in the short term. Small support levels from Tuesday afternoon stalled the selling at several points, but buying off each support level was lacking ambition and the momentum remained extremely pessimistic for the bulls. Each gradual move higher culminated in a bear flag and continue selling with the typical two-wave correction pattern holding. This meant that each of the main bear flags experienced two waves of upside within the flag before giving way to further selling.
http://tradingfrommainstreet.com/images/FocusLetter/20071213sp.gif
The strongest decline of the day came shortly after 14:00 ET. The selling began at a normal pace off the 15 minute 20 sma resistance after a lighter volume correction, but a small base at lows for gave way to a very steep downside move into 15:00 ET. This move flushed the market into those lower lows I mentioned yesterday. The intraday reversal was rather late in coming, however, and it was only in the final 45 minutes of the session that it whipped back. This created the hammer candlestick pattern I mentioned, but just barely! It definitely wasn't looking too likely heading into the last hour of the day! The reversal was so quick that I missed it myself, but the market did make back a large chunk of the intraday losses.
http://tradingfrommainstreet.com/images/FocusLetter/20071213dow.gif
At the end of the day the Dow Jones Industrial Average closed lower by 41.13 points. It had been up 271 out of the open. Citigroup (C) was one of the largest Dow losers, falling 5.3% on the session, while AT&T (T) rallied another 5.7%. The S&P 500 ($SPX) and Nasdaq Composite ($COMPX) both still managed to close in positive territory. The S&P 500 rose 8.94 points and closed at 1,486.59, while the Nasdaq rose 18.79 points and closed at 2,671.14. So far this action still lends itself to our scenario of greater overlap and choppy, slow upside this month from this point onward. What we need to see at the point is for the lows on Wednesday to not give way to another strong selloff. I don't think this is likely though quite yet.
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Tuesday, December 11, 200725 Basis Point Rate Cut Disappoints Market Participants
Good morning! The price retracement we've been watching for hit full force on the heels of Tuesday's disappointing 25 basis point rate cut by the Federal Reserve. There had been a lot of debate as to whether the rate cut would fall at a quarter or a half percent, with a quarter percent as a given. Although I think we would have still fallen on a half percent, the drop was much more substantial with the lower end of the expected cut.
The Dow Jones Industrial Average ($DJI) had lost 294.3 points, or 2.1%, and closed at 13,432.8 on Tuesday. The S&P 500 ($SPX) lost 38.31 points, or 2.5%, and closed at 1,477.65. The Nasdaq Composite ($COMPX) dropped 66.60 points, or 2.4% and closed at 2,652.35. American Express (AXP) was one of the biggest losers in the Dow, falling 5.2%. Two of the Dow 30 managed to close higher despite the sky dive action in the rest of the index. They were AT&T (T), which gained 4.1% on the announcement of a 13% dividend hike and share buyback and McDonald's (MCD), which has been making steady gains since its 2003 lows.
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The session did not begin with a strong show of concern from the bulls. In fact, the market was up ahead of the Fed. The day had begun with a slight upside gap, a trading range for the first 45 minute or so, and a slow decline into the 11:00 ET reversal period. When that reversal period hit, the market was testing strong support with previous lows in the S&P 500 and the 15 minute 20 simple moving average in the Nasdaq Composite. While it began slowly, the market corrected off this support and a mid-day base up off the lows broke higher around 12:30 ET. The buying continued steadily until the 14:15 ET Fed announcement. We have been seeing more of this pre-announcement type of move lately, but the volume was pretty light throughout the day up until that point. This actually helped the market break down since it indicated that the bulls were not very confident.
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After such a rapid freefall following the news, the market had a very difficult time correcting at all off support zones. A series of small bear flags followed the initial counter-move into 14:30 ET. The momentum slowed after the first drop, but then remained steady right into the closing bell. The session ended almost to the tick of Thursday's lows. While not noticeable on these charts, this support held in the immediate post-market action where the index futures bounced back up a bit in reaction to the support and intraday exhaustion.
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The market tends to have a difficult time keeping up the pace after a day such as Tuesday, but we can still see some slightly lower lows. I will be taking things slow, however, since hammer and doji candlestick patterns, whereby the market moves lower and then back up to close near the opening price, is fairly common. Chances are that I'll be focusing mainly on reversal patterns intraday. This action is also typical of the onset of a larger price decline on a daily time frame, which would break with the choppier back and forth upside ahead of the fall that I'd been expecting that would have had a better chance with a 50 basis point cut. I am not yet ruling it out, however, and instead will wait to see how the next several days play out. If the market can hold Wednesday's lows into Thursday, then that scenario is still going to be valid.
posted by Toni Hansen @ 8:11 PM 0 Comments