Monday, December 10, 2007Market Stalls Ahead of Fed
Good morning! Volume was very light on Monday as the market geared up for Tuesday's highly anticipated FOMC meeting. The market was stronger than I was expecting heading into the weekend, but the buying did not last long. Some choppy action out of the open on a small upside gap was followed by a strong move higher out of the 9:45 am ET reversal period in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX). The Nasdaq Composite ($COMPX) didn't quite play along. It popped into 10:00 am ET on pending home sales data, which was a strong accelerant for the buyers. The data came in with a second straight month of increases. The Nasdaq then chopped around into 10:30 am ET even though the Dow and S&Ps kept climbing. Upside momentum shifted to the Nasdaq, while the slowdown in buying in the Dow and S&Ps created a reversal pattern off highs into the 11:00 am ET pattern.
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The market did a decent job of holding the zone of the morning highs throughout the rest of the day. There were some slightly higher highs in the Dow and S&Ps, but this breakout attempt from the mid-day range merely served as a trap. Volume failed to confirm the attempt and a 2 minute Avalanche pattern formed after the steep retracement off the afternoon highs. The market then broke lower into 14:00 pm ET.
The Nasdaq fell all the way back into the morning congestion before it found support at the 14:00 ET reversal period. The Dow and S&Ps found some closer support at the 12:00 ET lows. The momentum rolled over somewhat at that point, but not enough to take the indices out of the day's trading range. The market pulled back into the middle of the range, but failed to make any significant move ahead of the closing bell.
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The Dow posted gains of 101.5 points on Monday, up 0.7%, and closed at 13,727.0. The S&P 500 rose 11.30 points, or 0.8%, and ended the session at 1,515.96. The Nasdaq Composite, which was the weakest of the three, climbed 12.79 points, or 0.5%. It finished the session at 2,718.95. Top Dow gainers included Caterpillar Inc. (CAT)(+3.2%), J.P. Morgan Chase (JPM)(+2.9%), McDonald's Corp. (MCD)(+2.9%). AT&T (T), on the other hand, lagged considerably. It fell 1.5%. In other markets, crude oil also posted losses, dropping 42 cents to $87.86/barrel. Meanwhile, gold futures climbed $13.3 to close at $813.5/ounce.
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With the Fed looming, I am expecting some corrective action off the recent highs. The market typically pulls higher the morning of the Fed and then volume dies off over noon. The least risky action on a Fed day is usually in the first 90 minutes of the session. There can be some decent moves mid-day, but it is more common to see very little activity just prior to the announcement. When the news hits we then tend to see three strong moves in reaction to the news. First the trio appears on a 1 minute time frame and then repeats on a larger one, typically the 5 minute time frame. It is very dangerous to trade in the immediate aftermath of the Fed announcement due to the rapid data stream. Proceed with caution at that time! A rate cut is anticipated, but there is great deal of debate as to whether it will be by a quarter or a half percent.
posted by Toni Hansen @ 5:59 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, December 9, 2007Market Likely to Chop Around Ahead of FOMC Announcement
Good morning! As expected, the market headed a bit higher on Friday, but the momentum slowed significantly after the strong upside from Wednesday and Thursday. The overall result was a much choppier market as volume continued to decline into the weekend.
Ahead of the open, the Labor Department reported the addition of 94,000 nonfarm payroll jobs in November, while the unemployment rate held steady at 4.7%, slightly under expectations of an increase to 4.8%. In other economic news released later in the session, the University of Michigan reported that consumer sentiment has continued to drop into December, falling to 74.5 from 76.1 last month. This is the second lowest reading since 1992. In the afternoon the Federal Reserve reported that consumer credit rose by 2.3% to $7.7 billion in Oct. on increased credit card debt.
After opening near Thursday's close, the session began on Friday with a trading range. It narrowed as the morning progressed, creating a symmetrical triangle on the 5 minute time frame. The S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) broke lower out of 10:15 am ET and continued into the 10:45 ET correction period. The selling had been slow and it didn't take much to turn it around. The Nasdaq had remained in its own triangle intraday up until that point, but it broke higher into 11:00 am ET with the S&Ps and Dow.
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The market was stronger on the upside, popping into the 5 minute 20 period simple moving average in both the S&P 500 and Dow, while the Nasdaq moved back up nto its opening prices. A small congestion followed as volume declined, creating a bullish pattern into 11:30 am ET. The breakout from this range was one of the strongest moves of the entire session. It took the S&P 500 back to its open, the Dow to its morning highs, and the Nasdaq to slightly higher intraday highs. These resistance zones held at about 11:45 am ET and the market pulled back into the early afternoon for the second time on the 15 minute time frame intraday.
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The momentum on the mid-day correction varied from one index to the next. The Nasdaq got off to the most rapid start, but all three indices formed descending triangles. The more narrow range of the S&Ps, however, led to strongest drop in that index around 13:00 pm ET. Both the S&Ps and Dow were able to retest the morning lows on this early afternoon descent, but the Nasdaq only came back into the middle of the morning's range before the downtrend channel on the 5 minute time frame broke higher mid-afternoon.
The market pushed higher with strong upward surges in buying on the 5 minute time frame. The corrections off each high, however, were also rather steep and gained in momentum with each correction even though the rallies were also gaining in momentum. In order to really judge the overall momentum of this afternoon buying, it was necessary to transect the entire upside from about 13:30 to 15:15 ET. The revelation was a slower overall ascent than mid-day. Since most trends form with two or three waves, the third wave of upside into 15:15 ET which took the indices back into upside resistance was the final one of the afternoon, leading to another correction off the highs going into the closing bell.
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The Dow gained 5.7 points on Friday, closing at 13,625.6. This was a 1.9% gain on the week. The S&P 500 lost 2.68 points, finishing the session at 1,504.66, or a 1.6% gain on the week. The Nasdaq Composite also fell slightly on the session as a whole after new highs on the week. It shed 2.87 points and closed at 2,706.16. This was a weekly gain of 1.7%.
Although the market as a whole didn't get very far on Friday, there were still some rather significant gainers and losers on the day. These included Macrovision Corp. (MVSN), which fell 5.55 points, or 21.3%, after announcing its plans to buy Gemstar-TV Guide Intl. (GMST). GMST fell nearly a point, losing 16.6%. Palm Inc. (PALM) also had a rough session, losing 0.85, or 12.9%, after Thursday's afternoon announcement of net losses for this last quarter. American Express Co. (AXP) was another top loser, falling 2.57 points, or 4.3% following a downgrade by Merrill Lynch. Amgen Inc. (AMGN) lost 3.05, or 5.5% on news of discussions regarding its drug Aranesp with the Food and Drug Administration. News was released on Saturday stating that its Romiplostim study met its goals, so this is something to watch again on Monday for more volatility.
On the winning side of the market were names such as Freeport-McMoran Copper & Gold (FCX), Penney JC Inc (JCP), Bear Stearns (BSC), Suntech Power Holdings Co (STP), United States Stl Corp. (X), Apple Inc. (AAPL), Imax Corp. (IMAX), First Solar Inc. (FSLR), Synopsys Inc. (SNPS), and JA Solar Holdings Co Ltd. (JASO).
The main news event of this upcoming week is going to be Thursday's FOMC meeting. A rate cut is highly anticipated, but I suspect that we are going to primarily experience a trading range this week with a great deal of overlap from one day to the next over the next couple of days unless the Fed does something completely unexpected. This should make intraday pivots and reversals favorable setups for trading.
posted by Toni Hansen @ 5:59 PM 0 Comments
Thursday, December 6, 2007Positive News for Borrowers Bolsters Buying
Good morning! The upside we were looking for on Thursday materialized early on in the session. Although the market opened relatively unchanged from the prior day's close, the indices immediately began to slowly climb higher. This first wave of buying was merely an extension of the move into the previous day's close, but it took the market to new highs on the month. The pace slowed and the market pulled back off the 10:15 ET reversal period, but the 5 minute 20 period simple moving averages held in the Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 and the gradual ascent resumed.
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The Nasdaq experienced the greatest degree of correction into mid-morning, making it more difficult to break through the morning highs as it rose intraday. It came back into the zone of those highs at the 13:00 ET correction period when the other indices were steadily making higher highs. This resistance held and a two-wave correction off the highs followed, leading to a downward move into the 14:00 ET correction period. The volume on the selling was weak, indicating a lack to motivated sellers, so the 15 minute 20 sma held very well and the strongest move of the session kicked off coming out of this time and price support. Although the momentum slowed into the final hour once again, the rally continued into the closing bell.
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The Dow ($DJI) rose 174.9 points, or 1.3%, on Thursday, closing at 13,619.9. 27 of its 30 components posted gains. American Insurance Group Inc. (AIG) was one of the top performers, rising 3.2%, or 5.5% per share. The S&P 500 ($SPX) rose 22.33 points on the session, or 1.5%. It closed at 1,507.34. The Nasdaq Composite ($COMPX) rose 42.67 points, or 16.1%. It ended the session at 2,709.03.
A strong incentive for the bulls was the afternoon announcement by President Bush and other key officials in administration regarding the development of strategies to provide aid for the struggling subprime borrowers. The plan involves freezing interest rates for as long as five years, but does not include any government funds. Loans entered foreclosures during the third quarter were reported to be at record highs. The rate of loans at some point within the foreclosure process hit 1.68%, up 0.28% from the previous quarter.
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Despite the buying, the volume in the indices continued to drop on Thursday. I am still looking for a bit more upside into Friday though. This will be the third day of the rally and after 2.5-3 days of upside, whereby the 15 minute 20 simple moving average holds, the market has a tendency to pull back further to break that moving average support into the afternoon or next day following such a move. This would mean another correction heading into early next week off Friday's highs.
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Market Busts Through Daily Resistance on Positive Data
Good morning! I was rather off the mark heading into Wednesday's session. After the close near the day's lows on congestion the day before, I had expected further downside into the next morning before we would see it turn higher. Looking back at the trend action, however, past development with this type of reversal off lows has it moving higher for a couple of days even without a much larger correction off the first highs of the reversal (from 4 days ago).
It was necessary to switch gears right away into the open due to strong premarket buying. The market had crept higher in afterhours and premarket trading, but then around 3:30 am ET they stalled and congested along the highs until the 8:30 am ET economic data. At that point the range broke sharply higher. The government had revised unit labor costs downward, reporting a 2% annual decline in labor cost as compared to the 0.2% drop estimated in November. This indicates a decline in inflationary pressure and happy news for the bulls to latch onto. Additionally, the Labor Department said that productivity in the nonfarm business sector rose at a 6.3% annual rate, which was 4.9% higher than estimates were reported at.
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Wednesday's upside gap was a form of a breakaway gap. This meant that it was a gap out of the pullback from the past couple of sessions, so the gap would have a more difficult time attempting to fill. This immediately led to a change in my intraday bias away from the bearish side. Not much happened shortly after the open, although the indices did hold up quite well. They waited around for the 10:00 ET data to hit. At that point the Commerce Department reported that orders for U.S.-made factory goods rose 0.5% in October. This marks the largest gain in three months. The Institute for Supply Management also stated at this time that its nonmanufacturing index declined to 54.1% in November off a 55.8% level the previous month. This was a larger than expected move. The direct response to the data was a rapid spike in prices, although they reverted to pre-data levels intraday at 10:30 ET before again resuming the upside at a strong pace.
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The mid-day market move, following a strong gap and early morning chop, created the perfect conditions for the market and a number of individual stocks to roll over around noon. Blyth Inc. (BTH) and Paccar Inc. (PCAR) were two excellent examples which caught my eye, where the early morning strength wavered and lead to a nice mid-day pullback. The market overall pulled back with two decent waves of selling on the 15 minute time frame into the mid-afternoon. Typical corrective moves within a larger trend then have a habit of turning back around. Since the daily now favored more upside, the intraday and daily time frames worked together to lead to a move upwards out of the 15:00 ET correction period and then through the intraday highs after a brief base into afterhours trading.
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Although the buying continued for much more substantial gains afterhours, the Dow still climbed 196.2 points (1.5%) intraday to close at 13,445. 29 of the 30 Dow components posted gains. The S&P 500 rose 22.22 points (1.5%) and closed at 1,485.01. The Nasdaq Composite had the strongest move thanks to morning upside. It gained 46.53 points (1.8%) and closed at 2,666.36.
Intel Corp. (INTC) was one of the strongest of the well-known names on Friday, advancing 3.5% following an upgrade. American International Group Inc. (AIG) also posted strong gains. It rose 4.9% with reassurance by its CEO in response to subprime mortgage concerns. As I mentioned earlier, I am anticipating the buying to continue for about two more days. I do, however, expect the overall momentum to be much less than earlier last week and possibly with greater overlap from one day to the next as well. Keep an eye on the 5 minute chart of the S&P 500 from the afternoon of the 29th for a comparable pattern development to the one occurring at the point on the daily time frame.
posted by Toni Hansen @ 6:51 PM 0 Comments
Tuesday, December 4, 2007Market Congests on Downside Bias
Good morning! Heading into Tuesday we were looking for a downtrend day in the market. I had hoped for a little upside in the morning to allow for a stronger trend, but unfortunately the market actually gapped a good deal lower into the open instead. This took out a lot of the downside potential it had heading into the session. The gap brought the Nasdaq Composite ($COMPX) back into what had been price resistance just over a week ago on November 26th. Since it had broken higher last Wednesday, however, this resistance level became a very strong support level. It also was the zone of Wednesday's lows
The size of the gap, coupled with the larger support on the daily charts, led the market to hold the gap prices to begin with and it turned higher throughout a large portion of the morning. Resistance hit after three waves of buying on the 5 minute time frame as the indices closed their gap zones and came into resistance at the 15 minute 20 simple period moving average zone. The volume had declined somewhat on the upside move, particularly the last segment of it, but it was not enough to create strong selling pressure. The 5 minute 20 sma zone held and the indices returned for a second test of the morning highs before again trying to pull lower into noon.
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While the pullback off highs did take place on a larger scale this second time around on the 5 minute time frame, the momentum was still insignificant compared to the rally and the pullback into noon literally held the "noon", or 12:00 ET, lows as that correction period hit. Another ascent on the 15 minute followed, taking the market higher in what had now become a 15 minute trading range. The pace of this buying was much weaker in the Nasdaq than on the initial move off the morning lows and this rounding off at the intraday highs created more of a bearish bias in that index into the second half of the session.
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The momentum in the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) did not slow on their second upside moves of the day on the 15 minute time frame. Instead they were nearly identical. This allowed for equal move resistance to hold as their gap zones closed more securely into the 13:00 ET correction period. As that strong afternoon correction zone hit, not only did the S&Ps and Dow pull lower once more, but the Nasdaq broke its gradual upside trend channel to trigger a solid short pattern on the 5 minute time frame, taking it back to the noon lows over the course of the following half hour.
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The 13:30 ET area held as support hit and all three indices formed 5 minute Avalanche setups into the 14:00 ET correction period. This took the S&Ps and Dow back to their own prior lows from noon. The momentum on the selling was not strong enough to create a great continuation pattern lower into the close, but the third upside move of the day on the 15 minute time frame was more gradual than the previous selloff and earlier channel break levels on the 5 minute time frame served as resistance into 15:00 ET. This resistance led to a third 15 minute breakdown into the close, resulting in a 65.84 point loss in the Dow, a 9.63 point loss in the S&Ps, and a 17.30 point drop in the Nasdaq. The Dow closed at 13,248, while the S&Ps closed at 1,462, and the Nasdaq ended the session at 2,619. I am expecting the congestion from Tuesday to break lower into Wednesday. The base on the 60 minute time frame is very favorable for such a move into about 1450 in the S&P 500 ($SPX).
posted by Toni Hansen @ 6:27 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, December 3, 2007Market Correction Continues Off Daily Resistance
Good morning! Choppy trading from Friday afternoon continued into Monday morning as the market continued to hold the daily resistance from mid-October. The market had moved very slightly lower into the open with the S&P 500 and Dow Jones Industrial Average showing weakness over the Nasdaq Composite. At the 9:45 ET correction period the indices pulled something higher off support on slowing momentum and declining volume, setting the market up for a breakdown when the 10:00 ET ISM Manufacturing Index data came out. Business activity dropped to 50.8 in November, down 0.1 from October. This very narrowly indicates expansion, whereas a number under 50 would show contraction. The immediate response to the data was a sharp downside trust, but once the initial reaction waned the buyers returned into 10:15 ET.
The upside throughout the remainder of the morning began quickly in the S&Ps and Dow, but was much more choppy in the Nasdaq Composite. When the 10:45 ET correction period hit the buying slowed and although the indices continued to test highs into the early afternoon they were unable to build momentum. Each high was less significant than the prior, creating rounded highs and a momentum reversal pattern which triggered just prior to 13:00 ET. Notice that in addition, the volume declined as the market made its way higher over noon. This meant that while the indices were moving upwards, there was no conviction in the move. This made it easy for the market to drop very quickly once that uptrend channel from the morning broke lower.
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The target on the early morning breakdown pattern from the momentum reversal was the morning lows. It took a couple of waves of selling to get there, first into about 13:00 ET and then a second wave beginning at about 13:30 ET and into nearly 14:00 ET. The afternoon decline slowed in momentum as it came into the morning target zone in the S&Ps and Dow, but still hit the level almost perfectly. The market was already turning over off this support when the 14:00 ET correction period finally came around. The 5 minute 20 sma held as resistance, however, and the market retested the lows into 14:30 ET, making slightly lower lows in the Nasdaq and Dow.
The third test came soon after 15:00 ET. This could have created another reversal into the end of the day if the third drop had been more gradual into the lower low than the previous two moves, but instead it flushed quickly. Even though it bounced back, it could not break the range highs since 14:00 ET and the indices closed near the day's lows.
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The day ended on Monday with a 57.1 point loss in the Dow, leading to a close at 13,314.6. An 8.72 point decline in the S&P 500 left it closing at 1,472.42. The Nasdaq Composite lost 23.83 points. It ended the regular trading day at 2,637.13. The overall volume had continued to decline since early in the previous week. This is very typical of congestion zone trading and can make it more difficult to sustain intraday moves, which is why the only decent move on the 15 minute time frame lasted only about an hour out of the entire session.
There were not a lot of well-known stocks trending strongly higher on Monday. One the best was the trend in Hess Corp. (HES), which rose steadily throughout the session. VMEare Inc. (VMW) also had another nice session with a decent mid-day breakout as opposed to the steady move of HES. Another similar breakout took place in Solarfun Power Holdings (SOLF) and this was even more powerful than the move in VMW and has been a favorite of daytraders recently due to the cheap price and wider intraday range. Most of the top gainers, however, established highs earlier in the session and then failed to continue to trend into the afternoon.
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The market goes not have a strong intraday trend bias into Tuesday. We can easily see a bit of a pop in the morning and then further and stronger downside into the afternoon. This is because the indices have been rounding off at resistance over the last couple of days and the higher high on Friday will make it more difficult for the market to easily break that resistance zone. This is in line with our expectations for a choppier market as the month progresses since ti would create overlap on the daily. Any retracement more than 50% of the rally off the lows on the 26th will then make it even more difficult for the market to rally quickly back into the previous weekly highs, although it can still trend slowly into that level should that larger correction off this resistance take place.
posted by Toni Hansen @ 7:31 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
posted by Toni Hansen @ 7:29 PM 0 Comments
Thursday, January 31, 2008Return of the Come-Back Kid
Return of the Come-Back Kid
Good day! After falling sharply after an initial rally on Wednesday's Fed announcement, the index futures had continued lower in afterhours trading. These losses accelerated sharply following the 8:30 am ET unemployment data. The data caught many off guard when the Labor Department reported that initial claims for state unemployment benefits rose 69,000 last week, hitting 375,000. This is the highest level since early October, but also marks the strongest weekly jump in claims since September 2005, shortly after Hurricane Katrina struck.
The gap into the open left the market with a bullish sentiment. I wrote a bit last week about how these extreme gaps leave the market extended and with strong odds for a gap closure. Thursday's open brought with it yet another example of just such a situation, making me bullish out of the open despite the appearance of weakness. Even though the market was very slow to fulfill this bias initially and came into the 5 minute 20 period simple moving average around 10:30 am ET with a short pattern under development, I choose to not go against the larger odds and went to grab lunch instead. Unfortunately, the upside picked up a little more quickly than I'd anticipated and I missed a large chunk of the mid-day rally which followed once the 5 minute 20 sma gave way.
Trader tip: Real traders bring lunch with them to their desk before the market opens or else wait until after the close to eat and they never consume any liquids so they don't need to leave their chairs at all during the day! HAHA! Ok, so not really, but it's sure tempting at times! It definitely helps, however, to eliminate as many distractions as possible. This can be a challenge if you trade in an office with others or at home where folks tend to not respect the fact that simply because you are home does not mean that you are readily available and not actually working.
After the breakout to new highs intraday around 11:00 am ET, the market continued to gain momentum with three waves of upside on the 2 and 5 minute time frames. Each move was more extreme than the last, but most trend moves last three waves when the corrections times are comparable between each wave. This meant that the move just prior to 12:00 ET exhausted the trend and left it open for a larger correction into the early afternoon. At that point I was assuming a slower pullback with the possibility that we'd end up stuck in a range the remainder of the session. I think that in many ways that would have suited the market a bit better. The indices instead had held lows around 13:00 ET and because to break higher too early on a 15 minute time frame. The market didn't have enough time to really correct from the morning move to sustain comparable momentum. The result was a very hesitant climb throughout nearly the entire remainder of the day.
The strong overlap from bar to bar and slower pace of the afternoon move created the risk that at an moment off any resistance level the rally would fall apart and take back all gains. This made it difficult to time an entry if you missed the initial setup since even a channel break for a stop runs the risk of getting flushed hard so that exits at the ideal prices would be more difficult. I switched to stocks fairly early in the afternoon to avoid this risk. The market did fairly well though, making it back into the previous day's highs before that flush took place. A glance at the 5 minute time frame, however, shows just how quickly gains made during a slow upside such as from 13:00 ET onward can disintegrate in just a matter of seconds at times. In one 5 minute bar all three indices had given back about an hour's worth of gains.
The Dow ($DJI) closed on Thursday at 12,650.4 with a gain of 207.53 points, or +1.7%. The gains were not unanimous, however, and 2 of the Dow's 30 components closed lower. These were Merck and Co (MRK) and Altria Group Inc (MO). Top leaders were Home Depot (HD) and American Express Co (AXP). The monthly losses in the Dow came to 4.6%, which was the worst one-month decline since January of 2002.
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The S&P 500 ($SPX) rose 22.74 points, or +1.7%, on Thursday. It closed at 1,378.55. The loss on the month came to 6.3%.
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The Nasdaq Composite ($COMPX) rose 40.86 points, which was also a +1.7% rally. It closed at 2,389.86. For the month as a whole it still lost 9.9%, which was also the worst performance since January 2002 for this index. Amazon (AMZN) was one Thursday's top performers and one of my afternoon positions. It gained 4.7% on the session, providing a great alternative to trading the index as a whole.
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Going into Friday I am expecting the market to slow. A lot of Thursday's gains were attributed to assurances from the bond-insurance company MBIA (MBI) that it would be able to ride out the mortgage market woes. There is a higher chance of a trading range day, but the market is still trying to head into those larger weekly resistance levels from last December, so as long as the selling is kept modestly at bay on Friday then I am looking for more upside into next week with the highs from the second week of January as the next decent daily resistance the market will need to deal with.
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Wednesday, January 30, 200850 Basis Point Cut Fails to Provide Sustained Relief
Good day! Wednesday's Fed day began on a slow note. A gap lower into the prior afternoon's lows held and the typical rally which occurs on a Fed day began at about the 9:45 am ET correction period. The Nasdaq, which had underperformed in recent days, actually took over as a market leader and closed its gap the quickest. Both the S&P 500 and Dow Jones Ind. Ave. closed their gap zones around 10:15 am ET at the same time as their 5 minute 20 period simple moving averages hit. A second attempt at a tighter close came heading into 11:00 am ET, while the Nasdaq moved into Tuesday's highs.
The Tuesday resistance levels held very well as momentum slowed on the upside. The indices began to retrace the morning's gains off those levels as light volume failed to create a significant impetus for the bulls to push higher. The volume continued to decline throughout the mid-day trading and into the 2:15 pm ET correction period. The Nasdaq Composite bears returned and it once again began to slide the quickest, while the S&Ps and Dow fell into a trading range until the news hit.
Although many had been looking forward to a 50 basis point cut in the Fed's lending rate, a 25 basis point cut was viewed as a given and the added 25 still caught a number of investors off guard and sent them rushing to buy what they initially considered to be welcome news. The Dow had been down around 30 points going into the Fed. When the news hit the wires all of the major indices spiked higher.
The three waves of post Fed action first took the market to new intraday highs before the second wave hit going into 14:30. The market retraced approximately half its gains before making a third move. This time it was again higher, but volume was lighter and the momentum was slower. By this point the Dow was up almost 200 points and well into the 12,600s level we had been looking at since last week as daily resistance. The S&Ps had also hit the lower end of the daily resistance zone I had drawn on the charts for last Friday's commentary, as well as the 20 day simple moving average we'd been watching. While the Nasdaq failed to even come close to those levels, the other indices held and began a strong and sustained move lower in the final hour of trading.
The Dow ($DJI) closed at 12,442.8, which was about where it was trading prior to the Fed rate announcement. It lost 37.47 points, or 0.3%. American Intl Group (AIG) was its biggest loser, falling 2.36 points, or 4.16%. In second place was Merck & Co (MRK) with a 1.32 points, or 2.75% loss after it reported fourth-quarter losses of $1.63 billion. The Dow's top gainer was Boeing Co (BA) with a 1.91 point gain, or 2.36%, on Q4 earnings. Disney (DIS) followed with a 0.61 point, or 2.12% gain.
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The S&P 500 ($SPX) fell 6.49 points, or 0.5%, on Wednesday. It closed at 1,355.81. Leading the index were Robert Half Intl Inc (RHI) with a 12.6% gain, ETrade Financial Corp (ETFC) with a 10.14% gain, Range Res Corp (RRC) with a 7.18% gain, Dover Corp (DOV) (+6.93%), C H Robinson Worldwide (CHRW) (+6.18%), and Unisys Corp (UIS) (+6.06%). Ambac Finl Group (ABK) and MBIA (MBI) were its weakest components, falling hard on concerns that they would lose more than earlier estimated from guarantees sold on mortgage-related securities. ABK closed lower by 16.09%, while MBI lost 12.64%. Allstate Corp (ALL) was also among the losers, falling 7.2% on earnings.
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The Nasdaq Composite ($COMPX) lost 9.06 points on Wednesday. This amounted to -0.4%, which was fairly comparable to the Dow and S&Ps. It ended the day at 2,349. The biggest gainer in the Nasdaq 100 was Flextronics (FLEX), which rose 12.51% on earnings news. CHRW was the second strongest, while XM Satellite Radio Holdings (XMSR) was third with a 4.47% gain. Yahoo Inc (YHOO) was the top Nasdaq loser, dropping 8.5% on weak earnings data. Sepracor Inc (SEPR), which had been in positive territory earlier in the day, reversed and began to plunge lower into the afternoon. It ended up down 4.94% by the closing bell.
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The Russell 2000 ($RUT) closed lower by 9.71 points, or 1.4%, at 695.49.
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Following the closing bell, the index futures continued to sell off, extending the afternoon losses until just after 6:00 pm ET before finally becoming exhausted and rounding off with a slow correction off lows into the early morning hours. It's about 1:45 am ET now and the ES (S&P 500 EMini) is up about 13 points off the afterhours lows. The YM (Mini-sized Dow) is up about 80 points. Although rounded lows tend to hold better than those made on a sharper pivot or "v" bottom, I am still concerned that the market will try to correct more off the daily resistance. Should they hold, it would make it harder to break those levels at all and more likely push the indices into a larger weekly trading range. In order to make it to the next resistance level from the end of last year in the Dow and S&Ps I'd want the 20 day sma to break by the end of this week to do so. It can still lead to a larger weekly range, but would be less likely to give us as much intraday chop next month.
posted by Toni Hansen @ 10:56 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, January 29, 2008Market Continues to Inch Higher as 2-Day Fed Wraps
Good day! As we head into the second day of this two-day Fed meeting the market is still tacking on some subtle gains. In Tuesday's session the Dow Jones Industrial Average ($DJI) gained 96.41 points, or 0.78%, and closed at 12,480.3. The S&P 500 ($SPX) gained 8.34 points, or 0.62%, and closed at 1,362.30. The Russell 2000 ($RUT) gained 2.81 points, or 0.4%, and closed at 705.2. The weaker Nasdaq Composite ($COMPX) added 8.15 points, or 0.35%. It closed at 2,358.06. Telecoms were among the best performers, while chip stocks closed lower for the most part.
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As the Fed announcement draws near, the market volume has dropped dramatically compared to recent trade. It had peaked on the 23rd and has been declining steadily since the recent lows. Tuesday's volume came close to the lowest of the month. Volume on the New York Stock Exchange on Tuesday approached 1.6 billion with the gainers outpacing the losers by 2:1. On the Nasdaq, nearly 2.2 billions shares traded hands with advancers leading decliners by 8 to 5.
Out of the open on Tuesday the market was trading higher, but those gains did not last long. The session began at resistance from prior 15 minute highs and within about 15 minutes the selling began. The gap closed quickly into 10:00 am ET. Although the Conference Board's consumer conference index fell in January, taking back a huge chuck of the previous month's gains, the market actually began to move higher following the data. The preliminary January consumer confidence index had dropped to 87.9 from 90.6 in December, which was short of the 88.6 estimate. This came very close to the 12-month lows.
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After coming into support at 10 am ET, the market popped, but the buying did not last long and the indices did not immediately retake the highs. Instead, the buying stalled into 10:30 am ET and the market corrected again into 11:00 am ET. A second attempt to rally failed to live up to the momentum of the first, although the S&P 500 managed to return to highs and the Dow pushed through them to retest the zone of Friday's highs. The slower momentum continued to slow as the market moved into noon. When the 12:00 ET correction period hit the bears returned, particularly in the Nasdaq.
The market dropped for about 30 minutes into the early afternoon before running into support again. Although volume declined and the market based along lows, it just never was able to obtain any volume confirmation of a downside bias. Three tests of mid-day lows failed to break and the market pulled higher out of the 14:00 ET reversal period. A smaller congestion around 14:30 ET then gave way to buying into 15:00 ET. The S&Ps made it back to highs, where it hit price resistance, while the Dow managed new intraday highs but failed to surpass the resistance from Friday's highs. The Nasdaq, ever the dog, could not even break the late morning congestion. All of these resistance levels held and the market again chopped around into the close. All in all, the day was very indecisive as investors and short term traders alike tried to get a feel for what as to come in the following day's Fed announcement.
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As I mentioned yesterday, the market is assuming a 25 basis point cut, but a number of folks are still looking for 50. The market tends to move higher in the morning, but Tuesday's afternoon lacked a strong bias. We are seeing more mid-day moves on a Fed day than is typical, but volume tends to dry up after about 11:00 am ET. Once the Fed announcement hits the wires all bets are off and the market becomes very volatile. Typically three waves follow: an initial move, a secondary move which can be stronger than the first and then a third in the direction of the initial move. These tend to form first on a 1 minute and then on the 5. Use caution in the first 5 minute swing since this is when quotes tend to be off by the greatest degree for many online traders and risk is at its highest. I will likely wrap up morning trading myself around 11:00 am ET and pick it up again following the first move on the 5 minute charts after the Fed.
posted by Toni Hansen @ 8:19 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, January 28, 2008Market Inches Higher in Anticipation of Fed's Actions
Good day! The market action on Monday was rather hesitant. There was a great deal of overlap from bar to bar on the 5 minute time frame throughout the session, but the market still managed to post some decent gains by the end of the day, closing at highs. The Russell 2000 ($RUT) posted the strongest gains, up 13.79 points, or 2% to close at 702.39. The Dow Jones Industrial Average ($DJI) rose 176.72 points, or 1.5%. It ended the day at 12,383.9 with 27 of the Dow's 30 components up on the day. The S&P 500 ($SPX) rose 23.35 points, or 1.8%, and it closed at 1,353.97. The Nasdaq Composite ($COMPX) was the weakest link. It only managed to climb 23.71 points, or 1%. It closed at 2,349.91.
Despite the gains by the end of the session, the market did not look particularly optimistic early on. In fact, the opening price action was to the downside. The market had continued Friday's descent to complete a third wave of selling on the 15 minute time frame. This exhausted that trend move and opened the door for another reversal intraday on Monday. This reversal did not take place until the 10:15 am ET correction period. In fact, the 10:00 housing data actually extended the downside even further. Sales of new homes fell 4.7% in December, well under expectations. This marked the lowest level since February 1995. December's sales were 40.7% lower than one year earlier. Meanwhile, November sales were revised lower by 13,000. The total of new and existing home sales in the past year fell 24.6%, which is the largest 12-month drop in 26 years.
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Although news from the housing front was still doom and gloom, the market nevertheless managed to bounce back. The Dow Jones Ind. Ave., S&P 500, and Russell 2k all held their 15 minute 200 period simple moving average support intraday shortly after the housing data hit. It did not take long before they began to head back into the highs of the session. Within about 15 minutes they were testing those highs and only a few minutes later they managed to break them.
The initial rally slowed once the indices had obtained those morning highs, however, and this is where the choppier trading really set in. The indices found it difficult to push through all the resistance levels from Thursday and Friday and each new high was made to a lesser degree, with three waves total on a 2 minute time frame into about 11:45 ET. They are still somewhat visible on the 5 minute charts shown here. Prior intraday highs, the 15 minute 200 sma in the case of the Nasdaq and the 200 sma in the S&Ps and Nasdaq all served as resistance as the market rounded off at those morning highs.
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Over noon the indices pulled back and corrected on light volume. 15 minute 20 period simple moving averages now served as support and the buyers returned with some hesitation into the early afternoon. Upside was again choppy and slow, and the indices barely made it to new highs before attempting to turn lower into 13:30 ET. The 5 minute 20 sma, however, held, and a third wave of buying followed before the uptrend channel broke lower shortly after 14:30 ET.
The Nasdaq fell apart in the second half of the afternoon. The selling returned with a vengeance and the Nasdaq retraced into the morning congestion zone. As the S&Ps and Dow hit support once again at the 15 minute 20 sma, the Nasdaq also began to roll over. I did not expect it to recover as well as the Dow, which had a more moderate correction, but the Nasdaq still managed to regain nearly all of its afternoon losses and closed within just a few ticks of the day's highs.
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In the Dow, the top performers on the day were JPMorgan Chase (JPM), which rose 4.4%, and Citigroup (C), which climbed 3.8%. McDonald's (MCD), on the other hand, fell 5.6% after solid earnings due to stagnant sales in the U.S. I must admit, I did tell my children that we don't have McDonald's here in Florida. Ok, true... we do drive by it every day, but they seem content to let me appear delusional. Did I contribute to their "stagnant sales"? Hmm... Perhaps... While I may not be a patron the establishment, I did, however, have MCD as a position trade over the past couple of years, so while I had bailed before the top last fall, it holds fond memories at least in that regard! Maybe everyone started their New Year's diet resolutions into the holidays... Who knows, but many fear that weakness in one of the Dow's big guys is just additional proof of an economic slowdown in the works. Gee... you think?
In other news, pay attention! Tuesday brings with it the beginning of yet another FOMC policy meeting and expectations are for another rate cut as well. The odds favor a 25 basis point cut, but some are still holding out for a 50 basis point cut. Either way, the typical Fed day action is as follows: upside in the morning, sharp volume decline over noon, occasionally a brief pre-Fed move on light volume, and then it's the running of the bulls... as in Spain and not necessarily the market variety. Unlike in Spain, there is no set route the bulls must take when it comes to the market. Not to mention that here you have to throw in the bears for good measure. So, it's pretty much every man and woman for him or herself. On the plus side, there is a pattern amidst this chaos.
The initial post-Fed move is the most dangerous. There is typically a sharp swing in one direction, followed by a rebound and then a third move back in the initial direction. This happens within just a few minutes and the counter-swing can be larger than the first. This action is then repeated on the larger time frame with the largest of the three swings leading into a first move on a 5 minute time frame and then a counter-move and reversal again. The second move can be larger than the first and the third can be rather minor. The degree of each move varies, but the pattern is fairly consistent. I tend to wait for these larger 5 minute swings before I will jump back into the action. By that time data irregularities have had time to clear up and the volatility has calmed down to a more manageable level.
posted by Toni Hansen @ 8:55 PM 0 Comments
Market Retraces Following Two Days of Strong Upside
Good day! After consolidating throughout Thursday's session, the market broke higher afterhours. This led to a decent upside gap into Friday morning, but after a huge rally on the 60 minute time frame, the bulls were exhausted. The highs from the gap held and selling began immediately out of the opening bell. The downside was slow to begin with, but after 10:15 ET it began to accelerate with the indices quickly closing the morning gap.
The selling continued into the 11:00 am correction period. The 15 minute 200 simple moving average and price support from Thursday's congestion held as the market took a break from the downside push. Over noon the markets consolidated, forming a narrow trading range along the support on declining volume. Without any real attempt to recover the morning's losses, the indices were poised for yet another breakdown into the early afternoon.
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Friday's morning decline lasted approximately an hour and a half. After the mid-day trading range broke lower, the early afternoon downside mimicked the earlier descent. The indices sold off for another 90 minutes before coming into Thursday's lows and strong price support into the 14:00 ET correction zone. Equal, or measured, moves in the market on breakouts and breakdowns are pretty typical phenomena in the marketplace. They can occur both in time as well as price. Since 14:00 ET is one of the strongest reversal or correction periods of the day, the combination of the the equal move, price support, and correction period allowed the selling to stall once again into the final two hours of the day.
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Once again, the market had a difficult time rallying off the intraday support in Friday afternoon. Although they attempted to move higher, the indices ran into resistance at the 15 minute 20 sma and fell back to the lows of the late day range. The day ended with all three indices within just a few ticks of the day's lows. The Dow Jones Industrial Average ($DJI) had fallen 171.44 points, or -1.4%, and closed at 12, 207.2. The S&P 500 ($SPX) fell 21.46 points, or -1.6%, and closed at 1,330.61. The Nasdaq Composite ($COMPX) closed lower by 34.72 points, or 1.5%. It ended the session at 2,326.20.
Top gainers on Friday included Perkinelmer Inc. (PKI) (+17.53%), Technitrol Inc. (TNL) (+17.41%), Peabody Energy Corp. (BTU) (+7.93%), Cummins Inc. (CMI) (+6.10%), China Fin Online (JRJC) (+20.08%), Scansource Inc. (SCSC) (+19.18%), Melco Pbl Entertainment (MPEL) (+12.85%), Sunpower Corp. (SPWR) (+5.9%), and Amgen Inc. (AMGN) (+4.38%). On the other end of the spectrum were the losers. Among them were Triumph Group Inc. (TGI) (-12.16%), Hartford Finl Group Inc. (HIG) (-5.96%), Ace Ltd. (ACE) (-4.95%), Merrill Lynch & Co. (MER) (-4.33%), Synaptics Inc. (SYNA) (-23.42%), Deckers Outdoor Corp. (DECK) (-8.34%), Cymer Inc. (CYMI) (-5.75%), Sears Holdings Corp. (SHLD) (-5.73%), Gilead Sciences Inc. (GILD), and Cephalon Inc. (CEPH) (-4.73%).
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A lot of the disappointment on Friday was attributed to reduced expectations out of next week's Fed meeting. Many had been hoping for a 50 basis point cut, but the consensus at this point is for a 25 basis point cut or even that they may not cut rates again at all. I was a bit surprised by both the former and latter, assuming that many, like I, had been looking for the 25 basis point cut. I guess we shall have to see! I don't know that this necessarily was the reason for Friday's move though. The markets had really pushed to extend themselves on Wednesday and I think that move was just a bit too much to be able to sustain a second wave of buying without an intraday correction lasting longer than a day. I still am looking at the potential for more upside into this coming week, but in order for that to occur, the market needs to hold onto a good chunk of Wednesday's gains or else it becomes more probable that it falls into a longer trading range on the daily time frame.
posted by Toni Hansen @ 6:14 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, January 24, 2008Market Pauses to Catch its Breath After Stellar Move
Good day! After Wednesday's sharp rally, the market did a really nice job of holding up into the morning as Thursday's session kicked off. Picking up where it left off the previous afternoon, the markets continued higher right out of the open. The Labor Department reported at 8:30 am ET that first-time jobless claims fell last week for the fourth week straight by 1,000 to 301,000, bringing it to its lowest levels since September, but this had little affect upon the open. The buying began immediately following the opening bell. This extended Wednesday's move without any break in the intraday trend.
Within the first 30 minutes of trading the Dow had added yet another 100 points to its previous day's gains. Ironically, assisting in this move was news from the housing market at 10:00 am ET. The National Association of Realtors reported that sales of existing homes fell 2.2% in December, bringing the year-end sales down 13%. The median sales price for existing family homes also dropped for the first time on record, falling 1.8%. This is likely the first time such an event has occurred since the Great Depression. The good news, which the market latched onto initially, was that inventories of unsold homes fell 7.4% in December. This little piece of data was not enough to continue to push an already extended rally, however, and within a couple of minutes the Dow was back into negative territory.
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After falling quickly from the morning highs, the market began a game of tug-of-war, struggling to hold on near highs, but at the same time giving itself a chance to correct and attempt to rebuild momentum. The drop after 10:00 am ET took the indices back into premarket trading levels and price support before bouncing higher again and flirting between positive and negative territory into noon. Momentum slowed on the upside, with a push from 11 to almost 12:00 ET forming three waves of buying. It was the second upside move on the 5 minute, however, and this created a short setup into the early afternoon on the 5 minute time frame that took the market back to the zone of the morning lows and left the market pace a bit more bearish.
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Since the time correction from the earlier rally into the day was still rather minimal, the market was left feeling a bit precarious Thursday afternoon. The bulls, however, were not yet ready to give up their booty and fought to hold the morning's price support. Once more the markets pulled into the morning highs, and once again those highs held. A final push into the closing bell, however, landed the markets firmly into positive territory with closes near the highs of the day. A federal stimulus plan put together by the House and White House was welcome news, but I am not sure that it had much impact upon the markets. Beginning in about late April to early May, households with an annual earnings of under $187,000/year will automatically receive tax rebates up to $1,200, assuming the bill passes within the next couple of weeks.
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On that note, the Dow Jones Industrial Average ($DJI) closed at 12,378.6 with gains of 108.44 points, or up 0.9%. The S&P 500 ($SPX) gained 13.47 points, or 1%, and closed at 1,352.07. The Nasdaq Composite ($COMPX), which had been lagging in recent weeks, had the largest percentage gain. It closed higher by 44.51 points, or 1.9%, at 2,360.92.
On the New York Stock Exchange the advancers outpaced the decliners by approximately 2 to 1, while on the Nasdaq advancers beat out decliners by about 4 to 1 on Thursday. Among the top gainers were NVE Corp. (NVEC) (+35.49%), F5 Networks Inc. (FFIV) (+22.89%), Polycom (PLCM (+16.97%), Baidu (BIDU) (+13.69%), Qualcomm (QCOM) (+10.32%), Mosaic Co. (MOS) (+12.26%), Consol Energy Inc. (CNX) (+11.18%), and National Oil Well (NOV) (+11%). Among the notable losers were Expeditors Intl. (EXPD) (-6.08%), Varian (VAR) (-7.01%), AT&T (T) (-2.6%) and THQ Inc. (THQI) (-22.31%).
As the week continues, so too should the market correction off Tuesday and Wednesday's lows. The 12,600 zone remains resistance in the Dow. I have marked the daily resistance zones on the charts of the QQQQ, SPY, and DIA. These price congestion zones also correspond to the 20 day simple moving averages. If the momentum remains strong, we could see it push past those levels over the next week or two and push back up into December's congestion, but it will likely stall first before it could manage such a move.
Wednesday, January 23, 2008Dow's Stellar Recovery: -325 points to +299
Good day! The markets managed another stunning recovery on Wednesday after gapping significantly lower for the second day in a row. After moving higher in the early morning hours on Wednesday, the market turned around quickly. Beginning at about 3:00 am ET the markets began to once again slip lower. By 8:30 am ET, however, the Dow Jones Industrial Average and S&P 500 had managed to complete a three-wave trend move to the downside. This trend exhaustion, creating yet another extreme gap (which, as we saw yesterday, tend to fill) made it very favorable for the bulls to once again position themselves into the open.
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Although things were a bit slow in the first 15 to 20 minutes of the day, the buying slowly built up steam and the market pushed higher over the next half hour. The S&Ps and Dow easily closed the morning gap zone, but unfortunately this was also a very strong resistance zone and the momentum stalled. We had seen the same thing happen just the previous day. The Nasdaq continued to severely lag, weighed down by a disappointing forecast for the second quarter from Apple (AAPL).
In addition to the gap closure resistance, the market also had to deal with price resistance from the previous session, as well as a number of moving average levels coming together. These included the 5 minute 20 period simple moving average intraday and the 15 minute 20 sma in the S&P 500 and Dow. The indices began to slide down these moving average resistance levels as the morning wore on, falling into 10:45 am ET where they formed 5 minute Avalanche patterns by basing along support before giving way to additional selling between 11-11:30 am.
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The mid-day downside was rather choppy, but around 12:45 pm ET the S&P 500 and Dow ran into price support on the 15 minute time frame from earlier in the session and from Tuesday's trading. The drop into 12:30 pm ET was also a third move on the 5 minute time frame in the S&Ps and Dow, completing a trend move. The market began to recover somewhat slowly, puling up into the 5 minute 20 sma. The indices then based along the 20 sma for about 20 minutes before triggering a buy setup at about 13:15 ET. The buying was choppy, but steady, and before long the S&Ps and Dow were back at their morning highs.
Very few of the afternoon correction periods held well on Wednesday, but the 15:00 was the exception. The market had pulled back on the 5 minute time frame after hitting the morning highs and corrected into the 5 minute 20 sma support at the same time as the correction period hit. They worked together to lead to the strongest upside move of the entire day. Buying remained steady from that point onward into the closing bell. The Nasdaq closed its gap zone and the S&Ps and Dow broke Tuesday's highs with all three of the major indices closing in positive territory.
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The Dow Jones Ind. Ave. ($DJI) gained 298.98 points, or 2.5% on Wednesday and closed at 12,270.2. The S&P 500 ($SPX) rose 28.10 points, or 2.1%. It closed at 1,338.60. The Nasdaq Composite also managed to lock in some gains. It rose 24.14 points, or 1.1%, on Wednesday and closed at 2,316.41. The afternoon rally created an equal move on the all sessions charts of the EMini S&P 500 and Dow futures contracts as compared to Tuesday morning, but for the Dow, the intraday point swing of 625 points, or 5.4% was the second largest point change ever. The largest was a 702 point swing on July 24, 2002 amounting to a 9.4% move for you trivia buffs.
One of the best performing sectors throughout this shortened trading week thus far has been the retailers. The rate cuts and widely held belief of further cuts next week have given the retail index a bit of a boost. It is up 9.7% so far this week. Nordstrom (JWN), Circuit City (CC), and Staples (SPLS) were some of the favorites. All were up well over 10% on Wednesday.
The financial sector also took a moment to catch its breath and breathe a sigh of relief... at least for the time being. Wells Fargo (WFC) gained 9%, while Wachovia (WB) was up more than 10%, and JPMorgan Chase (JPM) rallied 12% to come in first place in the Dow. 25 of the Dow's 30 components closed higher, as did 391 in the S&P 500 and 68 in the Nasdaq 100.
Apple (AAPL), Google (GOOG) and Motorola (MOT) were a few of the underperformers adding dead weight to the market's recovery. All in all though, I continue to think we will see this market correct off these levels in the short term. It would not be surprising, however, for the moves to remain a bit of a roller coaster ride along the way. The price levels from January 8th-15th will serve as initial daily resistance. This is the 12,600 zone in the Dow.
posted by Toni Hansen @ 8:02 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, January 22, 2008Fed "Saves the Day", but Long-term Remains Hazardous
Good day! Wow! What a ride! I was thinking yesterday how I should have waited to have sent the previous column yesterday instead of at the start of the weekend! A great deal changed in the world as the United States awaited the start of trading following the extended three-day weekend. It began in the early morning hours on Monday as the markets began to plummet overseas. At one point I had logged on and saw the Dow Jones futures down more than 600 points. I thought it must have been some sort of data issue. I had gotten a call around 2:00 am ET that the markets were crashing, but little did I know!
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Shortly after 8:00 am ET the Fed announced an emergency rate cut in an attempt to ward off further declines. They reduced the benchmark rate by 75 basis points to 3.5%. This was the first move of this scale since the aftermath of 9/11 and they left the door open for another 25 basis point cut next week. When the market actually opened, however, a lot of the immediate gains following the Fed's announcement had been erased. Nevertheless, as you may recall from previous posts, huge gaps such as the one Tuesday morning almost always attempt to fill. This is particularly true when they follow several days of selling and gap lower or several days of buying and gap higher.
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The market spent a decent chunk of the morning on Tuesday attempting a recovery. The buyers emerged right away again into the open and the market climbed very quickly for the first 20-25 minutes of the day before stalling. Two more waves of upside followed. Each was slightly less extreme than the previous one. The third push came around 11:00 am ET and both the S&P 500 and Dow Jones Industrial Average managed to return to the zone of Friday's close. The Nasdaq Composite fell a bit short. It only returned to Friday's lows before stalling at that resistance level.
The extent of the morning's rally, combined with the resistance, helped push the market into a correction phase intraday over noon. Although the market was very extended and showing significant exhaustion, the bulls were definitely feeling some pain and lacked confidence to push the market higher into the afternoon. Instead, the remainder of the trading day was spent in a range along the intraday highs. The market chopped back and forth at those levels before breaking lower again afterhours. The selling continued with two waves of downside into midnight before turning higher again into the early morning hours.
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At the time of the closing bell on Tuesday the Dow was down 128.11 points (-1.1%) and closed at 11,971.19. The S&P 500 ($SPX) lost 14.69 points (-1.1%) and closed at 1,310.50. The Nasdaq Composite ($COMPX), which felt the brunt of the selling pressure, lost 47.75 points (-2%) and closed at 2,292.27. Given Tuesday's flush, there is a very strong probability that the market will attempt a larger correction off the lows as the week progresses. In the long run, however, I would not be betting on any new record highs for quite awhile. Upside on the monthly time frame is just likely to lead to yet another larger downside move to give us those larger corrections we have been watching out for since this past summer.
posted by Toni Hansen @ 10:52 PM 1 Comments
Friday, January 18, 2008Lower Lows in a Choppy Session
Good day! The market attempted a correction off Thursday's support in Friday's session. It began with a gap higher into the open and was followed by a pullback into 10:00 am ET before breaking to new intraday highs following the University of Michigan's preliminary consumer sentiment survey for January, which climbed from 75.5 in December to 80.5.
The morning rally continued into the mid-day congestion from Thursday, which hit at the same time as the Nasdaq Composite's ($COMPX) 5 minute 200 period simple moving average and the 10:15 am ET correction period. Although the momentum was on the strong side with the gap and then the continuation, it turned over once the resistance hit, falling gradually to begin with, but with increased intensity as the morning wore on.
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The market reacted very little to each of the initial support levels on the 5 minute time frame as it slid lower. The first support was the congestion into 10:00 am ET. This was approximately the 5 minute 20 sma as well. Prices stalled there for only a couple of minutes before breaking lower and closing the morning gap. This level also had very little impact upon prices. The Nasdaq Composite did bounce for about 15 minutes at that point, but there was no volume increase to show exhaustion even though this gap closure corresponded to the 11:15 am ET correction zone. The Dow and S&Ps didn't bounce at all, but chopped sideways during that same period of time before breaking strongly lower at 11:30 am ET.
http://tradingfrommainstreet.com/images/FocusLetter/20080121sp.gif
This third continuation move on the 2-5 minute time frames finally brought with it the volume necessary for a larger correction on a 15 minute time frame. This volume increase can be seen most easily on the 15 minute charts. The increased momentum on this third move also helped flush out the market. The pivot off the lows following this flush began within minutes of the 12:00 ET correction period. The Nasdaq popped sharply to begin with, making its way into the 5 minute 20 sma. The S&Ps and Dow began more gradually, forming 2 minute Phoenix patterns before breaking higher once again into 12:30 ET. The Nasdaq also pushed through its 5 minute 20 sma at this time.
The previous day's lows in the S&Ps and the previous day's close in the Dow made up the larger time frame resistance zone which stalled the market's afternoon reversal attempt. The 15 minute 20 period simple moving averages also hit in this same time period. Throughout the morning the market had been on the choppy side, even though the trend lower was steady on the 15 minute time frame. When the market corrected off the mid-day lows, however, this "chop" became even more pronounced.
http://tradingfrommainstreet.com/images/FocusLetter/20080121dow.gif
The market made its way lower once again out of the 13:00 pm ET correction period. An initial drop was followed by a smaller congestion zone into nearly 14:30 ET before a second wave of afternoon selling took place on the 5 minute time frame. These moves were very short-lived and only the Dow managed to touch its earlier intraday lows before pulling back up into the larger range at 15:00 ET. The rest of the session was spent within this range between the day's lows as support and the 15 minute 20 sma as resistance.
The week ended with a loss of 59.91 points (-0.5%) in the Dow Jones Industrial Average ($DJI) on Friday. The Dow closed at 12,099.3 for a weekly loss of 507 points, or 4%. The S&P 500 ($SPX) fell 8.06 points on Friday (-0.6%). It ended the session at 1,325.19 for a loss on the week of 5.4%. The Nasdaq Composite ($COMPX) fell 6.88 points (-0.3%). It closed at 2,340.02 for a weekly loss of 4.1%.
Verizon Communications (VZ) was the largest loser in the Dow. It fell 4.4% on Friday, while American International Group (AIG) came in a close second with a loss of 4.1%. 18 of the Dow's 30 components posted losses. General Electric Co. (GE) (+3.3%), and International BUsiness Machs. (IBM) (+2.3%) were the top gainers. Both companies had been able to beat earnings expectations.
The selling in the past two days has brought the indices into that equal move territory on the weekly time frame that we have been following. In other words, the market managed to mimic the decline from October into November in terms of price. The difference is that the recent selling took place on stronger momentum than in that previous weekly decline, which has pushed prices a bit lower than an exact equal move. It is also going to make it more difficult for the market to pivot quickly off lows and instead make it more likely that the market will round off with slightly lower lows before pulling higher or else will hold this past week's lows and instead chop higher. The first scenario would allow for a stronger bounce following the lows, whereas the second would tend to be weaker with more overlap from day to day.
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Thursday, January 17, 2008Market Plunges to New Lows on the Year
Good day! I hope that you had a wonderful trading session yesterday. After breaking the 60 minute trading range several days ago, the market has had a difficult time making any headway on the upside. The bears have dominated the playing field. I discussed yesterday that the market was creating a potential two-wave correction within a larger trend move. These type of move tends to continue in the direction of the larger trend. In this case, that meant a continuation of the selling on the 15 minute time frame.
http://tradingfrommainstreet.com/images/FocusLetter/20080118nas.gif
The market did an excellent job of living up to expectations. While the indices did move higher out of the open, they created a bear flag which led to a break to new intraday lows at about 10:30 ET. This confirmed the larger bearish bias and kicked off the third straight day of losses in the indices. By the end of the day on Thursday, the Dow Jones Industrial Average had lost 306.95 points, or 3.5%, on Thursday. It closed at 12,159.2.The largest loser was American International Group, Inc. (AIG), which fell 6.3%. Merck Co, Inc, (MRK) came in close, however, with a loss of 6% on Thursday. The S&P 500, meanwhile, fell 39.95 points, or 2.9% and closed at 1,333.26. The Nasdaq Composite lost 47.69 points, or 2%, on Thursday. It ended the session at 2,346.9.
http://tradingfrommainstreet.com/images/FocusLetter/20080118sp.gif
There was very little bullish action at all on Thursday. While the market experienced numerous corrections off support levels, not one of them managed to gain the upper hand and take over the momentum from the bears. The market continued to chop lower throughout the entire day on Thursday. The 5 minute 20 period simple moving average was the main resistance throughout the trend move. Over noon the market formed another 2-wave correction. This time it was on a smaller time frame, but the outcome remained the same. The bears were able to regain control and the market closed within several ticks of the day's lows. This was a move into the -38.2% Fibonacci retracement level on the daily time frames in the Dow Jones Industrial Average and S&P 500.
http://tradingfrommainstreet.com/images/FocusLetter/20080118dow.gif
As we head into the weekend, i to think some very slightly lower lows may be possible, but for the most part I am expecting some corrective action off this larger daily price support. The 20 day simple moving average is going to serve as the first major resistance level in the indices.
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Market Takes Another Stab at Lows
Good day! In Tuesday's session we saw the market break down out of a multi-day trading range at the year's lows. The indices primarily congested throughout mid-day with some slightly lower lows and then in the afternoon attempted another breakdown. This move did not have a chance to pick up on the momentum from earlier in the session, but the mid-day congestion had held on a minor correction off lows just prior to the close and the selling resumed afterhours. This downside then continued into Wednesday's morning trading and the market was able to resume the larger 15 minute breakdown that it had been robbed of in the prior afternoon.
After an initial wave of selling into the close on Thursday on the 5 minute charts and into Wednesday's open with the gap lower, the market attempted a minor rally. The small gap was easily filled, but the 5 minute 20 period simple moving average held as resistance and a second wave of selling on the 5 minute time frame was soon under way. Trends typically come in waves of two or three with corrections more likely in waves of two and more directional trends in waves of three. Since the market still had plenty of room before the morning breakdown even came close to mimicking Tuesday's morning selloff and the larger trend was to the downside, it made it easy for the market to continue the trend with a second correction around 10:15 am ET. The third wave of selling on the 5 minute charts took the indices to new lows intraday before concluding.
http://tradingfrommainstreet.com/images/FocusLetter/20080117nas.gif
Morning trend moves in the market have a habit of correcting on larger time frames heading into lunch. This is what had happened on Tuesday and Wednesday followed suit. Since Tuesday's correction was more of a congestion move and the breakdown momentum into Wednesday was not as strong as Tuesday's, it created the potential for a larger price correction off Wednesday's morning lows than when compared to the prior session.
The market popped higher off the morning lows and into the 5 minute 20 sma, which had been holding as resistance throughout the morning. It then proceeded to fall into a sloppy range as it congested on the 5 minute time frame along that moving average resistance level. This resistance corresponded to earlier intraday congestion as well for those who do not use moving averages to help identify support/resistance levels.
Congestion zones often last a bit longer than the move leading into the congestion before they can break and continue. This took the market into about 11:45 ET before the buying resumed. The momentum was once again on the stronger side and the market was able to rally into the morning's highs, as well as the mid-day congestion from Tuesday. Another bonus in the resistance department which hit at the same time was the 15 minute 20 sma. All of these worked together with the 12:00 noon correction period to hold back the buyers over the next several hours.
http://tradingfrommainstreet.com/images/FocusLetter/20080117sp.gif
The momentum turned over somewhat into the early afternoon, but the bears never gained the upper hand. The earlier trading ranges from the morning served as strong support and the market merely rounded off at them once they hit. It did take until the 14:00 ET correction period before the bulls really felt comfortable making a stand again, however, and this was due in part to the release of the Fed Beige Book at that time.
The market gained momentum throughout the middle of the afternoon and rallied back to the upper end of Tuesday's mid-day congestion. The 5 minute 200 simple moving average held at the same time and indecision arose once more into the final hour of trading. The market had reacted sharply to the afternoon resistance, fell into the 5 minute 20 sma and continued with an Avalanche short setup into the final thirty minutes of trading, essentially repeating the mid-day correction off highs but on a larger scale and with stronger downside momentum.
http://tradingfrommainstreet.com/images/FocusLetter/20080117dow.gif
Remember how earlier I mentioned that corrective moves will often come in two waves? Well, the morning rally, followed by the upside continuation into the afternoon created two such waves. This makes it possible now for us to again see some more downside into Thursday. Neither the downside nor upside moves on the 15 minute time frame on Wednesday were particularly extended. This increases the risk that further downside can be a bit more on the choppy side and that as the market corrects off lows on the 60 minute charts we will see more of a rounding off at those lows as opposed to a sharp pivot or "V" type of bottom on those time frames, although it can still appear as such on a daily time frame. Right now it is still a little too early to tell, however, and you will want to monitor the pace on the intraday moves on the 60 minute time frame closely over the next day or two since it is likely to take that long for momentum changes on that time frame to begin to establish a larger bias.
Despite the turnaround off the day's lows, the market had a difficult time holding onto the afternoon gains and closed with losses across the board. The Dow Jones Industrial Average ($DJI) lost 34.95 points, or 0.3%, to end the session at 12,466.2. 16 of the 30 Dow components closed lower. J.P. Morgan Chase (JPM) was one of the exceptions. It gained 5.8% after earnings despite a 34% decline in 4th-quarter profit, which was better than many had feared. Citigroup Inc. (C), on the other hand, fell 2.6%. The largest hit in the Dow came from Intel Corp. (INTC). It dropped a whopping 12.4% on Wednesday. Even though it reported a 51% increase it net profit, it did not live up to expectations and its forecast for the new year was disappointing. In the other indices, the S&P 500 ($SPX) shed another 7.75 points, or 0.6%, and ended the session at 1,373.2. The Nasdaq Composite ($COMPX) lost 23 points. It closed at 2,394.59.
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Tuesday, January 15, 2008Market Breaks Lower, Kicking off a Trend Day
Good morning! The trading range that we've been dealing with over the past four days gave in on Tuesday to the bearish pressure I discussed in yesterday's column. While the indices had closed higher, the upside momentum had been very gradual into Monday's closing bell as compared to prior price declines and the volume on that buying was also on the lighter side as the indices hugged the 15 minute 20 period simple moving average throughout the second half of the trading day.
http://tradingfrommainstreet.com/images/FocusLetter/20080116nas.gif
The correction off Monday's highs began in afterhours trading and resulted in a large downside gap in the indices into Tuesday's opening bell. Early in the day the Commerce's Department released of the December retail sales data, which fell 0.4%. Excluding both autos and gasoline, sales fell 0.2%. This was the first decline in sales in 6 months and was more than economists had been anticipating. It deepened fears that the U.S. economy has now fallen into a recession. Stock and index prices tumbled as a result, although bonds received a boost from the data. Meanwhile, the Labor Department announced that producer prices declined 0.1% in December, while core producer prices (which exclude food and energy) climbed 0.2%.
http://tradingfrommainstreet.com/images/FocusLetter/20080116sp.gif
Gap and pivot levels from the previous two sessions held the market in a vice out of the open following the premarket data. I found almost no buy setups or strong upside momentum gainers in my scanning out of the open, making continued downside the path of least resistance. The momentum resulting from the gap and the break in the 60 minute range also supported more downside intraday. Nevertheless, many market participants sat on the sidelines out of the open, waiting to see how the support/resistance zone would play out. The market was unable to get off the ground, however, and at about 10:00 am ET the bears had caught their breath and were ready for another move.
http://tradingfrommainstreet.com/images/FocusLetter/20080116dow.gif
While the selling out of 10:00 am ET was steady, this would be the only move of the day to display such conviction on the 15 minute time frame. The indices continued lower into the 10:45 ET correction period, at which time they corrected for the second time intraday. The 5 minute 20 sma held as resistance, but the momentum had shifted enough to make it more difficult to break sharply to new lows. Without any strong momentum one way or the other, the downtrend continued as a series of slightly lower lows and even a number of slightly lower highs throughout the remainder of the day.
The market did spike quickly higher into the final 30 minutes of trading to flush out weak hands and offer a glimmer of hope to the bulls, but the larger time frame pressure won out in the end and the session ended near the lows of the day. The Dow Jones Ind. Ave. ($DJI) fell 277.04 points, or 2.2%, and closed at 12, 501.1. The S&P 500 ($SPX) lost 35.30 points, or 2.5%, and closed at 1,380.95. The Nasdaq Composite ($COMPX) dropped 60.71 points, or 2.4%. It closed at 2,417.59. This selling continued sharply in afterhours trading and the market is well on its way to the equal move on the weekly time frame. This is a comparison of the Oct-Nov drop to the one which began late last month.
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Monday, January 14, 2008Market Continues to Consolidate
Good morning! The indices continued to form a trading range on the 60 minute time frame into Monday morning following an initial reaction to support last Wednesday. This slower path was to be expected given the momentum on the selloff as well as apprehension from recent economic data and the advent of the current earning's season. What is not yet clear, however, is whether or not the market will be able to establish enough of a change in momentum to favor a stronger correction off this support or whether the upside is going to remain weaker and give way to further selling as the week progresses. As things stand now, while the market did post gains on Monday, the upside is slower than the prior selling on the 15 minute time frame and was established on significantly lighter volume. Both of these characteristics are bearish in nature.
Monday's session ended with a gain of 171.85 points in the Dow Jones Industrial Average ($DJI). This was the equivalent of a 1.4% increase. The index closed at 12,778.2 with International Business Machs. (IBM), whose earnings come out on Thursday, leading the bulls. It closed higher by 5.4%, while Hewlett-Packard Co. (HPQ) also assisted the Dow, gaining 2.5% on the session. Merck & Co. (MRK), on the other hand, slid lower after a disappointing cholesterol drug study. It fell 1.3%. In the other indices the S&P 500 ($SPX) climbed 15.23 points, or 1.1%, to close at 1,416.25, while the Nasdaq Composite ($COMPX) rose 38.36 points, or 1.6%, and closed at 2,478.30.
http://tradingfrommainstreet.com/images/FocusLetter/20080115nas.gif
From a technical standpoint, despite the solid price increases in the indices, the market was once again very choppy. I found it rather difficult to locate the higher probability setups that I favor and instead had to make do with a lot which were rather mediocre. A substantial portion of Monday's gains were established at the open when the market gapped sharply higher into price resistance from Friday's session. Without strong momentum from top index players, it was very difficult for the market to hold onto and hug the resistance. Instead it gave way to the pressure almost immediately and began to close the morning's gap.
While the indices did not quite make it back into Friday's closing prices, the market did fall into the highs of the closing move on Friday. This support zone hit at the same time as the 15 minute 20 period simple moving average intraday in the S&P 500 and Nasdaq Composite after about 15-20 minutes of selling. That support held well and the market again began to climb as the morning wore on. The upside retested Friday's highs around 11-11:15 am ET. This resistance held once again and a pullback of approximately equal momentum as the prior rally got under way.
http://tradingfrommainstreet.com/images/FocusLetter/20080115sp.gif
The market fell gradually until coming to rest upon the 15 minute 20 sma for the second time on the day. This level hit around 12:30 pm ET and the market did not show any immediate reaction other than to stall the price decline. By the time the 13:00 ET correction period hit, however, the upside was beginning to pick up on the 1 minute time frame and, after a bit of congestion along the 5 minute 20 sma, the bulls regained control.
The market continued its afternoon rally right into the closing bell, holding the 5 minute 20 sma throughout the uphill climb. The momentum was never able to sustain a strong pace, but there were still some rapid scalp moves on the 5 minute charts off the 20 sma support each time it hit. The market managed to establish new intraday highs in the final two hours of trading, but never quite broke through the near-term resistance levels. The 15 minute 200 sma held, as did the highs from Friday on both the S&P 500 and Dow Jones Ind. Ave. The Nasdaq did break Friday's highs, but found resistance at Thursday's closing prices when it filled that gap. The result was that the market held the afternoon highs for the final 15 minutes of trading. This resistance continued to hold past the closing bell and the market corrected off those highs in afterhours trading.
Heading into Tuesday's session, this continues to support a range on the 60 minute time frame and leaves me waiting for more data for larger time frame positions while playing on the smaller intraday time frames in the interim.
http://tradingfrommainstreet.com/images/FocusLetter/20080115dow.gif
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Sunday, January 13, 2008Market Consolidates into Earnings Season
Good morning! While the market continued to correct off last Wednesday's lows into the weekend, the correction has taken the slower path we were expecting. Instead of rallying strongly off the support from the week's lows, the indices fell into a trading range on the 60 minute time frame and on Friday they gave back a huge chunk of the gains made mid-week.
By the closing bell, the Dow Jones Industrial Average ($DJI) had fallen 246.79 points, or -1.9%, off Thursday's close and ended the session at 12,606.3. The result was a loss on the week of 1.5%, or -5% on the year to date. The S&P 500 ($SPX) lost 19.31 points on Friday, or -1.4%, and closed at 1401.02. The loss for the week came to 0.7%. The Nasdaq Composite ($COMPX) experienced the largest decline on the week and ended lower by 2.6% after adding a 48.58 points loss, or -1.9% move, in Friday's session alone.
Volume remained elevated on Friday. On the New York Stock Exchange it amounted to almost 1.8 billion, while on the Nasdaq about 2.4 billion shares were traded. On both the NYSE and the Nasdaq declining stocks beat out gainers by approximately 2:1, with the Nasdaq ratio slightly higher and the NYSE ratio slightly lower.
Although news on Thursday of a buyout by Bank of America (BAC) bolstered Countrywide Financial's (CFC) well-beaten shares, the enthusiasm waned into the weekend. CFC gave back 17.3% of its gains from the previous session, while BAC fell 2%.
Another big loser on Friday was American Express (AXP), which added to the credit woes by announcing that it would take a record $440 million Q4 charge due to economic strains and downwardly revised its earnings forecast, particularly due to stress in the Florida and California real estate markets. Another credit lender, Mastercard (MA), fell 8.6%, while Discover Financial Services (DFS) lost 3.7% on Friday. Although Capital One (COF) also lowered its profit forecast on Thursday, it held up pretty well on Friday, posting a loss of only 0.8% (a huge feat compared to others in its sector.)
A lot of the market really took its cue from these top losers, boosted mid-day by a speech from Fed Gov. Frederic Mishkin. In it he emphasized a shift in focus away from typical strategies focusing upon incoming economic data to institute policies aimed at growth with minimal inflation and towards action aimed at preventing the most damage in the longer term. In other words, moving away from short-term rate-cut discourse to placing more focus upon proactive measures to prevent longer-term financial havoc.
http://tradingfrommainstreet.com/images/FocusLetter/20080114nas.gif
The weakness in the market on Friday began in Thursday's afterhours and Friday's premarket trading, resulting in a modest downward gap into the opening bell. The market found support immediately at the 5 minute 200 period simple moving average. This stalled the sellers briefly while a range formed along the support before breaking lower into 10:00 am ET. Trade was sketchy from that point on into noon. While the indices established some slightly lower lows, they were quite minor and support levels from the previous session held well. In the Nasdaq this meant Thursday's lows, while in the Dow it was the mid-day lows and then the afternoon lows in the case of the S&P 500.
http://tradingfrommainstreet.com/images/FocusLetter/20080114sp.gif
The S&Ps corrected the strongest into mid-day, but none of the major indices was able to break through the 15 minute 20 period simple moving average resistance and instead the momentum shifted once more into the early afternoon as the sellers began to take over. The downside was steady throughout Friday afternoon, but it remained choppy as well. This resulted in a slower overall downtrend into the close than represented with the gap and morning decline. When the S&P 500 hit Thursday's lows and the Nasdaq hit support from mid-day on Wednesday the downside faltered. Having been put on edge by the sloppy nature of the downtrend, it was easy for the market to pop higher off the strong 15 minute support into the final 45 minutes of trade. This continued into afterhours trading on Sunday.
http://tradingfrommainstreet.com/images/FocusLetter/20080114dow.gif
Going into Friday morning I was expecting that we would hold Wednesday's lows into this week. Friday's performance, however, has me more open to the possibility of another drop on the daily time frame before we see a larger daily and weekly correction. There is still a bit of room before the market hits equal or measured move support on the weekly charts as compared to the drop from October and early November, so the market may attempt to complete that move this week. I will mainly be focused upon intraday time frames since the shifting momentum intraday on a 60 minute time frame is going to be the main clue in determining whether this can play out or not. If the momentum slows on the downside, then the indices will more likely round off at the lows and correct more from here, but if the buying wanes, then it will be easier for the bears to push things lower. We are also heading into earnings season now, so pay attention to major earnings releases when holding overnight.
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Economic Reports and Earnings Events This Week
Economic Reports and Events This Week
Monday, January 14, 2007
There are no economic indicators scheduled for today.
Tuesday, January 15, 2007
7:45a.m. ICSC Chain Store Sales Index For Jan 12. Previous: +0.4%.
8:30a.m. Jan NY Fed Manufacturing Report. Expected: 8.25. Previous: 10.31.
8:30a.m. Dec Producer Price Index. Expected: +0.2%. Previous: +3.2%.
8:30a.m. Dec PPI, Ex-Food & Energy. Expected: +0.1%. Previous: +0.4%.
8:30a.m. Dec Retail & Food Sales. Expected: -0.1%. Previous: 1.2%.
8:30a.m. Dec Retail & Food Sales, Ex-Autos. Expected: -0.2%. Previous: +1.8%.
8:55a.m. Redbook Retail Sales Index For Jan 12. Previous: -0.7%.
10:00a.m. Nov Business Inventories. Expected: +0.5%. Previous: +0.1%.
5:00p.m. ABC/Wash Post Consumer Conf For Jan 13. Previous: -20.
Wednesday, January 16, 2007
7:00a.m. MBA Mortgage Refinancing Index. Previous: +53.9%.
8:30a.m. Dec Consumer Price Index. Expected: +0.2%. Previous: +0.8%.
8:30a.m. Dec CPI, Ex-Food & Energy. Expected: +0.2%. Previous: +0.3%.
9:00a.m. Nov Treasury International Capital Flows. Previous: -$101.5B.
9:15a.m. Dec Industrial Production. Expected: -0.2%. Previous: +0.3%.
9:15a.m. Dec Capacity Utilization. Expected: 81.2%. Previous: 81.5%.
1:00p.m. Jan NAHB Housing Market Index. Previous: 19.
2:00p.m. Federal Reserve Beige Book.
Thursday, January 17, 2007
8:30a.m. Dec Housing Starts. Expected: -5.0%. Previous: -3.7%.
8:30a.m. Initial Jobless Claims For Jan 12 Week. Expected: +18K. Previous: -15K.
10:00a.m. Jan Philadelphia Fed Business Index. Previous: -5.7.
10:00a.m. DJ-BTMU Business Barometer. Previous: -1.0%.
Friday, January 18, 2007
10:00a.m. Mid-Jan Reuters/U Of Mich Sentiment Index. Previous: 75.6.
10:00a.m. Dec Conference Board Leading Indicators. Expected: -0.1%. Previous: -0.4%.
Key Earnings Announcements This Week:
Monday, Jan. 7:
Before: FCSX, MTB
After: DNA
Tuesday, Jan. 8:
Before: SCHW, C, FRX, MI, MESA, EDU, STT, USB
During: CBSH
After: CAMP, FUL, INTC, LCBM, LLTC
Wednesday, Jan. 9:
Before: AMR, ASML, JPM, NITE, LCRY, NTRS, PGR, WFC
During: TONS
After: CLC, GKK, KMP, LOGI, RMBS
Thursday, Jan. 10:
Before: APH, BK, BBT, BLK, BGG, CIT, CMA, CBH, CAL, DSL, FHN, HBAN, IIIN, IGT, MMR, MER, NVS, PH, PNC, PPG, AMTD
After: CREL, FNB, IBM, NVEC, PNFP, STX, SWKS, TRMK, PAY, WM, WIT, XLNX
Friday, Jan. 11:
Before: ACO, GE, JCI, SLB, WL
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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Friday, January 11, 2008Market Rallies on Correction and News
Good morning! The market was all over the place on Thursday. The day began a bit slowly following Wednesday afternoon's sharp correction off lows. As expected, the correction continued into Thursday, but it got off to a slow start. The indices had gapped lower into the open after steady premarket selling and then climbed slowly out of the open as volume dropped off while market players moved to the sidelines ahead of expected remarks out of the Fed.
http://tradingfrommainstreet.com/images/FocusLetter/20080111nas.gif
The uptrend channel on the 5 minute time frame broke lower with the 10:15 am and 10:45 am ET correction periods, but very little activity followed. The volume continued to decline and the market chopped around into the 15 minute 20 period simple moving average until noon. At that point the indices had pulled slightly higher within the congestion and were basing along the 5 minute 20 period simple moving average. This created a buy setup that just took off when the Federal Reserve remarks came out and Chairman Bernanke announced that more rates cuts are likely necessary to support growth and hold off "downside risks."
http://tradingfrommainstreet.com/images/FocusLetter/20080111sp.gif
The initial reaction to Bernacke's news was a sharp rally. The rally did not last long, however, and only about 10 minutes later began to pull in once more. Support hit initially at the 5 minute 20 period simple moving
average, which had originally been the resistance, and after congesting along that support for about an hour it gave way to another rapid drop. The second decline took the indices back to the mid to lower end of the late morning congestion. They found support at that level, corresponding to the 14:00 ET correction period.
http://tradingfrommainstreet.com/images/FocusLetter/20080111dow.gif
The market began to roll back over once again into the final two hours of trading, but it really received a boost at about 14:15 ET when more news hit the wires about Countrywide Financial Corp. (CFC). CFC rallied 51.5% on news that Bank of America is interested in taking over the mortgage lender and is in advanced talks to acquire the company. This provided the catalyst for still more buying and kicked off three waves of buying on the 3 minute time frame before stalling and pulling back in a bit during the final 45 minutes of the day after hitting resistance at prior highs on the 15 and 30 minute charts.
At the time of the closing bell, the Dow Jones Industrial Average was up 117.78 points, or 0.9%. It closed at 12,853.1. The S&P 500 was up 11.20 points, or 0.8%, and closed at 1,420.33. The Nasdaq Composite experienced the smallest gains, adding only 13.97 points, or 0.6%. It closed at 2,488.52. As I've mentioned over the past two days, we are likely to see this correction off lows continue into this coming week.
posted by Toni Hansen @ 12:48 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, January 9, 2008Market Extends Selling into Tuesday
Good morning! The market posted gains on Wednesday, but not without breaking to new lows on the year first! The session began with a lot of choppy activity as the indices corrected from the previous afternoon's massive selloff. Such moves have a difficult time bouncing back quickly, so the range type of action was fairly typical. As the range narrowed the volume dropped off and the momentum stalled on the upside moves within the trading range on the 5 minute time frame as compared to the downside moves. These all set the stage for continued selling on the day.
http://tradingfrommainstreet.com/images/FocusLetter/20080110nas.gif
The indices broke down originally out of the range at about 11:30 am ET. This was too early given the larger 15-30 minute selloff and the result was only a brief 30 minute drop into the 12:00 correction period. At that point the indices had established a slightly lower low on those time frames. The slower selling compared to the previous afternoon helped the market bounce higher into the early afternoon, but the congestion from the morning's activity held the move and another range on the 5 minute time frame formed, creating a second breakdown on the 15 minute time frame into 13:00 ET. This is another typical correction period for the market intraday.
http://tradingfrommainstreet.com/images/FocusLetter/20080110sp.gif
The momentum again slowed on the selling as the indices chopped their way lower. They broke to new lows once more on the day and this created a momentum reversal pattern on the 15 minute charts with three established lows once the third downtrend channel broke higher into 14:30 ET. At this point it became fairly certain that the day's lows would hold. Within about 15 minute of hitting those lows the momentum began to increase and quickly overtook the bears. The market shot first back into mid-day congestion and then rapidly broke through that resistance and into the morning highs. At that larger resistance they fell into some congestion, but still managed to force their way to new intraday highs into the closing bell.
http://tradingfrommainstreet.com/images/FocusLetter/20080110dow.gif
The Dow Jones Industrial Average ($DJI) finished higher on Wednesday by 146.24 points, or 1.2%, to close at 12, 735.3. 24 of its 30 components posted gains on the session. It was led by E.I. du Pont de Neumours & Co. (DD). DD rose 4.8% on the day. General Motors Corp. (GM) was one of the main losers, dropping 2.2%. The S&P 500 ($SPX) rose 18.94 points, or 1.4%. It closed at 1,409.13. The Nasdaq Composite also climbed 1.4%, which amounted to a 34.04 point gain and a close at 2,474.55. This was the first positive close in over a week. Earlier in the session, gold futures hit record highs of $894.40 in electronic trading. In other news, rumors on Tuesday of Countrywide Financial Corp. (CFC) filing for bankruptcy, which were denied by the company, continued to weigh down the stock, which closed lower by another 6.4%.
As the week progresses, we are likely to see some movement now off these current daily lows, but as I said yesterday, the odds are higher for more choppy upside with wider swings on 15 minute charts. The volume was strong in Wednesday's session and this will help a correction off lows, but sustaining rapid upside move intraday from one day into the next will be difficult.
posted by Toni Hansen @ 11:13 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
A Bit of Humor
Ok, so this post has absolutely nothing to do with the market... Although maybe if i stretched it a bit I could come up with a yarn to relate it to... but really, I just wanted to share a really funny advertisement my brother sent me from one of the local Iowa papers... I now know for sure that I was raised there because this is EXACTLY something I would do! It is so funny how I thought my parents were the worst when I was a teenager and now find myself exactly the same! LOL! Anyway, the ad is as follows and was on page 3F in the Sunday Marketplace the other day in the Des Moines Register for those of you that like fact checking, so no hoax! I did block out the number though since they may not want it posted all over the inet... even if posted all over the state!
OLDS 1999 INTRIGUE,
Totally uncool parents
Who obviously don’t love
Teenage son, selling his
Car. Only driven for 3
Weeks before snoopy
Mom who needs to get
A life found booze under
Front seat. $3,700/offer
Call meanest mom on
The planet. 515-XXX-XXXX
HEHE! I am lucky so far... My kids are not yet teenagers and still think I'm the best mom in the world even during many of the times they are in trouble... Will see how long that lasts though!
posted by Toni Hansen @ 9:30 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, January 8, 2008Market Plunges on News from AT&T
Good morning! The market had another high volatility day on Tuesday as the first full week of trading of the new year continued. It was also another very disappointing day for the bulls. Heading into the session I was looking for a greater correction off Monday's lows and into the 20 day simple moving average. Weakness hit rather early on, however, making it very difficult for the bulls to gain any hold on the market whatsoever. Yes, the market did begin on a positive note, continuing the previous afternoon's closing rally, but the bulls were sluggish and only made their way back into the zone of previous 15 minute highs and the highs of the larger congestion zone on the 30 minute time frame. Once that resistance level hit, the bears again took over.
http://tradingfrommainstreet.com/images/FocusLetter/20080109nas.gif
The market headed steadily lower throughout the second half of the afternoon and into the 12:00 ET correction period. The move was steady on the 15 minute time frame, but choppy on the smaller time frames. There was not a strong indication of exhaustion when the lows were established, merely the 12:00 ET correction period hitting and support from Friday and Monday price levels. This was due to the slower momentum on the selling than had taken place on Monday morning and it was also an indication that the market would then attempt another move higher into the afternoon.
http://tradingfrommainstreet.com/images/FocusLetter/20080109sp.gif
When the market did reverse, the momentum still failed to confirm a change in bias. The buying was even slower than the morning's decline and the volume also dropped off, meaning that while the market did manage to climb higher, the bulls were also lacking conviction. As the Nasdaq Composite hit the morning highs it suggested that a double top was in the making. The slower momentum and lighter volume played a big factor in those highs holding and it allowed the market to turn around into the final hour and a half of trading.
Aiding the late day plunge was news out of AT&T (T). A report out at 14:30 ET announced slowing U.S. growth in the U.S. as a contributing factor in hurting the company's consumer business. The overall market was barely holding on before the news hit, but once it did it opened the flood gates. The market sold off sharply and even though it found support initially at about 15:20 ET with AT&T, it resumed its selloff into the close while AT&T held the 15:20 ET lows.
http://tradingfrommainstreet.com/images/FocusLetter/20080109dow.gif
By the closing bell, all three of the major indices were trading at the day's lows. The Dow Jones Industrial Average ($DJI) had fallen an additional 238.42 points, or 1.9%. It closed at 12,589.1 with 25 of its 30 components losing ground. AT&T (T) alone lost 4.6%. Citigroup Inc. (C) was close, falling 4%. J.P. Morgan Chase (JPM) also lost 4%. The S&P 500 ($SPX) lost 25.99 points, or 1.8%, or Tuesday, while the Nasdaq Composite ($COMPX) fell 58.95 points, or 2.4%.
Countrywide (CFC) was one of the largest losers on the day, falling 17.2% after a story in the New York Times led to speculation that the company may end up deciding to file for bankruptcy. At one point it was down by more than 30%. Gold futures, on the other hand, soared to new all-time highs. February's delivery contract hit $884/ounce.
Due to the extended selling on Tuesday, my bias has changed a bit for the remainder of the week. The door is now open for some continued selling and corrections off support are now likely to be even more gradual than they would have been had the market held Monday's lows.
posted by Toni Hansen @ 7:38 PM 0 Comments
Monday, January 7, 2008Market Finds Support Following Strong Selling
Good morning! Monday was a very active day of trading in the market with over 1.7 billion shares traded on the New York Stock Exchange and nearly 2.6 billion on the Nasdaq. The indices had opened up higher with a small gap, but after about 30 minutes the selling set in once again to create the lower lows on the daily time frame that we were looking for before turning around once again.
This morning decline was very rapid and flushed hard into the November lows in the Dow Jones Industrial Average. These hit at about 10:30 am ET as the volume spiked to indicate intraday exhaustion. Heading into the day I had expected the reversal to take place at some point mid-day. This was a bit on the early side, but I switched gears nevertheless and began to focus on the upside from 10:30 and throughout the rest of the morning.
http://tradingfrommainstreet.com/images/FocusLetter/20080108nas.gif
The late morning rally was a nice one, quickly taking the indices back into the opening congestion, particularly the hard-hit Nasdaq Composite. Three waves of buying on the 5 minute time frame brought that index back into the morning highs. The Dow and S&Ps did not quite make it all the way, leaving a little more room mid-day for another test of highs. I had shorted the Nasdaq into noon, but ended up playing it only as a scalp into the 5 minute 20 simple moving average as a result of that larger potential for upside in the Dow and S&Ps.
Given the early bounce off the morning lows, the market's momentum did not quite have enough time to turn over to favor the bulls on the larger time frames. This set the stage for another round of selling into the afternoon. I was a bit premature on my second attempt at the highs just prior to 13:00 ET, but was able to catch them again coming out of that reversal period. 13:00 ET and 14:00 ET are typically very good times to play market reversals.
http://tradingfrommainstreet.com/images/FocusLetter/20080108sp.gif
The afternoon breakdown began slowly, gained momentum into 14:00 ET and then as that correction period hit the congestion once again began to set in. The market whipped back and forth for nearly 2 hours, making slightly lower lows on each drop and holding the 5 minute 20 sma as resistance on each bounce. It then shot higher in the final 20 minutes of trading, leading to positive closes in the Dow and S&Ps and nearly positive in the Nasdaq.
The Dow Jones Ind. Ave. ($DJI) gained 27.31 points, or 0.2%, on Monday. It closed at 12,827.5 with Altria Group, Inc. (MO) leading the gainers and closing higher by 3.1%. 21 of its 30 components closed in positive territory. McDonald's Corp. (MCD) was another winner for the index with a 1.7% gain after announcing plans to begin serving cappuccinos and lattes. The S&P 500 ($SPX) rose 4.55 points, or 0.3%, and closed at 1,416.18. The Nasdaq Composite ($COMPX), however, had a much weaker open and morning trading and did not quite make up enough of that lost ground by the end of the day. It lost 5.19 points, or 0.2%, by the closing bell and ended the day at 1,499.46.
http://tradingfrommainstreet.com/images/FocusLetter/20080108dow.gif
As we head into the remainder of the week I am expecting some more corrective action off these levels. It will likely not be anywhere as strong as the selloff, but can create some very nice back and forth moves on the 15 and 30 minute time frames which will make for favorable daytrading conditions. The 20 day simple moving average zone will serve as decent resistance initially on a daily correction.
posted by Toni Hansen @ 10:40 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Saturday, January 5, 2008Market Slides Lower with the Onset of the New Year
Good morning! I hope that you have had a wonderful holiday season! The New Year has certainly gotten off to a rough start! As you may recall, we have been watching for a breakdown into the New Year. Originally I had been expecting a retest of the previous highs from late October/early November, but the Fed threw in a bit of a curve ball in early December, leading to some earlier weakness and holding the indices down by only granting the lower end of the expected rate cut with a 25 basis point cut instead of the 50 point cut many had been looking forward to. The result was more of a congestion zone as the market continued to correct off early November lows as opposed to a stronger price correction higher off those lows. Now the market is looking even lower, although as we head into the new week we do have price support that can stall the breakdown for a few days.
http://tradingfrommainstreet.com/images/FocusLetter/20080107nas.gif
This past week of trading was very similar to the action which took place in mid-October in the S&P 500 $SPX) and Dow Jones Industrial Average ($DJI) other than the fact that the market is at a different place in the larger trend. Nevertheless, the similarities are enough to influence the market over the next week. Friday's flush after selling gradually increased throughout the week leaves the door open for some slightly lower lows on Monday, but then corrective action is most likely, whereby selling stalls for a few days at least.
http://tradingfrommainstreet.com/images/FocusLetter/20080107sp.gif
Friday's climactic selloff began with a strong downside gap after a very narrow trading range on Thursday which continued the intraday range from the prior afternoon. The gap created the trigger for a breakdown from a strong trading range on the 30-60 minute time frames. Since this also triggered a daily 1-2-3 continuation pattern, the gap held rather easily and the indices moved lower right out of the open before basing and continuing lower into the 10:15 ET correction period.
The market continued to selloff until the 11:00 ET correction period. At that point the Nasdaq was running into its November lows and the indices were hitting equal move support intraday as compared to the drop on the morning of the 2nd. While the market headed higher over noon, the volume declined. After hitting the 5 minute 20 period simple moving average, the momentum on the upside also dropped off. The market had congested along the resistance and broke higher with the 12:00 ET correction period, but it failed to confirm the breakout with either an increase in pace or in volume. Hence, this second wave of upside mid-day easily broke lower into the early afternoon. As 12:30 ET the market then began to base, creating a classic short pattern on a 15 minute time frame which triggered initially into 13:30 ET and then increased into the 14:00 ET correction period.
http://tradingfrommainstreet.com/images/FocusLetter/20080107dow.gif
The afternoon breakdown in the market quickly mimicked the move into the mid-day congestion. Equal move support hit on the 5 minute time frame going into the 15:00 ET correction period. A small bear flag on the 5 minute charts followed with another two waves of upside correction prior to the breakdown into the close. The resulting breakdown led to a close right in the zone of the day's lows. The loss amounted to 256.54 points (-2%) in the Dow with a close at 12,800 and a 35.53 point loss in the S&P 500 (-2.5%). It closed at 1,411. The Nasdaq Composite had the greatest difficulty following downgrades in semiconductors. It fell 98.03 points, which translated as a whopping 3.8%. It closed at 2,504. The weekly results were losses of 4.2% in the Dow, 4.5% in the S&Ps and 6.4% in the Nasdaq.
posted by Toni Hansen @ 9:35 PM 0 Comments
Thursday, February 28, 2008Market Corrects After Multi-Day Rally
Good day! The market took a turn once again on Thursday, but the S&P 500 and Dow Jones Ind. Ave. vastly underperformed as compared to the Nasdaq, which held up comparatively well. Apple Inc. (AAPL) had a lot to do with this. AAPL closed higher by 5.7% after the company announced that it is confident that it will meet its 2008 iPhone sales targets. AAPL had the help of a strong daily swingtrade setup heading into the session with momentum shifting on the daily time frames coming off a third low at prior monthly lows. The leaders in the Dow included Verizon Communications (VZ) (+2.2%) and AT&T (T) (+2.2%).
Despite these popular issues closing in strongly positive territory, the market as a whole lost ground. The Dow fell 112.10 points, or 0.9%, and closed at 12,582.18. It's top loser was American International Group, Inc. (AIG) (-4%). The S&P 500 lost 12.34 points, or 0.9%. It closed at 1,367.68. The Nasdaq Composite, despite the greater relative strength throughout most of the session, also closed lower by 0.9%, or 22.21 points, at 2,331.57.
A couple of economic releases prior to the open influenced some of the early morning action on Thursday and weighed upon the market throughout the day. Fourth-quarter gross domestic product was revised a tick lower than expected to a 0.6% growth. This marked 2007 as the slowest economic growth in five years, rising at a rate of 2.2% when adjusted for inflation. Consumer inflation was revised higher to a 4.1% annualized pace in Q4, up from 3.9%. Core inflation remained unrevised. Consumer prices rose 3.4% in 2007, while core prices rose 2.1%.
In a separate release, the Labor Department reported that first-time claims for unemployment benefits rose 19,000 to 373,000 last week, this brought those claiming benefits rose to the highest level since Hurricane Katrina.
After gapping lower into the open, the market began to correct, holding the lows thanks in large part to strong support on the 15 minute time frame from Tuesday's early morning price congestion. The first half of the morning was extremely choppy. The market made it's way higher, but could not manage to sustain any decent upside. It was enough, however, to push the Nasdaq to a slightly higher high. These were the very minor highs the market had the potential for heading into the day, but the S&P 500 and Dow both held the 5 minute 200 simple moving average resistance intraday and did not do as well. In the S&Ps this corresponded to a closure of the morning gap, but the Dow only managed to make its way back into Wednesday's afternoon lows. All of these resistance levels hit at the same time into 10:45 am ET and then led to the larger 60 minute correction we were watching for.
When the market reversed, it did so quite swiftly. The initial drop took it to the lower end of the morning's uptrend channel where it paused for a few minutes before plummeting to new intraday lows into 11:00 ET. This created a third wave of selling on the 15 minute time frame in both the S&Ps and Dow and the continuation tool the Nasdaq into the lower end of its trading channel on the same time frame. The momentum shifted as the downside came into support. The result was a bit of a turn-around into noon, but the shift on the the larger 15-60 minute charts was more powerful and the market had a tough time getting off the ground.
The market managed a 50% retracement of the intraday range coming out of 13:00 ET, but the congestion did not start to give way to more solid intraday moves until just after 14:00 ET when the mid-day range broke highs, taking the indices back into the zone of the intraday highs. Another shift in momentum, similar to the one off the morning lows, but in reverse, took place into 15:00 ET and the market sold off steadily for the next half hour, continuing into afterhours trading. As I mentioned yesterday, I am expecting this correction to hold into the weekend. Further downside into early next week is likely as a result of the 60 minute reversal.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080229dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080229sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080229nas.gif
posted by Toni Hansen @ 9:09 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, February 27, 2008Simple Moving Averages
Email Excerpt
Are there any simple moving average numbers that are especially important which you use in your trading? Also, I did appreciate your straight forward remarks in your article on Fibonacci...
Email Response
Thank you so much!
I know a lot of traders use a number of different moving averages, but the ones I have found to be the best to use on intraday time frames are the 20 and 200 period simple moving averages. I also will use a 10, 50, and 100 from time to time, particularly on a daily and weekly time frame. Some securities will hold a 40 period simple moving averages better than the 50, however, so it's worth scrolling back to see how it reacted to earlier support levels to gain a better feel for which will work the best under more current circumstances.
All my best,
Toni
P.S. Blog readers can check out my article, Fibonacci Trading with Toni Hansen, at TradingMarkets.com at http://www.tradingmarkets.com/.site/stocks/how_to/articles/-75282.cfm
...
posted by Toni Hansen @ 10:22 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Corrects After Multi-Day Rally
Good day! Heading into Wednesday's session, the market was shaping up for a larger correction off highs following the 2 1/2 days of upside in the market, whereby it had held the 15 minute 20 period simple moving average throughout the rally. The indices complied right away by gapping lower to open under the 15 minute 20 sma into Wednesday. The gap took the indices into strong support, however, making it difficult to continue the correction past the first several minutes. The Nasdaq Composite had hit the mid-range level from Monday's congestion, as well as its 5 and 15 minute 200 period simple moving averages. The S&P 500 and Dow Jones Ind. Ave. hit support from Monday's highs. The result was that these prices held right away and within a few minutes the market was making an attempt to close the gap.
It was choppy going, but the indices did manage to close the gap zone with the 10:15 ET correction period. That gap level was resistance and the market quickly pulled back off those highs. Just 15 minutes later the onslaught of news moving the markets, which began last Friday, hit once more when the Office of Federal Housing Enterprise Oversight disclosed the pending removal of the restrictions which had been imposed upon Fannie Mae (FNM) and Freddie Mac (FRE) following accounting mistakes. Both stocks soared and the market was happy to tag along.
The news-fed rally took the indices back into the prior 15 minute highs from Tuesday. Given the extended 60 minute time frame and the need for a larger correction, the indices found it impossible to break through that resistance. It attempted the feat three times throughout mid-day trading, but each move was on light volume and the momentum began to favor a breakdown into the mid-afternoon. The fact that each of the mid-day highs corresponded to a strong correction period assisted with the reversal. The first high was made into 10:45 am ET, with the second at noon, and the third into the 13:00 ET reversal period.
The downside momentum immediately picked up once the lower trend channel from the mid-day range gave way. It took the market back into the early morning highs, at which point they formed a nice little continuation pattern into the 14:00 ET correction period, followed by a third move into the early morning congestion. The market found support at 14:30 ET and held really well, pulling higher again for about an hour. The final hour of the day was quite choppy, and when all was said and done the Dow and S&Ps barely posted a change over the previous day's close.
The Dow Jones Ind. Ave. ($DJI) added 9.36 points, or 0.1%, and closed at 12,725.71. The S&P 500 ($SPX) lost 1.27 points, or -0.1%. It closed at 1,384.87. The Nasdaq Composite ($COMPX) did a bit better. It ended the session up 8.79 points, or 0.4%. It closed at 2,356.88. Despite the excitement, not even FRE and FNM were able to hold onto their gains. FRE lost $0.12 and FNM closed higher by only $0.30 despite them both being up more then $4.00 earlier in the day.
In other news, the euro hit a new highs once again against the battered dollar. Gold also hit record highs for April delivery. Assisting these moves were data showing new-homes sales falling again in January, this time by 2.8%, while orders for durable goods declined 5.3%. Comments from Fed chairman Bernanke signaled that the fed was likely to continue to lower rates into the next meeting in further attempts to combat the current economic woes of the nation. Although the market has room still for some slightly higher highs on the 60 minute time frame, I am continuing to expect more of a correction into the weekend.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080228dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080228sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080228nas.gif
posted by Toni Hansen @ 10:13 PM 0 Comments
Tuesday, February 26, 2008Market Rally Returns on Improved Outlook from IBM
Good day! The market posted gains for the third session in a row on Tuesday. Heading into the day I was looking for a correction on the larger intraday time frames coming off Monday's highs. The morning certainly began along those lines, selling off in the premarket to open slightly lower. Congestion with Monday's close as resistance was followed by further downside throughout the first half of the morning. Support hit with the 10:45 am ET correction period. This came in the form of previous 15 minute lows in the Nasdaq and the 15 minute 20 period simple moving average in the S&P 500 and Dow Jones Ind. Average.
The momentum of the downside was enough to favor a move higher off the support into the second half of the afternoon, but three waves of downside on the all sessions time frame of the Nasdaq also helped. This created trend exhaustion into the support to allow for a reversal. The ultimate bonus was the release of news from IBM. The company raised its 2008 earning forecast on the heels of a $15 billion stock buyback plan. As in the prior two sessions, the combination of a favorable price level given the technical aspects of the market and the release of intraday news allowed the market to once again surge higher.
The initial reaction to the IBM news was followed by a congestion period along the highs into 11:30 am ET, but then the market continued to push higher well into the early afternoon. The impact it had on the market nullified my bias for a greater correction on the 60 minute time frame and instead created a third wave of buying on the S&P 500 and the Dow on the 60 minute time frame. It also created an equal move on the 60 minute Nasdaq chart as compared to the rally off the lows on the 22nd and into the morning of the 23rd, taking that index back into last Thursday's highs.
One of the major afternoon reversal period is 13:00 ET and the market held this time zone very well on Tuesday after the strong morning trend move hit trend extension and price resistance at that time. The last surge of the rally into 13:00 ET made it difficult for the market to roll over easily right away. Instead, the market pulled back more gradually than that last pop. 14:00 ET and 15:00 ET are the next two afternoon reversal periods and the 14:00 one halted the descent. The correction was not enough to account for the morning rally, however, so the market only crept higher from that point on light volume and when the 15:00 ET zone hit the market plunged.
This 15 minute Avalanche pattern took back a decent chunk of the day's gains, but the market still closed in the upper end of the congestion which followed the fall. The Dow closed higher by 114.70 points, or 0.9%, at 12,684.92. 23 of its 30 components gained ground. The S&P 500 lost 9.49 points, or 0.7%, and closed at 1,381.29. The Nasdaq Composite rose 17.51 points, or 0.8%. It closed at 2,344.99.
In other markets, the euro once again hit new highs against the dollar. It hit $1.4982, pushing past the previous high of $1.4966 on Nov. 23, 2007. The dollar index, which tracks the dollar against 6 major currencies, hit a new all-time low of 74.706. This move began after early morning economic data and continued inflation worries. The producer price index climbed an unexpected 1% last month, driven by increasing food and energy prices. The core PPI, which excluded these, rose 0.4%. This was thanks primarily to higher drug and auto prices.
Due to Tuesday's rally, the S&Ps and Dow have now moved higher by nearly 2 1/2 sessions whereby they have held their 15 minute 20 period simple moving averages intraday. I cannot remember the last time that the market has been able to maintain a trend move such as this for more than 2 1/2-3 days. After that point the indices will correct more strongly in terms of price, time, or both and break through the 15 minute 20 sma support.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080227dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080227sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080227nas.gif
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
Trading Style
Email Excerpt:
In your managed accounts what time frame do you usually operate in, i.e., holding period? Having said that let me ask you if there a particular time frame you teach or is your material good for all time frames? I think by temperament when I do start trading I'll gravitate toward day trading.
Excerpt from reply:
I manage funds on several time frames, but daytrading in stocks is my favorite. I tend to take 3-6 trades a day on average and hold 30 minutes to several hours on most.
I use the same basic concepts on every time frame and security I trade, although intraday I focus more on momentum stocks and a lot of gap style plays. The building blocks I use are exactly the same though. I like these because on days when I'm busy I can come in 15 minute before the open and be done within about 90 minutes if I need to be and don't need to do as much for research afterhours....
http://www.swingtrader.net/
Labels: daytrading, gaps, managed accounts, multiple time frames
posted by Toni Hansen @ 5:05 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Flags vs. Avalanches
Email Excerpt: "One thing that I find hard to determine is how to tell the difference between a bull flag and an avalanche, since both setup in a similar way. My way of judging those setups and to evaluate the next move is to look at divergence in certain indicators. I don't know if you have a better way to determine that. Thanks again for your comments..."
Response: There are a few things to watch for. First of all, the downside pace should be increasing while the upside pace descreases in an Avalanche as opposed to a Bull Flag. In a Bull Flag, the upside moves at least as the flag nears completion should be stronger than the downside moves, within the flag itself.
Additionally, a more extended trend and larger time frame or multiple resistance levels overhead will increase the odds of an Avalanche as opposed to a Bull Flag.
http://tradingfrommainstreet.com/images/FocusLetter/FlagsAvalanches.gif
All my best,
Toni Hansen
http://www.tradingfrommainstreet.com/
Labels: avalanche, bull flag, flag, momentum, pace
posted by Toni Hansen @ 4:24 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Question on Trading News
Please view the past two day's of market commentary for charts to accompany this discussion.
Toni
I hope you're doing well.
I was noting your chart of the phoenix yesterday on the NQ. Though it may look like a phoenix on the chart now, it was news that came out at the time, as you know (ambak). Is it your view that you should trade such things when, as you know, news is very unpredictable. You will note the huge decline after the initial reaction.
You would have had to be very fast to do that one and not get hurt.
Your views?
Thanks,
(name withheld to protect privacy)
Hey -----,
If there is a pattern setting up that combines with news then yes, I will still trade it. The thing with this phoenix yesterday was that the base of a Phoenix itself will have two moves quite often. In this one the second pullback had actually made a higher high instead of holding the entire base highs longer. This is not ideal, but does happen a lot. A risk is that if you take the early trigger, in this casearound 14:15, then it can do what it did around 13:00 and just pop a little and fail.
If you buy any signs of upside cont. after the second move though, then the risk is significantly less. So, had it triggered again at 13:30 for instance on that one, or in the case of the afternoon one, as soon as buying began on the news.
On Friday, even though news really ran the market that afternoon, I had already been buying because the market pattern was favoring an afternoon rally anyway. The news just fueled it further than it would have had it not had news. It's actually rather common for the market to show signs of favoring one way of the other into a news event. It can be very subtle, but still there.
Another way to play news is to take the first continuation pattern by buying the first pullback into support when it starts to bounce, or looking for the 2-wave cont. patterns such as the one into 15:30 ET.
All my best,
Toni
posted by Toni Hansen @ 8:01 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, February 25, 2008Market Pushes Higher on Positive Data
Good day! The market has been chopping around, uncertain just what to do next for the past week and a half. On Friday, however, the bulls welcomed news out of bond insurer Ambac (ABK) regarding plans for providing relief. The market surged into the close, but this left it extended into the morning on Monday. The result was a pullback immediately out of the gate, which lasted into the 10:00 am ET home data.
Friday's uptrend continued on the heels of the release of January's existing home sales numbers. Even though resales of homes in the U.S. slipped 0.4% in January to a seasonally adjusted annualized rate of 4.89 million, it was stronger than the 4.8 million expected. This stronger-than-expected report brought hope to a housing market plagued in foreclosures and extremely sluggish sales. The low mortgage rates and dramatically lower housing prices have led to speculation that the market will start to see an increase in sales.
With tougher lending practices and the widespread credit woes of the nation, however, I am not hopeful that my house here in Southern Florida, which I first listed 2 years ago, is any closer to selling than it was then! Of course, it might help if I relisted it.... Hmmm... On the plus side, you can get simply amazing deals if you are relocating, including in the rental market. Just yesterday I came across several multi-million dollar homes renting for as little as $900 a month for a 5 bedroom in Orlando. Crazy....
In all seriousness though, I would not expect any rapid recovery in the real estate market without a nice rounding off at lows and a more gradual reversal to begin with. Market prices in real estate can be analyzed in much the same way as the prices of any security and a good comparison to look at would be the 2002-2003 lows in the Dow, S&Ps and Nasdaq. A pop and retracement lower once again would be normal and probably correspond to typical seasonal highs and lows in the housing market.
After bottoming out at 10:00 am ET, the market established three decent moves higher on a 2 minute time frame before running into solid price resistance on a 15 minute time frame. The Dow Jones Industrial Average ($DJI) hit its highs from Thursday, while the Nasdaq Composite ($COMPX) returned to the late Thursday morning congestion zone before stalling its ascent. Since three waves usually exhausts a trend move, the resistance cinched the deal. The Nasdaq had stalled a bit earlier at its resistance level and fell into a triangle trading range, while the S&Ps and Dow pivoted off highs a little later in the morning at the 11:00 ET reversal period.
The momentum of the rally, while not as steep as the prior afternoon, was still faster-than-average, so it didn't turn over too quickly at the highs initially. Instead, the indices began to favor the lower end of a small range along the highs. Real selling did not begin until about 11:30 am ET, but it was followed by a steady retracement off the highs into the 15 minute 20 sma 200 simple moving averages in the major indices intraday.
Although the support held at 12:30 ET, the bulls were not able to immediately regain control. A small two-wave bounce reversed again into 13:30 ET, leading to a retest of morning lows in the Nasdaq. All three of the indices then fell into a trading range with a somewhat uncertain outcome until news once again rocked the boat at roughly 14:25 ET. The bond insurers again made waves when Standard & Poor affirmed the AAA rating of ABK's bond insurance business. Additionally, it took the AAA rating of MBIA's bond insurer until off its CreditWatch. ABK continued its rally with a 15.9% gain on Monday, mirrored in MBIA Inc. (MBI), which rose 19.7%.
All the major indices popped on the latest development. An initial surge was followed by a picture-perfect two-wave continuation move, which took the market into new intraday highs just prior to the closing bell. The Dow closed higher by 189.20 points, or 1.5%, at 12,570.22. The S&P 500 gained 18.69 points, or 1.4%, and closed at 1,371.8. The Nasdaq Composite added 24.13 points, or 1.1%. It ended the session at 2,327.48.
I am looking for a correction off Monday's highs going into Tuesday. We may see some slightly higher highs in the morning, but then a pullback which materializes on a 60-minute time frame is going to be most probable. The 12,800 level remains Dow resistance on the daily time frame, but the 12,700 zone will hit first intraday to provide for a little bit of a pullback should it manage to hold up enough to attempt to work its way higher. The correction on the 60-minute will help with a more solid outlook, but a week of choppy trading seems likely as a whole.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080226dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080226sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080226nas.gif
posted by Toni Hansen @ 8:51 PM 0 Comments
Tuesday, February 26, 2008Market Rally Returns on Improved Outlook from IBM
Good day! The market posted gains for the third session in a row on Tuesday. Heading into the day I was looking for a correction on the larger intraday time frames coming off Monday's highs. The morning certainly began along those lines, selling off in the premarket to open slightly lower. Congestion with Monday's close as resistance was followed by further downside throughout the first half of the morning. Support hit with the 10:45 am ET correction period. This came in the form of previous 15 minute lows in the Nasdaq and the 15 minute 20 period simple moving average in the S&P 500 and Dow Jones Ind. Average.
The momentum of the downside was enough to favor a move higher off the support into the second half of the afternoon, but three waves of downside on the all sessions time frame of the Nasdaq also helped. This created trend exhaustion into the support to allow for a reversal. The ultimate bonus was the release of news from IBM. The company raised its 2008 earning forecast on the heels of a $15 billion stock buyback plan. As in the prior two sessions, the combination of a favorable price level given the technical aspects of the market and the release of intraday news allowed the market to once again surge higher.
The initial reaction to the IBM news was followed by a congestion period along the highs into 11:30 am ET, but then the market continued to push higher well into the early afternoon. The impact it had on the market nullified my bias for a greater correction on the 60 minute time frame and instead created a third wave of buying on the S&P 500 and the Dow on the 60 minute time frame. It also created an equal move on the 60 minute Nasdaq chart as compared to the rally off the lows on the 22nd and into the morning of the 23rd, taking that index back into last Thursday's highs.
One of the major afternoon reversal period is 13:00 ET and the market held this time zone very well on Tuesday after the strong morning trend move hit trend extension and price resistance at that time. The last surge of the rally into 13:00 ET made it difficult for the market to roll over easily right away. Instead, the market pulled back more gradually than that last pop. 14:00 ET and 15:00 ET are the next two afternoon reversal periods and the 14:00 one halted the descent. The correction was not enough to account for the morning rally, however, so the market only crept higher from that point on light volume and when the 15:00 ET zone hit the market plunged.
This 15 minute Avalanche pattern took back a decent chunk of the day's gains, but the market still closed in the upper end of the congestion which followed the fall. The Dow closed higher by 114.70 points, or 0.9%, at 12,684.92. 23 of its 30 components gained ground. The S&P 500 lost 9.49 points, or 0.7%, and closed at 1,381.29. The Nasdaq Composite rose 17.51 points, or 0.8%. It closed at 2,344.99.
In other markets, the euro once again hit new highs against the dollar. It hit $1.4982, pushing past the previous high of $1.4966 on Nov. 23, 2007. The dollar index, which tracks the dollar against 6 major currencies, hit a new all-time low of 74.706. This move began after early morning economic data and continued inflation worries. The producer price index climbed an unexpected 1% last month, driven by increasing food and energy prices. The core PPI, which excluded these, rose 0.4%. This was thanks primarily to higher drug and auto prices.
Due to Tuesday's rally, the S&Ps and Dow have now moved higher by nearly 2 1/2 sessions whereby they have held their 15 minute 20 period simple moving averages intraday. I cannot remember the last time that the market has been able to maintain a trend move such as this for more than 2 1/2-3 days. After that point the indices will correct more strongly in terms of price, time, or both and break through the 15 minute 20 sma support.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080227dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080227sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080227nas.gif
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
posted by Toni Hansen @ 5:05 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Flags vs. Avalanches
Email Excerpt: "One thing that I find hard to determine is how to tell the difference between a bull flag and an avalanche, since both setup in a similar way. My way of judging those setups and to evaluate the next move is to look at divergence in certain indicators. I don't know if you have a better way to determine that. Thanks again for your comments..."
Response: There are a few things to watch for. First of all, the downside pace should be increasing while the upside pace descreases in an Avalanche as opposed to a Bull Flag. In a Bull Flag, the upside moves at least as the flag nears completion should be stronger than the downside moves, within the flag itself.
Additionally, a more extended trend and larger time frame or multiple resistance levels overhead will increase the odds of an Avalanche as opposed to a Bull Flag.
http://tradingfrommainstreet.com/images/FocusLetter/FlagsAvalanches.gif
All my best,
Toni Hansen
posted by Toni Hansen @ 4:24 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Question on Trading News
Please view the past two day's of market commentary for charts to accompany this discussion.
Toni
I hope you're doing well.
I was noting your chart of the phoenix yesterday on the NQ. Though it may look like a phoenix on the chart now, it was news that came out at the time, as you know (ambak). Is it your view that you should trade such things when, as you know, news is very unpredictable. You will note the huge decline after the initial reaction.
You would have had to be very fast to do that one and not get hurt.
Your views?
Thanks,
(name withheld to protect privacy)
Hey -----,
If there is a pattern setting up that combines with news then yes, I will still trade it. The thing with this phoenix yesterday was that the base of a Phoenix itself will have two moves quite often. In this one the second pullback had actually made a higher high instead of holding the entire base highs longer. This is not ideal, but does happen a lot. A risk is that if you take the early trigger, in this casearound 14:15, then it can do what it did around 13:00 and just pop a little and fail.
If you buy any signs of upside cont. after the second move though, then the risk is significantly less. So, had it triggered again at 13:30 for instance on that one, or in the case of the afternoon one, as soon as buying began on the news.
On Friday, even though news really ran the market that afternoon, I had already been buying because the market pattern was favoring an afternoon rally anyway. The news just fueled it further than it would have had it not had news. It's actually rather common for the market to show signs of favoring one way of the other into a news event. It can be very subtle, but still there.
Another way to play news is to take the first continuation pattern by buying the first pullback into support when it starts to bounce, or looking for the 2-wave cont. patterns such as the one into 15:30 ET.
All my best,
Toni
posted by Toni Hansen @ 8:01 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, February 25, 2008Market Pushes Higher on Positive Data
Good day! The market has been chopping around, uncertain just what to do next for the past week and a half. On Friday, however, the bulls welcomed news out of bond insurer Ambac (ABK) regarding plans for providing relief. The market surged into the close, but this left it extended into the morning on Monday. The result was a pullback immediately out of the gate, which lasted into the 10:00 am ET home data.
Friday's uptrend continued on the heels of the release of January's existing home sales numbers. Even though resales of homes in the U.S. slipped 0.4% in January to a seasonally adjusted annualized rate of 4.89 million, it was stronger than the 4.8 million expected. This stronger-than-expected report brought hope to a housing market plagued in foreclosures and extremely sluggish sales. The low mortgage rates and dramatically lower housing prices have led to speculation that the market will start to see an increase in sales.
With tougher lending practices and the widespread credit woes of the nation, however, I am not hopeful that my house here in Southern Florida, which I first listed 2 years ago, is any closer to selling than it was then! Of course, it might help if I relisted it.... Hmmm... On the plus side, you can get simply amazing deals if you are relocating, including in the rental market. Just yesterday I came across several multi-million dollar homes renting for as little as $900 a month for a 5 bedroom in Orlando. Crazy....
In all seriousness though, I would not expect any rapid recovery in the real estate market without a nice rounding off at lows and a more gradual reversal to begin with. Market prices in real estate can be analyzed in much the same way as the prices of any security and a good comparison to look at would be the 2002-2003 lows in the Dow, S&Ps and Nasdaq. A pop and retracement lower once again would be normal and probably correspond to typical seasonal highs and lows in the housing market.
After bottoming out at 10:00 am ET, the market established three decent moves higher on a 2 minute time frame before running into solid price resistance on a 15 minute time frame. The Dow Jones Industrial Average ($DJI) hit its highs from Thursday, while the Nasdaq Composite ($COMPX) returned to the late Thursday morning congestion zone before stalling its ascent. Since three waves usually exhausts a trend move, the resistance cinched the deal. The Nasdaq had stalled a bit earlier at its resistance level and fell into a triangle trading range, while the S&Ps and Dow pivoted off highs a little later in the morning at the 11:00 ET reversal period.
The momentum of the rally, while not as steep as the prior afternoon, was still faster-than-average, so it didn't turn over too quickly at the highs initially. Instead, the indices began to favor the lower end of a small range along the highs. Real selling did not begin until about 11:30 am ET, but it was followed by a steady retracement off the highs into the 15 minute 20 sma 200 simple moving averages in the major indices intraday.
Although the support held at 12:30 ET, the bulls were not able to immediately regain control. A small two-wave bounce reversed again into 13:30 ET, leading to a retest of morning lows in the Nasdaq. All three of the indices then fell into a trading range with a somewhat uncertain outcome until news once again rocked the boat at roughly 14:25 ET. The bond insurers again made waves when Standard & Poor affirmed the AAA rating of ABK's bond insurance business. Additionally, it took the AAA rating of MBIA's bond insurer until off its CreditWatch. ABK continued its rally with a 15.9% gain on Monday, mirrored in MBIA Inc. (MBI), which rose 19.7%.
All the major indices popped on the latest development. An initial surge was followed by a picture-perfect two-wave continuation move, which took the market into new intraday highs just prior to the closing bell. The Dow closed higher by 189.20 points, or 1.5%, at 12,570.22. The S&P 500 gained 18.69 points, or 1.4%, and closed at 1,371.8. The Nasdaq Composite added 24.13 points, or 1.1%. It ended the session at 2,327.48.
I am looking for a correction off Monday's highs going into Tuesday. We may see some slightly higher highs in the morning, but then a pullback which materializes on a 60-minute time frame is going to be most probable. The 12,800 level remains Dow resistance on the daily time frame, but the 12,700 zone will hit first intraday to provide for a little bit of a pullback should it manage to hold up enough to attempt to work its way higher. The correction on the 60-minute will help with a more solid outlook, but a week of choppy trading seems likely as a whole.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080226dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080226sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080226nas.gif
posted by Toni Hansen @ 8:51 PM 0 Comments
Saturday, February 23, 2008Market Soars on News for Bond Insurers
Good day! The market extended Thursday's losses early on in Friday's trade. Although the day began with a modest upside gap following some afterhours recovery off the prior day's lows, the gap landed the major index futures contracts, including the S&P 500, Dow Jones Ind. Average, and Nasdaq, right at their 15 minute 20 period simple moving average resistance levels. This was also price resistance from early afternoon congestion on Thursday and it was enough for the market to decide that it just was not quite ready to do more, thanks in large part to the more substantial bearish daily action that had been trying to shape up.
After pulling slightly lower to close the tiny gap in the first 15 minutes of the regular session, the market congested along the 5 minute 20 sma support before breaking lower once again at 10:00 am ET. The steady selling which followed took the market into new lows on the week. Although the momentum slowed into 10:45 ET and the market attempted to correct off lows, there was not enough volume to trigger exhaustion on the downside. Due to the average volume on the selling the market would have to at least round off at the lows to turn back around and move higher at a stronger pace.
Without the exhaustive volume or the rounded lows, the market was able to hold the 5 minute 20 sma resistance around 11:30 ET and moved lower with a 15 minute bear flag. Notice the lighter volume even as the market moved higher into that 5 minute 20 sma. This indicated a lack of motivated buyers and helped keep the door open for further downside. Although the selling resumed into 11:45 ET, it picked up with the 12:00 ET correction period on a small Avalanche continuation pattern. The strongest drop lasted about 15 minutes, but the market was able to roll over a bit into 12:30 in the Nasdaq.
Another attempt at a correction off lows began at 12:30 ET. The 5 minute 20 sma once again served as resistance. The market congested along this resistance level as volume remained light. A second wave of buying on the 5 minute time frame barely broke the market past the 5 minute 20 sma resistance, but this feat, along with the shorter downside move in terms of price on the second 15 minute drop began to show signs of rounding off on the larger 15 minute time frame.
Since the second drop on the 15 minute time frame was to a lesser degree than the first, the odds were strong that a third attempt at lower lows would be even less substantial than the second. The market attempted this third move into 13:0 ET, but previous lows held in both the Dow and S&Ps. After two attempts to break, with a lower low of only a few ticks in the Nasdaq, I began to buy, anticipating a much larger break of the 5 and 15 minute 20 period simple moving averages.
One final test of lows took place just prior to the final reversal period of the day. At this point, that afternoon reversal attempt received a huge boost thanks to news from the financial sector. Even though a correction off the lows was already probable into the close, it would have been highly unlikely to get the type of momentum we saw in that final 30 minutes of trading had it not been for reports coming out at that time that several large banks were looking to bail out Ambac Financial (ABK), a flailing bond insurer, resulting in a 16% gain for shareholders. American Intl Group, Inc. (AIG), which had already been forming a momentum reversal pattern on the 15 minute time frame, was grateful for the added impetus to break higher and closed with a gain of 2.7%.
While the rising tide of the market didn't quite raise all ships, it came rather close. Even many of the top losers up until that point in the day managed to recover somewhat in the final 30 minutes of trading. The Dow, which had been down by about 120 points mid-day, managed to close higher by nearly 100 points with a 96.72 point gain, or 0.8%. It ended the day at 12,381, up 0.3% on the week despite making new lows on the week just a short time earlier. Within the index itself, only INTC, MSFT, GM, GE, and MRK closed in negative territory. The S&P 500 rose 10.58 points, or 0.8%, on Friday. It closed at 1,353, gaining 0.2% on the week. The Nasdaq Composite had the smallest percentage gain, weighing in at +0.2%, or 3.57 points. It closed at 2,303, down on the week by 0.8%.
Due to the late day rally, the market failed to confirm the daily weakness. Instead, the larger range along the 20 day sma held. Since volume has been light throughout this congestion, as soon as it does break, we should expect a multi-day trend. Currently the bias has shifted slightly in favor of an upside resolution to the range, but I don't expect the rally to continue far into the morning on Monday without correcting, and I'm not going to commit whole-heartedly to an upside breakout just yet. It would actually be rather difficult given the 60-minute chart action to really continue this type of buying and would not require much of a shift for the bears to regain control. Any immediate continuation of the upside would be more likely to be rather subdued at this point, barring additional news-based catalysts, with12,800 serving as strong resistance in the Dow.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080225dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080225sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080225nas.gif
posted by Toni Hansen @ 11:50 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Trends Lower on Heels of Dismal Economic Data
Good day! Although the range was not extreme in Thursday's trading, the market still found itself in a strong intraday downtrend throughout the entire session. The day had actually began on a positive note with a large upside gap into the opening bell. Premarket upside had begun around 3:45 am ET and continued into 7:30 am ET. Research in Motion (RIMM) had helped with the move, boosting technology issues as it rose 9% after announcing that it expects 4th quarter account additions to be 15-20% higher than previously anticipated.
After the strong premarket action, the indices reacted very little to 8:30 am ET initial jobless claims. The government reported a drop in weekly U.S. jobless claims, but revised the previous week's claims count higher. First-time jobless claims fell 9,000 last week to 349,000, while the prior week's claims were revised higher to reflect an increase of 1,000 to 358,000, as opposed to prior estimates of a drop of 9,000. The jobless claims reflect recent layoff activity and currently are pointing towards a weakening labor market.
When the opening bell rang, the morning's gap had taken the market smack into really strong price resistance from the opening highs on the 19th. Unable to push past those levels, the market was hit by more economic data at 10:00 am ET when the Conference Board reported a 0.1% decline in leading indicators in January. This was the index's fourth straight decline. Market prices immediately began to head lower with all three of the major indices breaking to new intraday lows and making headway on closing the morning gap.
Wednesday's closing prices in the S&P 500 and Dow Jones Ind. Ave. hit at the same point as the 5 minute 20 simple moving average and the indices fell into a congestion level along that support to create a 5 minute Avalanche pattern. Although prices had climbed somewhat off the support, the volume did not. That, combined with the momentum shift and overhead resistance on the larger time frames, was enough to drop the market lower once again out of the 10:15 ET reversal period.
This second wave of selling on the 5 minute time frame was able to sustain itself for nearly twice as long as the initial one. Equal move support hit on the 5 minute charts when the Nasdaq closed its morning gap at the 10:45 ET correction period, but then the selling continued after only a few minutes, lasting into the 11:00 ET correction period. This second wave of selling on the 5 minute time frame manifested itself as a much larger initial decline on the 15 minute time frame, taking the market into support from the prior two trading days at previous congestion levels and pivot zones, as well as the 15 minute 200 sma in the S&P 500 and Dow.
With the market once again at higher time frame support, it was able to form a larger correction off those prices. It was still rather early on in the 15 minute reversal off highs, however, so the result was an Avalanche pattern on that time frame. Two waves of upside over mid-day on light volume led to a breakdown into noon when the Philadelphia Fed. data came out, showing further weakness in the manufacturing in that region during February. This pointed once again to a bearish bias and the sellers held onto that notion throughout the remainder of Thursday's session. A couple of additional corrections took place off larger support, such as the 14:00 ET and 15:05 ET bounces, but lighter volume and sluggish pace kept the bears in command into the closing bell with a third wave of selling in play on the 15 minute time frame into 16:00 ET.
As we head into Friday, my outlook still remains bearish. The daily time frames are a little bit iffy, since there was some stronger upside about a week ago in the S&Ps and Dow and then congestion since the 13th. As long as this congestion on the 120-minute can break lower though, then we are looking at another week of selling rather easily. The next main support will hit at about 11,800 in the Dow and about 1290 in the S&Ps.
http://tradingfrommainstreet.com/images/FocusLetter/20080222dow.gif
http://tradingfrommainstreet.com/images/FocusLetter/20080222sp.gif
http://tradingfrommainstreet.com/images/FocusLetter/20080222nas.gif
posted by Toni Hansen @ 11:16 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, February 11, 2008Market Recovers After Early Morning Slide
Good day! After pivoting strongly off highs last week, the downside momentum in the market has slowed. In the Nasdaq that selling held lows last Thursday, but the selling continued in both the Dow Jones Industrial Average and S&P 500 on Monday morning. While the Nasdaq had gapped higher, the typically resilient Dow struggled, in large part due to the disclosure of potential credit-related issues by American International Group Inc. (AIG) (-11.72%). Other financial shares also had a more difficult time. J.P. Morgan was the third weakest stock in the Dow, falling 1.07%. Citigroup Inc. (C) fell 0.85%, while American Express Co. (AXP) lost 0.78%.
Although the Nasdaq Comp. opened higher, its gains were eroded early on while the Dow and S&Ps slid lower throughout the first 45 minutes of the day. Support hit between 10:45 and 11:00 am ET when the S&P 500 hit Friday's lows for price support and the Nasdaq ran into its 5 minute 20 period simple moving average intraday after having closed its upside gap. After stalling at the support levels for a few moments, the bulls began to take over.
The Dow and S&Ps have been the most downtrodden the past several trading days, while the Nasdaq has held up quite well comparatively. Unfortunately, this also meant that it had greater daily upside extension, so as it climbed off the morning lows, prices overlapped to a greater degree than in the other two indices and the pace of the buying was slightly more gradual. Resistance hit on this initial intraday rally when the indices came into their opening highs. This price zone corresponded to the S&Ps 5 minute 200 sma intraday as well.
After a nice two-wave correction mid-day on Monday, the market continued higher. Lows held at the 12:00 ET correction period, right as the Dow and S&Ps hit their 5 minute 20 sma support and the Nasdaq came into the gap support once again. The upside move was a bit early, so the market fell back into 12:30 ET before breaking to new intraday highs. The buying was steady into the 13:00 ET correction period, with the Nasdaq once again moving at a more gradual pace as compared to the other two.
After rising into resistance at the Nasdaq's 15 minute 20 sma and the previous highs in the Dow and S&Ps, the market began to struggle. Although the market trended nicely up until this point in the day, both to the downside earlier and then on the upside reversal, the afternoon was much more difficult. The market chopped around throughout the final three hours of the day, making very little progress either way. Some rounded highs pulled the indices back into 14:30 ET, but price support from earlier in the day held well and the market closed in the middle of the afternoon's range. The Dow had gained 57.88 points (+0.5%), while the S&P 500 rose 7.84 points (+0.6%) and the Nasdaq Composite added 15.21 points (+0.7%.)
While there is room for a 15 minute base or pullback on Tuesday, the intraday bias is still bullish. I am concerned, however, that this upside is going to be short-lived and that we will see selling once again into the end of the week or the beginning of next with another test of the daily lows.
http://tradingfrommainstreet.com/images/FocusLetter/20080212dow.gif
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posted by Toni Hansen @ 9:31 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Saturday, February 9, 2008Dow Posts 4th Straight Day of Lower Lows
Good day! From a technical standpoint, Friday was yet another correction day following the previous week's monumental gains. At the same time, however, the market had fallen, or corrected, into some initial support from January 28th in the S&P 500 and the Dow Jones Ind. Ave. The Nasdaq also hit support on Thursday from the 23rd. These support levels stalled the larger daily correction and on Thursday the market was pushed into a trading range on the 30 minute time frame.
Friday's session continued the 30 minute trading range. The market began to pull back a little about 5 minutes into the day, continuing into the 9:45 ET correction period, at which point the market broke higher, running to new intraday highs into 10:00 am ET. The 5 minute 200 period simple moving average intraday stalled this initial morning rally in the S&Ps and Dow, but while the momentum was a bit slower on this upside move than the prior one on the 5 minute time frame, it was not significantly so, and a third move higher intraday formed into 10:45 ET and continued into the 11:15 ET correction zone. This time the buying was a lot choppier and the market barely made new highs. The turning point came as the Nasdaq touched strong short-term price resistance at Thursday's highs.
The slowing upside momentum, assisted by declining volume, the 11:15 ET correction period and the price resistance from trading earlier in the week all led to the mid-day selloff which broke the intraday uptrend channel at about 11:45 ET. The 5 minute 20 sma support gave way after about 20 minutes of hugging the support level. This smaller base at support at the lower uptrend line was a little Avalanche pattern, which was part of a somewhat larger Head and Shoulders setup. When the support gave way, the momentum increased substantially. The market fell quickly into the morning lows in the S&Ps and Dow and the 5 minute 200 sma and morning congestion in the Nasdaq. The momentum slowed as these support levels hit, but the sellers pushed further into 12:30 ET and took the S&Ps and Dow to new intraday lows, while bringing the Nasdaq back into opening prices.
Although certainly a decent-sized move, the mid-day drop on Friday was not that great when compared to the average 15 minute moves lately. This left the market open for another hit in the afternoon. A two-wave correction off mid-day lows offered the perfect opportunity for the intraday bears to take another stab at a nice intraday position. Many continuation patterns form with these two-wave moves and the second high hitting at the 13:00 ET correction period was excellent timing on the part of the market, corresponding perfectly to the 5 minute 20 simple moving averages intraday as resistance. A second intraday selloff began at that time and continued into about 13:40 ET, which took the market back into price support from Thursday.
The market did have the potential to form a third wave of downside into the second half of the afternoon, but when it bounced off support it did so with a sharp pop higher just prior to 14:00 ET. The jump took the indices to the 5 minute 20 sma once again, at which point they fell into a sideways range with light volume to favor a Phoenix buy on the 5 minute time frame. This action alone does not mean that another selloff would be avoided. The Phoenix breakout could very well be a second upside move within a correction off lows, followed by another breakdown. This time, however, the move out of the Phoenix was strong enough that it managed to take the market back into the early afternoon congestion. When the second move higher did break, it was able to find support at the Phoenix's congestion and managed to reverse higher once more in the final hour of trading.
In the Dow Jones Industrial Average's ($DJI), 22 of its 30 components closed lower on Friday, led by the financials. American Express (AXP) lost 3.2%, while J.P. Morgan Chase (JPM) fell 2.9%. Merck & Co (MRK) also lost ground once again, falling 2.6%. Hewlett Packard Co. (HPQ) was the strongest stock in the Dow. It gained 3.4%, while Alcoa Inc. (AA) also posted gains and closed higher by 3%. The Dow as a whole lost 64.87 points, or -0.5%, to close at 12,182.1 with a weekly loss of 4.4%.
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The S&P 500 ($SPX) also fell once more on Friday. It shed 5.62 points, or -0.4%, and closed at 1,331.29. The S&Ps ended the week lower by 4.6%. Some of the top losers included Micron Technology Inc. (MU) (-6%), Allergan Inc. (AGN) (-6%), and CIT Group (CIT) (-5.7%). Top gainers included Cognizant Technology Solutions (CTSH) (+16.7%), E Trade Financial Corp. (ETFC) (+7.3%), and Marathon Oil Corp. (MRO) (+6.7%).
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The Nasdaq Composite ($COMPX) posted gains on Friday. It rose 11.82 points, or +0.5%, and closed at 2,304.85. On the week as a whole, however, it still lost 4.5%. Tech stocks received a boost from a buyback plan annouced by Amazon.com (AMZN), which lifted that company's shares by 3.7%. Other top stocks were XM Satellite Radio (XMSR) (+8.4%), Expedia Inc. (EXPD) (+5.7%), and Research in Motion (RIMM) (+5.6%).
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In other markets, crude oil prices sky-rocketed on Friday with March delivery up $3.66, or 4.2%. It closed at $91.77 a barrel on the New York Merchantile Exchange after being pushed lower in recent trade. This was the largest daily gain since October and the contract ended the week higher by 3.2%. This move was attributed not only to oversold conditions into support, but also news from the Organization of Petroleum Exporting Countries (OPEC). Some of the delegates are pushing to cut production in March to help hold up prices due to lower demand and U.S. economic influences.
On the data front on Friday, the Commerce Dept. reported that U.S. wholesale inventories were up 1.1% in December. This was the largest gain since August 2006. Sales dropped 0.7%, which was the largest decline in nearly a year, with inventory-to-sales ratios now standing at 1.09. This ratio had been at a record low of 1.07 in November. The Commerce Department will release the retail inventory data next Wednesday, finalizing estimates for business sales and inventories for December. Fed Chairman Ben Bernanke will follow on Thursday, Feb. 14th with his testimony on the economic outlook on Capital Hill in Washington.
In terms of price action this coming week, the market is slightly bullish on the 30 minute time frame, but this can easily just create a longer congestion zone on the 60 minute time frame before the market breaks lower for a better test of January lows in the S&Ps and Dow. This would create a two-wave correction off the highs of February 1st and if this second drop is slower than the first, then another daily pop in a couple of weeks is highly probable.
posted by Toni Hansen @ 9:17 PM 0 Comments
Wednesday, February 6, 2008U.S. Stocks Continue to Slide
Good day! The market continued to give us that additional downside we've been looking for into the weekend in Wednesday's session. The day began on a bit of a positive note with the indices gapping slightly higher before retesting Tuesday's lows. After three waves of downside the prior day, however, the trend was still extended on the downside, so it made it relatively easy for those lows to hold and for the market to attempt to correct throughout the rest of the morning.
The immediate reversal off the morning lows around 10:00 am ET was rather valiant. The market popped quickly and the market then based into 10:30 to form a Phoenix pattern on the 5 minute time frame. Unlike Tuesday's failed attempt at the same price action, the Dow Jones Ind. Average and S&P 500 managed some decent follow-through on it this time around. The Nasdaq Composite, however, failed to really break the morning highs. The rally in the Dow and S&Ps did not hold though. Initial momentum quickly stalled and the market rounded off at the highs from the previous afternoon, creating a short setup around 11:30 ET.
The market slowly rolled over as the mid-day trading progressed. An Avalanche into noon confirmed the reversal and a channel along morning support into about 13:30 ET continued to push the market lower. When that afternoon base gave way, it took the market past the morning lows and the momentum increased sharply once those lows gave way. Another bear flag into the 5 minute 20 period simple moving average finished off the session, taking all three of the major indices to new intraday lows. For the third day in a row they closed at them.
The Dow Jones Industrial Average ($DJI) finished lower on Wednesday by 65.03 points, or -0.5%, at 12, 200.10. 22 of its 30 components lost ground. The most notable one to NOT do so was Walt Disney Co. (DIS). It reported earnings which beat expectations and closed higher by 4.8%. The auto manufacturers were the big losers on the day. General Motors Corp. (GM) lost 2.87% thanks to a downgrade by Bear Stearns. Ford Motor Co (F) also saw its rating fall and its share prices along with it. F lost 1.9% on Wednesday.
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The S&P 500 ($SPX) fell 10.19 points, or -0.8%, and closed at 1,326.45. JDS Uniphase (JDSU) (+25.98%), and Polo Ralph Lauren (RL) (+9.97%) were the top gainers, but more noteworthy were the top losers. CME Group (CME) lost a whopping 103.55 points on Wednesday, or 17.59%. Harman Intl (HAR) came close in terms of percentage with a loss of 15.37%, but nowhere near it in terms of point loss. It shed 7.03 points.
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The Nasdaq Composite ($COMPX) closed lower by 30.82 points on Wednesday at 2,278.75. Celgene Corp (CELG) (+3.18%), Paccar Inc. (PCAR) (+2.87%), and Tellabs Inc. (TLAB) (+2.81%) led the gainers, while Marvell Technology Group (MRVL) (-10.20), IAC Interactivecorp (IACI) (-6.97), and Apple (AAPL) (-5.69%) led the losers.
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Although we are likely to start to see less of these downside trend days into the weekend, the market bias is still favoring the bears. I am expecting continued selling with only intraday corrections on a 15 minute time frame, such as that which took place on Wednesday morning. I would like to see a slightly lower low on the Nasdaq and retest of the previous daily lows zone in the Dow and S&Ps before I am willing to commit to anything overnight on the upside at this point. I think these levels are quite possible over the next several days.
Notice: Due to family visiting, I will not be posting a column tomorrow evening, however, it will resume for Monday's trading. So, have a wonderful session and enjoy your weekend!
posted by Toni Hansen @ 8:28 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, February 5, 2008U.S. Stocks Get Hit Hard in Tuesday's Trade
Good day! The market had a really tough day on Tuesday after selling pressure increased in afterhours trading Monday evening and Tuesday morning. This pushed all potential for a range along the daily resistance levels right out the window and set the day up for continued downside. Typically the extreme gaps in the indices attempt to close, but since this time the gap was also off a major daily resistance level and marked a break in the uptrend of the past two weeks it created one of the exceptions to the rule. While I've talked a lot about this in the past, we haven't seen it happen for quite some time. The result was that even though the market was opening into support, the risk was higher that bulls attempting to buy the gap would have a rough time.
The market did try to hold the lows initially. The market pulled up slightly beginning at about 9:45 am ET, but a more gradual pullback following the 10:00 ET ISM data failed to break strongly higher through the 5 minute 20 period simple moving average. Instead the resistance held well and the choppy selling of the previous session continued.
The Institute for Supply Management (ISM) stated that its nonmanufacturing index fell to 41.9% in January off 54.4% in December. It had been expected to slip to 53%. When if move to under 50% it indicates economic contraction. This was the largest drop in the index's history and was the first time the index had hit that level since October 2001.
Despite the data, the market was so oversold at the open that the effect was not immediate. When coupled by the Richmond Federal Reserve President Jeffrey Lacker's pronouncement that the economy may be heading to a recession, however, the bears had no problem taking the lead. It's not that this is news by any means, since it's been on everyone's lips for weeks, but he is the first Fed official to actually lend his voice to it.
The market moved lower throughout the entire day on Tuesday. It was divided into three main waves on the 15 minute time frame, but the moves were again on the more choppy side. The trend corrected twice within the downtrend. The first was at 11:15 ET and then again out of the 14:00 ET correction period. By the end of the day all of the major indices were at new lows on the week closed at those lows.
The Dow Jones Industrial Average ($DJI) fell 370.03 points, or 2.9%, on Tuesday. It closed at 12,263. Every single one of its 30 components posted losses. The index experienced its largest percentage decline since this time last year and was the largest point loss since last August. The worst performers were J.P. Morgan Chase (JPM) (-7.4%), Citigroup Inc. (CIT), American Intl Group. (AIG) (-4.5%), and American Express (AXP) (-4.1%).
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The S&P 500 ($SPX) fell even further than the Dow. It lost 44.18 points, which was a 3.2% decline. It closed at 1,336. Whirlpool Corp. (WHR) was the biggest S&P winner with a gain of 10.31%. Computer Sciences Corp. (CSC) (+6.03), and Avon Prods Inc (AVP) (+5%) also moved higher. NYSE Euronext (NYX) was the largest losers, down 14.14%. Principal Financial Group Inc. (PFG) (-11.22%) and Mgic Invt Corp (MTG) (-10.08%) were other top losers.
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The Nasdaq Composite ($COMPX) was also hit hard on Tuesday. It lost 73.28 points, or 3.1%. It closed at 2,309. Only 4 stocks in the Nasdaq 100 closed in positive territory: Wynn Resorts (WYNN) (+7.09%), Google (GOOG) (+2.29%), Ryanair Holdings (RYAAY) (+0.43%), and Intuitive Surgical Inc (ISRG) (+0.12%). Top losers were Garmin Ltd (GRMN) (-8.44%), Logitech Intl (LOGI), (-8.10%), Hii Holdings (NIHD) (-7.49%), and Infosys Tech (INFY). Unfortunately for the bulls, most of these look to continue lower this week.
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Even though the market ended the day rather extended, due to the channel break of the upside from the past two weeks we are facing more downside into the weekend. The previous lows on the daily charts will be support and if the momentum can slow a bit then stall just before the absolute lows then we are looking at a triangle range likely to form on the daily time frame. If the momentum is strong, however, then slightly lower lows would create a trap to allow for a bounce back to the 20 day sma again with a third move lower possilbe into the end of February/early March. I expect volume to be lighter on the descents than it last a few weeks ago.
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 Chops Around Following Last Week's Gains
Good day! The market headed lower on Monday as the new trading week kicked off. After strong gains in last week's trade, the market had begun to correct on Friday with some choppy action in a larger range. The indices had managed to climb back to morning highs prior to the close, but that level, which hit on slower momentum than it had earlier in the session, merely served as strong resistance and led to a double top intraday on the 15 minute time frame. This pattern began to follow through immediately out of Monday's opening bell.
A gradual decline with a great deal of overlap in price on the 5 and 15 minute set the tone for the day. Volume was on the light side throughout the session and although the market trended lower well into the afternoon, the bias was not a strong one and each of the downside moves was short-lived with a lot of price retracement in between to indicate a great deal of indecision. The volume reflected this indecision as well since the light volume meant a lack of commitment by either the bulls or the bears.
After breaking through it early on, the 15 minute 20 period simple moving average in the indices held as resistance throughout the day on Monday. It had broken it earlier in all-sessions trading after highs around 6:45 am ET, so even the morning's intraday trading was under that resistance when taking premarket futures trading into account. The market initially hit support from midday to early afternoon levels from Friday around 10:30 am ET, but continued through those prices into noon on slow but steady selling.
A second support level hit around 13:30 ET. This was approximately an equal move on the 15 minute Nasdaq as compared to the initial descent on the day and it was stronger price support from Friday as well. Once again, however, it failed to attract any strong buying and at 14:00 ET the market again rolled over, but the selling did not increase until the last move into the closing bell. The momentum did increase at that time, but it didn't help daytraders by that point and the primary session closed without much fanfare.
The Dow Jones Industrial Average ($DJI) closed at 12,635 on Monday with a loss of 109.03 points, or -0.8%. General Motors (GM) (-4.87%) and JP Morgan Chase & Co (JPM) (-4.21%) were the largest losers. Only 7 of the Dow's 30 components closed in positive territory, although most did so just barely. Drug makers helped to offset the losses with Merck & Co Inc (MRK) up 3.2%. Pfizer (PFE) and Johnson and Johnson (JNJ) posted smaller gains, but gains nevertheless, of 0.2% each.
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The S&P 500 ($SPX) fell 14.60 points, or -1%, on Monday. It ended the session at 1,380. The strongest gainers were Cummins Inc. (CMI) (+6.48%), Dynegy Inc. (DYN) (+5.89%), and Nabors Industries Ltd (NBR) (+5.69%). On the other end of the scale were losses in Ambac Financial Group (ABK) (-13.71%), Washington Mutual (WM) (-12.19%), and CIT Group (CIT) (-9.88%). 30 of the indices components fell more than 5%, while only three gained more than that. As you can see, banks felt quite a bit of pressure. Merrill Lynch downgraded both Wells Fargo & Co (WFC) and Wachovia Corp. (WB). WFC ended up losing 6.7%, while WB fell 8.2%. American Express Co. (AXP) also felt the slap of a downgrade by UBS and lost 3.9% on the day.
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The Nasdaq Composite ($COMPX) was the hardest hit yet again. It dropped 30.51 points, or 1.3%, to close at 2,382. In the Nasdaq 100 the largest gainers were Patterson Uti Energy Inc. (PTEN) (+6.58%), Yahoo (YHOO) (+3.35%), and Cadence Design System Inc. (CDNS) (+3.02%). Top losers were Ryanair Holdings (RYAAY) (-8.28%), UAL Corp (UAUA) (-6.22%), and Ross Stores Inc (ROST) (-5.79). 5 of the 100 closed with losses greater than 5%, whereas only one, PTEN, posted gains greater than 5%. Although not in the Nasdaq 100, Google (GOOG) had an impact on the Nasdaq as a whole with a loss of 20.47 points, or 4%.
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Heading into Tuesday's session, my focus has not changed much for the week. The market is currently dealing with the first daily resistance we'd looked at a few weeks ago, but how it reacts to this level is going to determine the odds from there. If the market drops sharply off this resistance, then a triangle on a daily-weekly time frame becomes likely, whereas congestion here would create a Phoenix on the daily time frame.
posted by Toni Hansen @ 2:07 AM 0 Comments
Sunday, February 3, 2008Small Caps Demonstrating Signs of a Recovery
Good day! The market followed through well on Friday with expectations favoring a trading range. The indices did continue the prior day's gains initially into the morning, but back and forth action left them unable to break the early morning highs.
The indices had gapped higher initially to kick off the trading day following premarket data. An hour ahead of the open the Labor Department released the January nonfarm payroll data. Employers cut back on hiring last month for the first time since August 2003 with an estimated loss of 17,000. Economists had been anticipating an approximate increase of 85,000 jobs, so the loss came as quite a surprise. Manufacturing, factory, construction and financial-sector employment all suffered the greatest, while the health care sector added positions. At the same time, the nation's unemployment rate fell, but it hit estimates at 4.9%, down from 5%. In related news, the average hourly wage for January increased 4 cents (+0.2%) to $17.75.
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Following the open the market stalled into the 9:45 ET correction period, at which point it shot higher, holding the trend channel from Thursday to break to new highs. A third wave on the 2 minute time frame followed around 10:00 am ET. At that point the Michigan Sentiment data, December's construction spending, and January's ISM Manufacturing Business Index all came out. Consumer sentiment dropped in late January, with Michigan's index falling to 78.4 from 80.5 in mid-month, but it was still higher than the previous month. Meanwhile, U.S. construction spending fell 1.1% in December. Lastly, the ISM Index rose to 50.7% last month from 48.4%. While a reading over 50% indicates expansion, the index is expected to slide again, however, before it finds support.
Although the initial response to the 10:00 data was positive, the afterglow did not last. By the time the 10:15 ET correction period hit the market was already turning over. The three waves of buying on the 2 minute charts exhausted that trend and once the selling hit, it hit hard. Within about 30 minutes of trading the Nasdaq had broken morning lows and was coming into Thursday's mid-day highs, while at the same time the S&P 500 and Dow Jones Ind. Ave. managed to close their morning gap zones and coming into 15 minute 20 simple moving average support. All of these support levels hit at the same time as the 10:45 ET correction period, giving the market strong support into the second half of the morning and into mid-day trading.
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The strong momentum of the morning's descent made it difficult for the market to move strongly to the upside, but the indices still managed to retrace a large part of the move. The Dow and S&Ps both took back about half their losses, while the Nasdaq moved into the 38% fibonacci level into noon. This is another major correction period and when it hit the momentum continued to slow, this time on the downside. The market fell back into the same support at the 15 min 20 sma in the Dow and S&Ps, slipping into the 13:00 ET correction period on light volume.
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The light volume indicated a lack of conviction on the selling and left the bias on the bullish side as the afternoon continued. It wasn't a strong bias though, and the larger trend extension from Thursday and into the morning kept the late day rally from picking up too quickly. It was still enough though to eventually bring the indices back up to close near the day's highs. This amounted to a 92.83 point (0.7%) gain in the Dow, a 16.87 point (1.2%) gain in the S&P 500, and a 23.50 point (1%) gain in the Nasdaq Composite. For the week as a whole, the Dow rose 4.4%, the S&Ps rose 4.9%, and the Nasdaq gained 3.7%.
Economic data for this coming week is rather light, but a number of speeches from the Fed and a continuation of this last quarter's earnings will continue to provide news to fuel the market. The indices have started hitting the earlier January price congestion and resistance levels, and better tests of this zone are expected this week. One thing I found interesting this weekend while scanning was that while a lot of the big caps and mid-caps are still looking rough, a number of small cap stocks have really started to show strength and have begun to turn back around with favor for continued upside on the weekly and monthly time frames.
posted by Toni Hansen @ 6:45 PM 0 Comments
Saturday, March 29, 2008Mini-Vacation (Kids on Spring Break)
Dear Reader:
My kids are on spring break this week, so I will be taking a "half vacation" and will be suspending my daily market action column for the next 4 days (for Tues-Fri.), but will be back once again next Monday! If you have any questions or anything in the meantime, please feel free to contact me through my website: http://www.tonihansen.com.
If you haven't had a chance yet, you can check out my new three-part series on Fibonacci at Trading Markets.
The links are as follows:
Part 1: http://www.tradingmarkets.com/.site/stocks/how_to/articles/-75282.cfm
Part 2: http://www.tradingmarkets.com/.site/stocks/how_to/articles/-75657.cfm
Part 3: http://www.tradingmarkets.com/.site/stocks/how_to/articles/-75988.cfm
Have a wonderful trading week!
All my best,
Toni
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
Market Pulls Lower, but Daily Remains Bullish
Good day! The market ran hard into the upside from the 17th into the 24th, but unfortunately this momentum surge left it without enough fuel to continue the move as the week progressed. The indices needed time to correct, but they brushed off all traces of negative news, holding onto a significant portion of the larger time frame rally heading into Friday morning.
Trade was very choppy from Tuesday onward, making it difficult to locate a lot of sustained intraday momentum, even in individual equities. Sure, a few names stood out, like Apollo's (APOL), which experienced a strong mid-day breakdown on Thursday that really fell apart into Friday, but for the most part it had been a scalpers market. This remained the case throughout the first half of the day on Friday as well. As the session wore on, however, this began to change.
The personal income and consumer spending data was released ahead of the open on Friday. In February, income rose 0.5%. Meanwhile, the Commerce Department announced that real consumer spending has risen less than 0.1% since November. Consumer prices rose 0.1% in February, as did core consumer prices which exclude food and energy costs. Over the past year consumer prices are up 3.4%, while core consumer prices are up 2%. This combination has led to an increase in the growth of personal savings. This trend is expected to continue due to continued fear about the economy. The impact of this information on the market as a whole, however, was nominal.
As I mentioned Thursday, I was expecting more upside to continue an afterhours rally heading into Friday morning. The market must have felt obliged to follow through at least to some degree, because it opened with a decent gap higher. A gradual pullback off the open created a continuation pattern on the upside and the indices moved to new intraday highs into 10:00 ET.
The Michigan consumer sentiment index came out a few minutes early, showing a decline from 70.8 in February to 69.5 in March. It had been expected to decline to between 69.6 and 70. This is viewed as confirmation of a recession. Despite the appearance of unfavorable news, the market still managed to rally. It was the last rally of such a magnitude throughout the remainder of the session. The market turned over shortly after 10:00 ET and remained in a downtrend into the closing bell.
After turning off highs, the indices pulled back into the lower end of the day's range. A very gradual correction off the price support created a large two-wave continuation pattern for a selloff into the afternoon. The 15 minute 20 period sma served as resistance and the 12:00 ET correction period helped kick off the breakdown. Once the support gave way, the 5 minute 20 sma held as resistance for the entire afternoon as a series of small 5 minute bear flags took the market continuously lower into the end of the day.
The market did manage to bounce somewhat into afterhours trading, but the Dow still posted a loss of 86.06 points, or 0.7% on Friday. It closed at 12,216. The S&P 500 lost 10.54 points, or 0.8%. It closed at 1,315. The Nasdaq Composite shed 19.65 points, or 0.9%. It ended the day at 2,261. As the market wraps up the first quarter of 2008, the Dow is down 7.9% on the year, while the S&P 500 has lost 10.4%, and the Nasdaq Composite has dropped 14.7%. Earnings season for the first quarter begins in about a week when Alcoa (AA) reports on April 7th. I am looking for a bit of upside in the market into Monday morning, but the increase in the downside into Friday afternoon was a bit of a disappointment and will most likely draw out the daily correction longer on a daily time frame.
Dow Jones Industrial Average ($DJI)
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S&P 500 ($SPX)
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Nasdaq Composite ($COMPX)
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posted by Toni Hansen @ 11:01 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Economic Reports and Earnings This Week
Economic Reports and Events This Week
Monday, March 31, 2008
9:45a.m. Mar Chicago PMI. Expected: 46.3. Previous: 44.5.
10:30a.m. Mar Dallas Fed Mfg Production Index. Previous: 7.1.
Tuesday, April 1, 2008
7:45a.m. ICSC Chain Store Sales Index For Mar 29. Previous: -0.4%.
8:55a.m. Redbook Retail Sales Index For Mar 29. Previous: +1.8%.
10:00a.m. Feb Construction Spending. Expected: -1.0%. Previous: -1.7%.
10:00a.m. Mar ISM Manufacturing Business Index. Previous: 48.3.
5:00p.m. ABC/Wash Post Consumer Conf For Mar 30. Previous: -31.
Wednesday, April 2, 2008
7:00a.m. MBA Mortgage Refinancing Index. Previous: +82.2%.
8:15a.m. ADP/Macroeconomic Private Payrolls Forecast. Previous: -23K.
10:00a.m. Feb Factory Orders. Expected: -0.8%. Previous: -2.5%.
Thursday, April 3, 2008
8:30a.m. Initial Jobless Claims For Mar 29 Week. Expected: +2K. Previous: -9K.
10:00a.m. Mar ISM Non-Manufacturing Composite Index. Expected: 49. Previous: 49.3.
10:00a.m. DJ-BTMU Business Barometer For Mar 15. Previous: Unch.
12:00p.m. Feb Chicago Fed Midwest Mfg Index. Previous: -0.1%.
Friday, April 4, 2008
8:30a.m. Mar Nonfarm Payrolls. Expected: -60K. Previous: -63K.
8:30a.m. Mar Unemployment Rate. Expected: 5%. Previous: 4.8%.
Key Earnings Announcements This Week:
Monday, March 31, 2008
Before: JRT, PEIX, RDNT, SGR
After: GIII, FUL, RMG, UBET
Tuesday, April 1, 2008
Before: GTOP, MNTG, QXM, SGK
After: EXFO, BLUD
Wednesday, April 2, 2008
Before: BBY, KMX, LULU, MON, UNF
After: ANGO, CHNL, LNDC, MU, RUMM, RT
Thursday, April 3, 2008
Before: AYI, CHINA, STZ, CAO, IART, MTRX, RSTO, RPM, WCG
After: CAE, CREL, LWSN, MRGE, NINE, RVI, PAY
Friday, April 4, 2008
Before: SHLM, AZZ, BTH, FDO, MOS
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 @ 10:59 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, March 27, 2008Market Pulls Lower, but Daily Remains Bullish
Good day! The market was still choppy on Thursday, but intraday it experienced some very strong swings on the 15 minute time frames to offer some decent intraday moves in the indices. The day began on Thursday with the downside into the morning that I mentioned in yesterday's column. The Dow Jones Industrial Average and S&P 500 had gapped higher into the open, but they held those opening highs and fell into congestion. The Nasdaq Composite had gapped lower thanks to weakness in technology due in large part to disappointing numbers from Oracle (ORCL) and Google (GOOG). Nevertheless, it also fell into congestion early on. The downside bias remained in play and the indices broke strongly lower around 10:15 ET.
The selling pressure was very strong and the market fell quickly to new lows on the day and had soon busted through Wednesday's as well. The Nasdaq found strong support when it hit an equal move as compared to the move into the prior morning at about 10:30 ET. While not a typical correction period, all three of the major indices held lows at this time, but they pulled slowly off them to begin with. The upside momentum increased once a minor pullback into the 11:15 ET correction period broke higher, taking the indices through their 5 minute 20 period simple moving averages.
The upside accelerated into 11:45 ET and returned the indices into the early morning congestion. A nice bull flag formed at that resistance zone and was followed by another move higher into the early afternoon. Prior highs and the 5 minute 20 period simple moving averages served as resistance in each of the indices and the market was able to roll over once again.
The morning action essentially completed the move that I had been expecting to take the entire day on Thursday. It left the door open for the remainder of the day and the bias quickly turned lower when the market held resistance and then formed an Avalanche pattern along the 5 minute 20 sma. It broke rapidly lower once again, taking the market back to the morning lows, but the momentum slowed at that support, so the indices were able to bounce rather quickly.
The rapid bounce confused matters somewhat since it turned the momentum back to the bullish side, but when resistance again hit it pulled sharply of that level into the 15:00 ET correction period. It based there instead of forming more of a range back into that 5 minute pivot high. By pulling back and then basing, it created another Avalanche pattern, which led to yet another selloff into the last 45 minutes of the day. It took the indices back to the lower end of the 15 minute trend channel, as well as the 15 minute 200 sma in the S&Ps where it closed.
The Dow ($DJI) lost 120.40 points, or 1%, and closed at 12,302.46. 28 of its 30 components lost ground on the day. Leading the downside were Intel (INTC) (-3.5%), Bank of America (BAC) (-3%), J.P. Morgan Chase & Co. (JPM) (-2.8%), and Boeing Co. (BA) (-2.7%). The S&P 500 ($SPX) lost 15.37 points, or 1.1%. It closed at 1,325.76. Top decliners were MEMC Electronic Materials (WFR) (-10.1%), Lehman Brothers Holdings (LEH) (-8.9%), and Washington Mutual (WM) (-8.4%). The tech-heavy Nasdaq Composite ($COMPX) remained the weakest of the three indices, falling 43.53 points, or 1.9%, to close at 2,280.83. Some of the top losers were Apollo Group (APOL) (-7.5%), and Oracle (ORCL) (-7.2%).
As we head into Friday, the index futures are up strongly in afterhours trading. They have returned to the level of congestion prior to the final afternoon breakdown on Thursday. While this is resistance, the increased momentum has me favoring even more upside off the afterhours lows. I would like to see a longer daily range before the market can really take off from this congestion. A move into the upper end of the daily range and then another pull off it would be best for a larger breakout to highs in a week or so. The 20 day sma will serve as support throughout the congestion.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080328dow.gif
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080328sp.gif
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080328nas.gif
posted by Toni Hansen @ 9:14 PM 0 Comments