Oil Prices Surge, While Market Dives
Good day! Oil hit record highs on Friday with crude futures trading as high as $139.01 in electronic trading on Globex. July crude rose $10.75, or 8.4%, to close at $138.54 a barrel on the New York Mercantile Exchange. Highs were hit at $138.80. They had been trading around $122 on Thursday. This really shook up a market that was already reeling in premarket trade thanks to a huge hit following the early jobs data. The Labor Department reported that unemployment in May rose to 5.5%. This was a jump of 0.5%, which is the largest seasonally adjusted increase in unemployment in 33 years. The unemployment had been expected to rise 0.1%.
The premarket data sent the index futures tumbling into the open. The bias on the larger time frames, however, as I pointed out Thursday evening, were still very bearish. Heading into the day I had been expecting a downtrend throughout the session. Given the extent of the gap, however, I had been looking for the selling to slow more in the afternoon than it did thanks to mid-day action later on.
The session began on Friday with opening prices in the zone of Thursday afternoon lows. This created some initial support right away. Now, as I've explained many times over the years, when the market has extreme opening gaps, they have a greater tendency to fill. A notable exception is in a major trend reversal on the daily and weekly time frame. It is also imperative that the indices show signs of closing the gap within the first 15 minutes. So, if the indices gap lower, such as on Friday, and sell a little and base at lows, the odds are very small that the gap will fill that day and more likely we will see a trend day in the direction of the gap. This is exactly what happened on Friday.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080609dow.gif
When the opening bell rang on Friday, the market was still selling off as it reacted to the premarket data. This continued for several minutes before things settled. The indices fell lows with slightly declining volume on a gradual slant higher to form a little bear flag on the all-sessions time frames that triggered a continuation pattern to lows at 10:00 ET. The market continued to step lower throughout the morning before hitting some larger time frame support around 11:30 ET.
As mid-day trading began the indices were all hitting price levels conducive to forcing them into a larger correction than seen up until that point in the day. The Dow was back at Wednesday's lows, the S&Ps had closed the prior day's gap, and the Nasdaq was hitting its 15 minute 20 period simple moving average and nearing Wednesday afternoon's lows.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080609sp.gif
The market failed to bounce adequately off mid-day support levels and failed to round off at lows at the support. As a result, the bias in the indices remained bearish. The volume dropped as the indices congested at the support. A continuation triggered with the onset of the 13:00 ET correction period. The break was similar to earlier moves to begin with, but another congestion move into 14:00 ET gave way much more quickly and plunged the S&P 500 through the lows of the congestion from the past two weeks. Both the Dow and Nasdaq also experienced a surge in selling pressure as volume increased.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080609nas.gif
The indices attempted to roll over into the final hour of trade, but only the Nasdaq experienced a lower low into 15:00 ET. The S&P 500 and Dow Jones Industrial Average both held 14:15 ET lows, so they created another set of bear flags or breakdowns despite the Nasdaq's attempt. All three failed to hold and continued fear from the bulls led to some additional panic into the closing bell as traders liquidated positions ahead of the weekend.
The week ended on Friday with a 394.64 point, or 3.1%, loss in the Dow Jones Ind. Ave. ($DJI) on the day and a 3.5% loss on the week. The S&P 500 ($SPX) fell 43.37 points, or 3.1%, on the day for a weekly loss of 2.9%. Financials fell 4.8%, while consumer discretionaries fell 4.3%. The Nasdaq Composite ($COMPX) dropped 75.38 points, or 3%, on Friday for a weekly loss of 1.9%.
The market has room for a bit of recovery action early on this week, but my larger bias is towards continued selling by the end of the week. NQ (Nasdaq 100 Emini) support levels are 1950 and 1900. ES (S&P 500 EMini) support is at 1338. YM (mini-sized Dow Jones Ind. Average) support levels are 12000 and 11800.
posted by Toni Hansen @ 2:22 AM 1 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, June 8, 2008Emini Trading Data
Question:
How can I track what the future markets (i.e. S&P, DOW and NAS) are doing pre-market open? Do they trade throughout the night? I was told by Scottrade that they don't provide access to futures. Do I need / do you recommend I open an account with an on-line service like Interactive Brokers?
Answer:
Hello!
Yes, the index futures trade nearly 24 hours a day and begin trading at18:00 ET on Sunday evenings.
The S&P 500 symbol is ES. You must then select the current active month and year. For instance, September futures under the symbol ESM are currently trading with 8 as the year. Different platforms will have somewhat different ways in which this data is entered. They change once a quarter with September expiration followed by December, then March, then June. Some platforms have continuous contracts so you do not have to change once a quarter. The Nasdaq 100 symbol is NQ and the Dow Jones. Ind. Ave. is YM.
In order to monitor futures trading afterhours and in premarket trade, you need to have a charting platform that provides this data. You must also be subscribed to the exchange and be permissioned to view the data.
There are many brokers and charting platforms that allow this and IB is one of them. If you plan on trading futures, I would suggest test-driving a few of the more popular platforms and see what works best for you.
All my best,
Toni
posted by Toni Hansen @ 9:44 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
How I locate setups
Question:
> Some more questions came to mind...What source
> do you use for new ideas / stocks to put on your watch list? as well as
> research and to follow breaking news? Do you use one source or multiple
> sources?
>
> There are so many resources out there from Bloomberg to IBD, MarketWatch,
> Briefing.com etc. that I often find myself overwhelmed by all the options
> and commentary and experience info overload! How do I cut out all the
> "noise" and focus on what's really pertinent?
Answer:
=) No problem!
I tend to keep things really simple. In terms of scanning, I primarily
monitor the gapping stocks and the intraday % and $ gainers and losers, as
well as stocks trading near day's highs or day's lows. This generally gives
me plenty of trade opportunities to monitor and it is pretty rare anymore
that I look further than that. If I am not finding much in those lists then
it means I'm looking too much because the market risk is obviously higher
than average. Sure, I will still find a couple of things if I pour through
other sources, but it's often not even worth it.
In terms of news sources, I don't even mornitor them. It's not so much what
the news is after all, but what the reaction is. You usually don't need to
know what the news is, but there can be some risks to not knowing. These
would include if the stock is a buyout, since you can get stuck in a gapper
that just goes nowhere because of the buyout, or if the news is
rumor-related and may easily be recanted or lead the stock to be subject to
a trading halt.
All my best,
Toni
http://www.tradingfrommainstreet.com
posted by Toni Hansen @ 9:41 PM 1 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Establishing a work/study routine
Question:
> I'm trying to establish a solid / consistent daily routine to track, learn
> and gain a real grasp of the markets (i.e. start following futures from
> 5am, follow news and global markets, look for setups etc.) any
> recommendations on how to best manage or standardize this workflow?
Answer:
Hello! One thing to be careful of regarding your work habits and routine is to not
set yourself up to burn out. This can be very difficult. Many newer traders
take on more than they can really handle. It is true that the more time you
spend with the market, the more you will lean the nuances of the market.
However, in order to really study the market, you need to learn how to
analyze it and this is done by trying to put together studies of comparable
price action.
What I would suggest is trying to pick out several strategies or patterns
and then compile a notebook with printouts when you locate setups that fit
the criteria you are looking for. Be particularly sure to print out both
those that confirm and work out as well as those that fail.
A good plan would be to spend the morning locating examples and trading them
with a simulated account or trading with very small risk. Print out those
you see that don't trade as well as those that you do. Then take the
afternoon to print them out, write out pros and cons and begin to categorize
them to place those with the most similar characteristics and follow through
together. From this, you can then perfect your system by creating rules
based upon your observations.
The CD course that I put together outlines what building blocks you should
look for in developing a system and analyzing the pros and cons of your
setups and system as a whole. (http://www.swingtrader.net)
All my best,
Toni
posted by Toni Hansen @ 9:39 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, June 5, 2008Action Choppy Despite Trend Day
Good day! The market experienced its first real uptrend day since May 12th on Thursday where it opened near the day's lows and closed right into the zone of the day's highs. As in the prior two days of action, the morning started out on a strong note. Ahead of the open the Labor Department released its report on first-time claims for unemployment benefits. They fell by 18,000 last week, hitting its lowest levels in just over a month and provided the market with some positive news ahead of Friday's jobs data.
The market did pull back off premarket highs following the data, but when the opening bell rang this quickly turned back around. The indices moved higher almost immediately and continued at a strong clip until about 10:45 ET. The Nasdaq stalled at 10:15 ET, but held highs while the S&P 500 and Dow Jones Industrial Average continued to step higher. Action on the upside, while steady on a 15 minute, quickly became a lot more choppy after approaching initial resistance at Tuesday's morning highs in the S&P 500.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080606dow.gif
The market rolled over slightly into 11:00 ET when the S&Ps formed a tiny pennant short pattern, but the 5 minute 20 sma was near at hand and served as resistance. The indices hugged this support level and began to creep higher into noon. We had seen similar action in the market on both Tuesday and Wednesday. In each of those sessions the market experienced upside throughout the morning with slowing momentum mid-day, a strong reversal lower into the afternoon, and a bounce into the end of the session.
Although the market technically looked like it was going to go for yet another repeat of this same activity, I was highly skeptical. Typically if a set of patterns in the market repeats two days on end, even if it begins the same on day 3, the second half of the day is highly unlikely to play out in a similar manner as the prior two. In fact, I cannot recall ever seeing this happen. The Nasdaq tried to give it a go and break higher into 14:00 ET to bust the pattern, but the pressure from the slowing upside in the majority of the indices was simply too much and the market did give way to selling into that time zone with an Avalanche (http://www.tradingfrommainstreet.com/techanalysis.html) pattern on both the S&P 500 and Dow Jones Ind. Average.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080606sp.gif
Despite the strong downside into about 14:20 ET, I was still not willing to commit to watching for another continuation on the downside, which was what I had done in each of the prior two sessions. The result of this trend placement meant that support would hold more easily with either a range into the close or even a continuation of the larger uptrend.
Oil Prices Surge, While Market Dives
Good day! Oil hit record highs on Friday with crude futures trading as high as $139.01 in electronic trading on Globex. July crude rose $10.75, or 8.4%, to close at $138.54 a barrel on the New York Mercantile Exchange. Highs were hit at $138.80. They had been trading around $122 on Thursday. This really shook up a market that was already reeling in premarket trade thanks to a huge hit following the early jobs data. The Labor Department reported that unemployment in May rose to 5.5%. This was a jump of 0.5%, which is the largest seasonally adjusted increase in unemployment in 33 years. The unemployment had been expected to rise 0.1%.
The premarket data sent the index futures tumbling into the open. The bias on the larger time frames, however, as I pointed out Thursday evening, were still very bearish. Heading into the day I had been expecting a downtrend throughout the session. Given the extent of the gap, however, I had been looking for the selling to slow more in the afternoon than it did thanks to mid-day action later on.
The session began on Friday with opening prices in the zone of Thursday afternoon lows. This created some initial support right away. Now, as I've explained many times over the years, when the market has extreme opening gaps, they have a greater tendency to fill. A notable exception is in a major trend reversal on the daily and weekly time frame. It is also imperative that the indices show signs of closing the gap within the first 15 minutes. So, if the indices gap lower, such as on Friday, and sell a little and base at lows, the odds are very small that the gap will fill that day and more likely we will see a trend day in the direction of the gap. This is exactly what happened on Friday.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080609dow.gif
When the opening bell rang on Friday, the market was still selling off as it reacted to the premarket data. This continued for several minutes before things settled. The indices fell lows with slightly declining volume on a gradual slant higher to form a little bear flag on the all-sessions time frames that triggered a continuation pattern to lows at 10:00 ET. The market continued to step lower throughout the morning before hitting some larger time frame support around 11:30 ET.
As mid-day trading began the indices were all hitting price levels conducive to forcing them into a larger correction than seen up until that point in the day. The Dow was back at Wednesday's lows, the S&Ps had closed the prior day's gap, and the Nasdaq was hitting its 15 minute 20 period simple moving average and nearing Wednesday afternoon's lows.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080609sp.gif
The market failed to bounce adequately off mid-day support levels and failed to round off at lows at the support. As a result, the bias in the indices remained bearish. The volume dropped as the indices congested at the support. A continuation triggered with the onset of the 13:00 ET correction period. The break was similar to earlier moves to begin with, but another congestion move into 14:00 ET gave way much more quickly and plunged the S&P 500 through the lows of the congestion from the past two weeks. Both the Dow and Nasdaq also experienced a surge in selling pressure as volume increased.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080609nas.gif
The indices attempted to roll over into the final hour of trade, but only the Nasdaq experienced a lower low into 15:00 ET. The S&P 500 and Dow Jones Industrial Average both held 14:15 ET lows, so they created another set of bear flags or breakdowns despite the Nasdaq's attempt. All three failed to hold and continued fear from the bulls led to some additional panic into the closing bell as traders liquidated positions ahead of the weekend.
The week ended on Friday with a 394.64 point, or 3.1%, loss in the Dow Jones Ind. Ave. ($DJI) on the day and a 3.5% loss on the week. The S&P 500 ($SPX) fell 43.37 points, or 3.1%, on the day for a weekly loss of 2.9%. Financials fell 4.8%, while consumer discretionaries fell 4.3%. The Nasdaq Composite ($COMPX) dropped 75.38 points, or 3%, on Friday for a weekly loss of 1.9%.
The market has room for a bit of recovery action early on this week, but my larger bias is towards continued selling by the end of the week. NQ (Nasdaq 100 Emini) support levels are 1950 and 1900. ES (S&P 500 EMini) support is at 1338. YM (mini-sized Dow Jones Ind. Average) support levels are 12000 and 11800.
posted by Toni Hansen @ 2:22 AM 1 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, June 5, 2008Action Choppy Despite Trend Day
Good day! The market experienced its first real uptrend day since May 12th on Thursday where it opened near the day's lows and closed right into the zone of the day's highs. As in the prior two days of action, the morning started out on a strong note. Ahead of the open the Labor Department released its report on first-time claims for unemployment benefits. They fell by 18,000 last week, hitting its lowest levels in just over a month and provided the market with some positive news ahead of Friday's jobs data.
The market did pull back off premarket highs following the data, but when the opening bell rang this quickly turned back around. The indices moved higher almost immediately and continued at a strong clip until about 10:45 ET. The Nasdaq stalled at 10:15 ET, but held highs while the S&P 500 and Dow Jones Industrial Average continued to step higher. Action on the upside, while steady on a 15 minute, quickly became a lot more choppy after approaching initial resistance at Tuesday's morning highs in the S&P 500.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080606dow.gif
The market rolled over slightly into 11:00 ET when the S&Ps formed a tiny pennant short pattern, but the 5 minute 20 sma was near at hand and served as resistance. The indices hugged this support level and began to creep higher into noon. We had seen similar action in the market on both Tuesday and Wednesday. In each of those sessions the market experienced upside throughout the morning with slowing momentum mid-day, a strong reversal lower into the afternoon, and a bounce into the end of the session.
Although the market technically looked like it was going to go for yet another repeat of this same activity, I was highly skeptical. Typically if a set of patterns in the market repeats two days on end, even if it begins the same on day 3, the second half of the day is highly unlikely to play out in a similar manner as the prior two. In fact, I cannot recall ever seeing this happen. The Nasdaq tried to give it a go and break higher into 14:00 ET to bust the pattern, but the pressure from the slowing upside in the majority of the indices was simply too much and the market did give way to selling into that time zone with an Avalanche (http://www.tradingfrommainstreet.com/techanalysis.html) pattern on both the S&P 500 and Dow Jones Ind. Average.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080606sp.gif
Despite the strong downside into about 14:20 ET, I was still not willing to commit to watching for another continuation on the downside, which was what I had done in each of the prior two sessions. The result of this trend placement meant that support would hold more easily with either a range into the close or even a continuation of the larger uptrend.
Although identifying support into 14:30 ET was relatively easy due to the day's highs from Wednesday in the Dow and Nasdaq futures, the market did not form strong reversal setups up off the support such as rounded lows or a Phoenix. Instead the market just crept higher into 15:00 ET. It paused there for a minute and then the trend accelerated as it broke through the day's highs. The momentum again slowed into the close, but the indices still ended the session at the zone of the day's highs.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080606nas.gif
Thursday's session closed at 12,604.45 with a gain of 213.97 points in the Dow ($DJI), up 1.7%. A lot of stocks trended higher throughout the day on Thursday, but Wal-Mart (WMT) was one of the main headline-grabbers after it reported a 3.9% increase in same-store sales. The S&P 500 ($SPX) rose 26.85 points, or 2%, on the day, closing at 1,390.63. The Nasdaq Composite ($COMPX) rose 46.80 points, or 1.87%, and closed at 2,549.94. Tops sectors included the airlines, natural gas, securities/broker dealers, and oil services. It is rather interesting to note that the market climbed higher even though oil and energy were also rallying. We don't see that very often.
I am going into Friday's session with the expectation of highs holding within about the first 15 minutes of the day. The jobs data might affect this somewhat, since ideally I want to see a relatively unchanged open or slight upside gap for this to happen. A gap on the upside can easily hold right away and begin to fill immediately. I am then anticipating a correction with a pullback off highs throughout most of the day. It may end up correcting more through a trading range, but the bias is favoring downtrend action.
posted by Toni Hansen @ 10:13 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Trade and Commentary Wrapup - 20080605
09:33 Toni: both ES and NQ are coming off highs premarket that were at the resistance of yesterday's highs
09:37 Toni: NUE on upside breakout watch list
09:37 Toni: some good daily action
09:45 Toni: NUE not holding up
09:50 Toni: NUE recovering so will keep it on watch list
11:42 Toni: NUE resistance at 80
09:42 Toni: MT on upside watch list
09:43 Toni: oil stocks recovering a bit today
09:44 Toni: ADCT on upside watch list
09:44 Toni: you already on top of that one
09:44 Toni: futs at resistance freom yesterday afternoon highs
09:46 Toni: hmm.. futures rallying but not much for morning gappers action
09:50 Toni: NQ back at morning high
10:16 Toni: EOG 5 min "D" setup for upside potential
10:23 Toni: i got stopped on EOG
10:18 Toni: ES closing in on prior 15 min highs from tuesday
10:19 Toni: futs resistance here
10:42 Toni: futures holding quite well off the 15 min resistance
11:01 Toni: CF wide range base at highs
11:34 Toni: CF from 145.5 breaking hitting some wohle number resistance 147
11:42 Toni: CF 148 next resistance zone
11:03 Toni: MTL base at highs
12:22 Toni: MTL slow....
12:23 Toni: resistance just under 55
11:10 Toni: futs coming into first support here
11:10 Toni: 1990.75 ES
12:04 Toni: ES hitting next resistance level
12:05 Toni: 1396
12:15 Toni: 12:15:25 Market Alert: indices 2T on the 5 min
12:15 Toni: 12:15:28 2T: This is the reverse of a 2B and is a form of double top. For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis.html#2
12:17 Toni: for the past two days the market has rolled over over noon with 2T setups
12:17 Toni: that makes me a bit more concerned this time
12:17 Toni: since larger market action rarely repeats three days in a row 12:19 Toni: in this case the action is morning upside with some strong pops, rollover midday with double tops and 2T and such and then sharp drops followed by a bounce into the close
12:19 Toni: i do not expect the afternoon to repeat the afternoon from the last two days
12:28 Toni: 1399.5 is next ES resistance
12:28 Toni: and 2058.5 NQ
12:33 Toni: market never bothered with the 2T trigger.. can see it has been working to break the pattern of the last two days as i said
12:33 Toni: this would mean that higher odds it will try to hold up this afternoon
12:33 Toni: so will want to be less aggressive on shorts
13:06 Toni: market keeps acting like it wants to roll over but i dont trust it to
13:40 Toni: well.. i tried the NQ long but got stopped on flush
13:40 Toni: i know this thing has room to move fast
13:46 Toni: i know momentum is shifting larger time frames
13:46 Toni: so this bias of mine is because of the trend and not the momentum
13:47 Toni: usually momentum rules, but there are many times the trend does
13:47 Toni: will see...
13:54 Toni: figured a pop would have come on that two wave pullback
14:02 AoN: can we see the mkt rolling over here TOni?
14:04 Toni: well.. was not planning on it so not sure because its certainly starting to try to roll over anyway
14:56 Toni: can see how the market is not repeating the action from the last two days even though it tried.. instead looking to still hold up
14:57 Toni: this is next futs resistance from the earlier congestion
15:11 Toni: ES into resistance
15:12 Toni: NQ 2058.5 is still next level
15:13 Toni: this rally.. its because so many people started thinking the market was gonna repeat a third time ... trapped em
15:16 Toni: both levels holding
15:18 Toni: the strong momentum is going to make corrections overall more difficult to get going
15:18 Toni: so slower
15:18 Toni: more choppy
14:10 Toni: MATK 5 min avalanche
15:11 Toni: MATK has to hold here
15:36 AoN: finally MATK
15:36 Toni: yeah
15:36 Toni: first support here
15:36 Toni: 35
posted by Toni Hansen @ 7:32 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Morning Rally and Afternoon Reversal Repeats
Good day! Although the action on Wednesday was not as extreme as Tuesday, the indices had a lot in common on both of these days. The morning action was to the upside, boosted by positive news on the data front. When this euphoria wore off over noon the market turned, heading lower throughout most of the afternoon and then bouncing back into the close. The momentum of the repetition, however, was not the same. The market had a stronger upside in the morning and weaker downside action into the afternoon.
Ahead of the open on Wednesday the ADP employment report showed a 40,000 increase in jobs in the private sectory in May with about 20,000 in the government. Nonfarm payrolls rose by about 60,000 in May. Economists had anticipated 50,000 decline. In another report, the Labor Department revised the productivity of U.S. nonfarm businessses higher for the first quarter from 2.3% last month to a 2.6% annual rate in the first quarter.
At 10:00 ET the Institute for Support Management released its May data for its composite index of non-manufacturing businesses. The index slipped from 52% in April to 51.7% in May. Since this was still above 50%, however, it indicates growth for the second month in a row. In the three months prior the index had fallen short of this key level and was in a contraction phase. The news from this report did not cause a strong immediate response in the market, but the gains solidified within the 30 minutes that followed and the congestion which began ahead of the data finally broke to new highs around 10:20 ET.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080605dow.gif
The indices struggled with confidence until 10:35 ET. At that point a small continuation pattern that had been forming broke higher. The opening momentum returned and the indices moved steadily higher into the 11:15 ET correction period where they starting running into larger time frame resistance levels. The 5 minute 200 period simple moving averages were hitting in both the S&Ps and Dow and the Nasdaq had hit the prior day's highs. Meanwhile the S&Ps and Dow were also testing price resistance from Tuesday in the early afternoon where the market had congested before falling sharply lower. This led to an initial reversal pattern into 11:30 ET.
The market moved slowly lower into noon where the 5 minute 20 sma zone served as support. Volume was light on the pullback, creating what appeared to be a bull flag other than the fact that the intraday trend was very extended with equal move resistance on the 15 minute charts hit in both the S&Ps and Dow. The market was simply at too much resistance to sustain a decent move off the 5 minute support. My focus by this time had shifted lower once again. Throughout the morning the stocks I had traded had been shorts in PBR and MTL, but up until 11:15 ET I had been bullish in the indices. Even though the market made an attempt to move strongly again off the 5 minute 20 sma, the Nasdaq only broke by a hair to create a bull trap I call a 2T (2-top) where the second high is slightly higher than the first at a strong resistance level.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080605sp.gif
Although momentum was on the strong side off the 20 sma, it lacked volume to confirm the move. The momentum was thus able to shift into the early afternoon. Volume picked up when the 5 minute 20 sma broke lower. It was not much in the Nasdaq, but was stronger than the upside in the S&Ps and Dow. The indices found support with the 13:00 ET correction period at the breakout level from the highs of the 10:30 range in the S&Ps and Dow. The reaction off this support was again on light volume. The S&Ps and Dow hugged their 15 minute 20 period simple moving averages as they crept higher, creating Avalanche setups on this time frame that triggered into the 14:00 ET correction period.
The market moved very well coming off this second wave of selling on the 5 minute time frames. Support hit within 20 minutes when the S&Ps hit support from around 10:15 ET and the Dow hit its morning lows. at about 14:15 ET. The third wave in the trend came off the 5 minute 20 sma at about 14:45 and took the market lower into the 15:00 ET correction period. Although the corrections between each of the waves of selling were not comparable in terms of how long they took to form, the market was still able to establish a larger correction off the lows. The 5 minute 20 sma had hit as resistance a final time into 15:30 ET and I did scalp this move, but the pullback was only a fraction of the prior upside move before the 5 minute 20 sma broke higher into the close.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080605nas.gif
Due to the morning rally and late day reversal, the Dow Jones Ind. Ave. ($DJI) only lost 12.37 points on Wednesday to close at 12,390.48. The S&P 500 ($SPX) lost 0.45 point to close at 1377.2. The Nasdaq Composite ($COMPX) rose 22.66 points and closed at 2503.1. The index futures held the late-day reversal and continued higher into the early hours of trading on Thursday. This leaves the market looking bullish into Thursday morning. I am looking for the indices to test the 10 and 20 day sma resistance levels before again stepping lower. The Nasdaq has opened the door for another slightly higher high on the daily time frame.
posted by Toni Hansen @ 1:30 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, June 4, 2008Trade and Commentary Wrapup - 20080604
CHART FOR MORNING MARKET CALLS USING YM
http://tradingfrommainstreet.com/images/trades/20080604_YM.gif
09:44 Toni: the futures here just popped into the premarket highs from around 2:30 am for price resistance initially in here
09:44 Toni: The Nasdaq is closing in on yesterday's last 30 min highs
09:52 Toni: this is some fib resistance on the NQ
10:32 Toni: NQ and ES hitting resistance
10:35 Toni: futs pulling in off the resistance
10:50 Toni: YM is fomring 100 tick "A" buy setup
10:50 Toni: 10:50:24 Breakout Template: For information on A, B, C, D, or Z template patterns, please see http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif The green circle is the entry with the red bar as the stop
10:53 Toni: YM first resistance
10:53 Toni: 12470
10:54 Toni: NQ is at yesaterday's highs zone
10:58 Toni: second resistance zone hitting 12480
10:58 Toni: YM
10:59 Toni: trigger on this buy was 12453
11:01 Toni: nice job with YM... still have concern we can keep testing highs a bit longer but hard action to read
11:30 Toni: Dow trying to roll over
11:30 Toni: ES is at resistance
11:36 Toni: YM first support
11:50 Toni: YM is at the second support btw
STOCKS: 2 MORNING CALLS (PBR AND MTL SHORT)
STOPS - 0
10:08 Toni: PBR base at lows
10:13 Toni: PBR going well
10:14 Toni: coming into first support zone
10:14 Toni: 66 is the whole number support
10:15 Toni: 66.04 last
10:15 Toni: 66.01 low
10:17 Toni: PBR :)
10:23 AoN: nice job on PBR toni
10:23 Toni: second support level PBR
10:23 Toni: taking gains
http://tradingfrommainstreet.com/images/trades/20080604_PBR.gif
10:33 Toni: MTL potential 5 min avalanche
10:42 Toni: MTL still forming
10:51 Toni: this is 5 min 20 sma zone on MTL so i want to see it react off it
11:00 Toni: MTL "D" trigger in the base triggered... channel trigger close
11:02 Toni: am looking for 51.75-52 on mTL
http://tradingfrommainstreet.com/images/trades/20080604_MTL.gif
12:00 ET
... at this point I took off for a few hours due to a migraine ...
15:10 Toni: MTL is breaking down again this afternoon i see
15:29 Toni: MTL hit 51 zone
15:26 Toni: 6 min 20 sma hitting here on the futs gang
15:26 Toni: also 10 sma on the 15 min
15:27 Toni: that is 5 min sry
15:27 Toni: not 6 lol
15:27 Toni: not using funky time frames i promise
15:28 Toni: ("psst.. you see that.... she using 6 min time frame... no wonder i am having problems with my trading... gotta use a 6 minute! its the holy grail!")
15:28 Toni: ok... maybe not....
15:29 Toni: first support on futs off that sma
15:50 Toni: rest of futs hit stop
15:51 Toni: 15 min 20 sma almost hit in the futs here ahead of the close (resistance)
posted by Toni Hansen @ 11:54 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Premarket Gains Receive Boost by Factory Orders, but Fail to Hold On
Good day! Market action was mixed for the first half of the day on Tuesday. Although the morning trend was to the upside, the indices struggled to make new highs after about 10:05 ET. The session began with a modest upside gap in the indices which left the S&P 500 ($SPX) and Nasdaq Composite ($COMPX) back at 50% retracement levels as they bounced off Monday's lows back towards Thursday's highs. This left the indices at resistance into the opening bell and since gaps of this size tend to fill it did not take long for the market to start selling off.
Early morning support hit as the gap zones closed and the 9:45 ET correction period hit. The market began to chop around at that point. They started to favor an upside bias within the chop, but it took the 10:00 data to provide the market the boost it needed to break free. The Commerce Department reported that April orders for U.S.-made factory goods climbed 1.1%. This better-than-expected news sent the market flying... at least initially.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080604dow.gif
The market rally out of the 10:00 data did not last long. The ES (S&P 500 Emini futures contract) was hitting a third high on an 800 tick chart and this signaled the beginning of trend exhaustion. The indices turned over relatively quickly, but the momentum slowed as the indices came into the lower end of the all sessions uptrend channel. This hit at about the same time as the 10:45 ET correction period. Since the market was making slightly lower lows at this time on the small intraday time frames such as the 1 minute chart, it created a rounded low into the support which allowed the market to rally fairly quickly.
Coming off the 10:45 zone lows I began to watch for the indices to retest the morning highs for reversal patterns such as a double top or 2T, which is a type of double top that breaks slightly to trap bulls and flush out bears. The Nasdaq was the first to succumb to this pattern. It formed a double top into the 11:15 ET correction period. It then fell into a congestion level to form a small 2 minute Avalanche into noon which the S&Ps (ES) triggered its own reversal with a 2T at the 12:00 ET correction period. Setups such as this that show up on a 15 minute time frame will make it very difficult for the market to hit new highs on the day, particularly if the setups form over noon or into the early afternoon since they are trend-breaker patterns.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080604sp.gif
Perhaps "trend-breaker" was a bit of an understatement. The market fell throughout the early afternoon. Given the larger pattern, I was watching for the setup to form a continuation pattern on the 5 minute time frame to continue lower. The 15 minute 20 sma was the support the indices needed to create that continuation pattern. The market congested along the support until about 13:30 ET. This was a relatively brief reprieve.
When the 15 minute 20 sma gave way it did so in a major way. The bottom completely fell out in the market. The Dow hit the prior day's lows first, but that didn't phase the bears at all. Next the S&Ps tried their prior day's lows, but this also broke in a matter of minutes. Finally the Nasdaq was testing its own lows from Monday. This zone held a little better, but the momentum was so strong it made it very difficult for the bulls to gain a foothold. The Russell 2000 was holding up the best on the day and this test of lows in the Nasdaq was the late afternoon low in the Russell from Monday with a bit of room to go before it's morning lows. As with the other indices, however, it did not take much of a pause in the market before its way was also paved to retest that level and break to new lows on the week.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080604nas.gif
Finally, around 14:25 ET, the indices looked like they might be done with the strongest of the downside. At this time the ES (S&P EMini) was hitting its lows from the 27th. This was also the highs from the 22nd in the NQ (Nasdaq 100 EMini). Among several of the news events for the day was the firming up of Barack Obama's campaign for the White House when he won the Democratic nomination for the presidency. Another was a report by the Wall Street Journal that Lehman Brother (LEH) is facing its first quarterly loss since it went public in 1994 and would likely have to sell up to $4 billion in common stocks to raise capital. When the indices hit the support ahead of 14:30 ET it slowly reacted to the support due to the strong downside. This changed at 15:00 ET, however, when LEH denied rumors that it was going to try to access the Fed's discount window to help with its capital crunch. This led to a quick pop in the indices which eventually led them into the 15 minute 20 period simple moving average as resistance at 15:30. The indices pulled slightly off this resistance going into the close.
Despite the substantial losses in the second half of the session, the early morning gains and late day rally helped the market's overall results appear not very significant. The Dow $(DJI) closed lower by 100.97 points, or -0.8%, at 12,402.85. The range from highs to lows was more than 200 points though. Remarkably, only 20 of the Dow's 30 components posted losses. The S&P 500 ($SPX) lost 8.02 points, or 0.6%, and closed at 1,377.65 on Tuesday. The Nasdaq Composite ($COMPX) shed 11.05 points, or 0.4%, and closed at 2,480.48. Crude futures continued to slide, falling $3.45 to $124.31 a barrel. Gold also lost ground, shedding $11.5 (1.3%) to close at $885.5 an ounce. The prices have had no affect on gasoline prices, however, which remain at record highs of $3.98 a gallon for regular unleaded.
As the week progresses, I am still focused primarily upon corrective action coming down from those highs a few weeks ago. Right now it is looking like we will stair-step lower in the Dow and S&Ps at least so look to prior daily lows as support levels and the 10-20 day sma zone as resistance. Corrections can last two to three waves. I am leaning towards three this time around with the second one currently under way. It will still take a week or so though before this plays out enough to give us a better indication if that action will still form.
posted by Toni Hansen @ 1:46 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, June 3, 2008Trade and Market Commentary - 20060503
09:50 Toni: futures sandwich between 5 min 200 sma support all sessions and 30 min 20 sma resistance all sessions
09:54 xeno: leh is a done duck
10:00 Toni: yeah.... LEH followed through but took until today
10:02 Toni: futs popping on factory orders data
10:02 Toni: hitting first resistance here
10:02 Toni: also have futs fib resistane
10:02 Toni: ES 50% retracement
10:06 Toni: futs second resistance
10:04 Toni: CF, MOS and AGU from yesterday on the daily upside breaks are still going
10:05 Toni: ipi turning back orth
10:47 Toni: indices are hitting the lower channel from the uptrend... ES has three highs so wont be likely to see a new high off this support
11:16 Toni: morning highs zone is futs resistance
11:18 Toni: indices have 2T potential
11:38 Toni: futs doing a decent job of holding prior highs... NQ was withing a tick
11:38 Toni: this is first support with 5 min 20 sma
11:55 Toni: futs initial support held well.. ES going for double top/2T or so
12:26 Toni-awa: ES going well off 2T setup
12:26 Toni-awa: NQ still holding double top
12:26 Toni-awa: 15 min 20 sma is support
12:26 Toni-awa: nice moves....
12:27 Toni-awa: fist bit of support showing here
12:28 Toni-awa: 1389es 2018.25nq
12:30 Toni-awa: market does look lower to hold correction into the afternoon so would watch for 5 min cont setups
12:45 Toni-awa: 12:45:43 Market Alert: ES hitting 15 min 20 sma
12:45 Toni-awa: for those trading the 2T this is a good place to take some off
12:46 Toni-awa: NQ is coming into prior 15 min lows for those that took its earlier double top also
12:46 Toni-awa: very nice action off these larger time frame patterns today
12:59 Toni-awa: NQ also at the 15 min 20 sma now
12:59 Toni-awa: support
13:28 Toni-awa: getting our cont in the futures... nice break
13:32 Toni-awa: NQ hitting 30 min 200 sma
13:33 Toni-awa: this is next support off that 2T double top in the indices
13:39 Toni-awa: ES making a run for yesterday's lows
13:49 Toni: heres that ES support at yesterday lows
13:53 Toni: sure is a wicked move....
13:53 Toni: not going to be any fast relief for this
13:55 Toni: NQ hitting yesteday lows
14:21 Toni: ES coming into last week's lows now
14:22 Toni: ER finally made it to mondays lows
14:22 Toni: hitting that zone here
14:30 Toni: this is the 27th lows on the ES btw
14:35 Toni: this is decent larger term support so will see how it holds
14:36 Toni: last lows ES on the daily
14:36 Toni: and 22nd highs in the NQ
15:02 xr3: LEH denial of borrowing from fed
15:03 charlie: that should pop it
15:04 Toni: popped the market anyway
posted by Toni Hansen @ 7:17 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Monday, June 2, 2008Market Correction Escalates; S&P Ratings for LEH, MER and MS Dropped
Good day! The market took a hit on Monday. Heading into the session I had been expecting a pullback off last week's highs due to short setups that had been forming on the 30 minute time frames as I mentioned in the weekend column. These patterns triggered with several strong breakdown setups in afterhours trade. On Sunday the index futures broke lower into 20:00 ET. They then fell into a base until 3:00 am ET Monday when they broke sharply lower once again. Finally, another base or congestion zone from 5:00 am into the open gave way with the opening bell. This confirmed the trigger on the 15 and 30 minute time frames as well as confirming the larger bearish bias. Strong volume on the break lower also benefited the bears.
The indices continued lower in the morning after a brief pause with data at 10:00 ET. April construction spending and the May ISM Manufacturing Business Index came out at that time. Construction spending fell 0.4% in April and March's decline was revised to a 0.6% decline. The Institute of Supply Management reported an increase in manufacturing activity, rising its index level from 48.6 in April to 49.6 in May. Despite the better-than-expected numbers, the market was not able to withstand a larger correction off the support due to the larger technical bias favoring further downside.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080603dow.gif
After the breakdown into 10:15 ET, the next correction period was 10:45 ET. The market was coming into support levels at this time from earlier last week and I was beginning to look at potential for a larger correction off the support going into mid-day. To accomplish this we needed to see some rounded lows. The momentum bias remained weak into 11:00 ET and the Nasdaq broke lower at this time. This was also a correction period, so it is a typical time to see such moves.
The momentum began to shift a little after 11:00. The downside slowed and we began to see some rounding off. Volume was light on the upside, however, and this created concern for bulls. The market began to base along the 5 minute 20 sma at noon. This created the start of a potential Phoenix buy setup. Volume dropped off even more, which was a pro for a Phoenix. Standard & Poor's threw a big wrench into the initial attempt by the market to show a correction up off support mid-day. It cut its debt ratings on three of the large brokerages. Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley (MS) were all hit. LEH lost 8%, while MER fell 2.8%, and MS fell 2.5% on Monday.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080602sp.gif
Index prices plummeted following the financial sector assault. This did have the advantage of flushing out the market, however, which created the potential for a correction off lows into the afternoon. The 13:00 ET correction period was the next time level for such a move to begin. Since the momentum was sharp on the downside, it took a bit of time for the indices to begin to move higher. Volume was light as the indices crept into the 15 minute 20 sma even though the sharp volume into the afternoon on the downside was good for exhaustion.
I began to watch for a buy setup late afternoon. The pattern that the market was favoring was a shallow Phoenix. This means it is a Phoenix pattern that comes after a slow ascent off lows, followed by congestion along a 20 sma and then it typically breaks higher with a strong pop when the resistance gives way. It initial began to look like we would see a move out of 15:00 ET, but this proved to be a bit early and the market tried to pull lower off the 15 minute 20 sma. The momentum shifted enough on the smaller tick charts though to still give us that pop into the close going into the final correction period of the day around 15:30 ET.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080603nas.gif
After losing so much ground early on, the late day reversal still left the Dow ($DJI) with triple digit losses. It closed lower by 134.5 points, or 1.06%, at 13,503.82. 28 of its 30 components posted losses, led by the financials. The S&P 500 ($SPX) lost 14.71 points, or 1.05%, to 1,385.67. The Nasdaq Composite ($COMPX) fell 31.13 points., or 1.23%, and closed at 2,491.53.
In terms of the outlook coming out of Monday's action, the daily bias I posted for Monday still rings true: If the indices try to break lower right away early this next week with a lower low on the S&Ps or Dow then we will be dealing with higher chance the market to bounce again on a larger time frame with more of a 2B type of action (a form of double bottom with a slightly lower second low that creates a trap for the bears). This would be particularly true if it is a slower decline than the ones two weeks ago. Or it could kick off a smaller downtrend, such as the one from 10:30 am to 11:10 am Friday morning on a 5 minute time frame in the ES and YM where the market would be heading into the second wave down.
Since the market did indeed break lower early in the morning on Monday, what we are left waiting to see is whether it breaks last week's lows a bit or holds them in favor of a longer range on the daily time frame. Although the indices hit strong support mid-day on Monday, there is still room to try those lows if the momentum shift from Monday' afternoon does not hold. I would actually favor such action for the bulls since it would help round the lows off a bit better once again. The mid-day flush created this added potential.
posted by Toni Hansen @ 11:11 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Trade and Market Commentary Wrapup - 20080602
09:40 Toni: MEE great daily to watch for cont upside patterns
10:05 Mykonos: MEE been fluched
10:06 Toni: yep.. it formed an ascending pennant on the 1 min
10:06 Toni: still keeping an eye on it for later though
10:06 Toni: nice 15 min base would be good
10:06 Toni: re MEE
10:14 Mykonos: MEE running more than a scalp :-)
10:16 Mykonos: outa MEE :-)
10:20 norancho: yeah, MEE nice for me too
10:21 Toni: bbiab gang
10:21 Toni: MEE 70 here is some price resistance
http://tradingfrommainstreet.com/images/trades/20080602_MEE.gif
10:09 Mykonos: CF nice I missed it :-(
10:10 Toni: yeah i had NMX on my swing list going into the day .. that was my big miss
10:11 Toni: MOS and AGU were ones i had as same daily type action as CF btw
09:40 Toni: 2021.25 is next NQ support zone
09:42 Toni: this is 50% retracement from 28th lows to 29th highs on the ES here
09:46 Toni: COST 60 minute breakdown pattern forming
http://tradingfrommainstreet.com/images/trades/20080602_COST.gif
09:50 Toni: ES next support level is 1389-1390
09:55 Toni: ES support hitting 1389
09:57 Toni: NQ also hit support level
09:58 Toni: Monday, June 2, 2008
09:58 Toni: 10:00a.m. Apr Construction Spending: Previous: -1.1%.
09:58 Toni: 10:00a.m. May ISM Manufacturing Business Index: Previous: 48.6.
10:00 Toni: initial boost off our support with the data
10:02 Toni: the market is poised for a correction off the lows mid-day
10:02 Toni: into mid-day
10:05 Toni: ER i had fib support marked at 738.43
10:05 Toni: it held that almost exact
http://tradingfrommainstreet.com/images/trades/20080602_futs.gif
10:04 Toni: GOOG is just starting to form a 15 min avalanche
http://tradingfrommainstreet.com/images/trades/20080602_GOOG.gif
10:09 Toni: SHPGY is a short to keep an eye on ... good daily gap but it is an ADR so gaps are typical
http://tradingfrommainstreet.com/images/trades/20080602_SHPGY.gif
10:11 Toni: 10:11:36 Market Alert: potential for 2B in the indices on the 1 min (No Setup)
10:11 Toni: 10:11:44 2B: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis.html#2
10:12 Toni: YM is in mid-range from the 28th lows congestion here
10:13 Toni: this is support here with the lows at the 12493 the next level if it step down one more time this morning
10:13 Toni: again, i am expecting correction off the lows going into mid-day
10:13 Mykonos: hope so
10:14 Toni: Dow is the weakest of the indices today
10:14 Toni: NQ here is 50% retracement off highs of the 28th-30th move
10:15 sngdncman: I got on a little bit...hopeful of that mid day correction
10:15 Toni: YM tick charts have little momo reversal of this support
10:16 Toni: off
10:17 Toni: 10:45 ET is next correction period for the market ... current is still showing reaction tothe 10:15 correction period that hit with the support
10:18 sngdncman: thks
http://tradingfrommainstreet.com/images/trades/20080602_YM.gif
14:40 Toni: ATI base at lows 5 min (72.10-.20)
14:54 Toni: want to see 72.35ish hold as highs on ATI in 5 min 20 sma zone
14:55 Toni: ATI was actually on my position trade scan list
14:55 Toni: based ont he weekly range
15:08 xr3: ati melting
15:10 Toni: 72.30 is ATI resistance now
15:11 Toni: first bit of support here
15:11 Toni: 71.75
15:23 Toni: ATi looking to take gains on this move
15:23 Toni: 71.60 last
15:23 Toni: 71.50 is the half number support (71.55 low just just after post)
15:24 Toni: nice....
15:27 Toni: ATi couldnt have timed that better haha
15:27 Toni: yikes
http://tradingfrommainstreet.com/images/trades/20080602_ATI.gif
14:48 norancho: Toni, we were discussing the where this market closes today, ie, up or lower from here, do you have any thoughts on that?
14:53 Toni: re the market.... i think this afternoon is probably going to be more choppy but can retest lows once more
14:35 Toni-away: WLT basing at highs on the 5 min
14:55 Toni: momentum in the range in WLT is not holding up very well
14:56 Toni: NQ is trying to form a shallow Phoenix
14:56 Toni: 5 min
14:56 Toni: 14:56:21 Phoenix: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis2.html#17
14:58 Toni: indices have the 15 min 20 sma right overhead
14:58 Toni: that is a con on Phoenix
14:59 Toni: think it should have gone by now...
15:02 Toni: looking like we wont get it and market can more easily pull blower again... bear flag 15 min... want to be careful because if it just slides lower it can pop fast into the close
15:26 Toni: futures just chopped lower so this is that pop i mentioned (trigger 1996.75 NQ, 1380.75 ES)
15:29 Toni: first futs resistance on pop (2004.25 NQ, 1384.25 ES)
15:48 Toni: this was a strong pop into the close... started a few min ahead of the reversal period.. but nice move
15:49 Toni: this is second reistance in that pop (2007 NQ,1386 ES)
http://tradingfrommainstreet.com/images/trades/20080602_NQ.gif
15:17 Toni: LEH base at lows 5 min($34.00)
LEH I want to see hold in here since not much time left so i'd rather take more of a scratch at this point than wait and end up with a potential loss (trading $33.94)
15:59 Toni: had to scratch pretty much o LEH.. ran out of time :(
15:59 Toni: 33.90 here
15:59 Toni: 33.85
http://tradingfrommainstreet.com/images/trades/20080602_LEH.gif
posted by Toni Hansen @ 12:29 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
News & Event Driven Price Action
Question:
Technical Analysis vs. News & Event Driven Price Action. Perhaps I’m over-analyzing this issue however, it seems that price action is usually driven by the events of the day. How can one rely upon historical Technical Analysis as a predictor of the future when events are so unpredictable?
Answer:
It is true that price action is a reflection of the sentiment of the day, but think in terms of psychology: Similar triggers create similar responses. If a loved one becomes sick you will start to worry. As their condition deteriorates your emotional reponses will also heighten. Should they pass away then you will also react in a predictable manner which psychologists call the stages of grief. The markets are merely a reflection of human emotions. Charts show the visual progression of this range of emotions as market participants react to the current sentiments. As such, technical analysis is a highly valid means of measuring and predicting price action which is merely a reflection of repetitive human nature.
posted by Toni Hansen @ 11:10 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
WRAPUP
12:12 Toni: energy is the leading sector
12:21 Toni: BIIB base at lows
13:10 Toni: BIIB still basing at lows
13:14 Toni: BIIB trying
14:21 Toni: first BIIB support
15:13 Toni: those holding partials on BIIB move stop over 70.10 on the rest
15:33 Toni: BIIB stop over .90 now
15:47 Toni: .83 (over) for trialing on BIIB now
15:47 Toni: not much time left...
15:47 Toni: was hoping for 69 today
15:47 Toni: but hmm...
15:55 Toni: over. 75 now on biib trailing
15:56 Toni: but really can just start to look to take the rest off since we only have a few min
15:56 Toni: the pattern intraday is ok for an overnight hold but things are gappy these days and the daily is iffy
15:56 Toni: so wouldnt take the risk
15:57 Toni: if the upside pace had not been as steep on the daily it would have been better for a hold
http://tradingfrommainstreet.com/images/trades/20080725_BIIB.gif
12:25 Toni: 12:25:18 Market Alert: futures watching for 5 min bear flag
12:29 firstbrain: @Toni: I'm new here, Could you explain a bit further what your last comment means. pls?
12:31 Toni: sure thing
12:32 Toni: it just means that in the index futures I am watching for a bear flag to form. This is a lower level range or slight upside move on lighter volume than the selloff
12:32 Toni: when the channel breaks it would trigger a short
12:32 Toni: you want the upside off this support overall, however, to be more gradual than the decline
12:32 firstbrain: on a 5 min timeframe?
12:34 Toni: correct
12:34 Toni: this would be about the 400 tick chart
12:34 firstbrain: ah ok thank you very much
12:35 Toni: yw
12:45 Toni: so far the upside pace is a bit stronger than i'd like to see for a bear flag in the futures... would need to see it hold here and fall more sideways
http://tradingfrommainstreet.com/images/trades/20080725_YM.gif
13:19 Toni: i get the feeling the market is just going to chop around the rest of the day
13:27 Toni: CB low-leve base
13:44 Toni: CB first bit of support
15:33 Toni: CB coming off second support level
http://tradingfrommainstreet.com/images/trades/20080725_CB.gif
14:09 Toni: NQ resistance in here prior highs and third push on a 50 tick
14:28 Toni: nice scalp off the futs resistance
http://tradingfrommainstreet.com/images/trades/20080725_NQ.gif
13:46 Toni: COLM low-level base
15:34 Toni: COLM still pretty much basing
http://tradingfrommainstreet.com/images/trades/20080725_COLM.gif
posted by Toni Hansen @ 10:09 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Breakout Buy Setup
http://www.tradingfrommainstreet.com/images/chartpatterns/breakout1.gifDescription: Also called a “rectangle”, this pattern is based upon a sideways trading range breaking higher. It is most commonly traded as a continuation pattern which is then called a consolidation, but a sideways range can at times also break in the direction opposite of the trend that had been in place heading into the trading range. In this description the traits will be discussed as if they are in a continuation buy setup, but they can easily be reversed in order to use them in a short setup.
Criteria: The criteria for a rectangular breakout pattern from a sideways trading range is very similar to a triangle range breakout. Most of the same criteria, as well as pros and cons will apply. The difference is that there are more comparable highs and lows, as opposed to a narrowing range or trend channel. There must be at least two highs and two lows within the range to be identified as a trading range if there is back and forth action. If there is just a lot of overlap from one bar to the next, then these waves of buying and selling will be more difficult to discern.
Entry: As in a triangle pattern, there are several entry techniques that work well on this pattern. The technique which is the most widely taught is to draw a line connecting the highs of the range to each other and connecting the lows of the range. In the case of an upside range breakout, the trigger would occur when that upper trend line breaks higher. This is one of the least preferred methods to entering a breakout, second only to taking a breakout from the absolute highs of the range.
[*]Another method in the case of a buy setup is to enter above the previous high once at least two highs are established. [*]A third setup, which is the one that will generate the highest reward compared to risk, is to watch the moves within the range and monitor the pace of each of the moves. When the security pulls back more gradually off the highs then before, or hugs the upper trend line, then use a break higher from that smaller downtrend or sideways trend within the larger trading range for an entry trigger. Stop: Under the last pivot low within the range, or if it bases on a smaller time frame within the larger trend channel, then a stop can be placed under the lows of that smaller range. Use greater caution when keeping a tighter stop such as this if the security is very volatile, meaning there is a lot of back and forth action and overlap even as it trends, if the pace has yet to change within the range when it breaks, or if the security is thinly traded.
Target: The targets on a breakout will depend upon whether they are continuations or reversals of the previous trend.
[*]In the case of a continuation buy pattern, when the pace or momentum on the breakout move is comparable to that of the move heading into the trading range itself, then a target is an equal or measured move. This involves taking the move into the range, from the lows of that move to the highs at the start of the range, and then comparing that to the lows at the start of the breakout and projecting them higher. If the momentum is slower than the previous rally, then it will be more difficult to hit that equal move and it will be necessary to identify closer resistance levels. If the momentum is stronger than that previous move, then a larger than equal move can form. [*]When the breakout from the range is a reversal pattern off lows, however, then monitor the price and moving average resistance levels overhead. If a downtrend preceded the base at lows and then it turned around and headed higher, then the level at which a previous bear flag broke lower would be resistance and a strong initial target, as would a resistance level such as a 200 period simple moving average, although any number of major moving averages can come into play on multiple time frames to serve as resistance. The resistance will be much stronger if several resistance levels are hitting at about the same
The economic data which came out on Thursday was not very favorable. The biggest of these was the 10:00 ET existing home sales data. The market had triggered the 15 minute short setup shortly after open. These losses deepened, however, when the National Association of Realtors reported that resales of U.S. single-family homes and condos fell 2.6% in June. This brought it to a seasonally adjusted annual rate of 4.86 million, which is the lowest level in about 10 years. Resales are now down 15.5% over the past year and down 33% since they peaked in 2005. Sales of single-family homes fell 3.2%, while sales of condos rose 1.7%.
In a separate report, the Census Bureau stated that about 25% of housing units available for rent that were built in the last decade are vacant, while about 10% of homes are. The median sales price fell 6.1% in the past year to $215,1000 while the inventory of unsold homes on the market rose 0.2% to 4.49 million. This is an 11.1-month supply at the current sales pace and is the second-highest inventory level since the 1980s. About 1/3 of current sales are distressed sales, meaning that they are either foreclosures or short sales.
The House approved legislation on Wednesday aimed at assisting the flailing housing market. It includes support for Fannie Mae (FNM) (-19.9%) and Freddie Mac (FRE) (18.4%), assistance for homeowners needing to refinance high-interest loans, and a $7,500 tax credit for first-time home buyers. FNM and FRE had opened higher on the session, but then trended lower following the 10:00 ET data throughout the remainder of the day and ended up being the third and fourth worst performers in the S&P 500 ($SPX).
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080725dow.gif
The selloff in the indices which took place immediately after the housing data found support by the 10:15 ET correction period. They then fell into a low-level base as volume dropped off into 11:00 ET. This created a strong short setup leading to new lows into 11:30 ET. The Nasdaq EMini (NQ) hit support at Wednesday's afternoon lows at this point, while the S&P 500 (ES) hit support from Tuesday's mid-day highs. This pushed the market into another correction over noon. The Nasdaq continued to show the greatest relative strength, but the S&Ps and Dow paced lower.
The 5 minute 20 period simple moving average served as resistance throughout the entire session in both the S&Ps and Dow, although the extent of the selling declined mid-day. The market then broke sharply lower again, however, coming out of 14:00 ET when that correction period hit. A final bear flag developed into the last hour of the day with the Nasdaq finally joining the S&Ps and Dow. All three of the indices closed at the zone of the day's lows.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080725sp.gif
The Dow Jones Industrial Average ($DJI) fell 283 points, or 2.4%, on Thursday and closed at 11,349. 26 of the Dow's 30 industry components finished the day in the red. General Motors (GM) fell 11.1%, while Boeing (BA) shed 6.3%. The five financial stocks in the Dow, however, accounted for more than 1/3 of the Dow's decline (108 points). These were American International Group (AIG), American Express (AXP), Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM).
The S&P 500 ($SPX) dropped 29.65 points, or 2.3%, and closed at 1,252. As you have probably guessed, the financial sector fronted the losses. It was down 7%, while consumer discretionary followed with a 4% loss. Information technology dropped 3%.
The Nasdaq Composite ($COMPX) lost 45.77 points, or 2%, and closed at 2,280. Share of Qualcomm (QCOM) took off after settling a patent and royalties dispute with Nokia (NOK). QCOM gained 17%, while NOK rose 2.2%. Amazon was up 11.6% after it reported better-than-expected earnings for the second quarter. Among the top losers in the Nasdaq were Sirius Satellite Radio (SIRI) (-9.7%), Broadcom Corp. (BRCM) (-9.65%), Wynn Resorts (WYNN) (-8.24%), and Sandisk Corp. (SNDK) (-7.21%).
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080725nas.gif
Thursday's session ended at support in the indices from the end of last week and the beginning of this at prior highs and congestion zones. This creates higher potential for a bounce in the morning. On the whole though, I am favoring further downside into next week for that larger daily flush lower that we had been looking at forming going into this week. The S&Ps and Dow can both easily drop back into the zone of the month's lows before they are able to bounce back again.
NOTE: I will be in Iowa retrieving my kids from a month at the grandparents next week, so the Daily Market Action Letter will not be sent out next week. It will resume on Monday, August 4th. I hope you have a wonderful week and you'll hear back from me then!
posted by Toni Hansen @ 12:22 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, July 24, 2008Question on Tick Charts
Hey gang... I was not able to get to all of the questions from my webinar yesterday, so I will be answering them as time permits here on the blog. I had a number of question on "Tick charts."
Tick charts are different from time frame charts where each bar or point on the chart represents a certain period of time, such as 5 minutes or 1 day. Instead, they measure the number of trades and mark a point or create a bar for each time that number of trades or ticks has gone off. For instance, on a 100 tick chart it is representing 100 ticks for each bar or point made on the chart. Volume is not helpful on tick charts, but tick charts can even out the charts and show action more clearly than on a time frame chart. As such, I really love to use them as a primary means of charting on the index futures with the time frame charts as supplementary to show me volume activity and I use them to help with timing on stock charts.
One question was whether or not you can use tick charts in forex. Well, technically wouldn't they be called "pip" charts? hmmmm :) Actually, I've never heard of them used in forex. I would assume that you can, but it is going to depend on your charting platform. I don't think I've ever seen this form of charting offered on forex charts, but it doesn't mean they don't exist. As long as you can find them, then yes, they would work well for timing and you are likely to find them more useful than the regular time frame charts in that market.
posted by Toni Hansen @ 7:37 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Oil Continues to Slide while Stock Prices Rise
Good day! The Dow Jones Industrial Average ($DJI) closed higher by 29.88 points, or 0.3%, on Wednesday. It closed at 11,632.38 with 21 of its 30 index components higher on the day. American International (AIG) led the gainers, up 7% on the day. Boeing (BA) weighed somewhat against the gainers, dropping 3.7% following a reported 19% decline in its quarterly profit.
The S&P 500 ($SPX) rose 5.19 points on Wednesday, or 0.4%, and closed at 1,282.18. Consumer discretionary fronted the gains, up 2.8%, with financials coming in second with a 2.4% gain. It is deemed likely that President Bush will sign the pending housing legislation which has helped boost the financials. Fannie Mae (FNM) rose 11.9%, while Freddie Mac (FRE) gained 11.3%. Energy shares led the downside, falling 4.9%, with utilities down 2%.
Crude oil fell nearly $4 to settle at $124.44 a barrel on the New York Mercantile Exchange, off more than 15% since its high of $147.27 on July 11th. It had recovered mid-day after breaking to new intraday lows on the inventories data, which fell less than expected. This reversal formed a nice continuation pattern in the form of a Phoenix in oil and many of the stocks which trade in tandem to crude, including energy. The recovery reversed in the second half of the session at about 12:30 ET, however, and prices ended at lows. Airlines continued to soar as oil fell. The benchmark index has gained nearly 80% since July 15th. The retail price of gasoline, however, remains over $4 a gallon at $4.042 on Wednesday. It had hit highs of $4.114 on July 17th.
The Nasdaq Composite ($COMPX) climbed 21.92 points, or 1%, and closed at 2,325.88, easily surpassing the gains in the other two indices. Amazon (AMZN) rose 3.8% on the day ahead of earnings due out after the bell, while Yahoo Inc. (YHOO) fell 4.7% after it failed to meet earnings expectations. Shares of AMZN traded higher after-hours after the company reported that second-quarter profit doubled since a year ago to 37 cents a share with a 41% jump in revenue. This was much stronger than the 26 cents per share that had been anticipated. It also guided higher for the third quarter from 29% for the same period last year to 36% this year.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080724dow.gif
The session began on Wednesday relatively unchanged from the prior day's close. The indices then congestion for most of the initial 30 minutes of the day, but the Nasdaq peaked its head higher to begin to display greater relative strength very quickly out of the opening bell. It continued to gain momentum over the course of the next hour with the S&Ps and Dow tagging along from about 10:15 ET onward. All three of the major indices continued to rally until striking price resistance on the daily time frame. In the nasdaq this mean last week's highs, while in the S&Ps it meant the highs from the beginning of July. The Dow pushed ahead even further to test the lows from June 24th. Prices peaking just ahead of the 10:45 ET correction period.
The market's reversal was nearly as sharp as its rally. In fact, the initial downside momentum was just as strong heading into 11:00 ET. This correction period held, however, as the indices hit their 5 minute 20 period simple moving averages for intraday price support. They congested along this support on declining volume to form a 5 minute Avalanche short pattern which took the indices down to their opening price levels and their 15 minute 20 period simple moving averages. When an Avalanche hugs its 5 minute 20 sma, the 15 minute 20 sma is a typical target level for the breakdown.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080724sp.gif
After such strong upside and reversal moves intraday, the market was left rather uncertain of what to do with itself for the remainder of the session. Prices hugged the 15 minute 20 sma, but instead of triggering an Avalanche on this larger time frame the momentum failed to confirm a shift and continued to hug the support into the close. Part of this was due to the larger time frames at play. The 60 minute continuation which triggered the prior afternoon still has room to move before it hits larger resistance and the two wave correction off highs on a 5 and 15 minute time frame created a bullish pattern into the afternoon, despite the lack of follow-through.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080724nas.gif
We are looking at prices currently in the middle of a congestion zone going into Thursday's session. Within that congestion itself there is a bearish bias in terms of the pace of action since there is only one low on a 30 minute time frame. The market is attempting to pull up into a second high. If it can make a second low on that time frame with lighter volume and a more gradual pace than Wednesday's intraday pullback, then it will allow the indices to break through this week's highs ahead of the weekend. 2400 is the next main resistance level in the Nasdaq Composite, while 11,800 is the Dow's next resistance zone.
posted by Toni Hansen @ 1:38 AM 1 Comments
Tuesday, July 22, 2008Market Extends Itself on the Downside With Strong Gap on Weak Earnings
Good day! As we expected, the market opened sharply lower on Tuesday morning following disappointing earnings reports from several heavyweights. After trading lower in overnight trade, Apple (APPL) opened down 12% at $149 after topping its quarterly earnings expectations, yet falling short on its fiscal fourth-quarter outlook. It had closed at $166.29 on Monday. Texas Instruments closed at $28.52 on Monday, yet it opened at $24.89 on Tuesday with continued selling out of the open to hit lows of $23.43 early in the session after it reported lower-than-expected earnings and lowered its third quarter guidance. After stronger-than-expected earnings from financials such as JPMorgan (JPM) and Bank of America (BAC), eyes were on American Express (AXP) and Wachovia (WB), but both disappointed Wall Street.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080723dow.gif
As I discussed in yesterday's column, when the market experiences a substantially larger-than-average gap overall, the general tendency is for the gap to fill. The trick to being on the right side following the gap is to stand by and just watch the action for the initial 15-20 minutes of the day. On a sharp downside gap, if the 15-20 minute high breaks soon afterwards, then the odds are favorable that the gap in the indices will fill in AT LEAST one of the major indices within the next two hours. If the 15 minute highs hold, however, and are followed by a break lower, then the odds favor a morning trend on the downside which will often be followed by a trend day lower.
The Dow Jones Industrial Average ($DJI) was down approximately 58 points 15 minutes into the day. The Nasdaq Composite ($COMPX) was down nearly 24 points. The S&P 500 was down about 10 points. The session began at equal move price support as compared to Monday morning's decline. Prices had stabilized following the open as they held this support, creating a base-like formation with congestion in the initial 15 minutes. The momentum was gradual on the downside, creating favor for a break higher out of that range. This took place coming right out of the 9:45 ET correction period.
Once the gap began to fill, the Dow mini-futures (YM) did not stop until it had fulfilled that goal. It was the first of the three indices to close their gap. This gap closure level served as initial resistance and a minor correction followed. When the 10:15 ET correction period hit the market again took off. This second wave higher closed the S&P EMini gap (ES). Once again the gap closure marked a strong intraday resistance level. A second correction followed, but the magnitude of this second correction was stronger than the first. This allowed it to correct further with a two-wave pullback on the 5 minute time frame. The 5 minute 20 sma acted as support for the ES and YM, holding both waves of correction. Light volume confirmed the continued presence of a bullish bias and the indices broke higher again out of the 11:00 ET correction period.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080723sp.gif
The Nasdaq EMini (NQ) was having a more difficult time holding on following the gap since the techs left it with more ground to make up. It had fallen off its 5 minute 20 period simple moving average after running up with the rest of the market and this turn lower took it back into that initial morning breakout territory. This level of action did a decent job of holding as support, so it was able to rally out of 11:00 ET as well. While the ES and YM broke to new intraday highs and positive territory, however, the NQ fell short.
The three indices began to correct again into noon. This pushed the market into a very long period of congestion. The NQ caught a little action out of 13:00 ET on a two-wave pullback on the 5 minute, but it failed to get past earlier highs and was followed by a rapid, albeit minor, flush out of 14:00 ET.
Although the pace shifted on a 5 minute time frame at 14:00 ET, the market's larger price bias remained bullish. Upside pace picked up one the market was able to break its prior 5 minute highs soon after 14:30 ET. A base formed from that point into about 15:15 ET. Volume was light throughout the base, lending itself to a bullish bias for the breakout. By this point Apple and a number of the other strong downside gappers had also formed high-level intraday bases and broken higher. These movers helped hold up the market as it broke the range and rallied into the close.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080723nas.gif
Given the extent of the gap in the NQ, I was actually quite surprised that it managed to make such a come-back. By the close the NQ had managed to fill its gap. The Nasdaq Composite ($COMPX) faired substantially better than its futures counterpart. The Composite closed its gap early in the session with the rest of the market. It was able to tack on a 24 point gain by the close, ending the session up 1.1% at 2,304.
The Dow Jones Industrial Average ($DJI) gained 135.16 points on Tuesday, closing higher by 1.2% at 11,602.5. 21 of its 30 components closed in positive territory. The financials were among both the biggest gainers and losers on the day. American Express (AXP) closed lower by 6.5%, while Bank of America (BAC) climbed 13.3%. Merck & Co. (MRK) weighed down the Dow to some degree with losses of 11.3% on the day after its earnings report.
Monday, July 21, 2008Slow Beginning to the New Week
Good day! The index futures traded higher in premarket heading into Monday with a sharp spike higher at 7:00 am ET following Bank of America's (BAC) earnings announcement. The company beat by $0.19 for a second-quarter earnings of $0.72 a share. Even though the bank reported a 41% decline in net income for the quarter, it beat Wall Street's estimates and helped further boost the financials, which had initially began to recover early last week. BAC closed higher by 3.89% on Monday. Wells Fargo (WFC), JPMorgan (JPM) and Citibank (C) had similar reports the week before. Two more large regional banks due out on Tuesday are Wachovia Corp. (WB) and Washington Mutual Inc. (WM). The market was already extended heading into the new week as a result of that strong recovery, so it made it difficult for it to hold onto the gains past the open.
The Nasdaq Composite ($COMPX) started the intraday session at a strong resistance level from Friday's highs, creating a two-wave correction off Friday's morning lows on a 15 and 30 minute time frame. This is a traditional short setup, but the market did not turn until the 10:00 ET leading indicators data was released. The Conference Board of leading indicators slipped 0.1% in June, in line with expectations. May's reading was revised lower, however, from a 0.1% gain to a -0.2% loss. The data points towards continued economic pressure as the year unfolds and the market did not take kindly to that thought.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080722dow.gif
The market found initial support when the morning's gap zone closed at about 10:30 ET. Volume was lighter than out of recent opens, which, given that it took place following a multi-day run but with strong downside pace, suggested further downside to come. It dropped off even further between 10:30-11:30 ET. The indices formed a two-wave correction off the intraday lows with the 5 minute 20 period simple moving average holding the upper end of the price range. Continuation patterns often form with this two-wave pullback and the declining volume again pointed towards lower prices. The breakdown triggered at about 11:30 and the market sold off solidly for another 30 minutes to mirror the initial turn lower off the morning highs.
Equal move support hit at the same time as the 12:00 ET correction period in the market. The market lacked an exhaustion move, indicating that the bulls were not eager to pick up new positions, while the bears were now willing to hold on. The market did recover to an extent with another two-wave correction. This time it lasted longer and took the form of two waves of upside as opposed to two waves within a range. The first wave brought the market into the 5 minute 20 sma in the Nasdaq and 15 minute 20 sma in the S&P 500 and Dow, while the second wave pushed the Nasdaq through the 5 minute 20 sma with a Phoenix. The S&Ps and Dow had been stronger to begin with, so they had less room to move on the continuation. All three held the earlier congestion from the first correction off morning lows into 11:30 ET as resistance.
The market resistance hit around 13:45 ET. This is not a typical correction, but the price resistance was enough to hold back further upside. The Nasdaq Composite had also hit equal move resistance on the 5 minute time frame at this point, whereby the move out of the Phoenix was comparable in both time development and price development when compared to the initial rally out of 12:00 ET.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080722sp.gif
Action slowed down quite a bit into Monday afternoon. Volume declined even more and the market began to experience a greater degree of chop with prices on a 5 minute and 15 minute time frame overlapping to a large extent from one bar to the next. Support hit with the 15:00 ET correction period at earlier morning lows, but the S&P 500 and Dow Jones Industrial Average pushed through these to a small degree to create a 15 minute 2B pattern. This is a form of a double bottom with the second low is just slightly under the first to create a trap pattern. The typical price action resulting from such a trap is a move higher once the channel from the move into the second low breaks. This happened shortly after 15:00 ET, but the setup lacked any volume confirmation and the indices merely chopped somewhat higher into the closing bell.
A lot of market participants were unwilling to hold a great deal on the short-term time frames overnight due to some rather hefty earnings announcements after the bell and ahead of Tuesday's open. Since many of these same players would have also lightened the load into the weekend, it meant that a lot of swingtraders sat out the session on Monday. This "wait and see" attitude partially contributed to the lighter action throughout the day, although the greater reason remained the strong upside exhaustion from the prior week.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080722nas.gif
The Dow Jones Industrial Average ($DJI) lost 28.99 points, or 0.2%, on Monday to close at 11,467.34. 21 of its 30 index components closed in negative territory. Merck & Co (MRK) led the downside after delaying their second-quarter earnings until after the bell following concerns about the effects of their cholesterol-fighting drug Vytorin. The result was a 6.24% drop in share price, while the fellow drugmaker Schering-Lough (SGP) fell 12.1%. JPMorgan (JPM) came in second with a loss of 3.42% in the Dow. American Express (AXP) followed, down 3.06% ahead of earnings. Following the bell, it reported earnings of 56 cents a share, quite a bit lower than the 83 cents per share that Wall Street had been expecting. Revenue was up 8% to 7.48 billion. On the positive side was American Intl. Group (AIG) which gained 5.82%. BAC came in second, but Caterpillar Inc. (CAT) also had a strong move of +3.3%.
Friday, July 18, 2008Mixed Trading Ahead of the Weekend
Good day! The market was all over the place on Friday with a large divergence between a strong Dow and a weak Nasdaq thanks to the effects of quarterly earnings reports from the prior afternoon, as well as premarket. A number of major tech stocks disappointed, leading to greater relative weakness in the tech-heavy Nasdaq Composite ($COMPX) on Friday. Google (GOOG) fell sharply afterhours on Thursday after it failed to meet expectations. On Friday it ended the session down 52.12 points, or 9.8%, and closed at $481.32. Microsoft's (MSFT) earnings also fell short, resulting in a 1.66 point, or 6%, price decline with shares closing at $25.86. Another big-name tech stock that lost ground was Advanced Micro Devices (AMD), which fell 12.3% to close at $4.65.
The Nasdaq Composite ($COMPX) shed 29.52 points, or 1.3%, on Friday, closing at 2,282.78. This meant a weekly gain of 2% with the year-to-date loss coming in at 13.9%. A large chunk of the losses took place into the open with a strong gap lower on the earnings data. The Philadelphia Semiconductor Index ($SOX) lost 0.7% on the session, while the Morgan Stanley High Tech 35 Index (MSH) fell 0.5%. Gilead Sciences (GILD) fell 10.60% on the day. Other top Nasdaq losers included Whole Foods (WFMI) (-5.06%), Expedia (EXPD) (-4.57%), and Amazon (AMZN) (-4.15%).
The Dow Jones Industrial Average ($DJI), on the other hand, gained ground once again on Friday. It climbed another 49.91 points, or 0.4%, and closed at 11,496.57. This marked a weekly gain of 3.6% with a year-to-date loss of 13.3%. 19 of the Dow's 30 index components closed in positive territory. The gains were led by Citigroup (C), which was up 7.7% after reporting a better-than-expected quarterly loss. For the week, C gained 19.5%. Bank of America (BAC) followed with a 3.74% gain on Friday. International Business Machines (IBM) defied the tech trend and closed higher by 2.66%.
The S&P 500 ($SPX) was relatively unchanged on Friday. It gained a fraction of a point to close at 1,260.68. This led to an overall gain on the week of 1.7%, which puts it down 14.1% for the year to date. Telecommunication services were up 1.7%, leading the advancers for the day, followed by energy (+1.1%) and financials (+0.9%). Consumer staples fell 0.8%, while consumer discretionary lost 0.4%. In the energy sector, Schlumberger Corp. (SLB) gained 3.9% following second quarter net income growth of 13%.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080721dow.gif
After spiking on Tuesday with the downside exhaustion gap in the indices, the volume in the market dropped off quite a bit on Friday. It came in at 1.7 billion shares on the New York Stock Exchange. Advancers outpaced decliners by 8 to 7, while decliners beat out advancers by 5 to 4 on the Nasdaq. Volume on the Nasdaq came in at just over 1 billion shares traded.
In commodities, crude oil futures again slipped lower on Friday, although the selling did manage to exhaust itself in the short term. Crude for August delivery came in 41 cents less than the prior day to end at $128.88 on the New York Mercantile Exchange. For the week overall crude fell 11.3%. Wholesale gasoline was also down 11% for the week, although the average retail price of gas still tops $4 a gallon. Gold futures on the Nymex lost $12.70 an ounce to close at $958 an ounce, down more than 1%.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080721sp.gif
From a technical standpoint the market was very sloppy on Friday. After several days of strong upside the indices were exhausted into daily resistance at the 20 day simple moving averages. The upside pace began to turn on Thursday when the gap higher was followed by a correction into the afternoon before the indices turned higher once again.
The S&P 500 and Dow Jones Ind. Ave. both gapped higher into Friday morning. The gaps were minor, however, and came on the heels of a rally into the closing bell. The gap itself took the S&Ps back into the previous day's highs, which served as price resistance. Meanwhile, the Nasdaq Composite experienced a stronger gap lower. This took that index into the zone of the prior day's lows into the open.
The market sold off immediately out of the opening bell. This downside continued steadily into 10:00 ET. Prior lows served as support, along with the 15 minute 20 sma in the S&Ps and Dow. The market rolled over at this support, leading into a Phoenix buy setup on the S&Ps and Dow and a 2B reversal on the Nasdaq. A Phoenix is a pattern whose named I coined about a decade ago to describe a reversal pattern which takes place immediately following a low. It can take place within more widely know patterns such as a cup-with-handle or inverse head and shoulders pattern, or following a "V" style pivot low such as on Friday. A 2B is a form of double bottom whereby the second low is slightly lower than the first and serves as a form of trap.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080721nas.gif
The market followed through strongly when the morning reversal patterns triggered coming out of the 10:45 ET correction period. The Dow was the first to hit the morning highs within minutes of triggering. This allowed it to form another continuation pattern to break to new intraday highs while the S&Ps and Nasdaq working on making their own ways back to highs. This feat was accomplished as the 11:15 ET correction period rolled around.
The sharp upside pace made it difficult for the market to simply roll over. Instead, the Nasdaq managed to create a shallow Avalanche breakdown setup on a 5 minute time frame, where as the S&Ps and Dow slid lower with a great deal of chop and overlap from one back to the next within the pullback.
Thursday, July 17, 2008Comparative Price Action - Potential for Upcoming Market Move
Hey gang... Here are some charts showing comparative price action for the daily Nasdaq Composite. This gives us an outlook for the next couple of weeks should the pace of the market action on the daily time frame repeat the intraday pace. It is something to keep an eye on! The downside on the daily NQ was obviously more substantial than the intraday action in the first example, so I would not expect as strong of a reversal off lows as seen in the bottom chart, but the overall template remains in play. The final chart here shows an example of a cont. on the downside with similar price development.
http://tradingfrommainstreet.com/images/FocusLetter/20080719a.gif
Another similar development:
http://tradingfrommainstreet.com/images/FocusLetter/20080719b.gif
Similar development which led to a break lower as opposed to seeing the support hold:
http://tradingfrommainstreet.com/images/FocusLetter/20080719c.gif
Close-up of the support failure:
http://tradingfrommainstreet.com/images/FocusLetter/20080719d.gif
Another variation without the pullback from this point lasting more than what would be a day or two:
http://tradingfrommainstreet.com/images/FocusLetter/20080719e.gif
posted by Toni Hansen @ 11:12 PM 0 Comments
Oil Drops, Stocks Rally with Financials Recovering
Good day! The market has been able to string together three solid days of upside since hitting lows on Tuesday morning. The session began on Thursday with a gap higher into the open. The index futures had been trading in a range throughout most of the overnight session, but broke sharply higher at 6:30 am ET following a buy pattern into 5:30 am ET. Even though they pulled back off highs around 7:30 ET, news on the housing front took the futures back to the premarket highs.
At 8:30 am ET the Commerce Department reported that overall construction starts rose 9.1% in June, boosted by a change in building permit rules for multifamily units in New York City. New construction of single-family homes, however, declined 5.3% to a 17-year low. Excluding the Northeast, which was the only area affected by the new construction code, housing starts as a whole dropped 4%.
In a separate report, the government announced that jobless benefits climbed 18,000 last week to 366,000. The four-week average fell 4,500 to 376,500. Continuing claims fell to 3.12 million last week, down 81,000. The four-week average rose 16,500 to 3.14 million, which is the highest level since February 2004. For the same period last year continuing claims came in at 2.56 million.
The early morning data was unexpected and the market was still able to rally on the news. A cup-with-handle pattern formed along the highs and led to a final push on the upside into the opening bell. This extended the rally from Wednesday's trend day and left the market exhausted in the short term after following through into the 9:45 ET correction period.
After the morning reversal, additional data from the economic front did not help the bulls and aided the market's pullback from highs. Manufacturing in the Philadelphia region weakened once again for the eight straight month according to the Federal Reserve Bank of Philadelphia. Economists had anticipated a slight improvement this month. The Philly Fed index rose from negative 17.1 in June to negative 16.3. Readings under zero imply that the firms participating in the survey reported declining business levels for the month. Three-fourths of them stated increased costs, while only a third raised their own prices to compensate for the difference.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080718dow.gif
The Nasdaq Composite ($COMPX) had the most severe drop off morning highs. It had returned to its 5 minute 20 period simple moving average and gap closure zone by 10:00 ET. The data pushed it under that support, while the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) were able to hold the 5 minute 20 sma following 10:00. A level of congestion along the intraday lows developed into 10:30 ET. This created an Avalanche short setup on the 5 minute time frame which led to a second wave of downside into 11:15 ET.
When the market is in a strong uptrend, a two-wave pullback offers the perfect opportunity to position oneself in the direction of the trend. The 15 minute 20 period simple moving average on the S&Ps and Dow corresponded to an equal move and the approaching 11:15 ET correction period to assist with the continuation pattern. Even the weaker Nasdaq had support at this time, pulling back into Tuesday's highs for a strong price support level.
The market was able to pop quickly off these zones and continued to rally strongly for the next 30 minutes. This meant that the upside move was about twice as strong as the prior decline. The significance of the change of pace was that another two-wave correction on a smaller time frame began to develop. The overall pace of the pullback on this two-wave correction was more gradual than the first one, resulting in an inverse head and shoulders pattern on a 5 minute time frame. The buy setup triggered just before the 13:00 ET correction period, but waited until after it to gain momentum. The 15 minute 20 sma was again support on the S&Ps and Dow and the setup triggered coming directly off that support level.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080718sp.gif
The strongest move of the session was the direct result of this 5 minute buy pattern. The indices easily hit equal move resistance. They did not stop there, however, and instead a small continuation pattern formed into 13:30 ET to push the market to new intraday highs. The pace began to shift at that point. The 20 day sma finally hit in the Dow and Nasdaq. This strong daily resistance level helped end the intraday rally. The Nasdaq also had resistance at that point at the morning's highs.
An initial reversal pattern triggered coming off the highs at 14:30 ET. A congestion formed in the Nasdaq along the 5 minute 20 sma. This created an Avalanche setup again on that time frame. Instead of the inverse "V" followed by the Avalanche such as the one from the morning, in this case it was an inverse cup-with-handle. This took the Nasdaq lower into 15:30 ET, although the market recovered slightly into the closing bell.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080718nas.gif
Despite the turn around into the close, the market still posted strong gains on Thursday. The Dow Jones Industrial Average ($DJI) rose 207.38 points, or 1.9%, to close at 11,446.66. Out of the Dow's 30 index components, 24 posted gains. Financials led the rally with a 16.9% rally in Bank of America (BAC) fronting the Dow's gains. JPMorgan Chase (JPM) came in a close second with a 13.52% gain. General Motors (GM) was also one of the top leaders and posted an 11.93% gain. Citigroup (C) came in fourth with a 9.11% gain, while AIG (AIG) followed with a 7.04% gain. On the losing side, Coca-Cola (KO) fell 3.82% following earnings, while Alcoa (AA) dropped 2.99%.
The S&P 500 ($SPX) rose 14.96 points, or 1.2%, on Thursday. It closed at 1,261.12. Financials rose 6.9%, followed once again by consumer discretionary, which were up 3.6%. Energy was again on the downside, falling 3% on the day. Top S&P stocks included Huntington Bancshares Inc. (HBAC) (+40.25%), Mgic Invt Corp. (MTG) (+39.02%), Wachovia Corp. (WB) (+27.51%), Regions Financial (RF) (+22.22%), Barr Pharmaceuticals (BRL) (+22.11%), Freddie Mae (FRE) (+21.96%), and Fannie Mac (FNM) (+18.16%). eBay (EBAY) (-13.88%), Nucor (NUE) (-11.08%), and Safeway Inc. (SWY) (-10.76%) were the major losers.
The Nasdaq Composite ($COMPX) rose 27.45 points, or 1.2%, to closed at 2,312.3 on Thursday. A number of large tech names were slated to report earnings following the closing bell, which led to some of the greater weakness in the afternoon as profit-taking took place ahead of the data. Microsoft (MSFT) and Google (GOOG) both released earnings after the bell. Those that didn't protect ahead of the close are probably wishing they did! Earnings results from both companies were disappointing and came in under expectations. Merrill Lynch (MER) also reported after the close and also failed to meet expectations. Shares of all three companies were off more than 6% in after-hours trade. The index futures also fell on the news. The Nasdaq futures even broke through the morning lows.
A lot of the activity in the morning is going to be driven by the reactions to Thursday's afterhours earnings releases. Citigroup (C), Honeywell (HON) and Schlumberger (SLB) also report ahead of the open and will be in play for the day. The market is slated to gap substantially lower into the open. After two-three days of upside it is typical for the market to form a larger correction to that trend, so the gap is going to assist with that correction. As long as the indices can break the 15 minute high soon after it occurs, however, that gap will have an easy shot at closing. Once an extreme gap begins to close, then it will usually complete that closure before the morning is over.
On a daily time frame, given the current price development, what I am expecting from the indices is a pullback for several days, possibly even back into the zone from the week's lows. After that point I am looking at another bounce off support. A second bounce has the potential to last for about 8-10 days back into the mid-June price zone.
posted by Toni Hansen @ 11:11 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
WRAPUP
13:16 Toni: bit of futs resistance here
13:08 Toni: ATHR base at highs
13:18 Toni: athr having trouble with that 22.30 sheesh
13:46 Toni: ATHR scratch
13:46 Toni: +.10ish
13:46 Toni: should have gone
13:50 * Toni trouts ATHR
http://tradingfrommainstreet.com/images/trades/20080717_ATHR.gif
13:38 Toni: futures resistance here at prior highs zone
13:43 Toni: NQ exhaustion move
14:14 Toni: market is so extended here.. hard to find much for setups since larger bias is bullish on a daily time frame but short term its prett extended into resistance
14:14 Toni: 15 min charts are favoring a correction
14:15 Toni: but can easily just be chop
14:15 charlie: but is that u or the 8 ball saying that?
14:15 Toni: lol
14:16 Toni: ok "will be fall apart into the close?"
14:16 Toni: uh oh... what happens if it doesnt answer you
14:16 Chris: I'm getting "Concentrate and ask again"....lol
14:16 charlie: lol
14:16 Toni: "outlook good"
14:16 Toni: yikes
14:16 Toni: i asked again
14:16 Toni: "signs point to yes"
14:36 aOn: any news out or just exhaustion?
14:37 Toni: market is just exhaustion
14:37 aOn: i mean mkt wise
14:37 Toni: just rounding off at highs
14:37 Toni: plus my 8-ball says its going down :)
15:27 Toni: NQ avalanche potential 5 min
15:38 Toni: avalanche target
15:38 Chris: nice call on da avalanche T
http://tradingfrommainstreet.com/images/trades/20080717_NQ.gif
16:30 Toni: futs gap down... big surprise :)
16:30 Toni: NQ under day's lows
16:39 Toni: this futs opened at 5 min equal move support on the ES
16:39 Toni: but pace is still bearish
posted by Toni Hansen @ 2:31 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, July 16, 2008Oil Continues to Slide While Banks Bounce Back
Good day! Bank and brokerage stocks climbed higher on Wednesday after Wells Fargo (WFC) reported a 10% increase in its quarterly dividends to accompany its quarterly earnings report. WFC climbed 32.8% on the day. This kicked off a widespread rally in the market that led to the largest one-day point and percentage gains in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) since April 1st. It was also the largest one-day gain for the Nasdaq Composite ($COMPX) since March 18th.
The Dow Jones Industrial Average ($DJI) rose 276.74 points, or 2.5% on Wednesday. It closed at 11,239.28 after a steady trend day. 26 of the Dow's 30 components closed in positive territory. Bank of America (BAC) led the Dow, following the lead from WFC, and closed higher by 22.1%. The banking rebound was quite extreme. The KBW Bank Index ($BKX) rose 17% for its largest one-day percentage gain ever. Another Dow component, General Motors (GM) also had another strong session and closed higher by 16.4%. Oil-related stocks did not fair as well with crude continuing to slip off the all-time highs made just a couple of days ago. Chevron Corp. (CVX) was the greatest Dow decliner, down 3.4%. The Amex Oil Index ($XOI.X) fell 2.1%, while the Philadelphia Oil Service Sector Index ($OSX.X) dropped 1.1%.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080717dow.gif
The largest decline intraday in oil-related stocks came at 10:30 am ET. The Energy Department reported that crude oil inventory increased by 3 million barrels last week. In contrast, a 3 million barrel decline had been anticipated. The reaction was decisively negative as crude and oil-related stocks took a rapid plunge on the heels of the news. Crude oil for August delivery fell $6.74 to an intraday low of $132, which is the lowest level in over a month. It managed to recover somewhat ahead of the close, however, and ended the session lower by $4.14, or 3%, at $134.60 a barrel.
The S&P 500 ($SPX) climbed 30.45 points, or 2.5%, on Wednesday and closed at 1,245.36. Financials as a whole climbed 11.1%. Consumer discretionaries also showed a lot of strength, up 5.2%. Some of the major companies in the consumer discretionaries are WMT, HD, DIS, CMCSA, NKE. Out of the S&P's 10 industry groups, only utilities and energy lost ground. Both fell 1.5%.
The Nasdaq Composite ($COMPX), led by the tech sector, scored the largest percentage gains out of the three major indices. It gained 69.14 points, or 3.1%, on Wednesday to close at 2,284.85. Sun Microsystems Inc. (JAVA) climbed 4.1% after posting better-than-expected earnings late Tuesday. Intel Corp. (INTC) also gained ground, albeit to a lesser degree, on Wednesday following earnings. It rose 0.9%. eBay Inc. (EBAY) added 4.5% ahead of earnings.
The two big names making the news on a daily basis again had substantial swings on Wednesday. Fannie Mae (FNM) closed higher by 30.8%, while Freddie Mac (FRE) gained 29.9%. Fed Chairman Ben Bernanke helped lift the shares as a result of testimony before a congressional committee regarding the government's plan to help ease their pain.
In other news, airlines closed strongly higher. While under pressure due to rising fuel costs, both AMR Corp. (AMR) and Delta Airlines (DAL) beat estimates although they still reported second-quarter losses. AMR rose 32%, while DAL climbed 26.6% on the day.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080717sp.gif
On the economic front, the Labor Department reported that the consumer prices index rose an unexpected 1.1% in June. The core CPI, which excludes food and energy, rose 0.3%. This was the greatest upswing since January. Factory outputs, meanwhile, increased by 0.5% in June after declining 0.7% in April and 0.2% in May. The annual rate of industrial production is down 3.1% following this most recent quarter.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080717nas.gif
The market was relatively unchanged by the opening bell on Wednesday despite moving higher the previous evening. The index futures had been selling off in premarket trade. This downside continued into the open for the initial 15 minutes of the day. The first correction period held well, however, and the market popped quickly at 9:45 ET. This marked a change of pace on the smaller time frames which was confirmed when the indices pulled back slowly into the 10:15 ET correction period.
At 10:30 ET the market jumped
Just one trade today. Was experiencing computer problems.
12:07 Toni UBB base at highs
12:45 Toni UBB coming into first resistance $125 zone
12:47 AoN nice
http://tradingfrommainstreet.com/images/trades/20080716_UBB.gif
posted by Toni Hansen @ 11:10 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Turns Positive on Bush's Comments, Overcoming Early Losses
Good day! The market took a plunge Tuesday morning. The selloff began in afterhours trade on Monday and continued into Tuesday's opening bell. The extreme gap in the market was followed by congestion for the first 15 minutes of the day, but the support quickly gave way with a sharp continuation lower into 10:00 ET. President Bush spoke for some time on the state of the economy. His words were not taken in a positive light until he began to focus upon the exploration and development of national oil reserves. On that note, oil futures began to tank while the overall market turned quickly higher. At one point crude oil fell under $138 a barrel on the largest dollar decline in 17 years and the largest percentage decline since April 2005. It closed down 4.4% at $138.74 a barrel, but is still up 45% this year.
In related news, U.S. gasoline demand fell 5.2% last week. This marks the 12th straight demand has fallen. With the retail price of gasoline at $4.109 a gallon, this is no surprise. I am hearing more commercials these days on public transportation than ever before. Interestingly, this is not always the best option. My local television station has been running a series on alternative means of transportation. My conclusion is that public transportation in many cities still has a long way to go in order to be an affordable, as well as timely, option. Sure, it may only cost a dollar each way, but if it takes you four hours to get to and from your destination when driving would take 30 minutes, is it really worth it? I think it would be safe to assume that for many it would definitely not unless they can take their work with them to help you pass the time. Hmm.... makes me appreciate the fact that my office is a mere hop, skip, and a jump across my courtyard... Even if the housing disaster means I may have to live here until I am as old as most of my neighbors... *grin*
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080716dow.gif
After taking off and gaining momentum around 10:45 ET, the Dow Jones Industrial Average ($DJI) and Nasdaq Composite ($COMPX) quickly closed their morning gaps. This was accomplished shortly after 11:00 ET. The indices then proceeded to correct somewhat, pulling lower into their 5 minute 20 period simple moving averages. Although the correction was strong, the overall momentum on the 15 minute time frame had turned bullish on very strong volume. The indices were able to roll over at the support and continue to step higher on a 5 minute time frame.
After three waves of buying the market hit resistance once again. The S&P 500 ($SPX) had now closed its own gap and was testing the 5 minute 200 period sma. All three indices were also at price resistance from the previous afternoon. They broke the trend channel from 11:45-13:15 ET, but prior 5 minute lows held at 13:30. This created a higher probability that the indices would form a two-wave correction for continued upside later in the afternoon. This took place shortly after 14:00 ET, but the market was unable to gain much momentum with the move and resistance held at the 15:00 ET correction period.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080716sp.gif
When the indices turned at 15:00, they had now established three waves of upside on a 15 minute time frame. This exhausted the larger trend and allowed it to break lower into the close. The Dow Jones Industrial Average ($DJI) had gone from down 227 points in the morning to positive territory in the afternoon and back down to close lower by nearly 93 points at 10,962.54. This was the first close under 11k in 2 years. American International Group (AIG) lost another 8.5%, while Bank of America (BAC) also broke the 8% level, down 8.1% at the close. Chevron Corp. (CVX) fell 3.6%, while Exxon Mobil Corp. (XOM) lost 3.8%. General Motors (GM) rose 4.9% after announcing cost cutting measures included salary cuts.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080716nas.gif
The S&P 500 ($SPX) fell 13.39 points on Tuesday to close at 1,214.91. The energy sector lost 3.9%, followed by the industrials which fell 1.5%. Six of the index's 10 sectors closed in negative territory. The gainers were led by health care, which rose 0.9%. The Nasdaq Composite ($COMPX) managed to close higher by 2.84 points, at 2,215.71. Intel's (INTC) afterhours earnings expectations helped hold up the techs. INTC gained 1.2% on the day.
Some additional news on Tuesday was also cited as contributing to the rally off Tuesday's lows. The Securities and Exchange Commission said that it would try to limit naked shorting in the major financials, such as Fannie Mae (FNM), Freddie Mac (FRE), Merrill Lynch (MER), Morgan Stanley (MS), and Goldman Sachs (GS). All closed lower on the day with FNM down 27.1%, and FRE down 26%.
Even though the market displayed another strong intraday showing on the upside on Tuesday, it has yet to offer any confirmation. Volume was high on Tuesday, but we still need to see some change of pace on a 60 minute time frame to support any larger correction off lows.
posted by Toni Hansen @ 12:57 AM 0 Comments
Market Remains Under Pressure
Good day! The market gapped strongly higher on Monday morning, bolstered somewhat from news out of the Fed that they Bush administration would seek to buy stock in both Fannie Mae (FNM) and Freddie Mac (FRE). On Sunday the Federal Reserve also voted to allow the companies to borrow from the central bank. These two companies hold control over nearly half of the mortgages in the United States. They had lost more than 45% of their share value last week, although they recovered part of their losses from an extreme gap lower on Friday. They reiterated earlier statements that they each have enough capital and liquidity to withstand the housing crisis, but concerns across the board for the housing and related financial markets as a whole remain widespread.
IndyMac (IMB), which focuses on deposits and originating home mortgages, was the latest to fall victim to the pressure of the current lending meltdown. Federal regulators seized the savings bank late Friday, earning it the distinction of the second-largest bank failure in U.S. history. The seizure of IndyMac is estimated to cost the FDIC between $4-8 billion. Unfortunately for many, the FDIC only insures deposits of up to $100k per depositor per bank with retirement accounts insured up to $250k.
A number of other financial institutions came under heavy pressure on Monday in the wake of the current financial selloff. Washington Mutual (WM) was particular hard-hit, falling 34.8% to close at $3.23. Just one year ago the company was trading in its $40s. Zions Bancorporation (ZION), which was trading around $75/share last summer, closed at $19.73 on Monday, down 23%. National City Corp. (NCC) slipped another 14.7% to close at $3.77. It had been trading around $33/share last July. Both Washington Mutual and National City released statements aimed at reassuring investors of it solvency. From the look of the charts, however, I'd say they need to do a little bit more convincing.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080715dow.gif
Needless-to-say, the market was once again unable to hold onto its short-term gains. The indices held the opening highs and immediately began to pull lower. By about 10:00 ET the morning gap zone had closed in the S&P 500 ($DJI), Dow Jones Industrial Average ($DJI), and Nasdaq Composite ($COMPX). That gap closure served as initial support. Although the indices began to bounce quickly off that zone, the correction lasted for only 15 minutes before turning lower once again out of the 10:15 ET correction period.
At the 10:15 ET correction period the indices made another attempt to recover from its earlier losses. Although three lows had been established on the smaller time frames and the market broke its immediate downtrend line, the indices failed to conquer the previous 5 minute high. The 5 minute 20 period simple moving average held as resistance and another move back into the day's lows followed.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080715sp.gif
On a 15 minute time frame the indices were entrenched in a larger descending triangle heading into noon. A base along the morning lows from approximately 11:15 ET onward broke lower into noon. This triggered the pattern on the 15 minute time frame and allowed the indices free pass into the prior afternoon's lows. The S&P 500 felt the greatest pressure and quickly returned to Friday's lows. Both the Dow and Nasdaq, however, nearly accomplished the same feat. They stalled shy of a complete retracement by hitting the 14:30 ET lows from Friday at the same time as the S&Ps hit their prior trading day's lows. A two-wave pattern along this support endeavored to bring the Dow and Nasdaq lower, but it failed to confirm the 13:00 ET attempt. Instead, upon pulling back into the 5 minute 20 sma at 13:30 ET, the indices hugged that resistance, making it easy for them to break higher soon thereafter.
The market moved uncertainly into the 15 minute 20 sma. Instead of pulling back to hug this second resistance, however, the indices made several ventures to push higher. This created a series of traps with the third high holding into 14:30 ET to form a reversal pattern that quickly resulted in a retest of the zone from the mid-day lows. Undeterred, a final rally pushed the market back into the morning's congestion and the 5 minute 20 period simple moving averages before falling back yet again in the final 30 minutes of trade.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080715nas.gif
The Dow Jones Industrial Average ($DJI) was up 138 points early into the open, fell nearly 100 points into negative territory by mid-day, and finally settled down 45.25 (-0.4%). It closed at 11,055.19. 19 of the Dow's 30 index components lost ground. Bank of America (BAC) fronted the losses, closing lower by 7%. Citigroup Inc. (C) fell 6%. American Express (AXP) lost 4.4%. Compared to these losses in the financial sector, the Dow's leaders were underwhelming. Coca-Cola (KO) rose 1.4%, while McDonald's Corp. (MCD) climbed 1.3%.
The S&P 500 ($SPX) dropped 11.19 points, or 0.9%, on Monday. It closed at 1,228.3. The financial sector lost 4.7%. Utilities also fell, down 1.2%. Oil services and gold were both strong. The PHLX Oil Service Sector Index rose 2.11%, while the Amex Gold BUGS Index rose 3.31%. Crude futures for August delivery closed at $145.18 a barrel, up $0.10. Gold futures closed at $973.70 an ounce, up $13.10.
The Nasdaq Composite ($COMPX) lost 26.21 points, or 1.2%, on Monday. It closed at 2,212.87. On Saturday Yahoo Inc. (YHOO) rejected another bid by Microsoft Corp. (MSFT) and investor Carl Icahn. Shares of Yahoo fell 4.2%, while Microsoft slipped 0.4%.
With the latest intraday breakdown, we have yet to see any confirmation form on the heels of strong attempts to push the market higher into a larger correction off lows. As I mentioned in this weekend's column, the market's inability to follow each of the strong pushes higher with a more gradual pullback increases the risk of yet another strong breakdown on the daily time frame. Should this occur, it would easily take the Nasdaq back into the March lows. Action on a daily time frame at the moment is highly indecisive. Congestion with only slight upside on Tuesday, however, would increase the odds of such a breakdown. If we see lower lows early on Tuesday, on the other hand, then the market can once again pop quickly to the upside on a 50 minute time frame.
posted by Toni Hansen @ 7:14 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Saturday, July 12, 2008Crude Hits New All-Time High / Dow Hits 2-Year Low
Good day! Throughout most of this past week I had been watching for the market to attempt a larger correction following the momentum shift which took place the week before. The market failed to offer any confirmation throughout the week, however, via a change in momentum on a 30 minute time frame and remained under heavy pressure into the end of the week. We are still at the same zone of support which hit two weeks ago and slowed the rapid descent in the overall market. Despite slightly lower lows, the support has yet to fail. The market ended the week on the rough side though.
Premarket data had no effect on the market. The Labor Department reported that the prices of imported goods rose 2.6% in June. Excluding fuel, import prices rose 0.8%. Imported petroleum rose 7.4%, for a 78.6% gain since last June. In a related report, the Commerce Department announced that exports increased much faster in May than imports. This created a drop in the U.S.'s trade deficit that caught many by surprise. The seasonally adjusted trade gap came in at $59.8 billion in May.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080714dow.gif
Friday began with a modest gap lower in the indices. Steady selling in premarket trade was followed by an open that placed the indices under 5 minute 20 period simple moving average resistance and the prior 5 minute lows of Thursday afternoon. The selling continued immediately out of the open, but lasted only briefly. By the time the first reversal period hit at 9:45 ET the indices were rounding off a bit and then began a steady climb back into the 5 minute 20 sma resistance.
The 5 minute 20 period simple moving averages hit at the same time as the 10:00 ET Reuters/University of Michigan Sentiment Index was released. July's preliminary consumer sentiment index rose to 56.6 from a final reading in June of 56.5. June's final reading had been expected to come in at 55.5. The survey is based upon questions posed to 500 households regarding their attitudes about the economy and is directly related to the strength of consumer spending. One-year inflation expectations rose 0.2% to 5.3%.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080714sp.gif
The pace of the price action in the market along the resistance soon rolled over with the help of a statement by Treasury Secretary Paulson on the status of Fannie Mae (FNM) and Freddie Mac FRE). An announcement to the tune of a bailout plan was way-laid when Paulson announced that the Bush Administration supported FNM and FRE "in their current form." The market reversed on this statement with a rapid move back to the lower end of the range out of the 10:15 ET correction period.
The Nasdaq Composite ($COMPX) held the previous lows perfectly. Although the S&P 500 and Dow Jones Industrial Average Index futures hit very slightly lower lows into 10:30 ET, the zone of the morning lows held and the indices were pushed into a minor correction up off the lows into the 5 minute 20 sma once again. This hit at the same time as the 11:00 ET correction period and the market again turned lower. This time all three of the indices broke to new lows.
A final bear flag developed from 11:30 ET into noon. At 12:00 ET the indices began to slide lower, but the momentum in the S&Ps and Dow was more gradual than each of the previous moves. This shift in the pace of the price action began to change the larger market bias in favor of a rally in the second half of the session. The last segment of the morning's downtrend channel broke coming out of the 13:00 ET correction period, so the time zone along with the pace of the price action supported the reversal.
Although the momentum increased somewhat on the upside as the indices pulled higher, it was not substantially sharper than the prior drop. The previous 5 minute highs held well as price resistance when the 15 minute 20 sma hit. The large level of overlap in price from one bar to the next on the 5 minute time frame allowed the market to flush quickly lower out of the 14:00 ET correction period. The larger reversal held, however, and at 14:30 ET the indices broke strongly higher.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080714nas.gif
At 2:30 ET news out of Reuters suggested that the Fed had agreed to let Fannie Mae (FNM) and Freddie Mac (FRE) use its emergency discount window to assist in the short-term with its cash crunch. Within a few minutes all three of the major indices were back to the 5 minute 200 sma resistance and shortly thereafter they were back to testing 15 minute highs from Thursday afternoon to place them in positive territory, albeit only for a minute. This larger level resistance zone corresponded to the 15:00 ET correction period and the market pulled back throughout much of the final hour to reclaim a large chunk of the afternoon recovery. A lack of confirmation of the Fed support also had created doubt. This was confirmed following the close when a Fed official told both Reuters and the Dow Jones that no such discussions had taken place. Fannie Mae (FNM) lost 23.5% on Friday while Freddie Mac (FRE) fell another 3.1%. Both had been in significantly more dire territory at the opening bell with FRE down over 50% within the first few minutes of trade and FNM nearly down the same.
The Nasdaq Composite ($COMPX) rose 22.96 points, or 1%, on Thursday and closed at 2,257.85. Among the Nasdaq's leaders were Verisign (VRSN), which rose steadily throughout the session to close higher by 5.3%; Patterson Uti. Energy (PTEN), which climbed 3.66% with the energy sector; and Dell Inc. (DELL), which gained 3.47%. Wynn Resorts (WYNN) suffered further losses, down 9.82%. Staples (SPLS) (-2.87%) and Starbucks Corp. (SBUX) (-2.38%) also slipped lower.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080711dow.gif
Now that we've taken a look at the bigger picture, let's break it down and examine the action intraday on Thursday. The session began with very little change since the prior day's close. The market had fallen sharply on Wednesday afternoon and this left it a bit extended into Thursday morning, but the volume had not really spiked to any large degree to confirm an exhaustion move. The indices did manage to pull higher out of the opening bell, but the move did not last long.
As soon as the 5 minute 20 period simple moving averages hit on the S&P 500 and Dow Jones Industrial Average the market turned back around. The Nasdaq Composite found resistance at the 5 minute 200 sma at the same time, so it also fell into 10:00 ET, although the larger opening rally helped it hold up better when the market turned. Both the Dow and S&Ps fell easily to new lows on the week, but the Nasdaq found support at the closing lows from Wednesday. This hit at the same time as the 10:15 ET correction period and the market reversed course once again.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080711sp.gif
Action throughout the second half of the morning was rather choppy. The indices formed a two-wave continuation pattern between the 10:45 ET correction period and the 11:15 one, breaking higher into 11:30 ET. The Nasdaq was a bit slow and held the range longer into 12:00 ET before it was able to tag along. By 12:15 ET, however, all three of the indices were testing price resistance at the morning highs.
Although the smaller 2 minute moves on the upside were on the strong side, the larger momentum in the market remained indecisive. The indices continued to hold the morning's range into the first hour of the afternoon, pulling back into the 13:00 ET correction period on light volume but modest pace. This was yet another variation of a two-wave correction and the lower end of the morning's channel held, leading to a third push higher on a 5 minute time frame after reversing from the morning lows.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080711nas.gif
Upper channel resistance on the 5 minute time frame, as well as the 5 minute 200 sma resistance in all three indices intraday, held going into the 14:00 ET correction period. After three waves of buying, the upside action intraday needed a little longer to rest. Paying tribute to the steep declines of recent sessions, the market fell sharply from 14:00 ET into nearly 15:00 ET. This correction period also held well, however, and the S&Ps were able to hold the morning lows. The indices pulled higher into the 5 minute 20 sma, stalled and threatened to break lower again, but ultimately held on and rallied into the close. Whether the downside action was enough to finally flush the market out on Thursday is something we shall soon find out. The 60 minute charts are once again looking bullish, so my bias into Friday will be on the upside.
posted by Toni Hansen @ 10:34 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
ISE Webinar and Power Point - View Anytime
Hey gang!
I would like to thank all of you that were able to make it to my class yesterday hosted by ISE. Whether you were able to make it or not, you can now view the presentation any time at the following URL:
https://ise.webex.com/ise/lsr.php?AT=pb&SP=EC&rID=25896357&rKey=9509A7B0B3BE48DE
I hope that you enjoy it!!! The presentation is titled "Spotting Opportunities in the FX Market" with a focus upon using multiple time frame and comparison studies. While the presentation was aimed at Forex traders, every tool I use in technical analysis applies to all time frames and markets, so no worries if you trade stocks, commodities, or whatever!
You can also download or view the Power Point slides at http://www.tradingfrommainstreet.com/presentations/ISE_TimeFrameAnalysis.ppt.
I will also be presenting another free webinar on Wednesday, July 23rd at 4:30 pm ET. I'll be sending out info early next week for registration, so be sure to mark it on your calendar!
Just a reminder: These FREE webinars and all of the other free articles, classes, etc. that I do these days are made possible by those who support my site through the purchase of my extensive CD training course and online bookstore, so please be sure to check these out at http://www.tradingfrommainstreet.com! Thanks!
All my best,
Toni Hansen
http://www.tradingfrommainstreet.com (main website)
http://www.tonihansen.com/blog (blog)
http://www.swingtrader.net (CD course)
Labels: forex, ISE, webinar
posted by Toni Hansen @ 4:39 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Trade and Commentary Wrapup - 20080710
The following is a wrapup of all my market calls and trade posts for Thursday, July 10, 2008.
Instructions for Use:
When following along in the chatroom, futures posts are done most often as support / resistance calls with support as buy and resistance as short (or closing out open positions from the other direction. These are pivots. Other patterns are posted according to the pattern forming, such as the Avalanche on the NQ below, and a link showing how to trade the pattern is posted.
Stock calls are breakout patterns unless otherwise stated with bases at highs as buys and bases at lows as short. We use the following template:
http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif
There is a link giving instructions for accessing this free chatroom on the lower left side of the page at http://www.tradingfrommainstreet.com/
WRAPUP
10:02 Toni: NSC base
10:08 Toni: nsc first resistance
10:14 Toni: NSC pace slowing here at resitance
10:14 Toni: 62.40 zone
10:16 Toni: NSC held resistance well
10:16 Toni: nice little trade at least
http://tradingfrommainstreet.com/images/trades/20080710_NSC.gif
10:26 Toni: ESI base at lows
10:26 Toni: did have extended morning
10:47 Toni: futs resistance
10:51 Kaizen: nice Toni, thx for a few ES points there ;-)
10:51 Kaizen: you rock!
http://tradingfrommainstreet.com/images/trades/20080710_ES.gif
11:36 Toni: VSEA base at lows
13:17 Toni: VSEA have off watch list now
11:57 Toni: ZUMZ base at lows
12:17 AoN: Toni, nice call on ZUMZ! what do u expect there?
12:19 norancho: i am thinking 13.40 fwiw
12:19 AoN: ty
12:20 norancho: not quite to support, at around 13.30
12:27 hermosaj: toni, u have target on your zumz?
12:28 AoN: if u r familiar with Trader X and his Fibo's extension system
12:28 AoN: than the final tgt is around 12.75
12:29 hermosaj: yeah, i draw them, but they haven't been working so well for me recently
12:29 AoN: yes, u r right
12:29 AoN: i took half off with 2R
12:29 AoN: 1/4 waiting at 13.50 from norancho and also round number
12:30 AoN: and lets see therest
12:30 AoN: my stop is : 14 now
12:35 AoN: there goes norancho's tgt
12:35 AoN: took 1/4 more off
12:35 AoN: my best trade in a while
http://tradingfrommainstreet.com/images/trades/20080710_ZUMZ.gif
15:15 Toni: futs resistance
15:38 Toni: first support futs
15:38 Toni: on that pivot
http://tradingfrommainstreet.com/images/trades/20080710_ES.gif
http://www.tradingfrommainstreet.com/presentations/ISE_TimeFrameAnalysis.ppt
posted by Toni Hansen @ 3:32 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, July 9, 2008Market Fails to Confirm Support
Good day! After several attempts to pull higher off support on a 60 minute time frame, the indices once again fell back on Wednesday. This reversal meant failure for the larger momentum reversal we had been tracking since the beginning of last week. I was out of the office most of the day and missed all of the excitement, but it was not a pretty sight if you were a bull unwilling to shake off that bias for the time being.
The action on Wednesday was very comparable to the reversal that the market experienced on Monday. Despite strength heading into the open, the indices fell into a trading range throughout the morning. Within this range the bias began to shift. Each upside move managed to climb to a lesser degree than the prior one and eventually gave way to another strong afternoon breakdown.
Unlike Monday, the first move out of the gate on Wednesday was to the downside. It began quickly, but slowed at support at 10:00 am ET when the Dow Jones Industrial Average ($DJI) and Nasdaq Composite ($COMPX) came into the mid-day highs from the day before. Ideally for the bulls, the market would have bounced quickly off this support to test the morning highs. The indices fell a bit short of this retest, however, and then pulled back a second time into the 10:45 ET correction period. While this correction period held, the upside out of the support zone was not as substantial as the initial intraday bounce and the market was still unable to test the earlier highs. This meant that even though the pace on the second move higher was itself strong, the momentum was weakening since the indices could not sustain the move for as long.
This occurred for a third time out of 11:15 ET. The indices came into the zone of the earlier highs, but by this point that price level was now a very strong resistance level and the result was a double top on the 15 minute time frame since the three attempts to move higher created a larger momentum shift and the beginning of a potential reversal pattern.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080710dow.gif
The market slipped lower into noon. Even though the pace was not exceptional on this pullback on a 5 minute time frame, the overall pace on the 15 minute time frame was now stronger on the downside than the upside. The shift confirmed into 12:30 ET when a light volume attempt at a rally resulted in a low-level trading range intraday on a 5 minute time frame. It triggered a larger breakdown out of 12:30 ET. All three of the major indices broke through their 15 minute 20 period simple moving averages with this smaller collapse.
The Nasdaq Composite ($COMPX) rose 22.96 points, or 1%, on Thursday and closed at 2,257.85. Among the Nasdaq's leaders were Verisign (VRSN), which rose steadily throughout the session to close higher by 5.3%; Patterson Uti. Energy (PTEN), which climbed 3.66% with the energy sector; and Dell Inc. (DELL), which gained 3.47%. Wynn Resorts (WYNN) suffered further losses, down 9.82%. Staples (SPLS) (-2.87%) and Starbucks Corp. (SBUX) (-2.38%) also slipped lower.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080711dow.gif
Now that we've taken a look at the bigger picture, let's break it down and examine the action intraday on Thursday. The session began with very little change since the prior day's close. The market had fallen sharply on Wednesday afternoon and this left it a bit extended into Thursday morning, but the volume had not really spiked to any large degree to confirm an exhaustion move. The indices did manage to pull higher out of the opening bell, but the move did not last long.
As soon as the 5 minute 20 period simple moving averages hit on the S&P 500 and Dow Jones Industrial Average the market turned back around. The Nasdaq Composite found resistance at the 5 minute 200 sma at the same time, so it also fell into 10:00 ET, although the larger opening rally helped it hold up better when the market turned. Both the Dow and S&Ps fell easily to new lows on the week, but the Nasdaq found support at the closing lows from Wednesday. This hit at the same time as the 10:15 ET correction period and the market reversed course once again.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080711sp.gif
Action throughout the second half of the morning was rather choppy. The indices formed a two-wave continuation pattern between the 10:45 ET correction period and the 11:15 one, breaking higher into 11:30 ET. The Nasdaq was a bit slow and held the range longer into 12:00 ET before it was able to tag along. By 12:15 ET, however, all three of the indices were testing price resistance at the morning highs.
Although the smaller 2 minute moves on the upside were on the strong side, the larger momentum in the market remained indecisive. The indices continued to hold the morning's range into the first hour of the afternoon, pulling back into the 13:00 ET correction period on light volume but modest pace. This was yet another variation of a two-wave correction and the lower end of the morning's channel held, leading to a third push higher on a 5 minute time frame after reversing from the morning lows.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080711nas.gif
Upper channel resistance on the 5 minute time frame, as well as the 5 minute 200 sma resistance in all three indices intraday, held going into the 14:00 ET correction period. After three waves of buying, the upside action intraday needed a little longer to rest. Paying tribute to the steep declines of recent sessions, the market fell sharply from 14:00 ET into nearly 15:00 ET. This correction period also held well, however, and the S&Ps were able to hold the morning lows. The indices pulled higher into the 5 minute 20 sma, stalled and threatened to break lower again, but ultimately held on and rallied into the close. Whether the downside action was enough to finally flush the market out on Thursday is something we shall soon find out. The 60 minute charts are once again looking bullish, so my bias into Friday will be on the upside.
posted by Toni Hansen @ 10:34 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
10:02 Toni: NSC base
10:08 Toni: nsc first resistance
10:14 Toni: NSC pace slowing here at resitance
10:14 Toni: 62.40 zone
10:16 Toni: NSC held resistance well
10:16 Toni: nice little trade at least
http://tradingfrommainstreet.com/images/trades/20080710_NSC.gif
10:26 Toni: ESI base at lows
10:26 Toni: did have extended morning
10:47 Toni: futs resistance
10:51 Kaizen: nice Toni, thx for a few ES points there ;-)
10:51 Kaizen: you rock!
http://tradingfrommainstreet.com/images/trades/20080710_ES.gif
11:36 Toni: VSEA base at lows
13:17 Toni: VSEA have off watch list now
11:57 Toni: ZUMZ base at lows
12:17 AoN: Toni, nice call on ZUMZ! what do u expect there?
12:19 norancho: i am thinking 13.40 fwiw
12:19 AoN: ty
12:20 norancho: not quite to support, at around 13.30
12:27 hermosaj: toni, u have target on your zumz?
12:28 AoN: if u r familiar with Trader X and his Fibo's extension system
12:28 AoN: than the final tgt is around 12.75
12:29 hermosaj: yeah, i draw them, but they haven't been working so well for me recently
12:29 AoN: yes, u r right
12:29 AoN: i took half off with 2R
12:29 AoN: 1/4 waiting at 13.50 from norancho and also round number
12:30 AoN: and lets see therest
12:30 AoN: my stop is : 14 now
12:35 AoN: there goes norancho's tgt
12:35 AoN: took 1/4 more off
12:35 AoN: my best trade in a while
http://tradingfrommainstreet.com/images/trades/20080710_ZUMZ.gif
15:15 Toni: futs resistance
15:38 Toni: first support futs
15:38 Toni: on that pivot
http://tradingfrommainstreet.com/images/trades/20080710_ES.gif
http://www.tradingfrommainstreet.com/presentations/ISE_TimeFrameAnalysis.ppt
posted by Toni Hansen @ 3:32 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, July 9, 2008Market Fails to Confirm Support
Good day! After several attempts to pull higher off support on a 60 minute time frame, the indices once again fell back on Wednesday. This reversal meant failure for the larger momentum reversal we had been tracking since the beginning of last week. I was out of the office most of the day and missed all of the excitement, but it was not a pretty sight if you were a bull unwilling to shake off that bias for the time being.
The action on Wednesday was very comparable to the reversal that the market experienced on Monday. Despite strength heading into the open, the indices fell into a trading range throughout the morning. Within this range the bias began to shift. Each upside move managed to climb to a lesser degree than the prior one and eventually gave way to another strong afternoon breakdown.
Unlike Monday, the first move out of the gate on Wednesday was to the downside. It began quickly, but slowed at support at 10:00 am ET when the Dow Jones Industrial Average ($DJI) and Nasdaq Composite ($COMPX) came into the mid-day highs from the day before. Ideally for the bulls, the market would have bounced quickly off this support to test the morning highs. The indices fell a bit short of this retest, however, and then pulled back a second time into the 10:45 ET correction period. While this correction period held, the upside out of the support zone was not as substantial as the initial intraday bounce and the market was still unable to test the earlier highs. This meant that even though the pace on the second move higher was itself strong, the momentum was weakening since the indices could not sustain the move for as long.
This occurred for a third time out of 11:15 ET. The indices came into the zone of the earlier highs, but by this point that price level was now a very strong resistance level and the result was a double top on the 15 minute time frame since the three attempts to move higher created a larger momentum shift and the beginning of a potential reversal pattern.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080710dow.gif
The market slipped lower into noon. Even though the pace was not exceptional on this pullback on a 5 minute time frame, the overall pace on the 15 minute time frame was now stronger on the downside than the upside. The shift confirmed into 12:30 ET when a light volume attempt at a rally resulted in a low-level trading range intraday on a 5 minute time frame. It triggered a larger breakdown out of 12:30 ET. All three of the major indices broke through their 15 minute 20 period simple moving averages with this smaller collapse.
The 15 minute bias was now negative. The downside off the late morning highs was now on the strong side, which opened things up for the possibility that the market would again fall into a larger range bias on a 30-60 minute time frame. When the market failed to bounce quickly off support at 13:00 ET, that bias was legitimized. The 5 and 15 minute 20 period simple moving averages held and the market rolled over around 14:00 ET.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080710sp.gif
At the 15:00 ET correction period both the Dow and Nasdaq were back to testing Tuesday's afternoon lows. There was not a strong volume surge at this test of support to indicate exhaustion. The support held for about 30 minutes, but volume dropped as the market congested tightly along the day's lows. The swiftest move of the session followed as the support gave way to continued downside into the closing bell. All three of the indices had returned to the lower end of the 60 minute price channel.
Officially in bear market territory, the Dow closed lower by 236.77 points, or 2.1%, on Wednesday at 11,147.44. American Express (AXP) lost 5.7%, while Intel Corp. (INTC) dropped 5.3%. Financials were again among the hardest hit, down 5.8% as a whole, after a strong recovery attempt on Tuesday. The S&P 500 fell 29.01 points, or 2.3%, to close at 1,244.68. Freddie Mac (FRE) and Fannie Mae (FNM) were both hit hard once again. FRE fell 23.8%, while FNM lost 13.1%. Utilities was the sole advancing sector in the S&Ps, up a fraction with a gain of 0.85. The Nasdaq Composite lost 59.55 points, or 2.6%. It closed at 2,234.89. Cisco (CSCO) was a major loser in that index, down 5.7%.
The market bias is now favoring another lower low on the 60 minute time frame. It is not enough to suggest a strong break, however, so I am a bit hesitant to commit fully. We have not seen a significant shift in momentum on those larger time frame for a more extensive break. It could be more of a trap that then reverses again into next week. Since we do have a series of slightly lower lows, the risk is higher than a strong flush lower can actually reverse again quite quickly at this point, so that is something else that I am keeping in mind.
Nasdaq Composite
http://tradingfrommainstreet.com/images/FocusLetter/20080710nas.gif
posted by Toni Hansen @ 11:32 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, July 8, 2008Commodities Loose Ground as Larger Market Attempts to Recover
Good day! Trade was choppy on Tuesday, but the market showed decent strength throughout most of the session. After falling sharply in overnight trade, the indices futures began to turn around in the early hours of the morning. Part of the recovery was attributed to words out of the Fed that it may extend the time frame for allowing brokerages to find assistance through the central bank's emergency funds. By the opening bell prices were off only slightly. The indices had been congesting at highs in premarket action and a second pullback off those highs on the 5 minute all-sessions charts created a buy setup which triggered into the open. This led to some immediate upside in the market which quickly returned the stronger Nasdaq Composite ($COMPX) to the previous day's highs and the price resistance thereof.
Given the momentum of the move back into the prior high, the market did not react quickly to the resistance level. It held, but it took a longer time correction before the market began to pull back in terms of price as well. Economic data out at 10:00 ET impacted prices in the short term with some rapid back and forth activity within the larger range.
The National Association of Realtors reported that pending-home sales fell 4.7% in May. This suggests that home prices are likely to still see some more deterioration before they can really begin to firm up. Since May 2007, this index is down 14%. The hardest hit locale remains the South (Whoo hoo! Grrr....) with a decline of 7.1%. Since summer months are typically the slowest down here, we should see numbers remain low throughout the next several months. In the Midwest sales dropped 6%, with losses of 2.9% in the Northeast and 1.3% in the West. The April pending home sales index was revised to show a gain of 7.1%, up from the previous estimate of a 6.3% increase.
Federal Reserve Chairman Ben Bernanke also announced on Tuesday that the U.S. central bank will be issuing new mortgage lending rules next week, emphasizing high-cost mortgage lending practices. Congress, meanwhile, is working towards the passage of housing legislation aimed at curbing the current mortgage crisis and preventing future collapses.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080709dow.gif
The markets continued to retreat following the 10:00 ET data. Both the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) hit new lows intraday before reversing off lows with the 10:45 ET correction period. The Nasdaq found support at that time as well when it hit its 15 minute 20 simple period moving average. Over the course of the next 45 minutes the indices slowly made their way back to the upper end of the day's trading range, although they failed to show any greater momentum on the upside than seen on the downside.
A continuation moved in favor of the bulls formed over noon with a low at that correction period as the indices hit 5 minute 20 sma support. Volume was light on the pullback into this support level, which meant a bullish bias into the early afternoon. A number of top names were forming cup-with-handle formations on the 5 minute time frame, including Apple Inc. (AAPL). When the correction broke higher, however, volume remained light and the moved failed to offer any confirmation. Prices rolled over at the higher with a steep Avalanche to nearly create a double top on the 5 minute charts leading into another descent into 14:00 ET.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080709sp.gif
The move lower into 14:00 ET created a second wave of selling on the day on the 15 minute time frame in the S&Ps and Dow. This form of correction is very typical leading into a larger upside continuation move. On the smaller time frames the indices did not offer much in terms of decent continuation patterns near the entry for the two-wave pullback buy setup. The channel break from the second move lower was perhaps the best chance one had, although the market did stall for about 15 minutes along the 5 minute 20 sma before the pace accelerated on the upside into the final 90 minutes of trade.
Once the afternoon rally got under way, earlier resistance levels had very little affect intraday. The market broke rather easily to new highs on the session. Although the pace of the buying slowed in the final 45 minutes of trade, the indices continued higher until they hit price resistance on the larger 30 minute time frame. The S&Ps were the weakest and held the highs from Monday morning, along with the 15 minute 200 sma. The Dow and Nasdaq, however, were able to retest the levels from last week's highs when the daily congestion first began. The Nasdaq led the way with the Dow close behind.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080709nas.gif
All three of the indices closed at the level of the day's highs. The Dow gained 152.25 points, or 1.4% on Tuesday. Citigroup, Inc. (C) was among the strongest within the index, posting a gain of 6%. Along with financials, health care was another leading sector. Meanwhile, Alcoa Inc. (AA) was a top loser, dropping 3.2% ahead of earnings that came out after the close. The S&P 500 rose 21.39 points on Tuesday, or 1.7%, and closed at 1,273.7. Many of the commodity-related securities were down substantially in the morning on Tuesday. By the closing bell, however, the only one of the 10 industry sectors in the S&Ps to close lower was the energy sector. Crude oil futures dropped sharply to close lower by $5.33 a barrel at $136.04. Rounding off the indices was the Nasdaq Composite. It rose 51.12 points, or 2.3% on the day and closed at 2,294.42.
Favor continues to reside with the bulls as the week progresses. Tuesday's action confirmed the larger 60 minute buy setup. The next step is for the market to clear last week's highs. Once that is accomplished it should be fairly easy for them to hit the 20 day sma resistance and push into the congestion level from two weeks back, from just before the downside gap on June 26th. The gap closure would be a major resistance level on the daily time frame.
posted by Toni Hansen @ 9:37 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
09:45 Toni: oh sure... now CLF goes.....
09:45 Toni: pffft
09:59 Toni: all the energy stocks are crushed
10:38 Toni: futs at a bit of support in here
11:03 Toni: not really because larger bias is still bullish
11:04 Toni: on futs
11:16 Toni: futs showing some resistance
11:19 Toni: indices back at morning highs
11:19 Toni: price resistance
11:30 Toni: i am bored with the market today... i keep scanning and scanning and nothing meeting enough of my criteria
11:56 Toni: indices just holding range so getting that back and forth action i posted yesterday as likely
11:56 Toni: not very exciting unfortunately
11:56 Toni: futs reacted well so far to the prior highs in that they held, but not really much for price reaction
11:56 Toni: just time
11:57 aOn: do u think this 5' base on WMT will resolve to the upside soon?
11:57 Toni: no
11:58 aOn: :)
11:59 Toni: wmt worries me that it can easily form a trap
11:59 Toni: trigger, not go far and turn
12:19 Toni: IDCC base at lows
12:21 Toni: only has scalp but can come back into zone of lows
12:24 Toni: futs resitance 2 min
12:48 Toni: energy is making a good recovery
13:27 Toni: furues here are coming off the 15 min 20 sma
13:27 Toni: intraday
13:40 Toni: not very pleasant 30 min charts for the futures
13:41 icewater: more flush coming today?
13:41 icewater: or you does it look like we hold?
13:41 icewater: we are getting oil sell off but not mucch bids in the market
13:42 Toni: kind of hard to say today.. there is no overwhelming bias on mid time frame charts
13:42 Toni: they suggest the range is going to hold
13:52 Toni: MT trying to get nerve up for a cont on the downside
14:29 Toni: MT off watch
14:37 Toni: futures back at morning highs again
posted by Toni Hansen @ 11:55 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Don't Be Peter Davies
http://tradingfrommainstreet.com/images/elephant.gif
In 1986, Peter Davies was on holiday in Kenya after graduating from Northwestern University .
On a hike through the bush, he came across a young bull elephant standing with one leg raised in the air. The elephant seemed distressed, so Peter approached it very carefully.
He got down on one knee and inspected the elephant's foot and found a large piece of wood deeply embedded in it. As carefully and as gently as he could, Peter worked the wood out with his hunting knife, after which the elephant gingerly put down its foot. The elephant turned to face the man, and with a rather curious look on its face, stared at him for several tense moments. Peter stood frozen, thinking of nothing else but b eing trampled. Eventually the elephant trumpeted loudly, turned, and walked away. Peter never forgot that elephant or the events of that day.
Twenty years later, Peter was walking through the Chicago Zoo with his teenaged son. As they approached the elephant enclosure, one of the creatures turned and walked over to near where Peter and his son Cameron were standing. The large bull elephant stared at Peter, lifted its front foot off the ground, then put it down. The elephant did that several times then trumpeted loudly, all the while staring at the man.
Remembering the encounter in 1986, Peter couldn't help wondering if this was the same elephant. Peter summoned up his courage, climbed over the railing and made his way into the enclosure. He walked right up to the elephant and stared back in wonder. The elephant trumpeted again, wrapped its trunk around one of Peter legs and slammed him against the railing, killing him instantly.
Probably wasn't the same elephant.
posted by Toni Hansen @ 8:49 AM 0 Comments
Monday, July 7, 2008Amusement Park Fans Welcome!
Good day! So far this month the indices have taken some wild swings back and forth intraday. A few weeks ago my family and I took a day trip up to Busch Gardens in Tampa. My daughter is a roller coaster fiend, so of course we rode on every one in the park. While I still have no luck getting even the slightest little feathery feeling or rush from roller coasters (hey... 12 years in the markets means it takes a lot more than a roller coaster to cause a thrill), the market's action today bore a striking resemblance to the newest enhanced coaster at the park: SheiKra.
The basic description of the ride could aptly be borrowed and applied to today's indices. Named after an African hawk that is known to dive straight down for its prey, SheiKra makes a steady climb up a 47 degree track, turns and pauses, and then drops the bottomless cars straight down at a 90 degree angle before it whips back up and sends riders into what is called an "Immelmann loop." The coaster then takes its passengers into a second drop of 81 degrees.
Ok, so the markets didn't exactly have an Immelmann loop going on, but it had the sharp ascents and even sharper descents nailed! After hitting lows on July 4th during a shortened trading session, the index futures began to recover steadily in overnight trade beginning on Sunday evening. This recovery continued into the opening bell on Monday. At 5:30 am ET the index futures broke free from a high level trading range which led to three waves of buying on the 5 and 15 minute time frames. The third wave took place into the open and continued for the first 30 minutes of trade.
When corrections between upside moves take approximately the same time to form in an uptrend, then a third wave of buying is generally the final chance a security or index will have to establish a move of comparable or greater strength than the prior two. Following that third move, a longer correction is generally necessary to balance things out. Even if there is a fourth attempt after another comparable correction in time, that fourth move will not be nearly as strong as the prior three and will more often create a trap pattern such as a double top, 2T or Avalanche to lead into a correction of greater length. This is exactly what we experienced on Monday.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080708dow.gif
After hitting highs around 10:00 ET, the pace of the buying slowed and the market turned over with a pullback into the 10:15 ET correction period. Although the time correction zone held, the indices could not gather enough strength to break to a new high and instead began to fall into a longer trading range, hence breaking the uptrend with the formation of a lower high.
This did not have to be the end of the trend. Had the pace shifted once again into a second low on a 5 minute time frame intraday with a stronger pop off the low and another little base, the indices could have easily formed a triangle with an upside bias. Given the larger 60 minute triangle breakout with the gap, this is what I had originally been watching for. Between 11:00 and 11:45 ET, however, the indices failed to pull back up to the upper end of the trading channel for a base at a third test of highs. Instead the pace shifted a final time with a sharp drop into 11:45 ET to create a bearish bias into noon.
The new bias held with the indices formed a trading range along the zone of the intraday lows into noon. The light volume during this range confirmed that the bulls had now moved to the sidelines. This was comparable to the roller coaster when you sit paused, looking straight down at the drop to come just before it releases and sends you plunging lower. You could almost hear the gasps of astonishment when the markets began their own freefall.
The S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) had absolutely no trouble closing their morning gaps. Those of you who read this column regularly will likely recall that on a day which gaps to the degree that we experienced on Monday, if the highs of the first 15 minutes break, the odds are high for a trend day higher. Monday proved to be an exception. Although it broke through the 15 minute highs, it managed to do so by only a few ticks and then rolled over. This was enough to cause a trap, however, and when the morning lows gave way, triggering stops and new short sales, panic again took over.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080708sp.gif
The downside continued with a bear flag at 12:30 ET to lead to a new intraday low at 13:0 ET. By this time the Nasdaq had also closed its gap and the continuation led it into another support level from Thursday's lows. At this point the larger momentum was again turning. A final flush into 14:00 ET created a 2B pattern on a 5 minute time frame in the EMini futures with the indices hitting a slightly lower low to flush out some weak hands and trip new short sales for those thinking the bottom really had fallen out. The reversal was not a pretty one. Even though a Phoenix followed along the 5 minute 20 period simple moving average, the indices did not show much of a change of pace on a 1 minute time frame and were still displaying strong downside moves on that level. This made the 15:00 ET trigger for the Phoenix a bit tricky. As soon as the upper channel along that 5 minute 20 sma broke, however, the ascent was rapid and steady.
Resistance hit for a final time intraday into the 15:30 ET correction period. The Nasdaq EMini futures contract was back into the congestion from the morning, while the S&P Emini futures were running into 5 minute 200 sma resistance. At that point the Dow also hit a substantial resistance level. It was finally back in positive territory and moved directly into the opening price level, which held perfectly in the YM (the mini-sized Dow futures contract). This was followed by that second drop I spoke of at the beginning of this column which took the indices sharply lower once again into the closing bell.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080708nas.gif
When all was said and done, the Dow lost 56.58 points, or 0.5% on Monday to close at 11,231.96. The S&P 500 fell 10.59 points, or 0.8%, to close at 1,252.31. The Nasdaq Composite lost 2.06 points, or 0.1%, and closed at 2,243.32. The downside on the day was propelled by losses in the financial sector. Mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) both tumbled more than 16% with FNM down 16.3% on the session and FRE down 17.9%. Drug manufacturer Merck & Company Inc. (MRK) led losses on the Dow after a downgrade by UBS, while oil, energy, and gold stocks also posted large losses. These had all gapped lower while the market rallied, but when the market turned, they failed to pick up the slack. Crude oil closed at $141.37 a barrel for the August contract, down $3.92 a barrel, while August gold futures fell $4.80 to settle at $928.80 an ounce. On the bright side, Yahoo Inc. (YHOO) shares rose 12% on renewed interest on the acquisition front by on again, off again suitor Microsoft Corp. (MSFT).
Although the reversal pattern I had been watching for on the 60-minute time frame failed to provide confirmation on Monday, it has not confirmed a failure either. The lower end of the channel from this past week held, despite the slightly lower low in terms of absolute price. This means that the larger channel for the month remains more gradual than the prior selling pressure. I am not a particular fan of this type of market environment when it takes place on anything larger than a 15 minute time frame, even though I love it on the smaller intraday charts. It is too easy to get chopped up while waiting to see whether or not the setup will follow through.
Although I managed to come out ahead on Monday, it was not much to brag about since many traditional setups failed to follow through or only offered small gains before reversing. I plan on continuing to treat the market gingerly heading into Tuesday's session as well. Although my bias does still favor a greater correction off this support zone on the daily time frame, the market was weak into Monday's close and in afterhours trade. A downside gap at this point will have a good chance of closing in the morning.
posted by Toni Hansen @ 9:19 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Trade and Commentary Wrapup 20080707
The following is a wrapup of all my market calls and trade posts for Monday, July 7, 2008.
Instructions for Use:
When following along in the chatroom, futures posts are done most often as support / resistance calls with support as buy and resistance as short (or closing out open positions from the other direction. These are pivots. Other patterns are posted according to the pattern forming, such as the Avalanche on the NQ below, and a link showing how to trade the pattern is posted.
Stock calls are breakout patterns unless otherwise stated with bases at highs as buys and bases at lows as short. We use the following template:
http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif
There is a link giving instructions for accessing this free chatroom on the lower left side of the page at http://www.tradingfrommainstreet.com/
WRAPUP
09:18 Toni: http://www.tradingfrommainstreet.com/images/momofan_20080707b.gif
09:19 Toni: looking at higher odds for uptrend today... pace is different off the highs from both of these patterns
09:20 Toni: with the 60 min slower on the nasdaq and more rounded so the even pattern confirmation today would not as easily have same momo on the upside for the nasdaq so just going to have to wait to see if we get any confirmation today
09:20 Toni: and how it forms
09:20 Toni: but same concepts at play here
09:23 Toni: 100 tick charts now on wave three on premarket trade on the upside
09:33 Toni: some initial resstance in here in the indices
09:34 Toni: strong momentum sof ar into today
09:34 Toni: russell 2k is the weakest of the indices
09:47 Toni: AAPL trying to turn over off highs
09:54 Toni: FAST has a good daily for more upside today so worth keeping a watch on
10:00 Toni: banks/financials hit hard again today
11:21 Toni: 11:21:03 Market Alert: indices forming two wave cont pattern for possible "A" formation being created on the 5 min (no trigger)
11:21 Toni: 11:21:04 Breakout Template: For information on A, B, C, D, or Z template patterns, please see http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif The green circle is the entry with the red bar as the stop.
12:19 Toni: futures supprot
12:19 Toni: or not.... :/
12:23 Toni: poor market.....
12:23 Toni: ES gap closed
13:46 Toni: CLF avalanche 5 min
14:06 Toni: hmm... futs maybe not done yet....
14:23 Toni: ROST on upside watch list for a bit later.. not the best so just watching at the moment
15:03 Toni: tomorrow likely to be more of a back and forth day
15:33 Toni: Dow is positive again
posted by Toni Hansen @ 4:28 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Market Bias - pattern comparisons
looking at higher odds for uptrend today... pace is different off the highs from both of these patterns.... with the 60 min slower on the nasdaq and more rounded so the even pattern confirmation today would not as easily have same momo on the upside for the nasdaq so just going to have to wait to see if we get any confirmation today... and how it forms, but same concepts at play here
100 tick charts now on wave three on premarket trade on the upside (premarket exhaustion on upside within the larger pattern)
http://www.tradingfrommainstreet.com/images/momofan_20080707b.gif
posted by Toni Hansen @ 6:23 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Friday, July 4, 2008Market Shows Signs of Support Reaction After Third 60-Minute Low
Good day! The market held up rather well on Thursday heading into the extended holiday weekend. On Wednesday the indices headed lower for a third low on the 60 minute time frame since breaking for a continuation on the downside the previous Thursday. As the week began we had originally been looking for a series of two slightly lower lows following the one made on the 27th. The first slightly lower low came on Tuesday morning. The second lower low, and third total, began on Wednesday following a gap higher that morning. When Wednesday's trade concluded, the Nasdaq was the only one of the three major indices to have established a second lower low. The S&P 500 and Dow Jones Industrial Average had both held Tuesday's lows. After gapping higher on Thursday, however, they made a push to complete the pattern.
The index futures had been trading in a fairly narrow range in the premarket on Thursday. When June's jobs data was released at 8:30 am ET, however, they shot higher. At that time the Labor Department reported that payrolls for last month fell 62,000 to match the losses in May. So far this year the payrolls have fallen every month. The jobless rate in June remained steady at 5.5%. The data was a bit worse than anticipated since the unemployment rate had been expected to come in at 5.4%. Total hours worked fell 0.1% in June with an 0.5% drop in June in the factory sector. Unemployment is expected to rise further as the year wears on. Some of the sectors hit hardest have been construction, manufacturing and the temp-agencies.
The Labor Department also reported that initial jobless claims rose by 16,000 the week before to hit 404,000.
In related news, average hourly earnings rose by 6 cents to $18.01 in June. Over the past year the average hourly earning are up 3.4%, while consumer prices have risen by 4.2%.
Additionally, the government reported on Thursday that employment fell by 155,000, while unemployment rose by 12,000 in June with the overall labor force falling by 144,000. Labor force participation dropped by 0.10% to 66.1%.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080707dow.gif
The gap higher in the indices led to an open at the 5 minute 20-period simple moving averages in the S&P 500, Dow Jones Ind. Ave., and Nasdaq 100 EMini futures. This resistance held and the indices began to sell off immediately. The downside continued with all three indices hitting new lows on the week until the 10:00 ET data came out. At that point both the S&P 500 and Nasdaq Composite flushed to the lower trend channel created by connecting the low from June 27th to the one on July 1st and extending that line outward.
The Institute for Supply Management (ISM)'s non-manufacturing sentiment index fell sharply in June to 48.2%. Reading over 50% indicate growth, while under 50% indicates contraction. In May it had come in at 51.7%. The indices dropped with the news, but very quickly began to recover. The momentum shifted after the larger channel support hit and by 10:15 in the Nasdaq, 10:45 in the Dow, and 11:15 in the S&Ps, the indices returned to their opening highs.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080707sp.gif
The market had a more difficult time holding onto the late morning's recovered losses than it did making them back. When the opening highs began to hit, the pace shifted on the smaller time frames. By the time those price resistance levels actually hit, the buying was quite a bit slower than it had been immediately following the pivot off lows. This created rounded highs on a 5 minute time frame and made it easy for the indices to turn into noon. I left a bit early on Thursday, figuring the last two hours would have light volume and little action, but the reversal also came off 15 minute 20 sma resistance and followed through rather well into the early afternoon before falling into a range in the final 45 minutes of trade.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080707nas.gif
The Dow closed higher on Thursday by 73.03 points, or 0.7%, at 11,288.54. The losses for the week came in at 0.5%, which has it down more than 20% off last year's highs. The S&P 500 rose 1.38 points on Thursday, or 0.1%, and closed at 1,262.9. This is a 1.2% loss for the shortened trading week and a 19.2% loss since last October. The Nasdaq Composite once again had a more difficult day. It fell 6.08 points, or 0.3%, and closed at 2,245.38 for a weekly loss of 3% and a loss of 21.5% since last year. Although volume was light on the day as a while given the early close, it was on the heavy side in the first several hours, dropping off only slightly over lunch. The steep decline out of the open and a move to record highs in crude oil kept things interesting. On Globex with electronic trade crude hit $145.85 a barrel, while it hit $144.30 a barrel on the New York Mercantile Exchange.
Given the current price formation on the 60-minute time frame, I am expecting the market to bounce back this coming week. The congestion zone from two weeks ago leading into this newest low will become resistance, as will the 20 day simple moving averages.
Reminder: The Position Trader is not published on holiday weekends, however, it will resume next Sunday!
posted by Toni Hansen @ 9:40 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Economic Reports and Earnings Events This Week
Economic Reports and Events This Week
Monday, July 7, 2008
10:00a.m. Jun Conference Board Employment Trends Index Jul 7: Previous: -0.5%.
Tuesday, July 8, 2008
7:45a.m. ICSC Chain Store Sales Index For Jul 5: Previous: +0.1%.
8:55a.m. Redbook Retail Sales Index For Jul 5: Previous: -0.6%.
10:00a.m. May Wholesale Trade: Previous: +1.3%.
10:00a.m. May Pending Home Sales Index: Expected: -2.8%. Previous: +6.3%.
3:00p.m. May Consumer Credit: Expected: +$7B. Previous: +$8.9B.
5:00p.m. ABC/Wash Post Consumer Conf For Jul 6: Previous: 43.
Wednesday, July 9, 2008
10:30a.m. Crude Inventories
Thursday, July 10, 2008
8:30a.m. Initial Jobless Claims For Jul 5 Week: Expected: +6K. Previous: +16K.
10:00a.m. DJ-BTMU Business Barometer For Jun 21: Previous: -0.3%.
Friday, July 11, 2008
8:30a.m. May Trade Balance: Expected: $62.7B. Previous: $60.90B.
8:30a.m. Jun Import Prices: Expected: +2%. Previous: +2.3%.
10:00a.m. Mid-Jul Reuters/U Mich Sentiment Index: Expected: 55.0. Previous: 56.7.
2:00p.m. Jun Federal Budget:
Key Earnings Announcements This Week:
Monday, July 7, 2008
Before: -
After: -
Tuesday, July 8, 2008
Before: GBX, HELE, PBG
During: CBSH (?)
After: AA, PRXI. ZZ
Wednesday, July 9, 2008
Before: ACGY, FLOW, ISCA, NUHC, WWW
After: AIR, INTV, RECN (?), RT, SGR
Thursday, July 10, 2008
Before: CHTT, EMMS, FCSX, HITK (?), MAR, PGR, TXI (?)
After: CAMP, INFY, LWSN, SYMM (?)
Friday, July 11, 2008
Before: FAST, GE (?), COL
After: -
Note: All economic numbers and earnings reports are in line with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column and some companies have not confirmed their time, so always double check when taking positions overnight during earnings season! (?) = Not yet confirmed at the time the list was compiled.
Labels: earnings, earnings accouncements, earnings reports, earnings this week, economic calendar, economic events, economic reports
posted by Toni Hansen @ 9:38 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Thursday, July 3, 2008Trade and Commentary Wrapup 20080703
The following is a wrapup of all my market calls and trade posts for Thursday, July 3, 2008.
Instructions for Use:
When following along in the chatroom, futures posts are done most often as support / resistance calls with support as buy and resistance as short (or closing out open positions from the other direction. These are pivots. Other patterns are posted according to the pattern forming, such as the Avalanche on the NQ below, and a link showing how to trade the pattern is posted.
Stock calls are breakout patterns unless otherwise stated with bases at highs as buys and bases at lows as short. We use the following template:
http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif
There is a link giving instructions for accessing this free chatroom on the lower left side of the page at http://www.tradingfrommainstreet.com/
WRAPUP
09:09 Toni: gm all
09:09 Toni: reminder: market closes at 1 et today
09:12 Toni: everyone be safe this weekend... remember..you should not use the excuse of "i was not drunk driving when i crashed my truck, you see officer... what happened was i dropped my beer"
09:14 icewater: gm all.. what do you make of this gap toni?
09:15 Toni: this is in line with the three wave push down on the 60 minute so actually a decent chance we close higher today... will be less likely to see another day of strong selling intraday
09:16 Toni: I do notice on the ES futures however that we have three pushes up here premarket into the open, so it may get a little bit of a pullback at the open to compensate for that
09:35 Toni: not much hold for upside gappers
09:35 Toni: so far AMT and AMGN are, but slowed their pace a lot
09:40 Toni: futs following through pretty well with the premarket sell setup
09:40 Toni: initial support in here
09:46 Toni: futs at a little support
09:50 Toni: NQ at premarket lows
09:50 Toni: my data is jumpy again
09:58 Toni: AMGN just plugging along pretenting its in its own little world
10:01 Toni: indices tested the lower channel for this third low on the 60 min
10:18 Toni: market has really good supoprt
10:21 Toni: CNX base at lows
10:41 Toni: yeah third push higher ES and YM
10:43 Toni: ZION
10:51 Toni: right now i'm in ZION short... we will see
11:19 Toni: ZION still in a base so maybe another chance
11:22 billgi: have taken partials on zion +.60 ty toni
11:33 Toni: futs 5 min are bearish but 60 min bullish
posted by Toni Hansen @ 10:43 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Wednesday, July 2, 2008Market Fails to Woo the Bulls
Good day! Ok, so much for the second flush on that 60 minute time frame being enough to lure in the bulls on Wednesday! When the week began, I had been watching for a three-wave push into lows on a 60 minute time frame before we would see a larger daily bounce. The upside action into the close on Tuesday, however, left me looking for more of a range in the morning on Wednesday and then an easier shot for the market to break higher without that third test. This possibility slipped away rather quickly, however, when the indices gapped higher and ran into strong price resistance from the zone of Monday's highs.
Hitting Monday's highs alone is not a nail in the coffin. How they hit those highs, however, was. Had the market simply continued the upside Tuesday afternoon and closed at highs and then continued into the prior highs coming out of that same swing higher on the 15 minute time frame, then it could have still formed a steady pullback or base along that resistance to create what would have essentially been an inverse head and shoulders pattern on a 60 minute time frame. This same pattern could have formed had it held the afternoon highs on Tuesday and continued to congest into the next morning, which is the direction I was leaning towards. Instead, the indices created a series of slightly higher highs on a 5 and 15 minute time frame.
This series of slightly higher highs created a form of momentum reversal creating a short setup. It is most apparent on the intraday chart of the Dow Jones Industrial Average whereby it rallied sharply Tuesday in the middle of the afternoon and then formed two more higher highs on Wednesday. Each higher high creates a trap and this pattern typically consists of two 2T setups in a row. A 2T is a form of double top with a slightly higher high on the second high of the pattern. When two of these form in a row, then a larger trend reversal becomes very likely. It is one of my favorite patterns.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080703dow.gif
It was not until around 11:30 ET that the change in direction provided strong confirmation. At that point the early morning lows broke, as did the 15 minute 20 period simple moving averages. The momentum on the downside was strong enough to quickly take back at least half of the prior day's afternoon gains by 12:20 ET. The S&Ps and Nasdaq both formed 5 minute 2B patterns at that time. This is the 2T pattern in reverse. They attempted to go for the momentum reversal with a third low going into 13:00 ET, but did not quite make it. The slightly higher lowon light volume made it more difficult for the attempted afternoon rally to take hold and resistance held from the 11:30 ET breakdown zone.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080703sp.gif
The market turned back over coming out of the 14:00 ET correction period. While this was the earlier breakdown level for price resistance in the indices, it was also the 15 minute 20 period simple moving average in the Dow, S&Ps and Nasdaq. The return of the bears was very subtle at first. Only an Avalanche on a 1 minute time frame provided confirmation of the reversal. Once it began, it chopped lower throughout the remainder of the session with very minor corrections in between. This made it one of those more difficult trends to jump in on once it was under way since the slower pace and greater overlap can create some rather sharp upside flushes with very little notice and typical measurements in terms of the amount of time a base or bear flag needs to be successful in a typical market does not apply as obviously when this type of action takes place.
The momentum on the late day descent was very comparable to that of the morning's move lower. This placed a target zone on the breakdown near the prior day's lows and slightly lower in the case of the Nasdaq. This meant that the market had returned to the earlier bias for a third low on the 60 minute time frame. This now creates a greater potential for a stronger move higher into next week.
A concern that I have, is that the volume in the indices, while high, has not been extreme and lacks an exhaustion flush to the downside. I am also not fond of the fact that the 60 minute momentum shift has formed more of a fan formation with the channel between the highs and the lows since last Friday. Ideally this channel will be a descending parallelogram, so the conditions are not as favorably as our hypothetical pattern was, even though we now have the three lows.
Since we are heading into an extended weekend, and the markets close at 1:00 on Thursday, I will be sticking to daytrades within the first two hours and will probably be taking off a bit early after that since volume will drop off quite a bit past 11:00 am ET. This will give me the chance to reassess things ahead of the open on Monday based upon the reaction off this third low on the 60 minute.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080703nas.gif
On Wednesday the Dow Jones Industrial Average ($DJI) fell 166.75 points, or 1.5%, landing at 11,215.51. General Motors suffered the greatest blow, falling 15.1% following a downgrade by GM. The S&P 500 ($SPX) fell 23.39 points, or 1.8%, and closed at 1,261.52. Each of the S&Ps 10 industry groups closed in negative territory. Energy and materials led with losses exceeding 4% each. The Nasdaq Composite ($COMPX) had the largest decline, selling off by 53.51 points, or 2.3%, and ending the session at 2,251.46.
posted by Toni Hansen @ 10:45 PM 0 Comments
WRAPUP
09:34 Toni: UNH nice daily for further upside potential
10:40 norancho: Toni, what was it about UNH, that you liked? I just can't see it.
10:41 Toni: hasnt had anything yet
10:42 Toni: was just the breakaway gap
10:42 Toni: hasnt given anything intraday though
09:35 Toni: CHK I also like
10:17 Toni: CHK base at lows
10:23 Toni: was 5 min avalanche
10:24 Toni: re: chk
10:24 Toni: hit first support
10:24 Toni: had 50 tick momo reversal off the lows at that equal move
11:00 Toni: CHK keeps creeping
11:03 Toni: CHK has momo type of buy setup on the 1 min so would be out of shorts
http://tradingfrommainstreet.com/images/trades/20080702_CHK.gif
09:41 Toni: that was a momo reversal buy on the ES at 9 am...
09:46 Toni: APOL on my long watch list but it may take a bit of time for a decent base for more than a scalp
http://tradingfrommainstreet.com/images/trades/20080702_APOL.gif
10:26 Toni: ESI nice base at highs... potential "A" on the 5 min forming
10:26 Toni: 10:26:57 Breakout Template: For information on A, B, C, D, or Z template patterns, please see http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif The green circle is the entry with the red bar as the stop.
http://tradingfrommainstreet.com/images/trades/20080702_ESI.gif
11:03 Toni: DVN I am watching for a Phoenix or similar pattern on the 1 min
http://tradingfrommainstreet.com/images/trades/20080702_DVN.gif
11:38 Toni: futures support 5 min
11:44 Toni: futures still not looking too great... sheesh
12:25 Toni: futures coming back into prior lows again on strong momentum
http://tradingfrommainstreet.com/images/trades/20080702_ES2.gif
12:24 Toni: energy, coal, etc getting butt kicked
13:10 Toni: ES going for third push lower on the 5 min
http://tradingfrommainstreet.com/images/trades/20080702_ES1.gif
13:30 Toni: BIDU is rolling back over to the upside
http://tradingfrommainstreet.com/images/trades/20080702_BIDU.gif
13:58 Toni: futures 5 min resistance
14:21 Toni: KSS 15 min avalanche
15:08 Toni: KSS dealing with support in here 41.54
http://tradingfrommainstreet.com/images/trades/20080702_KSS.gif
14:57 Toni: 3rd low on 800 tick ES
posted by Toni Hansen @ 11:46 AM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Tuesday, July 1, 2008Market Extends Itself With Large Premarket Gap Down
Good day! Heading into Tuesday's session we were looking for a slightly lower low in the indices on the 60 minute time frame to create pattern known most commonly as a "2B". This pattern consists of an initial low, followed by a slightly lower low. This essentially creates a type of bear trap by breaking through the previous low by just enough to take out stops and catch those who use this break as a confirmation of a continuation of the trend. Those of use who have been around long enough know better though!
The slightly lower low on Tuesday was created with a large gap lower following steady selling in afterhours and premarket trade in the index futures to mirror the selling overseas. When a gap in the indices is stronger than average on the downside and then manages to break the 15 minute highs, the odds are quite high that the gap itself will then proceed to close relatively quickly. This is usually accomplished within the first two hours of the day. On Tuesday it did so within the first 35 minutes.
The gap closure began on Tuesday soon after the initial 15 minute of the day had passed. The bias received a welcome boost when the 10:00 ET data came out. The Institute for Supply Management (ISM) announced on Tuesday that its manufacturing index climbed unexpectedly from 49.6% in May to 50.2% in June. This put it above the 50% level. Readings under 50% are an indication of contraction in manufacturing.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080702dow.gif
After the market closed the morning gap, the indices pulled back quickly into the pre-data level, but the support held at the 10:15 ET correction period from that prior breakout level and then moved steadily higher once again into 11:00 ET. As that correction period hit, the S&P 500 and Nasdaq Composite were both testing their 5 minute 200 period simple moving average resistance levels. The S&Ps and Dow Jones Industrial Average were also at their 15 minute 20 smas. The momentum shifted to a series of slightly higher highs on a 1 minute time frame to create a momentum reversal leading into an extremely rapid decline mid-day.
While I had been looking for a second lower low as I mentioned yesterday, the fact that it took place in the middle of the same day as the first was not something I had been expecting heading into the session. I had suspected that it would at least hold off another day. This would have created better symmetry between the lows to assist with a strong rally into the end of the week and beginning of next without as much risk of another flush to the downside. The shift in pace compared to the immediate 10:00 data reaction and the slower continuation, however, opened the door for the drop.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080702sp.gif
Despite being on the early side, the market gained momentum rather quickly in the afternoon following lows around 12:30 ET. The indices had been creeping higher, but at 13:45 ET they surged on news from General Motors (GM). On Friday, Ford (F) posted worse-than-expected monthly sales, leading to speculation about its rival GM. On Tuesday afternoon, however, GM announced that decline in sales for June was less severe than most analysts had expected. GM, which is one of the Dow's 30 index components, closed higher by 2.2% at $11.75.
A continuation move took place shortly after 14:30 ET and took all of the indices into new intraday highs. They hit resistance from late day highs in the S&Ps and Dow and Monday's morning highs in the Nasdaq. This extended the bulls and they pulled back to the 5 minute 20 sma ahead of the final 30 minutes of trade. Although they did manage to hold that support level, they weren't able to push through the afternoon highs. This held true in afterhours trade as well.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080702nas.gif
The Dow closed higher on Tuesday by 32.25 points, or 0.3%, at 11,382. The intraday low on the index was 11,183. In addition to the boost from GM, American Express (AXP) also helped the index out a great deal. AXP gained 6.2% on Tuesday following an upgrade by UBS and other financials followed its lead. Lehman Brothers (LEH) rose 4.9%, while Citigroup gained 2.2%. The S&P 500 gained 4.91 points, or 0.4% on Tuesday to close at 1,284, while the Nasdaq Composite rose 11.99 points, or 0.5%, and closed at 2,304.
Volume and volatility were both quite high on Tuesday with the wicked back and forth swings on the 15 minute time frame. I am still expecting further upside from this point on the daily time frames with the 20 day sma and congestion from early last week serving as resistance. The second slightly lower low on the 60 minute time frame was still on the early side as I said before, so this actually creates more of a two-low pattern still on that time frame than the three lows I was favoring. Nevertheless, the momentum shift and additional flush lower mid-day looks like it will be enough to allow it to hold the lows anyway.
posted by Toni Hansen @ 11:05 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
09:34 Toni : on a gap this size, as long as it breaks the 15 min highs the gap should close
09:53 Toni : futures broke 15 min highs so decent shot at the gap closing
09:54 Toni : Tuesday, July 1, 2008
09:54 Toni : 7:45a.m. ICSC Chain Store Sales Index For Jun 28:
09:54 Toni : 8:55a.m. Redbook Retail Sales Index For Jun 28:
09:54 Toni : 10:00a.m. May Construction Spending: Previous: -0.4%.
09:54 Toni : 10:00a.m. Jun ISM Manufacturing Business Index: Previous: 49.6.
09:54 Toni : 5:00p.m. ABC/Wash Post Consumer Conf For Jun 29:
09:56 Toni : first bit of resistance
10:01 Toni : NQ gap closed
10:01 Toni : ES gap closed
10:01 Toni : YM gap closed
http://tradingfrommainstreet.com/images/trades/20080701_ES1.gif
10:14 Toni : PKX is starting to base at lows
10:14 Toni : a longer congestion would be ideal to be more than just a fast scalp
10:34 Toni : PKX still basing at lows
11:44 AoN : Toni, tgt on PKX?
11:44 AoN : lod 1st?
11:45 Toni : yes, on this one $123ish.. usually wont use morning lows.. this would be partials though
11:51 dsb : what is the stop for PKX?
11:52 Toni : at this point i'm using over the $124 resistance zone
11:52 Toni : which is also the 5 min 20 sma zone
11:52 Toni : taking some off in here though
11:52 Toni : and just trailing the rest
11:52 Toni : 123.06 last
11:52 Toni : 123.09
12:06 Toni : looking like it can get a bounce here in a minute... PKX so willing to take gains any time
http://tradingfrommainstreet.com/images/trades/20080701_PKX.gif
10:15 Toni : futs support
10:15 Toni : 5 min
10:34 Toni : futures at resistance from that move off support around 10:15
10:59 Toni : i am expecting some correction from the rally over noon
11:17 Toni : 800 tick ES formed a momo reversal short
11:17 Toni : I missed the initial trigger off the third high
11:17 Toni : 1276.5 is initial target
11:43 Toni : ES hit first target
11:53 Toni : next level on it is 1273.75 zone
11:56 Toni : here is second target on ES.. .final is that 10:15 low for the rest if you have any left
12:00 Toni : this is that zone for larger target slowing things up in here
12:01 Toni : here we go
12:01 Toni : it is now noon btw
http://tradingfrommainstreet.com/images/trades/20080701_ES2.gif
11:47 Toni : as per todays newsletter...
11:47 Toni : i do think we can get another test of lows this week
11:48 Toni : before the market really can have a bounce on the daily time frame
11:48 Toni : so this would ideally look like a second 2B on the 60 min
11:48 Toni : got that first 2B i was talking about with the gap this morning and the bounce
11:48 Toni : so I am looking at more of a choppy afternoon
11:48 Toni : and room to fall again sometime tomorrow
11:49 Toni : so far its holding that pattern development
12:15 Toni : futures back into morning lows
12:30 Toni : market is showing some exhaustion finally
http://tradingfrommainstreet.com/images/trades/20080701_ES3.gif
13:55 Toni: NEM forming 5 min avalanche
13:55 Toni: 13:55:54 Avalanche: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis.html#4
13:59 Toni: looking for 52.40-.50
13:59 Toni: NEM
14:00 Toni: first little support here at earlier lows but should break even if it bounces a little first
14:21 Toni: NEM needs to hold here
14:21 Toni: darn thing
14:22 Toni: have two wave pop on NEM
14:22 Toni: back to upper end of the range
14:22 Toni: so has to hold
14:32 Toni: got stopped nem
http://tradingfrommainstreet.com/images/trades/20080701_NEM.gif
14:09 Toni: futures resistance in here
14:24 Toni: NQ is retesting highs
14:46 Toni: futs resistance
http://tradingfrommainstreet.com/images/trades/20080701_ES4.gif
posted by Toni Hansen @ 10:08 AM 0 Comments
Despite a Weak Start, Market Ends Week in Positive Territory
(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)
This past played out very well with our expectations. As stated in last Monday's column, while the indices were looking higher into the open on Monday (which they accomplished with a gap to the upside), "the larger intraday time frames (were) favoring a reversal off highs once again rather early on in the week". Several of the factors contributing to this bias included the completion of three waves of upside on the 60 minute charts for the Dow Jones Industrial Average and S&P 500 EMini futures contracts and major price resistance on a daily time frame in the Nasdaq 100 EMini futures contract at early summer congestion levels.
The kicker for the reversal in the indices came from the formation of a 60-minute 2T reversal pattern on the Nasdaq Composite. An initial high was formed on 8/11 with a slightly higher high, relatively speaking, on 8/15. A smaller 2T was also formed within the second push into the highs from the 11th on a 15 minute time frame. The first high on the smaller 2T was on the 14th, while the second high on the 15th. The 2T on the smaller time frame assisted the change of pace necessary to procure a strong price correction. Initially the push into the second high on a 60 minute time frame was as rapid as the move into a second high on the 14th. The slightly higher high on the 15th rounded off the highs, leading to what is most commonly known as a head-and-shoulders pattern from the three-day period the 14th through the 15th on a 15 minute time frame. It then triggered a short when the afternoon congestion from the 15th broke lower on Monday morning.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080825nas.gif
Once the selloff was under way, the indices continued lower until both the S&P 500 and Dow Jones Ind. Average found support on Tuesday in the form of an equal move on the 60 minute time frame. Last week I showed how well this concept works in terms of determining resistance, accurately predicting the highs on the 11th. It works equally as well for determining support.
To predict when a flag or breakout will mostly likely stall or reverse, take a look at the previous trend move in the same direction. In the above case, measure the move from the highs on the 11th to the lows of the 13th. Then take the high of the next move lower and project that forward. The highs from the 18th, when taken and extended lower to the same degree as the drop early the previous week show price support right in the zone of the lows which took place on Tuesday. This support was also the same as the 200 period simple moving average on the 60 minute ES (S&P 500 EMini) and the middle of the two-wave formation on the daily time frame in both the Dow and S&P futures.
The Nasdaq experienced a more mellow selloff than seen in the S&Ps and Dow. Without the extension, it was not as exhausted heading into the second half of the week. The three indices each fell into congestion throughout the day on Wednesday, but while this congestion held in the S&Ps and Dow into Thursday morning, the Nasdaq broke to a slightly lower low on the 60 minute time frame and the 20 day simple moving average on Thursday.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080825dow.gif
After rounding off at lows, the market turned higher Thursday afternoon and into Friday. The pace increased on the upside Friday morning following a decent gap higher into the open. Contributing to the move was news that Lehman Brothers (LEH) may be a possible takeover candidate. This caused the stock to gap up into Monday's opening price zone on Friday morning.
The action in LEH over the past week was quite comparable to action displayed on both the Dow and S&P's 60 minute charts. The difference is that both of the indices ran Friday morning, while LEH achieved the same pattern objectives with the gap. In other words, all three had two waves of selloff from the highs of the 11th, followed by rounded lows between the 19th and 21st and the sharp move higher Thursday afternoon into Friday morning. The pattern alone was already a highly bullish one, but the news certainly didn't hurt its prospects!
The morning rally on Friday in the indices had a difficult time pushing through resistance and held upper levels early on. Since the pace of the buying was so strong, however, it made it difficult for the indices to roll over. Instead it created congestion once again, leading to light volume into the weekend. In addition to the price resistance from the previous week, the Nasdaq hit resistance at its 60 minute 50 sma and its mid-week highs. Although the larger time frames are pointing higher this week, the resistance from Friday stands a good chance of holding into Monday morning. The 20 sma on a 60 minute time frame will be support. A pullback into this level can then lead to a second wave higher on a 60 minute time frame mid-week.
Based on current pace action, there is not a strong bias on a 120 minute time frame for a larger move on the daily charts at this time. The Nasdaq is forming a cup-with-handle, however, the handle is likely only be about halfway complete, which would cause a lot of chop over the next two weeks. The "cup" of this pattern would be the move from June with lows rounded into July and a break higher into August, followed by the "handle" creation since August 11th. The Dow and S&Ps will likely continue to congest along the 50 day sma while the Nasdaq's handle develops.
As long as prices hold up at these zones, then the indices can easily break rapidly higher in September to take them to the next daily and weekly resistance levels from May (shown on the charts in dark red). The lighter volume throughout August is a bonus. While part of this can be attributed to the fact that August is a typical holiday season, particularly in Europe, it is also indicative of a lack of strong bearish sentiment throughout the correction (congestion).
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080825sp.gif
The Dow Jones Industrial Average ($DJI) ended lower last week by 0.3% at 11,628.06. This was after the 197 point recovery on Friday (+1.7% on the day). The financials led the gainers with Citigroup (C) up 3.8%, J.P. Morgan Chase (JPM) up 3.9%, Bank of America (BAC) up 4%, American Express (AXP) up 4.7%, and Lehman (LEH) up 5%.
The financials also drove the S&P 500 ($SPX) on Friday for a 1.1% gain on Friday to close the week down by 0.5% at 1,292. Financials climbed 2.9% Friday, while consumer discretionary rose 2.4% on the day. The energy sector ended in the red, down 2.4% after chopping around throughout the week.
Hey gang, I have been on vacation and getting the kids back into school the last couple of weeks, so I have not been very active. Things will continue to be slow on my part over the next couple of weeks while I complete a book project. Here is what I've posted from Friday and today:
20080815
10:13 Toni: CY attempting another breakout (no break)
10:42 Toni: NMX keep an eye on this coming week on the upside.. forming daily phoenix
10:42 Toni: 10:42:55 Phoenix: For more information on this setup, please 11:31 Toni: NMX later today maybe tomorrow
http://tradingfrommainstreet.com/images/trades/20080815_NMX.gif
10:47 Toni: futures at some 5 min resistance in here
11:30 Toni: ENR base at highs
http://tradingfrommainstreet.com/images/trades/20080815_ENR.gif
11:49 Toni: MGM potenital 15 min avalanche
11:49 Toni: 11:49:17 Avalanche: For more information on this setup, please see12:09 Toni: MGM first support
12:15 brandon: mgm nice t, thank you
12:19 Toni: equal move target hitting
http://tradingfrommainstreet.com/images/trades/20080815_MGM.gif
20080818
12:52 Toni: FCX phoenix potential (no trigger)
12:52 Toni: 12:52:30 Phoenix: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis2.html#17
12:52 Toni: 5 min
12:53 Toni: no exhaustion move on this market drop even though equal move hit on the 15 min
12:53 Toni: meaning no volume spike
12:54 Toni: 13:00 correction period coming up
12:55 Toni: equal move hit on 5 min indices since premarket also
12:55 Toni: in that zone now
13:30 Toni: bullish 5 min base on JRCC (no setup)
13:31 norancho: CLF similar, but I am wondering if the bases may be a little stretched
13:31 Toni: that is possible.. would have to go off the 15 min 20 sma
13:33 Toni: POT 15 min avalanche
13:41 Toni: 170 pot target
14:21 Toni: POT coming into target zone
14:47 cduncan: TY for POT call, Toni
14:47 Toni: yw
14:53 Toni: POT perfect hold on target 170
http://tradingfrommainstreet.com/images/trades/20080818_POT.gif
14:04 Toni: third push down here since mid-day on the ES
14:04 norancho: that is signal for a bounce, right?
14:08 Toni: yep
14:20 Toni: hmm... or no bounce....
14:20 Toni: trend quite extended here intraday
14:20 Toni: not really wanting to short now
14:28 Toni: futures support
14:44 Toni: futures at pretty decent support zone now
14:44 Toni: trying to round off
14:51 Toni: pace not confirming support on 1 min NQ.. room for one more flush
14:52 Toni: here is flush
14:56 Toni: decent chance we hold lows zone in the market into the close
14:57 charlie: Toni..and here i was thinking we would get a rally!!
14:57 Toni: :)
14:57 Toni: well i was hoping for one!
14:57 charlie: thanks
14:57 Toni: scratched my first attempt to buy the low
15:01 Toni: not looking yet like we will see the momo shift .. trying for cont of the flush
15:01 Toni: seems like choppy last hour most probable
15:02 Toni: can still get a pop
15:56 Toni: hey.. market held our support but was definitely choppy too as expected
http://tradingfrommainstreet.com/images/trades/20080818_NQ.gif
posted by Toni Hansen @ 8:49 PM 0 Comments http://www.blogger.com/img/icon18_email.gifhttp://www.blogger.com/img/icon18_edit_allbkg.gif
Sunday, August 17, 2008Action Found in Falling Commodities
Important Announcement:
Good day! Just a reminder: The "Daily" Market Action Letter has become a weekly letter at this time. It will continue as such until after the Forex Expo in mid-September, after which it will resume on a daily basis. In the meantime, I will be resuming the Weekly Market Action Video, which will be updated each weekend by the open on Monday and posted at http://www.tonihansen.com/marketactionvideo/. I hope that you enjoy it!
All my best,
Toni
Action Found in Falling Commodities
This past week was a very mixed one for the market overall. The Dow Jones Industrial Average ($DJI) fell 0.63% on the week to close at 11,659.90, while the S&P 500 ($SPX) was essentially unchanged for a gain of 0.15% and ended the day on Friday at 1298.20. Both indices took a beating early on in the week due to financial-sector downgrades. The Nasdaq Composite ($COMPX), free from the weight of weakness in the financial, energy and oil-related sectors that assisted in holding the Dow and S&Ps down over the past week, managed a gain of 1.59% by week's end to close at 2,452.52 on Friday. The Russell 2000 ($RUT) faired even better, up 2.6% on the week with a close at 753.37 on Friday.
Last week began on Monday with a continuation of the patterns we have been following over the past several weeks on the daily and weekly time frames. The indices hit strong support in mid-June and began to roll over up off those lows into the second half of the month. Several weeks ago the indices confirmed the correction when the Dow and S&Ps both formed two-wave buy setups (in the form of a Phoenix) on the daily time frame and the Nasdaq broke through the highs of its July trading range. These indices both hit resistance, however, when they established equal moves on the 60 minute charts as compared to the rally off the lows a week earlier (shown in blue on the 60 minute charts). At the same time the Nasdaq also struck that first daily resistance level I had drawn on the chart last week which corresponds to the congestion level from mid-June in that index. Although not displayed on the charts, the Russell 2k ran into highs from early in June to hit a strong resistance level in that index as well early last week.
Dow Jones Industrial Average ($DJI)
http://tradingfrommainstreet.com/images/FocusLetter/20080818dow.gif
After striking price resistance on Monday, the indices had trouble continuing higher last week. From Tuesday onward they took a break, pulling back for several days into lower trend channel support and the 20 day simple moving average in the Dow and S&Ps. As with the two-wave pullback from the week before, this correction off Monday's highs also came in two waves on a 15 minute time frame. Mid-day on Wednesday is when support hit for the indices. The pace of the selling slowed and the market rolled over off lows on a 15 minute time frame into the afternoon.
Three waves of buying followed Wednesday's reversal on a 15 minute time frame. These are most notable in the S&Ps and Russell 2k. The third move came into the open on Friday and exhausted the intraday trend. This created a slow and lackluster trading environment for the remainder of Friday's session, so the volume on the day as a whole was the lightest of the week. The momentum has remained stronger on intraday upside than vice versa, so this favors more buying into Monday, but the larger intraday time frames are favoring a reversal off highs once again rather early on in the week. Such correction would likely break the uptrend channel for the past several weeks. Sometimes an upper channel level can build momentum to break higher, shifting momentum on smaller time frames to aid in such a breakout. This is possible given the current development and the fact that the weekly time frames still have a lot of room to move before they hit higher level resistance, but I would prefer to see a flush lower on a 15-60 minute time frame first.
There are a number of things than can lead to a larger pullback on the daily time frame (while still holding weekly support) right now. For one thing, oil prices have dropped sharply in recent weeks, but are showing some signs of stability on a daily time frame for a modest correction off lows. This can be seen on a 60 minute chart where there have been some slightly lower lows and rounding off. As we saw on the daily charts of the indices, however, it is not uncommon to get a flush or two when this happens before a low is really established. This would mean that a false attempt to bounce would likely push the indices lower on the 60 minute charts, but when oil again picks up on the downside it can then send the indices sharply higher into the next daily and weekly resistance level.
S&P 500 ($SPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080818sp.gif
Oil, gasoline and other commodities have continued to grab headlines recently. While spring and into early summer was dominated by the constant setting of new record highs, the second half of the summer has made the news by record downside moves. Crude oil fell another 1.24% last week to $115.20 a barrel on Friday. While still up $18.54% on the year to date, this is a 22% drop off July 11th highs. Many lead analysts are expecting prices to continue lower before finding monthly support. I agree. Larger time frame support levels for crude are the March congestion zone for about $112.50 a barrel (with the range from $100-$115) and then the congestion late last year into this. That range was from $88ish at lows to $100 a barrel at highs. $100 is obvious whole number support, but the middle of a trading range tends to hold better longer term, so I suspect it (crude oil) could easily slip into the $90s by year end.
Americans are finally seeing the result of this price drop at the pump. On Friday the average U.S. retail price of gasoline was $3.771 a gallon. This is an 8.3% decline from July 17th's highs of $4.114 a gallon. Prices here in southern Florida tend to track the national average quite well and I was able to fill up on Saturday for $3.64 a gallon for regular, while midgrade was going for $3.75, which was down further from Friday. Interestingly, for the first time since 1982 U.S. consumers have spent more on gas than they did on cars.
Closely related to the drop in crude oil prices is the rally in the dollar and corresponding collapse of the euro. The U.S. dollar index is up 5.28% on the month, while the dollar in euros is up 6.25%. This put them both positive on the year to date. The euro in dollars in down 5.82% for the month, up 0.53% year-to-date. The dollar is up 7% against both the euro and the British pound since the end of June. The European economy has been showing signs that it is starting to weaken lately and this, combined with the events unfolding in Russia, have assisted in shifting investments back into the States. Adding to global tensions with the United States in relation to Russia was news late last week of Poland's agreement to allow the U.S. to create an antimissile defense system located in Poland.
Nasdaq Composite ($COMPX)
http://tradingfrommainstreet.com/images/FocusLetter/20080818nas.gif
This past week was a very busy one from an economic perspective, particularly from Wednesday onward.
On Wednesday the Commerce Department announced that retail sales fell 0.1% in July. Excluding a 2.4% decline in auto sales, the seasonally adjusted retail sales rose 0.4%. Excluding a 0.8% rise in gasoline sales, retail sales fell 0.2%. Retail sales are up 2.6% over the past year. This is a 0.2% increase when excluding gasoline sales. The data as a whole was better-than-expected and was assisted by an upward revision from 0.1% to a 0.3% gain in June.
Import prices rose 1.7% in July for a 21.6% increase over the past 12 months. A large portion of this advance was due to petroleum imports, which rose another 4% last month, while natural gas prices rose 5.8%. This was larger-than-expected. For the year up to July, petroleum import prices were up 79.2% and natural gas prices were up 75.5%. Meanwhile, U.S. inventories rose 0.7% in June, higher than the expected 0.6% increase, while the inventory-to-sales ratio fell to a record low of 1.23.