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Tuesday evening: NQ is trading at or near its two year high, so there are no Virgin POC's above.Instead, you can consider other pivots as possible short scenarios.Floor Pivots are shown in this chart.Another one is the Fib 1.618 target from the first wave up in the reversal pattern (called a "Seed Wave" that started October 13 and ended October 26, as shown in the chart below this one.
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Buy signal approaching on NQ
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Wednesday, 10/18 6:30 PDT
NQ Already gapped down to the bottom of our Natural Trading Range of 1534, bouncing twice and creating a double bottom and good buy signals on the Universal at 7:30am Eastern, as shown in the next two charts below:http://www.enthios.com/blogs/images/05-10-19_0631.pnghttp://www.enthios.com/blogs/images/E425.png
10/18 10:15 PDT
Typically when the Universal moves "substantially" in the direction ofprofit, then reverses, we will exit at break-even.On the ES, that is at +2 points.On the NQ,that would be closer to +5 points but one can use the Keltner Bands as a good indicator because they represent a moving average of the trading range. This is also why it is a good idea to exit half of the trade at the Keltner Bands. If the trade reverses just below the Keltners, then you might want to consider a stop at break-even, as shown here. http://www.enthios.com/blogs/images/E2005-10-18-1007.png
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Monday 10/17 7:00am PDT
Déjà Vu, All Over Again (and again…)
by Steve Selengut
During every correction, I encourage investors to avoid the destructive inertia that results from trying to determine: "How low can we go?" and/or "How long will this last?" Investors who add to their portfolios during downturns invariably experience higher values during the next advance. Yes, Virginia, just as certainly as there is a Santa Claus, there is another market advance in our future.
Corrections are part of the normal “shock market” menu, and can be brought about by either bad news or good news. (Yes, that’s what I meant to say.) Investors always over-analyze when prices are weak and lose their common sense when prices are high, thus perpetuating the "buy high, sell low" Wall Street line dance. Waiting for the perfect moment to jump into a falling market is as foolish a strategy as taking losses on investment grade companies and holding cash.
Repetition is good for the brain’s CPU, so forgive me for reinforcing what I’ve said in the face of every correction since 1979… if you don’t love corrections (and deal with them like visiting relatives) you really don’t understand the financial markets. Don’t be insulted, it seems as though very few financial professionals want you to see it this way and, in fact, Institutional Wall Street loves it when individual investors panic in the face of uncertainty. Psstt… uncertainty is the regulation playing field for investors, and hindsight isn’t welcome in the stadium.
A closer examination of the news that’s fit to print (but isn’t printed often enough) should make you more confident about the years ahead, whatever your politics.
The good news is very, very good: 1. Employment, jobs, and unemployment numbers are as good or better than they have been in years. 2. Manufacturing numbers are stronger and trending upward. 3. The “core” inflation rate is historically low. 4. Interest rates are also historically low. 5. Durable goods orders are trending upward. 6. Corporate earnings reports have been strong. 7. Corporate dividend payouts have been increasing. 8. Equities, as an Asset Class, are considered the most fairly valued, when compared with Real Estate, Fixed Income, and Commodities. 9. Income Tax Rates are at low historical levels, particularly with regard to investment income. 10. Gross domestic product is growing.
The bad news isn't all that bad, pretty much the same ole stuff: 1. Hurricane Damage. We’ve actually had fewer major storms than anticipated. The ones we’ve had were devastating, but the rebuilding/preparation task ahead will be good for the economy. 2. War in Iraq. There’s always been a war of some kind, somewhere. It’s bad, but only the battlefield has changed… and war has also always been good for the economy. 3. Politics. We have an unpopular President who can’t seem to get out of his own way. Who were the last ones that were loved? Didn’t they have wars? 4. Wall Street/Corporate scandals. Hardly new and never economy busters. 5. Energy prices. I still don’t see gas lines, and maybe somebody will push for added refining capacity. 6. Trade deficits. News would be giving foreigners more money so that they could buy more of our products. 7. High consumer debt. New? Not. 8. The terrorism threat. A major serious problem for the past how many years? The federal regulatory agencies probably do more damage to the economy. 9. The Avian Flu pandemic? Maybe, but not yet, and we’ll really need those bad boy drug companies then, won't we? 10. The Anniston/Pitt break up, and neither the Yankees nor the Bosox in the World Series. Now we're talking!
Clearly, there are no new (economic) problems to be overly concerned about. And for now, we simply (and I mean simply) have to deal with the opportunities at hand. Low, but increasing, interest rates force fixed income prices down and yields up… Opportunity One! Economic good news encourages higher rates to reduce inflationary pressures causing equity prices to trend downward… Opportunity Two! These forces of good are intersecting with the dark side of calendar year mentality Wall Street, causing premature tax loss selling and portfolio Window Dressing… Opportunities One and Two squared!
There is an Investment Mindset Solution for the problems that most people have dealing with corrections, and rallies too, for that matter. I’ve never understood why “yard sale prices” here are so scary. What if you cut off a finger each time you get a splinter? Wounds heal, and so do the prices of high quality securities.
In recent years, Wall Street and the media have turned the process of investing into a competitive event of Olympic proportions and stature. What was once a long term (a year is not long term), goal directed activity, has become a series of monthly and quarterly sprints. The direction of the market isn’t nearly as important as the actions we take in anticipation of the next change in direction. Performance evaluation needs to be rethunk (sic) in terms of cycles!
The problems, and the solutions, boil down to focus, understanding, and retraining. It would be impossible to cover each of these issues here, but here are a few teasers. You need to focus on the purposes of the securities in the portfolio. You need to understand and accept the normal behavior of your securities in the face of different environmental conditions. You need to overcome your obsession with calendar period Market Value analysis, and switch to a more manageable asset allocation approach that centers on your portfolio’s Working Capital.
But for now, relax and enjoy this correction. It’s your invitation to the fun and games of the next rally.
http://www.enthios.com/fpdb/images/universal/051011.pngHere is a comparison of the two trades from 9/28/05, one on Ensign (on my desktop PC) using 0.5 range chart, and one on Investor/RT (on my Apple PowerBook) using the 180-tick chart.Both use the IB datafeed.Investor/RThttp://www.enthios.com/fpdb/images/universal/050928-itrades.pngEnsign Windows
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A difficult day:
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