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发表于 2009-3-23 18:42
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Thursday, October 9, 2008Market Collapse Continues
Market Collapse Continues
(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.)
Good day! The market gapped higher on Thursday morning following that afterhours reversal I commented on in yesterday's column. The afterhours activity took the ES (S&P 500) and YM (Dow) back into the middle of the previous day's range, which served as resistance, while the NQ (Nasdaq) returned to the price level from the prior afternoon's Avalanche congestion. These resistance levels held in premarket trade going into the 4:00 am ET correction period and the market pulled back into 8:00 am ET before bouncing again into the resistance zone coming out of the opening bell.
Ahead of the open, the Labor Department announced that initial jobless claims fell by 20,000 to 478,000 last week. Continuing claims rose to 3.65 million, which is the highest levels since June 2003, while the four-week moving average hit 5-year highs of 3.56 million. This data, however, had little impact on premarket trade.
Nasdaq Composite ($COMPX)
The market very quickly found itself again faced with selling pressure shortly after the opening bell on Thursday. The 9:45 ET correction period held at the resistance from premarket highs and the indices turned lower. The selling remained steady into the 11:00 ET correction period with both the S&Ps and Dow hitting the new lows on the 60 minute time frame that we were watching for. This created a 2B pattern, which is a form of a double bottom whereby the second low is slightly lower than the first, and the market started to correct.
The overall momentum on the upside was not any stronger than the downside action. This made it difficult for the move to sustain itself. I had hoped to see it push more quickly into 15 minute 20 period sma resistance and then back up into the zone of Wednesday's afternoon correction before heading lower in order to get the most decent rounded lows on a 60 minute time frame for a larger correction next week. The market, however, had other plans! The Nasdaq's closer 15 minute 20 sma held instead and the market stalled at some price and moving average resistance at 11:45 ET, falling into a range on the 15 minute time frame .
Dow Jones Industrial Average ($DJI)
The remainder of the mid-day action was quite choppy. The market continued its trend of moving in duo waves, pulling back twice off highs into nearly 13:00 ET on a 5 minute time frame with each of those waves consisting of two waves of downside. This came after two waves higher out of the 2B. After 13:00 ET the market became more erratic. The indices were now fully entangled in a low-level base on the 15 minute time frame, but it was obvious that the larger time frame extension on the downside was making market participants not very eager to push prices lower right away. The 60-minute tome frames were still favoring the morning lows holding, so this made me rather hesitant as well to place bets on the short side going into the afternoon despite the base.
When the two-wave short pattern triggered, it was a rather hesitant start. Both the S&P and Dow cautiously kept trying to break the lower end of the channel, but it wasn't until the lows of the day finally gave way into 15:00 ET that a larger confirmation took place. This negated the larger 60 minute pattern that had been attempting to form with rounded lows on the S&Ps and Dow using the two lows over the past two days as the start of the pattern (with a third low still possible into Friday), and instead took it up to the next time frame, making Monday's lows the first major low with Wednesday's open as the second and a new afternoon low on Thursday as the third in the Nasdaq. The S&Ps and Dow no longer have this potential. I have drawn the pattern I had been initially watching for on the S&P chart and the current beginning of that attempt on the Nasdaq. The market is continuing to fall apart here into 23:00 ET as I write this column, but the lower channel is still holding in the NQ on a 60 minute time frame.
S&P 500 ($SPX)
On Thursday the Dow Jones Industrial Average ($DJI) closed lower for the seventh day in a row, losing another 675.97 points, or 7.3%, closing at 8,579.19. All of the Dow's 30 components closed in negative territory. Thursday's close was the third largest point drop on record, closing under 9,000 for the first time in over 5 years. The S&P 500 ($SPX) lost 75.02 points, or 7.6%, and closed at 909.92. All 10 industry groups settled lower with financials fronting the losses on the first day the temporary short ban on hundreds of financials had been lifted. The Nasdaq Composite ($COMPX) fell 95.21 points, or 5.5%. It closed at 1,645.12. Declining stocks surpassed gainers by 10 to 1 on the New York Stock Exchange and 5 to 1 on the Nasdaq.
Crude oil slipped lower to $86.59 a barrel, breaking the support from earlier in the week with the next support being an equal move off the late September highs as compared to the drop off late August highs into mid-September lows. Even though the euro also hit support on Monday, it is also at risk of retesting those lows now going into next week. It slipped from $1.3684 to $1.3617 on Thursday.
posted by Toni Hansen @ 9:54 PM 0 Comments  
Wednesday, October 8, 2008Indices Fight for Gains Following Rate Cuts on a Global Scale
Indices Fight for Gains Following Rate Cuts on a Global Scale
(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)
Good day! The indices opened lower on Wednesday morning following the announcement heard around the world of lending rate cuts here and abroad. Not only did the Federal Reserve slash its overnight lending rate to 1.5% from 2% (as had been speculated a great deal recently), but the European Central Bank, the Bank of England, the Swiss National Bank, the Swedish Riksbank, and the Bank of Canada all cut their rates half a percent as well. Initially the action was welcomed and the market rallied into the open after opening lower, but that rally quickly ran into resistance a mere 30 minutes later.
Although the early morning rally appeared quite swift from an intraday perspective, when one steps back to look at a 60 minute time frame it is obvious that the downside momentum still has the upper hand. The indices reacted very little to the news at 10:00 ET that pending home sales were on the rise, up 7.4% from July to August. The indices were testing their 15 minute 20 period simple moving averages at this time, but instead of hitting the resistance and pulling back, they began to form rounded highs on a 1-2 minute time frame. This sort of action is not as conducive to the market being able to hug the resistance and then break it. Rather, it tends to lead to longer corrections in price instead, allowing the market to pick up some downside momentum instead of congest.
Nasdaq Composite ($COMPX)
The market rollover was confirmed by a small Avalanche on the 1 minute time frame into the 10:15 ET correction period. The selling then continued at a steady pace into the 10:45 ET correction period. The move was merely a slightly smaller time frame version of the late-day rally from the 6th, followed my the turn-over and pullback on the 7th on a 15 minute time frame. The two-wave pullback off highs on a 2 minute time frame allowed the indices to hold the 10:45 ET correction, leading to a minor bounce into the 5 minute 20 sma on the S&Ps and Dow and the 15 minute 20 sma on the Nasdaq into 11:30 ET. The selling then resumed, albeit more gradually, into the early afternoon.
From 11:30 to 12:30 ET each wave of downside was met by only slightly lower lows on both the S&Ps and Dow. This weakening of downside momentum helped develop a two-wave pullback on the 15 minute time frame that favored a more rapid recovery into the early afternoon. It began on a hesitant note, but confirmed with the breakage of the 5 minute 20 sma out of the 13:00 ET correction period.
Dow Jones Industrial Average ($DJI)
The indecision in the market on Wednesday can best be noted by the fact that each of the trend moves throughout the session came in waves of two. This type of trend is best known as a corrective trend. By moving both higher and lower in waves of two, the indices showed that each move was merely correcting to the previous one without a stronger bias. The afternoon rally also came in the form of two waves, which can be best seen on a 5 minute time frame. Earlier 15 minute highs and the 5 minute 200 sma zone halted the trend, but even upon reversing the market once again continued its progression in duos. The 5 minute 20 sma was initial support and the market bounced twice off the support zone on a smaller time frame before continuing with a second move off the 5 minute highs going into the closing bell. This, of course, led to support immediately afterhours as earlier intraday lows and congestion and by 17:00 the index futures were again on the rise, very slowly climbing into midnight.
S&P 500 ($SPX)
The bias for the market remains more bearish on a 60 minute time frame, but I do not think it will be by much. Remember, we do have an exhaustion move in on the indices on a weekly time frame, placing the market at strong support levels for that time frame and the daily charts also suggest we stall here for the time being. So, even though I am looking for a somewhat lower low on a 60 minute time frame still this week, I continue to favor a greater correction off this support next week. Once again, larger overall upside will be difficult to sustain on a weekly time frame as it did in July. The market simply cannot recover the losses of the past 5 weeks over the course of the next 5.
After bouncing back and forth within a range of more than 400 points on Wednesday, the Dow Jones Industrial Average ($DJI) closed lower for the sixth day in a row, losing another 189.01 points, or 2.0%, closing at 9,258.10. 24 of the Dow's 30 components closed in negative territory with Alcoa (AA) down 12%. The S&P 500 ($SPX) lost 11.29 points, or 1.1%, and closed at 984.94. All 10 industry groups settled lower, telecommunication services and financials led the selling. The Nasdaq Composite ($COMPX) fell 14.55 points, or 0.8 %. It closed at 1,740.33.
Meanwhile, both crude oil and the euro continue to hold their daily support zone, although crude oil futures were down Wednesday on reports of larger-than-expected increases in domestic supplies. Crude oil settled at $88.95 a barrel. Gasoline supplies also rose. The euro closed slightly higher in New York at $1.3684.
posted by Toni Hansen @ 9:36 PM 0 Comments
Tuesday, October 7, 2008Market Remains Skittish as Earnings Season Arrives
Market Remains Skittish as Earnings Season Arrives
(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.)
Good day! Monday's session brought with it the largest intraday swing we have seen to date in the Dow Jones Industrial Average. After hitting lows at a whopping 800 points off the prior day's close, the market market recovered by more than 400 points to close lower by 370. The extent of the late day rally, which took place in the course of a mere 75 minutes, created an exhaustion move on the upside into the closing bell. The rally took the form of two waves on the upside on a two minute time frame and the second wave extended into Tuesday morning until it hit equal move resistance. This equal move is based upon a comparison to the first wave higher on a 2 minute time frame, following by a second move in the final 15 minutes of the session on Monday into highs at the 9:45 ET correction period on Tuesday.
Even though the indices reacted swiftly off the morning's highs initially, the larger pace of the rally made it quite difficult for the market to sustain such a rapid reversal. The 5 minute 20 period simple moving average hit a mere 15-20 minutes later and served as the first level of support for the indices intraday. The volume in the market began to wane as the indices hugged this support. By doing so, it created a continuation pattern for the reversal pattern that I call an Avalanche. It is the first continuation move following a larger trend reversal. The congestion along the support continued until the 10:45 ET correction period. At that point it broke, triggering the Avalanche short setup. This setup took the market into new intraday lows within half an hour.
Nasdaq Composite ($COMPX)
The pace of the initial downside continuation was not very strong. It hit support with the 15 minute 20 sma around 11:30 ET, but its failure to react strongly to the moving average kept the bias in favor of the bears as the afternoon approached. After a second mild correction within the newly established intraday downtrend, the selling resumed into the afternoon. The momentum began to increase as well on the downside once the 15 minute 20 sma gave way. The 5 minute 20 sma, which had served as support for the Avalanche, was now resistance for the intraday downtrend. A second bear flag around 13:15 ET brought with it the strongest downside of the afternoon thus far, accelerating the move back into the level where the prior day's downtrend channel broken and the afternoon rally began.
The indices found support on the breakdown not only in the form of the price level from the previous day, but also the 14:00 ET correction period, which brought with it the release of the FOMC minutes. These minutes revealed that the Federal Reserve had considered rate cuts at its mid-September meeting and it appears likely that another interest-rate cut is in store this month. The next FOMC meeting takes place at the end of the month.
Dow Jones Industrial Average ($DJI)
The market managed a decent 5 minute recovery out of the 14:00 ET correction period, however, the 5 minute 20 sma and congestion from the previous 5 minute breakdown served as resistance. Instead of hitting these resistance levels and holding, which could have led to a base along the resistance and another attempt to move higher for a stronger test of the 15 minute 20 sma, the indices established a slightly higher high on a 2 minute time frame. This created a rounded high on the 5 minute charts and the result favored a new low on the session. This took place shortly after 15:00 ET, taking the indices back into Monday's lows, but the reaction to that support was a correction more through time than price. The market hugged the support and then broke through it into the final 30 minutes of trading, resulting in yet another close in the territory of the day's lows.
The Dow Jones Industrial Average ($DJI) closed lower for the fifth day in a row on Tuesday, dropping another staggering 508.39 points, or 5.1%, closing under 10k for the second day in a row and the second time in 4 years at 9,447.11. Once again, each of the Dow's 30 components closed in negative territory. The losses were fronted by Bank of America (BAC), which fell 26.2% after announcing a 68% drop in profit and slashing its dividend. Citibank (C) also weighed heavily on the Dow, falling 12.98 points while it continues to battle Wells Fargo (WFC) over acquiring Wachovia (WB). The S&P 500 ($SPX) hit 5-yr lows by dropping 60.66 points, or 5.7%, and closed under 1k, at 996.23. All 10 industry groups settled lower, but the financials and consumer discretionary led the downside. The Nasdaq Composite ($COMPX) dropped 108.08 points, or 5.8 %. It closed at 1,754.88. Google (GOOG) made headlines just over a week ago by closing under $400 a share. On Tuesday it went a step further by closing under $350 a share, falling more than 50% off its highs just one year earlier.
S&P 500 ($SPX)
Crude oil futures on Tuesday held the weekly price support and bounced $2.25 a barrel to close at $90.06 on Tuesday. The euro closed slightly higher in New York at $1.3604 after hitting a 13-month low against the dollar on Monday. As I mentioned yesterday, both oil and the euro were poised to correct off lows this week. It is a relatively mild correction so far, which does create potential for a more rounded low at this support zone, but I would urge caution again new shorts on a daily time frame at this juncture. We are likely to see trading in both of these become more volatile over the next several months with greater back and forth action on a daily time frame and lesser directional trend moves.
Tuesday brought with it the official start of earning season with the release of Alcoa's (AA) earnings following the closing bell. AA reported earnings of $268 million, or 33 cents a share. This is down $555 million from a year earlier when it amounted to 63 cents a share. Analysts had expected 54 cents a share.
Earnings overall are not expected to wow investors this quarter. Dismal results are already built into the market to a large extent. I think a lot of investors at this point are prepared for the worst, and I am not convinced that many are even hoping for the best! Results which are in line or merely less dismal than expected will likely provide such securities with at least a short-term boost of morale, but don't loose focus of the larger picture. Simply because something may look good on a smaller time frame, does not mean it necessarily does on the larger ones, so don't neglect to step back and take a look at weekly and monthly time frames when planning on holding shares of anything overnight since most of the larger time frames have a bearish bias. This does not mean they won't offer buy triggers, but rather that many may have too substantial of a downside pace to sustain upside moves easily on the one hand, while on the other they will also have to deal with a great number of resistance levels based upon prior price action. It's always wise to know what these may be before committing!
So far this week my bias has not changed. I am still expecting lower lows this week and a correction off the larger weekly support next week. We are in the a larger weekly exhaustion move, but the momentum of the selling will make strong upside price recoveries very difficult to sustain.
posted by Toni Hansen @ 8:16 PM 0 Comments |
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