Market Holds Congestion into the Weekend

Good morning! The range widened intraday on Friday, but still held the larger daily congestion zone. All three indices posted mild losses despite greater intraday activity and sharp bouts of selling. The Dow Jones Industrial Average ($DJI) fell 17.31 points (-0.1%) to close at 13,895.63. This meant a 4% gain on the month and an 11.5% gain thus far on the year. The S&P 500 ($SPX) lost 4.63 points on Friday (-0.3%). It closed at 1,526.75. The monthly gain the S&P 500 came to 3.6%, which meant a 7.6% gain on the year. The Nasdaq Composite ($COMPX) also managed a strong showing to end the month. Despite losing 8.09 points on Friday to close at 2701.50, it also gained 4% on the month. The recent relative strength, however, has not been reflected in the longer term gains, which only amount to 3.8% on the year to date.



Heading into Friday's session my bias was "hesitantly higher," but with a very wary eye due to a number of signs of upward exhaustion. As such, as I mentioned heading into the day, I was on the lookout for any change of intraday momentum to flush out the bulls. While the bulls did in fact hold on going into the session, and the move to the upside out of the open was pretty quick, and it did not last for long. Within the first 20 minutes of the day the indices had found resistance at previous highs and soon gave up trying to push through them.



After turning over into 10:00 ET, the indices began to sell off very quickly. The reversal gained momentum over the course of the next half hour and took all three indices past Thursday's lows, retracing the entire previous day's price range in a mere 30 minutes. Support hit initially at 10:00 ET with a push to those lows and into the S&P 500's 15 minute 200 simple moving average. This corresponded to the closure of Thursday morning's gap in the Nasdaq Composite and Thursday's opening highs in the Dow Jones Industrial Average. The market then pushed slightly lower to test the support levels more securely at the same time as the 10:45 ET reversal period hit.

The slowdown in the momentum as a result of the slightly lower lows, combined with the reversal period and the larger time frame support all worked together to create a correction off the morning lows. I took the YM due to its greater relative strength into the previous day's close. While the Dow made it back into the early morning congestion zone, the S&Ps and Nasdaq had an extremely difficult time showing any inclination to assist the bulls. They held the lows instead, pulling slightly higher in a trading channel along the lows. This channel broke initially into 12:00 ET and then a second channel followed into 14:00 ET.



As the S&Ps and Nasdaq continued to move slowly off the lows, the Dow managed to retest the morning highs, but volume was light throughout the upside. After the highs hit, along with the 14:00 ET reversal period, the bears again took over. An initial drop into the morning lows in the Nasdaq was soon followed by a correction and second decline into 15:00 ET. Momentum again accelerated throughout the move. It exhausted itself around 15:10 ET as the Dow fell into its morning lows.

While I timed the support and pivot off the lows very well, I was nevertheless surprised at the extent of the bounce off those lows in the final 45 minutes of the day. The market nearly made it all the way back to the 14:00 ET breakdown prices, which meant that the rally during this time was actually stronger-than-average. This action also is one indicative of market congestion, however, and tends to be followed by trading range activity.

With a range already well under way though, I am hoping to see some better intraday swings this week and a potential resolution to the range, although there is still the potential for it to hold the range into the 20 day sma zone. My directional bias is once again bullish on the 60 minute time frame, but I continue to remain on edge given the daily overhead resistance at previous highs in the Dow and S&Ps and the larger uptrend extension in the Nasdaq since the 18th.

I do not expect any upside to be very sustainable if it begins early in the week, since a base on the weekly time frame will typically be necessary to bust through daily resistance such as this. As we head into the end of Sunday's afterhours trading at 11:40 p.m. ET, the market is currently bearish on the 15 minute time frame, but it is hard to say whether or not it will sustain the move heading into the open since there is still plenty of time for the momentum to change again before then.





Economic Reports and Events This Week

Monday, October 1, 2007
10:00a.m. Sep ISM Manufacturing Business Index. Previous: 52.9.
5:00 p.m. Auto and Truck Sales for Sep.

Tuesday, October 2, 2007
7:45a.m. ICSC Chain Store Sales Index. Previous: -1.0%.
8:55a.m. Redbook Retail Sales Index. Previous: +0.5%.
10:00a.m. August Pending Home Sales. Previous: -12.2%.
5:00p.m. ABC/Wash Post Consumer Confidence. Previous: -11.

Wednesday, October 3, 2007
7:00a.m. MBA Mortgage Application Survey. Previous: -2.8%.
7:30a.m. Sep Challenger Layoffs. Previous: +85.2%.
8:15a.m. ADP/Macroeconomic Advisors Employment Estimate Non-Farm Payrolls Forecast. Previous: -4K.
10:00a.m. Sep ISM Non-Manufacturing Business Index. Previous: 55.8.
10:30a.m. Crude Inventories

Thursday, October 4, 2007
8:30a.m. Initial Jobless Claims. Previous: -15K.
10:00a.m. August Factory Orders. Previous: +3.7%.
10:00a.m. DJ-BTMU Business Barometer. Previous: -0.7%.

Friday, October 5, 2007
8:30a.m. Sep Nonfarm Payrolls. Previous: -4K.
8:30a.m. Sep Unemployment Rate. Previous: 4.6%.
3:00p.m. August Consumer Credit. Previous: +$7.5B.

Market Yet to Shake Trading Range

Good morning! Ever since last Tuesday's Fed meeting and the subsequent rally, the market has had a difficult time sustaining any momentum from one day to the next and even within a single session. A tug-of-war has been underway without either side prevailing. Instead the market has been stuck in that trading range we were expecting at the beginning of the week and not much had changed since.

While there have been some very large moves in a couple of stocks each day, such as in the China stocks, the market as a whole has been extremely sloppy. The stocks which grabbed my attention for play in Thursday's session were KongZhong Corp. (KONG), China Fin Online (JRJC), and Unibanco (UBB) on the long side of the market and Starbucks (SBUX) on the short side. Starbucks was hit when Banc of America cuts its rating to "sell" from "neutral" due to slowing growth stateside.



Before the opening bell, the Labor Department announced that first-time claims for jobless benefits fell to their lowest level last week since May. Additionally, the Commerce Dept. noted that U.S. economic growth accelerated in the second quarter. The market had been heading higher following Wednesday's close, but beginning at about 4:00 am the S&P 500 began to turn back over and the 8:30 am ET data didn't move the market very much at all. While the afterhours setups were very clear-cut, when the open rolled around the indices became very choppy and throughout the rest of the day they failed to break free from the congestion between the premarket highs and lows.



I didn't have a lot of luck with the futures market on Thursday and came out of it nearly flat after only four trades. I found it more difficult to avoid getting flushed and while the Dow had been the weaker index in recent days, that was not the case on Thursday when the Nasdaq lagged and the Dow led. As you can see on the charts, I have very few patterns even marked because there was so much overlap in price and chop that it was difficult to locate strong intraday triggers. The general areas of support and resistance at previous highs and lows and trend channel lines held, but they were not nearly as tight as in the week thus far and did not hold them as closely, so timing the pivots off the highs and lows was a bit more difficult than usual. Not even the intraday housing data phased the market. While sales dropped 45,000 to 825,000 in August, this weakness in the housing market is hardly newsworthy these days and was brushed off quickly.



Despite the slop, the market still managed to close near highs on this exceptionally narrow range day. The Dow gained 34.79 points and closed at 13,920.4 after testing the 14,000 zone several times. The S&P 500 rose 5.96 points. It closed at 1,531.38. The Nasdaq Composite also posted gains of 10.56 points. It ended the session at 2,709.59.

I would describe the current market bias as "hesitantly higher". Both the S&P 500 and Dow Jones Ind. Ave. had two waves of correction off highs within this range since the 19th, but since coming out of the second wave of selling they have not had much luck gaining momentum nor falling into a more gradual correction to allow for a strong upside breakout to more easily take place. Instead the upside creeping action adds risk for downside flush potential, even if it's only short-lived. The Nasdaq's better relative strength is also a bit of a potential problem for the bulls since it now has three waves of selling since it began to move higher on the 18th on the 120-minute chart and it is also now at risk of flushing lower into the weekend. So, while I will still be focusing primarily on the long side, I will be monitoring intraday momentum changes very closely.

Market Holds Daily Trading Range

Good morning! The market experienced a great deal of divergence on Tuesday. While each of the three major indices gapped lower into the open, the S&P 500 and Dow Jones Ins. Ave. experienced the largest gaps. The market opened into support from previous lows in the Nasdaq and the 15 minute 200 sma in the S&P 500. In the S&Ps and Dow the gap was significantly larger than average, which meant that typically that gap zone will attempt to fill and will nearly always do do in at least one of the three major indices .



By the times the 11:15 ET reversal period hit the indices had all closed their gaps and had put in at least three waves of buying on the 5 minute time frame. A short setup triggered well after the third his to lead to a decent correction off the market's initial highs. After pulling back off the morning highs the indices formed their first upside continuation pattern after 12:30 ET and moved into highs following 13:00 ET.

The market struggled throughout the day to gain any real momentum. The Nasdaq faired the best and trend higher into the close, but the S&P 500 and Dow were stuck in a range nearly all day and failed to trigger strong setups on the 5 minute time frame. The Dow Jones Ind. Ave. formed an upside continuation pattern coming out of a cup with handle pattern around 14:30 ET, but the market did not seem terribly excited. The market still managed to close at intraday highs., but the action was one conducive to intraday shopping for work clothes.!



When the closing bell rang the Dow was up 19.59 points and it closed at 13,778.7. Home Depot was again another strong decinrer. The market ended on a strong note, however, and continued higher throughout the afterhours and into the early morning. The S&P 500 shed 0.52 point on Tuesday and closed at 2,683.45. The Nasdaq Comp. ($COMPX) ended its session higher by 15.50 points at 2,683.45.



The market range is likely to continue over the next couple of days. I am still rooting for a better test of the previous highs. I'm going to be out of the office throughout most of Wednesday though, so I am hoping that any strong activity in the market which serves as a break in this congestion will be kind enough to wait until I return on Thursday!

Nasdaq Breaks to Highs, Dow and S&Ps Hold Range

Good morning! The market had a bit of a tough time trying to make up its mind on Monday. Thanks to strength in some key technology stocks, the Nasdaq managed to outperform the rest of the market throughout the day. The S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) both began to fall as soon as the opening bell tolled, but the Nasdaq Composite ($COMPX) actually climbed somewhat for the first 15-20 minutes of the day and broke to new highs on the month. While it also gave in to a bit of selling heading into 10:00 ET, the selling was not enough to close the gap and the 15 minute 20 simple moving average held as support.



The market began to head higher following 10:00 ET. At first there was a great deal of congestion on the 1 minute time frame, but when the 10:45 ET correction period hit the market shot higher. I did not notice anything in terms of news at this time, but the market reaction was very similar to one driven by news. The S&P 500 and Dow both returned to the zone of Friday's highs, while the Nasdaq cleared the resistance very well and confirmed that 60-minute range breakout we had been watching for heading into the day. Unfortunately for the bulls, the S&Ps and Dow were unable to mimic this breakout. After hitting the highs the market turned around immediately.



The pullback off the highs was extremely gradual to begin with due to the sharp rally into the highs in the first place. I was initially watching for a slightly higher high to slow the momentum, but the market held the zone of those highs even though it did retest them shortly after 10:15 ET. When the market didn't attempt a new high almost right away though, I began to change my focus towards the short side. I took a scratch on my initial attempt around 10:55 ET, but caught it perfectly the second time around at 12:11 ET. By this point the Nasdaq and S&Ps were hugging the 5 minute 20 simple moving average support and volume was drying up on the buying. This meant that even though the prices were heading higher in the Nasdaq at least, there was no conviction to the move.

Once the moving average support broke the sellers began to show their heads. They were a bit hesitant at first, but the momentum intraday on the downside increased a great deal shortly after 13:00 ET. Support hit initially at the morning lows in the Nasdaq Composite just prior to 14:00 ET. A bear flag on the 5 minute time frame followed and broke to a lower low heading into 14:30 ET. This move took the S&Ps into price support from last Thursday's lows. Since this breakdown did not last as long as the one which preceded it, the move began to turn the indices over and create a momentum shift on the 15 minute time frame. Another bear flag tried into 15:00 ET, but this time the lows was even less than before and could not break at all in the Nasdaq. The rounding off at the support allowed the market to hold the zone of the lows into the closing bell, although they dd give way again in the afterhours session until around 18:00-19:00 ET when the slower afterhours downtrend broke higher.



When the closing bell sounded the Dow was down 61.13 points. It closed at 13,759.1 with losses in 22 of its 30 stocks. The financials led the decline, while MSFT helped moderate the selling thanks to its 1.5% gain. The S&P 500 lost 8.02 points on Tuesday. It closed at 1,517.73. The Nasdaq Composite lost 3.27 points. It ended the session at 2,667.95. Since the selling increased on Monday within the range, it seems likely that the range will hold for a few more days at least, but I suspect that we will see some upside spikes within the range to regulate the selling and uphold the current bias for a continuation pattern coming out of the trading range. The 20 day simple moving average will be support.

Phoenix? Avalanche? Breakouts? Flags????

Anonymous said...
Hi ToniI have read about the Phoenix set up in the bonus manual and understand that it is the reverse of an Avalanche.In the last chart posted on this blog or thread using the DIA, there is a breakout, avalanche, and a phoenix.Here is the question: What is the real difference between a breakout and a phoenix set up?They look the same to me but I know there must be some difference.ThanksTAB
September 20, 2007 9:13 AM


Hey TAB,

Actually these setups all look pretty similar other than where they take place in the trend. A Phoenix is the first high and higher low to kick off a new uptrend. The Avalanche is the opposite. A flag just takes place in the direction of an already established trend as opposed to the beginning of a new trend.

Chatroom, CD course, etc....

sngdncman said...
Toni,I so much enjoy the daily reports I receive. Do you folks still offer various 'trade' services during the trading day? I am so busy at my chosen profession, but do trade online some. However, 'during the day' anaylsis, on my own, is not possible, so I do some dumb stuff. I am willing to purchase or help cover costs of such service
September 23, 2007 5:56 AM

Hey "sngdncman" :)

Well, the chatroom is actually free. The link for the setup is http://www.tradingfrommainstreet.com/roomsetup.html. I'm there pretty much every day and we just share trade ideas, etc. throughout the session. The posts must conform to they style of trading that I focus on, but it does not mattern what time frame or security you trade. I compiled all the basics of my trading style into a CD course. More details can be located at http://www.swingtrader.net/. It is about 7 hours long with well over 200 pages of text, but I'll be adding a packaged deal with another 3 hours of material and about 100 more pages by the end of this coming week.

Position Trades - MATK, BCR, ADTN, UPS

Good morning! Our watch list from Sept. 10th has panned out quite nicely over the past two weeks (9/10/2007 Short: CAKE, ADP, and IRF. Long: NEM, GG, SYY, ALTR, SLAB, EBAY and PAY)!

There are fewer setups this week than earlier this month now that the market is again heading back into the previous highs and hence decent price resistance, but I have a couple of things that have caught my eye. The main one is Martek Biosciences Corp. (MATK). Martek Biosciences Corporation engages in the development, manufacture, and sale of natural products derived from microalgae, fungi, and other microbes primarily in the United States. It's been in a downtrend since peaking in 2004, but has begun to round off at the monthly lows. These lows were smack into price support from the pre-2003 breakout and rally.

In May MATK took off, shooting higher throughout June and into mid-July. Since then it has fallen into a period of congestion. It had two waves of correction within that trading range and on Friday it busted through a third test of the highs of the range.

MATK is a stock which I feel can keep running throughout the remainder of the year and easily into the next. This might correct a bit on the weekly and lacks a decent daily setup now since the daily trigger was on Wednesday before it had popped up in my scans, so I'll be looking to build a position on correction intraday and on the daily time frame. August lows will serve as support. This pattern on the monthly time frame is very similar to these ones which took place in OSTK and NWRE earlier this year.

Other stocks to watch in coming months for buying ops include BCR and then on the larger time frames I am watching the base developments in ADTN and UPS.

Market Holds Range into the Weekend

Good morning! The market had a very strong showing this past week following a larger-than-expected 50 basis point rate cut by the Fed. The S&P 500 rose 2.8% on the week, while the Nasdaq Composite climbed 2.7%. Nearly all of the week's gains, however, came on Tuesday immediately after the announcement. Some follow-through occurred heading into Wednesday morning, but ever since then the markets have been stuck primarily in a trading range. The dollar hit record lows over the past couple of days, while crude oil is once again at record highs. The credit woes which contributed significantly to the late-summer collapse are also still on many people's minds.

As I mentioned this past week, I do still think that we are going to head for a better test of this summer's highs and are likely to see that happen this coming week. The general zone of those highs will be resistance, but since we have been consolidating the last couple of days, the push to those highs has some better potential to push past the exact price level. The last trading range at highs lasted from the 13th to the 17th, which was three trading days, and broke higher on the 18th with the Fed. Often these corrections are repeated, so since we now have three days of congestion beginning last Wednesday, it's quite possible to begin to move higher early this week. I do not, however, expect a repeat of Tuesday's extreme upside momentum.



Following Tuesday's rally, volume declined throughout the remainder of the week. Even though Friday was more active than Monday, it was the lightest volume of the week following the Fed. The first and final 15 minutes of the day had the strongest activity on this triple-witching Friday when contracts for stocks index futures, stock index options and stock options all expired.

To kick off the day, the markets gapped strongly higher into the open. The markets had begun to turn around following Thursday's afternoon decline almost right away after that day's closing bell. They gained momentum around 3:00 am ET with a rally in the Asian markets. Although the premarket momentum slowed after 4:00 am ET, the indices continued to creep higher. At 8:30 am ET the momentum again began to pick up steam, hitting premarket highs just ahead of the opening bell.



The market hit strong resistance from 15 minute highs of the previous two trading days going into Friday's open and held them very well at the start of the day. Initially I was looking at the potential for the morning gap to close completely in at least one of the indices, but kept in mind that the market has had a lot more exceptions to this larger than average gap closure rule in the past month or so as the phase of the market has changed. Initially the market did a decent job of holding this potential by falling strong into the open off the premarket highs. That momentum slowed, however, as the move came into initial price support from the highs in the Nasdaq and Dow on Thursday.

Thursday's highs held very well as support in the marketplace and the indices began to reverse momentum. They first made their way back to the intraday highs, hitting them at the same time as the 10:15 ET reversal period. They then retested the intraday lows, but at a somewhat more gradual pace than the initial morning decline. This time the lows did not correspond quite as neatly to the 10:45 ET reversal period, but still began to turn back around in that general area. The market tested the intraday highs for a third time around 11:00 ET, breaking quickly through them in the Nasdaq, but stalling in the S&P 500 and Dow.



The mid-day activity in the indices was very sloppy and the volume in the market began to decline dramatically. While the indices continued to push highs, they did so in small spurts of momentum and could not sustain any move. This creates a bearish bias and adds risk to each subsequent test of highs. At 12:30 ET the market gave up on one last-ditch effort and held the price resistance from Wednesday's highs. They turned over slowly at first, but the Nasdaq began to drop sharply following 13:00 ET and the Dow and S&Ps following heading into 14:00 ET.

The market had not been trading that well throughout the day and this became more marked in the final hours of trading. While the three traded in the same general direction, they were constantly switching roles in terms of relative strength leader versus laggard. While the Nasdaq had led on the upside, the greater extension also allowed it to fall the quickest into the early afternoon, but this meant that it also came into support more quickly as well on the 15 minute time frame from the morning highs and the 15 minute 20 sma. So, when the indices again dropped into 14:00 ET, it did not have as much room to move before those support levels hit more securely than compared to the Dow and S&Ps which had not risen much above those same support levels and hence did not view them as strongly as the Nasdaq. They broke them quickly and had little in the way of support until the morning lows.

14:00 ET is a very strong reversal zone in the market. The Nasdaq hit this level as it hit its larger intraday support levels and held it almost perfectly. The S&Ps and Dow slowed their downside momentum into 14:00 ET, but continued lower for several more minutes, bounced into 14:30 ET and then flushed hard into the morning lows and a few ticks beyond into 14:40 ET. The flush took the Nasdaq with it, but the Nasdaq still held the 14:00 ET lows and then made its way back to its intraday highs soon after 15:00 ET. The S&Ps and Dow also moved higher at this time, but they were more choppy and only returned to lower resistance levels such as the breakdown zone in the S&Ps and the 15 minute 20 sma. Another sloppy reversal then took the market back to the zone of the afternoon lows heading into the closing bell.

The Dow ($DJI) closed 53.49 points higher at 13,820.2, while the S&P 500 ($SPX) rose 7 points and closed at 1,525.75, and the Nasdaq ($COMPX) gained 16.93 points and closed at 2,671.22. The Dow was weighed down by Home Depot (HD), which fell 2.4%, and American Express (AXP), which she 1.4% on Friday. On the other hand, Google Inc. (GOOG), which gained 1.3%, and Oracle (ORCL), which rose about 4.4% on earnings, topped the Nasdaq gainers list.

Market Deals with Predominately Range-Bound Trading

Good morning! Volume was somewhat lighter on Thursday as the market continued to correct off Wednesday's morning highs. After pulling lower out of the open into the previous day's lows, the market bounced into the 5 minute 20 simple moving average and promptly fell into a trading range which should last well into the afternoon. While the range made it a decent day if a trader simply focused on trading pivots, things were a bit more difficult for those searching out some decent momentum.

I only traded three stock positions on Wednesday. Alexandria Real Estate (ARE) I managed to catch for a rapid daytrade breakdown in the morning, along with another scalp, this time on the upside in JA Solar Holdings (JASO). The third one, however, in Monolithic Pwer Sys Inc. (MPWR) was by far the best of the bunch and it trended highs throughout the afternoon. Other notable gains on Thursday included Cree Inc. (CREE) once again, E Future Information Tech Inc. (EFUT), Sigma Designs Inc. (SIGM), and Barrick Gold (ABX).



Over noon the momentum in Thursday's session began to turn over. The upside slowed with lighter volume and at 13:00 ET the market could not even take back all the losses from the decline into 12:30 ET. The strongest downside began soon after af the 14:00 ET reversal period and led to a rapid return to the morning lows in the Nasdaq Composite and a closure of the previous day's gap in the Dow Jones. Ind. Ave. The support levels hit at 15:00 ET and the market moved somewhat higher throughout most of the remainder of the day until hitting the 15 minute 20 sma resistance and pulling slightly lower again into the close.



By the end of the session on Thursday the Dow ($DJI) had fallen 48.86 points (-0.4%). It closed at 13,766.7. 20 of its 30 components lost ground on the day. One of the hardest hit was Home Depot Inc. (HD). It lost 2.4% by the end of the session. The S&P 500 ($SPX) shed 10.28 points (-0.7%). It closed at 1,518.75. The Nasdaq Composite ($COMPX) lost 12.19 points (-0.5%). It closed at 2,654.29.



My outlook into Friday is now favoring a hold of the 60 minute range since the market did not attempt to move higher on Thursday, but there is still room to push for a better test of the daily highs. I don't think, however, that at this point the market will be able to do this before the week is over. I am leaning for a continuation of the somewhat more difficult trading of the last two days instead.

Indices Push for a Retest of the Summer's Record Highs

Good morning! The much-desired rally which kicked off with Tuesday's Fed meeting continued into Wednesday, but the session as a whole was a more difficult one with a lot of more choppy action and trading range activity. A large chunk of the day's gains were made in the premarket following the 8:30 am ET economic data. The Labor Department reported a 0.1% decline in consumer prices last month, while the core consumer price index rose 0.2%. This core CPI excludes the costs of food and energy. Both of these numbers came in at expected levels. In other news, the Commerce Department announced that U.S. housing starts and permits fell to a 12-year low last month, which was slightly less than expected.



After Tuesday's move, it became a lot more difficult to sustain the upside momentum and, as expected, the intraday upside on Wednesday was a lot more muted. The market experienced three waves of upside on the all-sessions 5-minute time frame coming out of the premarket data. The first stalled at 9:00 ET and the second began at the open and stalled at the 9:45 ET reversal period. The market then fell into a trading range along the intraday highs and a third rally began out of the 10:45 ET reversal period. It continued into the 11:15 ET reversal period.

When a security or index has three waves of buying whereby the correction time between each wave of buying is comparable between waves 1 and 2 and 2 and 3, then the market typically cannot establish a decent 4th wave of buying without correcting for a longer period of time following that 3rd move. In Wednesday's session the indices did not even bother to form a minor 4th move and broke the trend line going into noon as they returned to the congestion zone between the 2nd and 3rd waves of upside. This support held for a bit of a bounce into the early afternoon, but then established a lower high and was quickly followed by a lower low. This established the beginning of a new trend: a downtrend.



The afternoon trend was a very sloppy one. I had a much more difficult time with Wednesday's trading because many support and resistance levels would get flushed and more easily trigger stops even when given what would typically be considered ample room to avoid such actions. I was flushed out of three positions on Wednesday by just a few ticks before they continued and hit targets, which is something I cannot recall ever happening in one day of trading for me before. It's a disadvantage of using stop orders on the books as opposed to manually managing positions. I have yet to decide which is the best option long term. I tend to do better when manually handling stops, but it requires a lot more time and can result in a lot more significant losses when the flushes hold. Since many times a security can tease a stop level for quite some time, this also takes away from your ability to scan and look for other trades and setups which can boost your overall performance.



The afternoon downtrend continued until nearly 14:30 ET with the final push into lows gaining momentum out of the 14:00 ET reversal period. This was the sharpest decline of the day with an initial downward thrust closing the Nasdaq's gap and a secondary once only a few minutes later as the S&Ps attempted to close their own gap but didn't quite make it.

Typically a downside move such as that which took place into 14:15-14:30 ET on Wednesday will have a difficult time turning around quickly. The market did manage to return to the levels of the congestion ahead of the final downside move on the 5 minute time frame, but it took longer to regain the losses than it did to loose them in the first place. The momentum picked up a bit after a small Phoenix into 15:00 ET created a bit of a more rounded low. Once the previous 5 minute highs hit, however, the sellers returned and the market pulled somewhat lower again in the final 30 minutes of trading.

As the primary session closed on Wednesday, all three of the major indices were reporting comparable percentage gains. The Dow Jones Industrial Average ($DJI), S&P 500 ($SPX), and Nasdaq Composite ($COMPX) each posted gains of 0.6%. In the Dow this translated as a gain of 76.17 points and the index closed at 13,815.6. 24 of the 30 Dow components closed higher. Merck Co. (MRK), which was one of the top Dow stocks, gained 2%. The S&P 500 rose 9.25 points. It closed at 1,529.03. The Nasdaq Comp. gained 14.82 points. It closed at 2,666.48. Some of the other top winners on the day were Plexus Corp. (PLXS), which rose 7.8% following an upgrade by J.P. Morgan, Accredited Home Lenders Co. (LEND), which climbed 18.2% due to news of its acquisition by Lone Star for $11.75/share, LDK Solar Co (LDK), Cree Inc. (CREE), and my favorite Warnaco Group Inc. (WRNC).

I am still expecting the market to head back into the highs from July, but as I mentioned yesterday, the pace of the buying is likely to be a lot slower. So, if the buying continues on Thursday then expect some rounding off into the highs. Should the market base into the weekend instead of continuing higher on Thursday, then it will be easier for the indices to push to a higher high as opposed to stalling right at or just under the prior high

Stellar Move Following 50 Basis Point Interest Cut

Good morning! Tuesday was a very busy day for the market. The indices gapped higher into the open after turning around at 3:00 am ET and then gaining upside momentum at 8:00 am ET. The Labor Department reported that wholesale prices fell 1.4% in August. Falling food and energy prices played a significant role. The core producer price index, however climbed 0.2%, which was more than anticipated. It was read as good news by the market since it represented a nice curb on inflation.

The morning gap was pretty impressive in and of itself. The session began at strong prices resistance, however, from the previous 2-3 days of trading where the market had been stuck in a range. The result was an attempt to close that gap shortly after the open. The indices rounded off at premarket highs and began to fall rather quickly following the bell. The Nasdaq's gap zone closed nicely, while all three indices found support at the 5 minute 20 period simple moving averages.



After the first 25 minutes or so of the day there really was not much of a bearish bias at all in the market. The indices were on the more sloppy side, but they trended higher into the 11:15 ET reversal period. This closed the gap zone from Friday's close in the Nasdaq and brought the S&P 500 back into the resistance level from Thursday's highs. The strong overhead prices and impending Fed rate announcement put a halt to the upside for awhile. Volume diminished dramatically and the indices slowly pulled lower head of the announcement. There were some stronger moments of selling than buying on the pullback, but the larger momentum of the correction itself remained more gradual than the earlier buying.



When the news hit at about 2:15 ET that the FOMC not only cut its overnight interest rate, but that it did so by half a percentage point, the market was stunned. The bulls were tripping over themselves to initiate new positions and the indices soared. A continuation pattern quickly followed after a brief stall at highs into 14:30 ET. The S&Ps did not perform quite as well as the Dow and Nasdaq, but they still climbed back into the intraday highs.

Even after already establishing one of the largest intraday upside moves in the past 5 years, the indices still did not let the sellers gain any edge. A second correction off the highs pulled the market slightly lower into 15:00 ET, but the volume declined as the market pulled back. This meant that true sellers were not driving the correction, but rather that the buyers had just eased off for a bit. They took the helm for a third time soon after 15:00 ET. This time the Nasdaq was left behind while the S&Ps and Dow experienced the strongest pushes to new highs.

By the end of the day the Dow Jones Industrial Average ($DJI) rose 335.97 points (+2.5%) to close at 13, 739.4. The S&P 500 ($SPX) gained 43.13 points (+2.9%) and closed at 1,519.78. The Nasdaq Composite ($COMPX) added 70 points (+2.7%). It closed at 2,651.66. Broker/dealers and many others in the financial sector were among the top gainers on the day. They were led by Lehman Brothers (LEH) and Goldman Sachs (GS).



The move which resulted from Tuesday's economic data and news triggered a breakout on the daily time frame as well. This comes from a rough cup-with-handle pattern that began at the start of the month. It will once again be easier for the Nasdaq to retest July's highs and now the S&Ps and Dow have a decent shot as well. Expect that the buying would stall just a hair under the exact highs since there is some congestion in that zone. Intraday corrections on the 15 minute time frame are worth keeping an eye on. I am concerned that since the breakout momentum was so strong, that the buying which follows will be much slower overall as the excitement dies down a bit.

Afterhours Bull Flag

I know, I know.... I should be sleeping.... :)

Market Activity Slows Ahead of the Fed

Good morning! I hope you had a wonderful weekend and nice start to the new week! Things were a bit slow on Monday with narrower trading throughout the session on lighter volume. The largest contributing factor to this is Tuesday upcoming FOMC meeting. The Fed meets Tuesday afternoon and it is expected that they will cut the federal funds rate by 25 basis points. More importantly, the focus will be upon any accompanying comments regarding the potential to further ease rates. It is not likely, however, that they will allude to any upcoming rate changes in this newest report. The U.S.'s economic outlook has been rapidly diminishing and in the overseas market many customers have been yanking their savings from troubled banking enterprises.



Monday's session began with a decent downside gap after the indices rounded off at highs on the 15 minute time frame intraday on Friday, leaving the indices with a bearish bias going into the new week. The indices found themselves heading in different directions following the opening bell. While the Nasdaq soon began to head lower and fell into a downtrend intraday, the Dow Jones Industrial Average ran into 5 minute 200 simple moving average support and previous 15 minute lows support right away with the opening bell. It then fell into a trading range into 10:00 ET before rallying higher to close the morning gap. It is very typical that in the case of a larger-than-average gap, at least one of the indices will close the gap zone. It was the Nasdaq which closed Thursday's upside gap, while the Dow closed it this time as the Nasdaq remained the weaker index.

The 10:15 ET reversal period held very well on Monday and the Dow's gap closed at the same tim as this reversal period hit. The Dow turned quickly, pivoting off highs, while the Nasdaq broke lower out of a small 5 minute trading range along the intraday lows. While the S&P 500 had pulled up slightly with the Dow, it held the 5 minute 20 and 200 simple moving averages and soon broke to new intraday lows with the Nasdaq. The Dow faired somewhat better and found support at the morning lows as the market moved into 11:00 ET. The indices popped quickly for a few minutes at that point, but they were not able to break above 5 minute resistance and instead just created a continuation short pattern going into the 11:15 ET reversal period.



A final wave of selling took the market once more to new intraday lows. The decline into 12:00 ET, however, was a lot more gradual in the S&P 500 and particularly in the Dow as compared to earlier in the morning and the change of pace or momentum began to prejudice the market towards a stronger upside resolution to the final morning decline. It did not take the market long to begin to gather momentum and all three indices moved quickly back into the 15 minute 20 simple moving averages.

As resistance hit heading into 13:00 ET, the momentum began to change. A slowdown on upside trading until 13:00 ET resulted in a pullback into 13:0 ET. It lasted through two waves on the 5 minute time frame before heading back higher after 14:00 ET. The market failed to gather eager participants, however, and even a continuation pattern on the upside out of 15:00 ET failed to return any of the three major indices to their morning highs. The market pullback back again as the Nasdaq hit its prior 5 minute highs from around 13:15 ET, but rolled over at the resistance and continued to selloff afterhours.



Monday's session concluded with a loss of 39.10 points in the Dow Jones Ind. Ave. ($DJI to close at 13,403.4. The S&P 500 ($SPX) lost 7.6 points and ended the regular trading day at 1,476.65. The Nasdaq Composite ($COMPX) experienced the strongest percentage decline and fell 20.52 points to close at 2,581.66.

On Tuesday, due to the Fed announcement, I expect to take things pretty slow. I will be missing the first hour or so of trading due to an appointment and that tends to be the best trading period the day of a Fed announcement before it's been released. When it does come out I would advise that you do not keep a lot of level IIs or data streams up and running since they can quickly become bogged down and begin to post inaccurate quotes. I am still waiting for the day that this is not the case and each year it does seem to get better. Following the announcement itself there are often three swings back and forth on first a 1 minute time frame and then on a 5 minute time frame.

My Trading

john said...
gleftgptoni you always talk about the indexes in your blog and newsletter, which I appreciate, do you rade the futures on a daily basis? do you do day trades? I am still debating as to my approach and thinking of your cd course. thanks for your thoughts (September 14, 2007 12:33 PM)


Hi John,

Well, not exactly a daily basis, but nearly every day! In the indices 99.99% of my trades would be considered to be daytrades. I actually cannot think of the last time I held them overnight. I tend to trade about as many futures trades as stocks... perhaps a bit more lately though since I am averaging 4 stocks vs. 6 futures trades lately. If you have any questions at all just let me know! My email is toni at tradingfrommainstreet dot com.

All my best,
Toni

NIHD Breakdown Setup

Hey Gang,

Here is one of my trades from today. It was in NIHD. It popped up in my "range" scan in Real Tick shortly before 12:30 ET. It was in the process of pulling back up into the range with a slower momentum move from 15:10 to about 15:25 ET. The entire range was hugging the 15 minute 20 simple moving average and volume was light throughout after it had rolled over in the morning off highs. The target was based upon an equal move on the breakdown and the whole number support at $71, although slightly stronger momentum than that seen off the morning's highs allowed for it to push a bit past that equal move and whole number support.

Market Mixed in Wednesday's Trading

Good morning! So today (13th) is my birthday! Yippee! I turned 29! (For those of you have have helped celebrate my previous 29th birthdays I'd like to thank you for sticking with me this long! =) For a bit of a heads up, I'll be out of the office the next few days, so sadly I will not be sending out a column for tomorrow or Sunday night. Please forgive me!

On another exciting note... Well, ok, maybe it was not terribly exciting this time, but let's chat a bit about the market action from Wednesday. Trading was a bit lighter throughout the day and a lot more range bound. There were some nice setups, but the action was definitely a lot more mixed! By the end of the session the Dow Jones Industrial Average ($DJI) lost a mere 16.74 points (-0.1%) and ended at 13,291.7. The S&P 500 didn't want anyone to notice that it had actually traded on Wednesday. It closed only 0.07 point higher at 1,471.56. The Nasdaq Composite shed 5.4 points (-0.2%) and closed at 2,592.07.

There were not really a lot of stocks that managed to trend higher throughout Wednesday's session. The market gained ground throughout the morning and this is when most of the top gainers on the day had their strongest performance as well.

Some of those top names in the Nasdaq included Amgen Inc. (AMGN), which continued its rally from Tuesday; Wynn Resorts Ltd. (WYNN), which had also had a strong showing the day before; Google Inc. (GOOG); Synaptics Inc. (SYNA), which gave back a large chunk of its intraday gains in the afternoon, but still managed to close strong; Sohu Com Inc. (SOHU); and Lifecell Corp. (LIFC). In the NYSE the financial stocks, as well as the oil and energy stocks were the top leaders. Las Vegas Sands Corp. (LVS) also rose substantially for the second day in a row after breaking out of a nice daily range on Tuesday.

On the flip side, a number of names performed very poorly on Tuesday. One of the top NYSE losers was NYSE Euronext (NYX), which has been sliding lower all year and triggered a swingtrade short setup on Tuesday by breaking lower out of a multi-week base. The high-flying Aluminum Corp. (ACH) also had a tough break and gapped down sharply on the session. In the Nasdaq there were a lot of well-known names topping the losers category. These included the likes of Sandisk Corp. (SNDK), Nvidia Corp. (NVDA), First Solar Inc. (FSLR), Kla-Tencor Corp. (KLAC), Apollo Group Inc. (APOL) and Lam Research Corp. (LRCX). Most of these fell into trading ranges through the morning, but then broke lower over noon and continued lower throughout the remainder of the session.



In the markets themselves, while there was a great deal of choppy trading throughout the day, there was still a lot of order to the action as well. For instance, the market began with a bit of downside, but it was very mild selling which simply continued the correction from the previous afternoon. This downside was established with a slight gap and was followed by an almost immediate reversal and move back into the highs of the 15 minute range with the Nasdaq leading the way. It broke to new highs before 10:00 ET, but the S&Ps and Dow hit resistance at previous 5 minute highs and a pullback into 10:15 ET followed. Lighter volume on the very gradual correction off the intraday highs created a buy setup into 10:30 ET. This took all three indices to new intraday highs and past those of the previous session. A second pullback soon followed into 11:00 ET.

Since the second pullback on the 5 minute time frame had followed a somewhat slower upside move than the one out of the open, I had expected the third upside move of the day to be even more gradual. The move was a bit stronger, however, and the market was again able to hit the upper trend channel limits. This stronger move on the upside meant that while I'd been looking for a reversal and pullback into the afternoon, it would have a difficult time getting off to a strong start and would take longer to roll over. Nevertheless, the 11:00 upside move was still an exhaustion to the intraday trend. The market had hit resistance at previous highs on the 60 minute charts from last week and after three waves of buying, in which each correction between the waves is comparable, then the market needs to establish a longer correction and any additional continuation attempt is often very stunted.



The stunted continuation attempt on Wednesday came out of 12:00 ET when the market hit the 5 minute 20 sma support and the indices popped for a few minutes. Even though I thought they might form a 2T with a slightly higher high, they actually ended up holding those highs and the 5 minute 20 sma quickly gave way to some strong early afternoon selling. A continuation followed for a third wave of selling into 13:00 ET. This third move was a bit shorter than the second. Support held and the market turned back around with a pace change into 13:30 ET and another strong upside move which quickly took the market back to the morning highs.

Once again the market had a difficult time at the upper price resistance. The S&P 500 was the strongest and returned to the upper trend channel line, but the Dow had begun to round off at highs and the Nasdaq had given up its position as the relative strength leader. It only moved back into the resistance zone from the earlier congestion at highs and held under the absolute high. This reversed its leadership role and placed it in the spot of the index with the least relative strength. As I mentioned earlier, the afternoon is when most of the Nasdaq losers really began to move, so the fact that the overall Nasdaq had a more difficult time as well was not much of a surprise.



Since the upside in the afternoon was stronger-than-average, it did take the market a little bit of time to turn over and create some stronger afternoon selling. The market did this by hugging the 5 minute 20 sma with two waves of upside within the congestion and lighter volume along the support. The support gave way to a very strong late-day move to the lower end of the range in the Dow and S&Ps and through the previous 15 minute lows in the Nasdaq when the 15:00 ET reversal period hit. This second afternoon reversal off highs left the market relatively unchanged into the closing bell after being up nicely two times intraday.

Market Closes Higher, Previous Nasdaq Highs Back in Sight

Good morning! After turning around on Monday into the late morning and early afternoon the indices continued to head higher throughout Tuesday's session. The Dow Jones Industrial Average ($DJI) gained 180.54 points (+1.4%) on the session. It was led by General Motors, which climbed 4.6% after announcing reduced spending on crossover vehicles and McDonald's (MCD), which moved 3.2% on a strong increase in August sales. The S&P 500 rise 19.70 points (+1.4%), while the Nasdaq Composite ($COMPX) climbed 38.36 points (+1.5%). Advancing stocks outpaced the decliners on the NYSE by 3 to 1, while the beat 2 to 1 on the Nasdaq.

Fed. Chairman Ben Bernanke let very little slip in his speech intraday regarding the potential for an upcoming rate cut next week and left market participants assuming that we would in fact receive a cut in interest rates. The volume was light compared to the volume from late July and early August, but held up well against the average of the last two weeks. There were still some decent moves though. Top gainers included Las Vegas Sands Corp. (LVS), National Oil Well Verco Inc. (NOV), Trina Solar Limited ADR (TSL), Agrium Inc. (AGU), Amgen Inc. (AMGN), Imclone Sys Inc. (IMCL), and Celgene Corp. (CELG).



Tuesday began with another gap higher for the second day in a row. Unlike Monday's gap, which took place after the market had turned around into the close on Friday, the market ended the day on selling on Monday, so it had no upside to already take out part of the potential on continued upside. After the open the market stalled, but it held onto the gains and moved slightly higher. Then the indices based into 10:15 ET. The volume declined a bit and the market popped coming out of the reversal period.

This morning breakout took the indices into very strong resistance on the 15 minute time frame. The Nasdaq ran into previous daily highs, while the Dow hit resistance at its 15 minute 200 simple moving average and the S&P 500 hit price resistance at Friday's highs. All of these corresponded to the 10:45 ET reversal period and the market reacted accordingly and pulled lower throughout the remainder of the morning.



The market pulled quickly into the 5 minute 20 sma support at about 11:15 ET. It then hugged that support level before breaking lower for a second wave of selling on the 5 minute time frame into noon. This second decline was a bit slower than the first with more overlap from bar to bar and on lighter volume. These were the perfect traits for a mid-day buy setup and the corresponding 12:00 ET reversal period and 15 minute 20 sma support didn't hurt matters either! Within half an hour the market was back at the previous highs, but it did take a bit longer for strong momentum to come in again.

The indices chopped around a bit for another correction into 13:30 ET and then at 14:00 ET they broke out to new intraday highs. The buying was steady into 14:30 ET before the market again slowed and began to show signs of correction. The correction took the market into the 5 minute 20 sma into 15:00 ET, but then retested highs before falling apart into 15:30 ET. This flush was brief, testing the 15 minute 20 sma, before it pulled back up into the close. The session ended within a few ticks of the day's highs, but the resistance left it selling off afterhours for the remainder of the evening.



My bias in the market remains on the upside as the week continues, but I'm still refraining from being too aggressive on swingtrades and have been putting a lot more focus on intraday setups in recent weeks than on larger time frames where I'd hold for more than a day or two at a time. I'm still targeting the previous highs from July as resistance for the Nasdaq, but the rest of the market has a lot of moving average resistance that it's going to have to deal with first and due to the stronger gap and drop on the 7th I'm not completely sold that the Nasdaq is going to make it!

Note: Due to upcoming b-day plans, I will not be releasing a letter on Friday or Monday, but will resume the newsletter for Tuesday morning!

Market Swings Strongly Intraday, Attempting to Find a Foothold

Good morning! The indices were riding a bit of a roller coaster in Monday's session. The market gapped strongly higher to begin the day, but this open was smack into price and moving average resistance. The S&P 500 ($SPX) and Dow Jones Ind. Ave. ($DJI) both opened into the mid-day price levels from the previous session, while the Nasdaq Composite ($COMPX) hit Friday's highs and the 5 minute 200 simple moving average into the open.

Within just a couple of minutes of the open the bulls found themselves under pressure. The gap closed quickly, but the market only bounced for about 15 minutes when support hit at 10:15 ET. By 10:30 ET the bears had again taken over. This second drop continued into 10:45 ET, where once again the market had a hard time reacting despite the support from Friday's lows in the Nasdaq. I had bought both the 10:15 ET and 10:45 ET pivots, but neither moved more than about 4 NQ points in my favor before turning and heading lower again.



A third and final drop in the indices began at about 11:00 ET on Monday. The volume was lighter on this wave of selling, and while it began to move quickly lower, the pace changed into 11:30 ET. A very slightly lower low held as the Dow hit lows from a few weeks ago. Momentum increased immediately to the upside. After hitting the 5 minute 20 sma the indices stalled, but another strong buy setup followed into the 13:00 ET reversal period. The market had pulled over the 5 minute 20 sma by that point and had been correcting for about half an hour. The decline was gradual off the overhead resistance. It also took place on declining volume as it pulled back into the 5 minute 20 sma support, which hit at the same time as that reversal period. This kicked off a second wave of buying on the 5 minute time frame.



The indices moved higher throughout the early afternoon, establishing a 5 minute measured move into 13:30 ET. At that point the indices hit resistance from the first support zone of 10:15 ET and the market corrected for a second time in the afternoon. The pullback was sharper into 14:00 ET than the earlier drop, but volume still declined to show a lack of motivated sellers and the 5 minute 20 sma support zone held. New afternoon highs soon followed, although the larger price correction meant that they barely broke before the market was again stuck. This time the correction was very gradual.

From 14:30 ET onwards the indices just fell flat along the afternoon highs. This correction continued into 15:00 ET and the 5 minute 20 sma support once again. A final upside move then took the market all the way back into the morning highs zone and the opening prices for the session. This was also 5 minute 200 sma resistance in several of the major indices.

Given the time frame for this resistance, the market had a difficult time getting through it and turned over to sell off into the close. This move was steep and took back a large chunk of the gains. The Dow still gained 14.47 points to close at 13,27.8. The S&P 500 lost 1.85 points and ended the day at 1,451.70. The Nasdaq Comp. lost 6.59 points. It closed at 2,559.11.



As you all know, today marks the anniversary of the Sept. 11th attacks. I want to send my thoughts out to all of those directly impacted by this event, including those whom have lost family members in the ongoing war and those still overseas. I remember that day beginning much like any other day in the market for me, but before we could even get under way we began to see the catastrophe unfold before our eyes. I have never witnesses a live event such as that in my life and hope I never do again.

It will take many years for us to not have some reservations and nervousness each year when September 11th rolls around. On the first anniversary of that day I found myself on a very nearly deserted plane bound for Los Angeles. Even though many of us are less likely to alter our plans for the day at the point that we hole up in our homes, there is still the lingering concern that something, somewhere will go horribly wrong. The impact of this could be a rather subdued session on Tuesday. There is not much on the economic front in terms of data to move the market until next week.

Borrowing Money For Trading

Reply to a trader who just borrowed funds for trading and is now feeling overwhelmed....

Well, ok, yes you are right "you'll probably chastize me for what I'm about to say..." I've known so many traders over the years that have taken out loans, borrowed from friends, etc. etc. to get the funds they think they need to trade with full time. Not once, and I mean not ever, has it worked out for them. This does not matter whom they borrowed from or what the reason was. I don't know a single one that made it. I don't say this to be disheartening. It's just what I know from my own experience with others in your place.

Now, what would I do? Well, first I would close the loan. Then I would start to save and while saving I would study. Get a charting platform... something that is cheap. It doesn't even have to be live charts... You can use something 20 min. delayed. In this case you can often get them free. Then start studying market moves, momentum stocks if you are looking at stocks. Examine top gainer and losers on the day and study the intraday activity. Treat it as if you are going to school part-time for your advanced degree. During this time you can keep a small account if you want. Use it to try out different strategies with very small shares. You can use something like Interactive Brokers where anything 100 shares or less is only $1. You can even take a couple of daytrades a week if it's under the pattern day trader rule, but can still swingtrade.

This is what I would do and what I would tell my friends and family to do if in this situation. You have to make it so that you are NOT trading scared and trading is almost always scary to start with, but particularly so on borrowed cash.

All my best,
Toni

Trading Software Commercials....

Question:

Toni,

Say do have any opinions on the trading software info commercials that appear late into the night on tv? Someone brought it up to me and generally i think it is just someone trying to sell you something. Yip it works to a certain extent but that's it! You for one may now what i'm talking about. It's dependent on your technique, discipline and your own ingenuity. I made a whole series of mistake over time before i got into books and professionals that trade for a living that taught me what oscillators were really about until i got good enough to build one. It interests me to hear if you have any opinion one these so called trading software informercials.

Thx

Answer:

Well, I tend to agree that yeah, it's just someone trying to sell you something. Most of the books, courses, platforms... are all like that. I've actually never been able to read most trading books because they are just not that helpful. I flip through them and toss them aside. I don't even use the indicators like oscillators, etc. They are just trying to show you readings on price and volume activity. It's best to just learn to read the underlying price and volume itself. It will keep you from getting mucked up when price activity and the oscillators are giving separate readings. Yeah, indicators can help to a certain extent, but I'd never rely wholly on one and I'd certainly never buy one of those "red light, green light" trading systems.

All my best,
Toni

Market Hit Hard by Friday's Jobs Data

Good morning! After pulling back slightly from Thursday's close in afterhours trading Thursday evening, the market began to experience some restlessness in the early morning hours, gaining momentum a bit after 4:00 am ET. Then, after basing at premarket lows for several hours, the furies were released. At 8:30 am ET on Friday the government announced that in August the U.S. suffered the worst jobs decline in nonfarm payrolls in four years. The unexpected loss of 4,000 jobs hit the market hard and the indices plummeted ahead of the open. So much for the 60 minute upside breakout and retest of July's highs in the Nasdaq that I'd had my eye on! Yikes!



Typically larger-than-average gaps in the indices will attempt to close the morning of the gap. This is not as common when the market is in a larger monthly transition stage. Given that the market never closed its gap earlier in the week on the 5th, I was a bit more hesitant to buy the downside gap this time around as well. While I did take it in the NQ, I only ended up with minor gains since the indices merely crept slightly higher after the open into 10:00 ET. The choppy upside and declining volume created a reversal pattern and selling hit. It began slowly, but after a small base from about 10:15-10:30 ET the downside increased. This was particularly true in the Nasdaq Composite where the downside momentum was the strongest.

Selling stalled at about 10:45 ET with the reversal period, but the market lacked a strong exhaustion move with a decent volume spike, even though the volume was higher than during the previous session. The market continued slightly lower after 11:00 ET, but the Nasdaq was too extended and barely slid past the previous lows by only a few ticks, whereas the Dow Jones Ind. Ave. and S&P 500 which had been more reserved on their price declines and were able to push through the earlier lows by a greater degree. In the Nasdaq the fact that the second low took place on such gradual pace and on lighter volume than into 10:45 ET helped turned that index and the market as a whole higher into lunch.



The pivot at 11:30 ET, while not coming out of a typical reversal period, was much stronger-than-average thanks to the slowdown in the selling just prior to the reversal. The market hit resistance initially at 12:00 ET when the Nasdaq came back into opening lows and the S&Ps hit that morning congestion at the same time as this mid-day reversal period. Volume dropped off as the market pulled back off these highs, but it failed to increase much when the market attempted a new mid-day high into 12:30 ET. The indices only broke the previous high by a few ticks before pulling back a bit more strongly into 13:00 ET. A third wave of buying on the 5 minute charts mid-day followed, but once again the highs were only slightly above the previous one. This created a larger momentum reversal and a strong breakdown setup triggered at about 13:30 ET when the lower trend channel and 5 minute 20 sma support gave way.



Although the initial breakout kicked off strongly, it did not get far before congestion set in. The market chopped sideways, using the 15 minute 20 sma as resistance, before breaking lower into 15:00 ET. This took the indices back to the morning lows, but the indices had a difficult time maintaining downside momentum and the market whipped back and forth after hitting the support. The market retested lows and then pulled up a final time in the last 15 minutes of the day after hitting the 15 minute 20 sma a third time around 15:15 ET.

Despite closing up off lows, the Dow ($DJI) still lost 249.97 points on Friday, while the S&P 500 ($SPX) fell 25 points, and the Nasdaq Composite ($COMPX) dropped 48.62 points. While the market has been under heavy pressure, gold stocks have really chosen this moment to shine. Many broke out of congestion to the upside recently and really took off in this past week. GLD, which tracks the index, shot to new 52-week highs.

Most the focus in the market this week will be on the Fed. since there is very little in terms of significant economic data this week. Federal Reserve Chairman Ben Bernanke, Fed. Governor Frederic Mishkin, and San Francisco Fed. President Janet Yellen are all planning on speaking early in the week. Currently the Fed.'s lending rate stands at 5.25%, but more and more people are expecting a 50 basis point cut to be announced with the Sept. 18th Fed. meeting.

Market Closes Higher on Light Trading

Good morning! It was a bit of a tougher day out there in the markets on Thursday. Volume remained on the lighter side and the market spent a large chunk of the day stuck chopping back and forth. The best activity came in the morning. The indices had gapped slightly higher out of the open, but this gap took them smack into resistance from previous highs and congestion levels as well as the 5 minute 200 simple moving average resistance intraday. Although there was a bit of hesitation initially, the market quickly turned over and began to sell off.

The morning gap filled fairly quickly, but the indices barely paused before it continued lower. The Nasdaq Composite and S&P 500 both fell into the zone of the previous day's lows, while the stronger Dow Jones Ind. Ave. came into its previous 15 minute lows before the selling finally abated. This roughly corresponded to the 10:15 ET reversal period. My only futures trade for the day came just a couple of minutes later at 10:23 ET.



This market moved very well off this early morning pivot. The indices stalled somewhat going into 11:00 ET, but a second wave of buying on the 5 minute time frame triggered at 11:15 ET and this took the Dow and S&Ps both to new intraday highs and brought the Nasdaq into its opening prices. This resistance stalled the rally for a second time, but the third and final move of the trend did not take long to develop.

Soon after 12:00 ET the Dow and S&Ps were again making new highs. This final push took the Nasdaq back into its morning price resistance at the opening highs and its 5 minute 200 sma. This resistance corresponded to the zone of Wednesday's highs in the Dow and S&Ps, so once again, even though the types of resistance were not the same, all three indices nevertheless ran into a price ceiling at the same time.



While most trend moves in the market consist of three waves of buying or selling, corrective moves are notorious for taking only two. One of my favorite strategies in the market is to buy a two-wave pullback when the larger time frames are strong. This time around, however, while the market did still conform to this bias, the pullback was a bit on the more sloppy side. All three indices did have two waves of selling on the 5 minute time frame, but the price spike in between them was a bit stronger than usual in both the Nasdaq and S&P 500, so the continuation caught me a bit off guard even though it triggered out of the 13:00 ET reversal period.

The second wave of selling on the early afternoon correction brought the indices back into their 15 minute 20 sma support levels. This was also price support from earlier intraday congestion. The market rounded off a bit at this support, but not enough to trigger strong buying. Instead the indices just crept higher into the close with a great deal of chop. I found it incredibly difficult to settle on a bias and ended up not trading the final two hours of the day for fear that I would just get chopped up in the mess.



I was leaning a bit more to the bearish side going into the last hour of trading, but the congestion really should have broken lower around 15:00 ET. Instead the market held the lower trend channel that had been in place since about 13:15 ET. The Dow ($DJI) ended the session with a gain of 57.88 points, while the S&P 500 gained 6.26 points, and the Nasdaq Comp. rose 8.37 points. This ugly close still had me a bit more bearish into the end of the day, but only on about a 5 minute time frame, so that follow though can easily work itself out afterhours. The creeping move higher, however, is more often resolved with an increase in upside momentum, so it would not surprise me if the Nasdaq makes that push for July's highs.

Market Stumbles Yet Again

Good morning! The market was inundated by bad news on Wednesday and struggled to recover throughout the session. While the major indices didn't close at lows, they were unsuccessful in regaining any real footing intraday. The session began on a sour note with a strong downside gap which was the most pronounced in the Dow Jones Industrial Average ($DJI) and the S&P 500 ($SPX). The market had kept falling throughout afterhours trading on Tuesday evening and into the early morning hours on Wednesday and both the Dow and S&Ps opened at their 5 minute 200 simple moving average zones. In contrast, the Nasdaq gap was minor and nearly filled within the first 15-20 minutes of trading except that it first hit the 15 minute 20 sma overhead as resistance. After that resistance hit soon after the open all three indices gave way to further selling.



The sellers were given a boost by 10:00 ET economic data. At this time the National Association of Realtors reported a decline of 12.2% in July for contract signings on existing homes. This was the weakest performance since 2001. The market immediately responded with a rapid decline to new intraday lows. Support hit when the Dow came into its 15 minute 200 sma, but the market didn't go far from those 10:15 ET price levels. Instead they crept very slightly higher into the 5 minute 20 sma resistance before giving in to another wave of selling intraday which continued into about 11:45 ET.

The momentum began rather quickly on the second 5 minute decline ar 11:00 ET, but then it slowed significantly into 11:45 ET. The slower descent into the Nasdaq's 5 minute 200 sma was on lighter volume than the first move lower. This created favorable conditions for a mid-day correction off the lows. The Nasdaq, which had been holding up the best of the three indices, had a more difficult time finding room to move on the upside due to the 15 minute 20 sma overhead. The Dow and S&Ps on the other hand had a lot more room before their own 15 minute 20 period simple moving averages would hit in terms of price movement.



All three of the indices rose into their 15 minute 20 simple moving averages at about the same time as the 13:00 ET reversal period hit. The market dropped and then based along support into 14:00 ET. The sharper decline created a more bearish bias into the afternoon and when the Fed Beige Book came out at 14:00 ET the bears took over yet again. The Nasdaq fell strongly to lower low intraday and returned to Friday's closing level. The S&Ps and Dow were only able to make it back into their morning lows because they were already further extended on the downside to begin with. After hitting this support the market again turned over, pulling higher into the final hour of trading.



By the end of the session the Dow had fallen 143.39 points (-1.1%). The S&P 500 fell 17.13 points (-1.2%). The Nasdaq Composite lost the least in terms of percentage movement, falling 24.29 points (-0.9%). Most of the Nasdaq's losses were in the afternoon and were aided by news on Apple (AAPL) which announced substantial price reductions on their iPhones. Other top losers were TSN, FNSR, COST, and GES. APLX and KFT were a few of the bastions of strength While I'm still favoring a larger test of resistance from prove highs on ton the year, I'm taking positions in both directions

Market Breaks Free of Congestion

Good morning! The market was significantly stronger on Tuesday than I had anticipated heading into the session. I figured that the congestion would continue for another couple of days before the breakout would occur, but instead the indices began to move higher right away out of the open with the Nasdaq leading the way into this shortened trading week. The Nasdaq quickly moved through Friday's highs, but the S&P 500 and Dow Jones Ind. Ave. both had to deal with the price resistance from those levels before they could continue. The Dow hit those highs soon after 10:00 am ET and based at that level until 10:30 ET before breaking through them. The S&Ps, however, lagged by quite a bit and stalled on the upside at the 5 minute 20 simple moving average.

As the market continued to climb throughout the morning it broke each previous intraday high by a lesser degree than before. This created some rounding off at highs on the 5 minute time frame and when the S&PS finally hit Friday's highs that slowing uptrend broke its lower trend channel. I shorted the ES break around 11:45 ET, but the market failed to gain any momentum to follow through on this setup. After hitting the 11:00 ET price support the market again pulled back up into the zone of the morning highs. Then shortly after 13:00 ET the highs broke with a rapid flush into new intraday highs.



The market continued to trend higher throughout the remainder of the day. The trend was not an easy one to trade if you are used to daytrading pullbacks and breakouts since a great deal of the move higher experienced only slightly corrections and crept slowly to the upside with a lot of overlap from bar to bar on the 5 and 15 minute time frames. I really dislike this type of trend move, because while it is wonderful if you are a swingtrader or trade off the larger intraday time frames such as the 60 or 120 minute chart, they are not nearly as much for an average daytrader.



Upside moves such as that which took place in the overall market on Tuesday afternoon easily give way to strong flushes on the downside and it can often be difficult to tell exactly when that move will begin. This made me very hesitant to be aggressive on the long side in the final hour of trading. This flush finally began around 15:35 ET and the market dropped sharply into the close, continuing lower afterhours.

On the plus side, while the indices were a bit more difficult for me, there were a number of individual stocks which performed exceptionally well. The ones I focused on included Vasco Data Sec Intl. Inc. (VDSI), Freeport-McMoran Copper & Gold (FCX), Wynn Resorts Ltd. (WYNN) and Morgan Stanley China Fd (CAF) on the upside.



By the end of the day on Tuesday the Dow gained 91.1 points (+0.68%). It was led by GM, which rose 3.8% after posting a large increase in light vehicle sales in the U.S. for this past month. Home Depot was the largest Dow loser. It fell more than 5% after announcing a buyback of nearly 3 million shares at $37. The S&P 500 did better, rising 15.43 points (+1%), while the Nasdaq gained the most in terms of percentage, gaining 1.3% or 33.88 points. Now that the Nasdaq had broken most of its upside resistance levels, it will be easier to retest the highs from July this week. The S&P 500, however, will first have to deal with August's highs, which would likely correspond to the Nasdaq's July highs.

Market Appears Weaker into Shortened Trading Week

Good morning! I hope you had a wonderful holiday weekend! Not surprisingly, trading was light as the week wound down on Friday. Despite the lighter volume, the market still pushed higher. The Dow Jones Industrial Average ($DJI) gained 119.01 points on Friday, while the S&P 500 ($SPX) climbed 16.35 points, and the Nasdaq Composite added 31.06 points. Advancers led decliners 7 to 1 on the New York Stock Exchange, but on the Nasdaq advancers beat out decliners by more than 2 to 1.

Two key news events existed on Friday which were watched closely by many market participants, although the end result was rather indecisive intraday given that the market had a difficult time gaining and maintaining any strong momentum one way or the other intraday. Fed chairman Bernanke spoke at the central bank's yearly conference in Wyoming, but he let very little slip. The market is expecting at least one rate cut by the end of September and was hoping to get a better read as to when and if their expectations would be met.

In other news, President Bush announced his goals to assist subprime mortgage borrowers in keeping their homes, a plan that would include refinancing into government-insured mortgages. For now this is merely word-play and it is yet to be seen as to whether any of his proposal will make it. The market toyed with this while Bernanke continued to preach to the choir about the pressure the housing market could have upon the overall economy.



The market had initially turned bullish again on Wednesday, gapping up into the open and then continuing higher throughout the day. This buying then continued into Thursday morning. At this point, however, the momentum slowed. The indices had a more difficult time making new intraday highs as Thursday morning progressed. Before noon the indices had rounded off at highs before giving way to some stronger selling into the afternoon. The market recouped very little of its intraday losses before Thursday's closing bell, but the market nevertheless gapped higher on Friday.

Although the indices were trading higher in the early hours of the morning, the morning gap had a bit of help from premarket data. At 8:30 am ET the Commerce Department reported milder-than-expected inflation in July, while there was slightly better-than-expected growth in consumer incomes and spending.



Following the open, the indices fell into a weak trading range. This range broke lower with the 10:00 ET economic data. The Commerce Dept. announced that factory goods made in the U.S. rose 3.7% in July, which was better-than-expected. Most of this increase was the cost of transportation, however, with an increase of 2.4% when transportation data was excluded. The flush pr