Disappointing End to the Second Quarter

Good day! The market moved higher into the morning on Monday as we had been expecting, but it had a difficult time shaking off the bears that have had a hold of its pant leg over the past month. In the end, the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) posted gains on the day, while the Nasdaq suffered from an even further decline. As I mentioned last week, however, this is not surprising given the greater upside extension which leaves it with more room to go on the downside now.

The Dow Jones Industrial Average gained 3.50 points on Monday, ending the session at 11,350. In a true showing of mixed trade, half of the Dow's 30 components closed in positive territory on Monday, while the other half lost ground. The Dow has fallen 19.9% off its October 9th high of 14,165 with 10.2% of those losses taking place in June. For the quarter as a whole it is down 7.4% and for the year to date it has fallen 14.4%.

The S&P 500 also posted nearly insignificant gains on Monday. It rose 1.62 points to close at 1,280.00. This marked an 8.6% decline in June, a 3.3% loss for the second quarter, and a 12.9% loss on the year to date. It has fallen 18.1% since its highs on October 10, 2007 at 1,562.

The Nasdaq Composite ($COMPX) suffered the greatest blow. It fell another 1%, or 22.65 points, to close at 2,292 on Monday. It has dropped 9.1% in June, but it still closed positively on the quarter and is up 0.6%. On the year so far, however, it is down 13.6%. Since highs on October 31, 2007 at 2,859 it has fallen 19.8%.

Meanwhile, crude oil hit a record high overnight, hitting $143.67 in electronic trade. This created an upside gap in oil-related securities. Like the rest of the market, however, they were unable to hold onto all of their gains and pulled back into the close. The August crude contract closed at $140 a barrel on the New York Mercantile Exchange. Year-to-date, crude futures were up nearly 46%. 37.8% of the gains were in this past quarter with a 9.9% increase in June. This has pushed gasoline prices to record highs as well. The average retail price for a gallon of regular hit $4.086 on Monday, which is a 40% increase from a year ago. Motor gasoline demand is down 2.1% from a year ago.

Dow Jones Industrial Average ($DJI)


When the session began on Monday, I had been looking for some upside within about the first 45 minutes of the day, but was expecting it to hold up during that time within the congestion from the prior afternoon. After the 9:45 ET Chicago PMI came out, however, the indices slowly turned over and then fell sharply into 10:00 ET. The Nasdaq found support at Friday's morning lows, while the Dow moved into a slightly lower low on the 15 minute time frame, creating a 2B setup coming off the morning low.

Although the market moved higher throughout most of the remainder of the morning, it was not a strong enough shift in momentum to hold off the bears for long. At 11:20 ET the Nasdaq, Dow, and S&Ps all hit highs from Friday intraday which served as strong price resistance. The move up was a two-wave correction off lows in the Nasdaq and a three-wave push in the S&Ps and Dow. This created extension into 11:30 ET and the market began to slowly roll over into the early afternoon.

S&P 500 ($SPX)


The Nasdaq experienced the greatest weakness and easily held the morning highs, pulling back sharply into the 5 minute 20 period simple moving average. It then hugged that support level into 12:30 ET to create an Avalanche pattern on the 5 minute time frame. Meanwhile, the S&Ps and Dow retested morning highs, but still hugged the 5 minute 20 sma. They both turned around with the Nasdaq, but were not able to gain as much momentum on the selling. The Nasdaq fell back into the morning lows, hitting a very slightly lower low just prior to the 14:00 ET correction period. The S&Ps and Dow only pulled back about 2/3rds of the morning rally.

As on Friday, the 14:00 ET correction period did not hold perfectly. Instead of pivoting off the lows at 14:00 ET, it broke the downtrend channel at 14:00 ET. After increased selling the correction off the support was not particularly strong. By 15:00 ET it had become apparent that the indices were forming an Avalanche pattern on the 15 minute time frame. This came in the form of a reverse cup-with-handle as well on that same time frame. It triggered into the final 30 minutes of the day and the indices continued to fall strongly into the closing bell.

Nasdaq Composite ($COMPX)


Heading into Tuesday morning the market is still looking to favor its late-day bias from Monday. This means that it is going to be easier for it to break Friday's lows. At this stage, however, I am expecting it to only show a modest break. The odds currently are favoring a 2B on a 60 minute time, which can lead to another 2B on Wednesday or Thursday if the action off the lows is not very strong, which I suspect will be the case. A 2B, for those unfamiliar with the term, is a form of double bottom whereby the second low is slightly lower than the first. This would create a nice shift in momentum that would allow the market to bounce back into the end of the week and beginning of next.

Trade and Commentary Wrapup - 20080630

The following is a wrapup of all my market calls and trade posts for Monday, June 30, 2008.

Instructions for Use:

When following along in the chatroom, futures posts are done most often as support / resistance calls with support as buy and resistance as short (or closing out open positions from the other direction. These are pivots. Other patterns are posted according to the pattern forming, such as the Avalanche on the NQ below, and a link showing how to trade the pattern is posted.

Stock calls are breakout patterns unless otherwise stated with bases at highs as buys and bases at lows as short. We use the following template:
http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif

There is a link giving instructions for accessing this free chatroom on the lower left side of the page at http://www.tradingfrommainstreet.com/


WRAPUP

09:14: Toni first real day back to trading in about a week so I will probably take things a bit slow today

09:22: Toni Monday, June 30, 2008
09:22: Toni 9:45a.m. Jun Chicago PMI: Previous: 49.1.
09:22: Toni 10:30a.m. Jun Dallas Fed Mfg Production Index: Previous: 5.5.

09:38: Toni HES nice daily for more upside today so its on my long watch list



09:41: Toni data out in 5 min
09:47: Toni chicago est was 48, came in at 49.6
09:49: Toni no trades yet for me today

10:00: Toni NQ coming into premarket lows here
10:05: Toni ES at premarket lows



10:10: Toni GMXR basing at highs
10:56: Toni GMXR on the move
10:59: Toni first resistance in here
10:59: Toni 75.65 high
11:00: Toni 75.37 last
11:00: Toni 75.58
14:50: Toni GMXR was a nice continuation



10:14: Toni CLF- gonna keep an eye on this for upside a little later out of this congestion
10:26: Toni CLF broke
10:40: Toni CLF resistance



11:21: Toni APOL has a "D" short setup on the weekly time frame



11:27: Toni futures testing resistance from friday 15 min highs
11:47: Toni futs coming into first support



12:25: Toni 12:25:25 Market Alert: nq 5 min avalanche forming
13:06: Toni about 1855 is the equal move zone on the NQ avalanche
13:09: Toni NQ support zone
13:12: * Kaizen ---- out nq @ 55.00 :----



13:43: Toni futs coming into some support again here

13:54: Toni nasdaq back at morning lows



15:09: Toni ES and YM do look like reverse cup with handles
15:09: Toni 15 min avalanches
15:09: Toni still a little early though
15:09: Toni so will see...

Economic Reports and Earnings Events This Week

Economic Reports and Events This Week

Monday, June 30, 2008
9:45a.m. Jun Chicago PMI: Previous: 49.1.
10:30a.m. Jun Dallas Fed Mfg Production Index: Previous: 5.5.

Tuesday, July 1, 2008
7:45a.m. ICSC Chain Store Sales Index For Jun 28:
8:55a.m. Redbook Retail Sales Index For Jun 28:
10:00a.m. May Construction Spending: Previous: -0.4%.
10:00a.m. Jun ISM Manufacturing Business Index: Previous: 49.6.
5:00p.m. ABC/Wash Post Consumer Conf For Jun 29:

Wednesday, July 2, 2008
8:15a.m. Jun ADP Employment Report:
10:00a.m. May Factory Orders: Previous: +1.1%.

Thursday, July 3, 2008
8:30a.m. Initial Jobless Claims For Jun 28 Week:
8:30a.m. Jun Nonfarm Payrolls: Previous: -49K.
8:30a.m. Jun Unemployment Rate: Previous: 5.5%.
10:00a.m. Jun ISM Non-Manufacturing Composite Index: Previous: 51.7.
10:00a.m. DJ-BTMU Business Barometer For Jun 14:

Friday, July 4, 2008
There are no economic indicators scheduled for today.

Key Earnings Announcements This Week:

Monday, June 30, 2008
Before: RBN, SGK (?)
After: HRB, HMX (?)

Tuesday, July 1, 2008
Before: STZ, MSM, SMSC
After: APOL, GTOP (?)

Wednesday, July 2, 2008
Before: SHLM, AYI, FDO, ISLE (?), UNF
After: PRXI (?), WDFC

Thursday, July 3, 2008
Before: CREL, MESA (?)
After: SYMM (?), PAY (?)

Friday, July 4, 2008
none

Note: All economic numbers and earnings reports are in line with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column and some companies have not confirmed their time, so always double check when taking positions overnight during earnings season! (?) = Not yet confirmed at the time the list was compiled.

Commodities Surge While Larger Market Faces Strong Selling Pressure

Good day! Well, being away from the market for most of this past week sure left me missing all of the excitement! Yikes! Even though the indices had managed to correct off some support on Wednesday with the help of a run-up into the Fed, the sentiment had turned into the closing bell. The index futures continued to spiral lower into the opening bell on Thursday. The indices then held near opening lows throughout the first 15 minutes of the session. As you may recall from past columns, if this 15 minute low breaks after such a gap, the odds are strong that the session will turn into a downtrend day. What a day it ended up being at that! The trend continued into Friday as well, although the intraday price swings were larger.

Dow Jones Industrial Average ($DJI)


Thursday's selloff continued into the first 15 minutes following the opening bell on Friday before finding support at the 9:45 ET correction period. The market popped rather quickly off this low, but the 5 and 15 minute 20 period simple moving averages held back the bulls and momentum shifted once gain coming off the resistance. This led into a small Avalanche pattern on a 2 minute time frame that took the indices to new intraday lows, albeit just barely in the case of the S&P 500 ($SPX) and Nasdaq Composite ($COMPX). The Dow's ($DJI) Avalanche was lower in the intraday range, so when it triggered it was able to break to a more significant lower low on the session, whereas the S&Ps and Nasdaq had further to go before those initial lows hit. The result was that in those indices the morning lows served as a support zone, so the slightly lower low created a type of double bottom bear trap known as a 2B (Hint: Think: "2 bottoms").

S&P 500 ($SPX)


Despite the 2B reversal pattern coming out of the 11:00 correction period, the momentum was unable to turn over easily. Instead the indices crept higher into 12:20 ET. At this point they once again tested the 15 minute 20 period sma resistance. This also created a two-wave correction on the 15 minute time frame. These are strong continuation patterns in the direction of the larger trend, which favored the downside.

After pausing for a few minutes at morning support, the indices continued their afternoon breakdown. They pushed to new intraday lows coming out of 13:00 ET. Unlike many intraday reversals, the market did not find support at a correction period, such as 13:30, or, more significantly, 14:00 ET. 14:00 ET, however, did correspond to the break in the early afternoon downtrend channel.

Since the momentum on the downside was about average, the market was able to turn around rather easily off the lows. A "V" type of formation is typically when a move is neither faster nor slower than average, and it often leads into a longer period of congestion. In this case, the momentum did increase a bit more quickly than it would in a simple "V", but the larger range for the day prevailed and resistance levels from earlier price levels held at 14:30 ET in the S&Ps and Dow and around 15:00 ET in the Nasdaq. The remainder of the session was choppy and the market closed at about the same level it had been at 90 minutes earlier.

Nasdaq Composite ($COMPX)


The Dow had the strongest decline on Friday. It had fallen nearly 360 points on Thursday and added another 106.91 points to that loss on Friday. It closed down 0.9% on the session and 4.2% lower on the week at 11,346. So far the index has pulled back almost 20% since its October 2007 high of 14,165. The S&P 500 faired slightly better, losing 4.77 points, or 0.4%, on Friday and 3% on the week to close at 1,278.38. This is just over an 18% correction off last October's high of 1,562. The Nasdaq Composite closed lower on Friday by 5.74 points, or 0.2%, at 2,315. It had hit a high last year of 2861.51. Meanwhile, oil broke over $142 a barrel and gold also soared higher with strong swingtrade setups on the upside triggering on Thursday for muli-day to multi-week holds.

Going into the start of last week we had been looking for continued downside on the week. The follow through was particularly compelling. Even though the indices have hit support again on Friday and now look to move higher on Monday (which I would want to see confirmed early on in order to avoid one more break lower on a 15 minute time frame), the larger reversal on the weekly chart has been confirmed. Both the S&P 500 and Dow Jones Ind. Average have established three waves of selling on the daily time frame, which now extends those trends.

I would like to see a two-wave correction off the lows for a stronger continuation pattern on the downside on the weekly time frame now. The Nasdaq has only had two waves since highs, so it can still trade places with the other two indices and have a more difficult time correcting off lows and instead break to a third low on the daily time frame before it puts in a larger correction off support. Due to the downside already this month, I am finding that my watch lists are now rather meager on a daily time frame, so my focus will be on intraday activity instead for most of this week.

Trade and Commentary Wrapup 20080620-25

Hey gang,

I've been out of the office most of this week, so here is the action I did post for the room since Friday.

June 20, 2008

10:29 CSIQ base at lows ($46.45)
10:48 csiq first support ($45.40)
10:52 csiq second support ($45)
11?01 http://www.tradingfrommainstreet.com/images/trades/20080620_CSIQ.gif Here is that "D" setup on CSIQ

10:30 GMXR starting to basee at highs (no setup)


June 23, 2008
Out of office.


June 24, 2008

11:57 Toni: Market Alert: futs resistance
11:57 Toni 15-30 min time frame

12:29 Toni futs resistance 2 min

12:36 Toni Market Alert: ES potential momo reversal 5 min
12:57 Toni first small support on momo reversal
12:58 Toni 5 min 20 SMA
15:26 Toni the ES momo reversal picking up after the 2T on the 5 min

13:32 Toni Market Alert: ES avalanche forming for cont potential on the momo reversal at this first support level


June 25, 2008

11:33 Toni : PCLN "D" setup on the 5 min
11:33 Toni : 11:33:48 Breakout Template: For information on A, B, C, D, or Z template patterns, please see http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif The green circle is the entry with the red bar as the stop.
11:33 Toni : !!!!!
11:33 Toni : sry... popped!
11:34 Toni : argh
11:35 Toni : sry guys... tried to get logged in here in time!
11:36 Toni : this is initial target
11:45 Toni : barely caught pcln but made 50 cents in like 5 minutes
11:45 Toni : that is all i've traded today so far tho

11:56 Toni : 11:56:31 Market Alert: futs support 5 min

12:32 Toni : nq and er into some initial resistance coming off the support

13:01 Toni : WX is thin but basing at highs

13:02 Toni : DRI btw had a daily momo buy setup that triggered today
13:02 Toni : something to watch for upside cont. on that time frame


13:11 Toni : AAPL potential "d" on the 5 min ($176.40 zone entry)
13:11 Toni : 13:11:53 Breakout Template: For information on A, B, C, D, or Z template patterns, please see http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif The green circle is the entry with the red bar as the stop.
13:11 Toni : buy
14:11 Toni : AAPL on the move
14:11 Toni : look to go ahead and bail.. fed
14:11 Toni : 177.25 highs just made

13:12 Toni : SHLD forming 5 min avalanche
13:12 Toni : 13:12:15 Avalanche: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis.html#4
13:41 Toni : first bit of SHLD support
13:41 Toni : 75.52 last
13:52 Toni : 75.52
13:51 Toni : be sure to ge out of SHLD before the fed
13:51 Toni :stuck at first support here
13:51 Toni : 75.53

13:12 Toni : just missed "a" setup on ptr

Trading Afterhours in the EMinis

> Question:
>
> Can I trade Emini at non regular trading hours (Off working hours of New York time) so that I can keep my day job and practice intraday trading during the eveing?
>
> Does it have sufficient liqulity during the non regular trading hour?
> DO it form a patterns using Candlestick analysis?
>
> Thanks,

Answer:

You can definitely trade the Eminis afterhours! Things will be slower, but that is actually nice for a lot of people, particularly if you spend time at night near your computer or on it working on other things. I trade a lot afterhours because I am here working on other projects, so I keep one monitor up to watch the ES and when I see a setup form I can go ahead and place a position and go back to work on my other projects. My average hold afterhours is quite a bit longer than intraday and averages 3-4 hours, but shorter ones can take place if there is a lot of global news coming out or such. I prefer the ES at this time because it has the greatest liquidity, although about 1 our of 10 of my trades will be in the YM or NQ afterhours. I use exactly the same setups and trade triggers and such afterhours as I do during regular trading hours, so nothing changes in that regard other than the correction periods. These are on the hour beginning at 3 am ET and tend to correspond to foreign exchange opens and closes and the times of major economic data releases overseas.

All my best,
Toni

Market Takes Huge Hit to End the Week

Good day! The market had quite a rough session on Friday after a week of the bears at the helm. The Dow Jones Industrial Average ($DJI) fell below 12,000 and closed down 220.40 points, or 1.8%, at 11,842.69. By the end of the session the Dow futures had hit the support level I had pointed out on the 10th in the 11800 zone after breaking the first support of 12000 that we had been looking at which had held on Wednesday and Thursday. The losses placed the Dow in the position to closed under 12k for the first time since March and took it back into the support from those lows. 29 of the Dow's 30 components posted losses with the index closing down 3.8% on the week. General Mills (GM) had the most difficult time, extending its substantial daily losses with another 6.8% drop. Meanwhile, Citigroup (C) fell 4.3%, while American Express (AXP) lost 3.4%.

The S&P 500 ($SPX) lost 24.90 points, or 1.8% as well, on Friday. It closed at 1,317.93 with all 10 of the index's industry groups losing ground. It closed lower on the week by 3.1%. The Nasdaq Composite ($COMPX), which had rallied throughout Thursday, took back its gains to lead the decliners on Friday with a loss of 55.97 points, or 2.3%. On the week overall the index tied with the S&Ps down 3.1%. Volatility was higher on Friday thanks to options and futures expiration. Although the indices we're bearish from a technical standpoint going into the day, this fact probably did not help the bulls at all.

Dow Jones Industrial Average ($DJI)


Friday's session began on a weak not. It experienced the second strong downside gap of the week, but it was larger than Wednesday's and without the opening hesitation. The Dow, S&Ps and Nasdaq all found themselves directly under strong price resistance from previous 15 minute lows on Thursday. They immediately began to move in the direction of the gap and, like Wednesday, could not break the 15 minute highs. By failing to do so right away, it sent the indices down the path yet again for a stronger bias in favor of a downtrend day.

S&P 500 ($SPX)


The Nasdaq led the decline throughout the morning. It fell the strongest immediately out of the open and then, even though all three indices dropped into 10:00 ET, the Nasdaq went for a third low into 10:30 ET. The S&Ps and Dow held 10:00 ET lows and began to shift momentum into mid-day. This allowed them a greater price recovery into noon. That momentum shifted again, however, into the early afternoon. The S&Ps and Dow formed strong Avalanche short patterns into 13:00 ET and their 15 minute 20 period simple moving averages. Taking up where the Nasdaq left off, they had the strongest mid-afternoon downside follow-through. Three waves of afternoon selling left them at support with the 15:00 ET correction period, but the indices remained weak into the close with congestive action in the final hour of trade.

Nasdaq Composite ($COMPX)


The 5 minute pattern in the indices into 15:00 ET on Friday created a bullish setup despite the upside follow-through in the remainder of the day. Although the reaction was not immediate, it allowed the index futures to pull up in trading on Sunday and early Monday during premarket activity. I am expecting a bit of a bounce early in the week to help the market correct from this most recent selloff. It's going to be difficult to sustain any strong move in momentum on the upside though, so I remain more cautious on setups larger than on the 5 minute time frame. Nevertheless, the larger weekly bias, as I mentioned on Friday, is still bearish.

Note: I will be out of the office on Monday, Thursday and Friday this week to wrap up vacation with my kids before they head back to Iowa at the end of this week for the rest of the summer. As a result, I will be posting special editions of the newsletter for those days again.

Market Recovers Following a Weak Open

Good day! The indices closed unanimously higher on Thursday, but it was really the Nasdaq Composite ($COMPX) that led the way. The Dow Jones Industrial Average ($DJI) rose 34.03 points, or 0.3%, to close at 12,063.09. American Insurance Group (AIG) made a strong recovery, up 4.9% after Citigroup upgraded it to a buy. The S&P 500 climbed 5.02 points, or 0.4%, and closed at 1,342.82 with information technology leading the gainers and energy on the losing end. The Nasdaq Composite vastly outperformed both of the other indices, rising 32.25 points, or 1.3%, to close at 2,462.07.

Dow Jones Industrial Average ($DJI)


Although the market closed higher on Thursday, it didn't begin the day that way. Heading into the session I had been hoping to see more of a trading range since this would have confirmed the 30 minute reverse cup with handle that was forming in the Nasdaq. Instead the indices fell to a new lower low on the 15 minute time frames. In the S&Ps and Dow this marked the third low since Wednesday morning and created a momentum reversal pattern that triggered coming out of the 10:15 ET correction period when the two indices pulled up off their lower trend channel support on the third low.

The upside was decent in terms of pace and was similar to the earlier selling. This was a continuation of the momentum trend from the prior day. It also helped hold the indices in a range for a longer period of time. The indices fell back off morning highs at the 11:00 ET correction period. The S&Ps and Dow both fell back into the zone from the morning lows, but it was here that the Nasdaq pulled ahead. It only retraced about half of its gains before it turned higher once again.

S&P 500 ($SPX)


The momentum in the market really began to shift into afternoon trading. Although the S&Ps and Dow still held earlier resistance at 12:30, the Nasdaq had broken strongly to new intraday highs and closed the gap from the prior day. This price resistance hit at 12:30 as well at the same time as the S&Ps and Dow were hitting the morning highs for the third time.

A small short pattern triggered at that point and pulled the indices back to their 5 minute 20 period simple moving averages. In the S&Ps and Dow this could have been a bull flag except that ideally the market needed more time to correct, so instead of bouncing strongly off the support it hugged it instead, creating a 5 minute Avalanche short pattern shortly after 13:30 ET. This took it into the 14:00 ET correction period to complete a two-wave pullback on the 5 minute time frame, which is also a strong buy setup.

Nasdaq Composite ($COMPX)


The market moved strongly higher out of the 14:00 ET lows. The Nasdaq pushed into price resistance from afternoon highs on Tuesday, while the S&Ps and Dow moved steadily into intraday highs on Wednesday. These hit around 14:45 ET and slowed the upside, although the rally itself continued at a slower pace with a slightly higher high into the 15:00 ET correction period before pulling back very gradually into the close.

I think that we have room on Friday or into Monday to come back down into the week's lows once more before they pull higher and can easily form a lower low. It is not uncommon to see such a retest with the pattern that has formed on the 30 minute time frames in the S&Ps and Dow. In the larger scheme, however, it is still a very bullish setup and this is going to make it easier to attempt another recovery on the daily time frame next week. For this to happen I want the market to react very swiftly off any new low on the 30 minute time frame. If that doesn't happen with more of a "V" type of low as opposed to a slower reaction with more of a tilted "L" then the market can more easily push lower before it manages to correct enough to test the 20 day sma again. Keep in mind that the larger weekly time frames are still bearish.

Dow Hit New Low on the Month

Good day! Picking up where it left off on Tuesday, the markets continued lower into Wednesday morning. The index futures had been gaining momentum on the downside throughout premarket trade and by the time the opening bell rang there was a rather substantial gap in place. With this rapid decline, it became almost certain that the Dow would break through the lows established just one week earlier.

Typically, larger than average gaps in the indices will close. To do this, however, they need to first break through the highs of the first 15 minutes of the day in the case of a downside gap. When this happens then they will often fill within the first two hours. If those 15 minute highs hold, however, the odds increase that the market will find itself in a trend day in the direction of the gap.

In Wednesday's session the 15 minute high held perfectly. This was the 15 minute 200 simple period moving average zone in the Nasdaq futures and the market could not push past that level. Within the 15 minutes that followed the indices all broke to new intraday lows. The Nasdaq led the way. At 10:00 ET the selling stalled and the market fell into a trading range along the day's lows. Volume declined, creating a continuation pattern which triggered just ahead of 10:30 ET. This move was stronger than the last and pulled the Nasdaq back into last Friday afternoon's lows.

Dow Jones Industrial Average ($DJI)


When support hit in the market going into 11:00 ET, it reacted rather swiftly. Even though the selling was on the strong side, the move was becoming very extended on a 15 minute time frame and volume spiked as an exhaustion move formed into the Nasdaq's prior lows. The indices quickly popped back up into the 5 minute 20 sma resistance where they paused for less than half an hour before pushing higher into noon.

The Nasdaq made the swiftest recovery mid-day, but all three of the major indices ran into strong resistance once again at the 15 minute 20 sma. This hit at the same time as the 12:00 ET correction period. The S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) had both formed three waves of upside on a 2 minute time frame as well, leaving them extended at the same time. The result was a steady reversal off the highs. The indices first found support at the 5 minute 20 sma which had previously served as resistance, but as before they held it only briefly before it gave way.

S&P 500 ($SPX)


The afternoon selling continued into 13:30 ET. At that point the S&Ps and Dow broke their downtrend channels. Since the momentum was not any stronger on the mid-day selling than it was in the morning, even though they hit slightly new lows on the day, these lows merely served as traps for a 2B reversal on the 15 minute time frame. It did take one more flush into that zone, however, around 14:15 ET to really get things turned back around and this made things a bit more tricky since it created additional chop once again intraday.

By 14:30 ET the market was again pulling higher. We had seen several similar waves of buying and selling on the 15 minute time frame and this created more of a range bound day than a true downtrend day despite the slightly lower lows and lower highs of the S&Ps and Dow. The market climbed into 15:25 ET at a similar pace as well. This made it difficult to break through the congestion at the prior highs and selling took over one last time into the close.

Nasdaq Composite ($COMPX)


The Dow Jones Industrial Average ($DJI) closed lower by 131.24 points, or 1.1%, on Wednesday at 12,029.06. General Motors (GM) was one of the top decliners, down 5.88%. Bank of America (BAC) was another big loser, down 2.98%, while AIG (AIG) lost 2.35%. In the S&P only energy made gains, and they were minimal at best. The index fell 13.12 points, or 1%, and closed at 1,337.81. The Nasdaq Composite dropped 28.02 points, or 1.1% and closed at 2,429.71.

I am a little ambivalent about the market's direction on Thursday. The Dow made the new lows to go along with our altered outlook for the week, but they don't really look ready to bounce yet. The Nasdaq held the range better yesterday and is forming a base with a reverse cup with handle on the 30 minute time frame. This has it pointing lower, but it may still take another day to develop. It's not looking very pretty for the bulls these days. The weekly charts are all showing confirmation now and rolling over that the resistance zone we've been following the past two months, so there is a lot of room on those larger time frames for more downside this summer.

Question on "Core Positions"

> hello toni
> can you tell me what "retain core positions" mean in stock trading?
> thank you

Answer:

Core positions are usually those that a fund or similar entity holds long term and has built large positions in. These often change less than other positions which the fund may be getting into or out of based upon fundamental or technical reasons.

In a company it would mean holding onto key things relating to infrastructure and the center upon which the company is built, whereas the company may have obtained other ancillary assets that it can more easily part with, particularly when there is the need for the company to raise funds for some purpose or another, usually these days its to reduce debt. This is something we are seeing happen a lot, particularly in the financial sectors.

All my best,
Toni

Chatroom Trade and Commentary 20080618

09:42 Toni: paltry gainers lists lol

09:58 Toni: all the financials are dominating the losers lists today
09:58 Toni: oh.. i have an article b sent me last night
09:58 Toni: just a sec
09:59 Toni: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml
09:59 Toni: a bit of doom and gloom

10:02 Toni: AN is basing at lows
10:24 Toni: AN first support
10:24 Toni: 12.71



10:05 Toni: dow is holding premarket lows

10:55 Toni: NQ is coming into Friday's afternoon lows
10:55 Toni: ES is closing in on last week's lows
10:56 Toni: this is a decent support zone although doownside momentum remains strong
11:08 Toni: futs coming into first resistance from this bounce off the support
11:37 Toni: futs second resistance coming off those erlier lows here

11:26 Toni: BUD potential 5 min avalanche
11:34 Toni: BUD fighting against bullish daily for this avalanche
11:43 Toni: BUD i think should have gone by now
12:13 frank_: toni what was your tgt on bud
12:13 Toni: had been looking for 61.60ish
12:13 Toni: so basically hit within 2 ticks



11:28 Toni: futs trying to pull lower again
11:28 Toni: momo reversal on the YM 100 tick
11:29 Toni: con is the highs are a bit further apart on 2 and 3 than between 1 and 2
11:30 Toni: short

11:33 Toni: the larger time frames in the market have turned up... so this momo is against a larger trend bias

11:37 Toni: futs second resistance coming off those erlier lows here
11:43 Toni: futs resistance holding

11:53 Toni: futs into resistance again here
11:53 Toni: this is morning highs intraday in the NQ
11:57 Toni: third push higher into resistance so decent shot of a bit longer correction this time
11:57 Toni: pace is strong tho so can take a for it to pull back in price instead of just time
12:06 Toni: pace slower on this correction in the nasdaq but not too bad in the S&Ps and Dow.. a little initial support in here
12:06 Toni: larger pattern is favoring 5 min correction tho so room for cont patterns lower
12:43 Toni: futs giving us that larger correction
12:48 Toni: futs at next support
12:54 Toni: futs holding support zone but not much action

12:52 Toni: CSIQ turning bearish intraday

13:32 Toni: SMTS base at lows ($19.87)
support call at $19.26

13:33 Toni: futs support
13:51 Toni: ES is trying to hold a 15 min 2B

There goes my backup plan...

Well... I had set this up as a backup plan in case a career in the financial markets didn't pan out... but I guess I'm stuck trading... Anyone in the market for some nice waterfront property???

Ok, so this really WASN'T my place... but the basement in my duplex in Iowa looks similar... and it actually IS waterfront property... Was supposed to be "waterback" property, but maybe the term is "waterallover" property now.... or "waterin" property? drrr... The pic above is from Cedar Rapids, which is the next town over from where I lived for about 10 years. Here are some more pics for those interested:
http://www.andrealynnphoto.com/CRflood2008/

I moved to Florida two weeks before Hurricane Charlie made landfall minutes from here. Had three hurricanes pass over me that year, but in the town where I lived a tornado took out places on the same block I lived for 3 years and that same area is now flooded. While living there I had two cars totaled by nature. One from hail and one from a tree falling on it and had another three down into the back of my house.... Hmmm... the worst the hurricanes did was rip off some screens... So... which is safer: Florida or Iowa? Oh, I forgot to mention being stuck in two blizzards for a day each.... Let's not forget winter fun in Iowa in addition to the spring and summer kind! haha!

Markets Divided in Tuesday's Trade

Good day! The market climbed slowly in premarket trading into Tuesday morning, but it hit a bit of a road bump when the 8:30 ET economic data came out. May's producer price index rose 1.4%. Energy prices rose 4.9%, while food prices rose 0.8%. The gasoline index rose 9.3% in May. The Labor Department stated that the PPI, which tracks inflation at the wholesale level, climbed 7.2% over the past year. May's core PPI, which excludes energy and food prices, rose 0.2%. Over the past year the core prices are up 3%. In other news, the Commerce Department reported a 3.3% decline in housing starts in May. This is the lowest level since March 1991. Starts for single-family homes fell 1%.

The premarket highs, which corresponded to the 8:30 ET data, ended up being the highs of the day. The market began to slide lower into the open and that selling continued into the first several minutes of trade. The Nasdaq ($COMPX) was the first to fall into negative territory since both the Dow Jones Ind. Ave. ($DJI) and S&P 500 ($SPX) futures gapped over the prior day's highs and the Nasdaq did not. The Nasdaq's recent relative strength emerged again, however, coming off initial intraday support levels. These support levels included the S&P's 15 minute 20 period simple moving average, the closing zone from Monday in the Dow, and Monday's mid-day congestion in the Nasdaq.

The Nasdaq bounced sharply off support, while the S&Ps and Dow struggled. This divergence continued throughout the day. Although the indices moved in the same general direction, the Nasdaq's upside was more substantial. While the Dow and S&Ps broke to new lows into the 10:15 ET correction period, the Nasdaq held well above the morning's lows. It bounced back and created a bullish triangle that triggered a buy into the 10:45 ET correction period while at the same time the S&Ps and Dow used that upside to merely form another bear flag.

Dow Jones Industrial Average ($DJI)


The market broke lower soon after the 11:00 ET correction period. The Dow had hit its 5 minute 20 sma resistance at that time, while the S&Ps were back at early morning congestion and the Nasdaq was testing its premarket highs. The sellers came in very quickly and the S&Ps and Dow easily broke to new intraday lows. The pace slowed into 11:30, but the indices crept a bit lower in order to hit support from prior 5 minute lows in the Nasdaq and the 5 minute 200 period sma in the S&Ps. This took place going into noon and the market formed a small bear flag followed by another break lower into 12:30 ET.

The mid-day bear flag triggered a bit on the early side and was not able to sustain as strong of a move as the 11:00 ET breakdown. The momentum began to shift somewhat into the early afternoon. It popped rather quickly just after 13:00 ET and this move took the indices back into the 15 minute 20 sma resistance. The push into that level, however, was slower than the beginning of the move and the indices began to show more of a bearish bias again into the second half of the day.

S&P 500 ($SPX)


The market began to sell off around 13:40 ET, but the Nasdaq didn't join in until the 14:00 ET correction period. A base from 14:30 into the 5 minute 20 sma led to another strong 5 minute move lower, particularly in the Nasdaq, around 15:15 ET. While sloppy, the indices remained weak into the close with the S&Ps pushing into Monday's lows and the Dow into last Friday's lows.

Nasdaq Composite ($COMPX)


The market's 60 minute bearish action heading into Tuesday followed through rather well, but as you can see, the action has been choppier as expected as well. This has made things a bit more difficult and I've ended up jumping out of things much more quickly than I should just to avoid the possibility of getting chopped up myself. My larger outlook has changed slightly due to the late day selling on Tuesday. I had been expecting the lows from last week to hold for about two weeks, but now it looks like the Dow might try for a slightly lower low as the week progresses. This will be particularly true if the downside momentum remains the same again on Wednesday. A slightly lower low, however, has a decent chance to move the market higher again into next week. Right now it's a bit of a waiting game, so my focus is going to be intraday at this time going for smaller time frame setups.

The market closed on Tuesday with a loss of 108.78 points in the Dow, or 0.9%, at 12,160.3. American Express (AXP) was a big loser on the Dow, down 4.3%, while Bank of America (BAC) fell 3.6%, and J.P. Morgan Chase (JPM) lost 2.2%. The S&P 500 fell 9.21 points, or 0.7%, to close at 1,350.93. As indicated by the losses on BAC and JPM, the financials led the downside, falling more than 3%. Consumer discretionaries fell 1.4%. Energy and utilities were the only two industry groups to post gains. The Nasdaq Composite lost 17.05 points, or 0.7%, and closed at 2,457.73.

Chatroom Trade and Commentary Wrapup - 200817

09:48 Toni: YM and NQ also hit support levels
10:00 Toni: messy market right now
10:01 Toni: i think its because of the downside last week
10:01 Toni: market doesnt want as smooth of trends

11:05 Toni: futs at a bit of resistance here

11:35 Toni: market now coming into a bit of support but strong downside will slow corrections off support

Chart showing market posts and the bias given today:


14:37 Toni: TROW watching for a little bounce to get short for move into 60.50
14:37 Toni: 15 min 20 sma resistance
15:17 Toni: well.. got TROW bounce.. will see....



14:44 Toni: STI base at lows



14:49 Toni: market still feels bearish

15:18 Toni: market still weak....
15:18 Toni: still sloppy too

Trading Mixed, but Pushes Higher Intraday

Good day! The market spent a large chunk of the day chopping around on Monday. The indices had opened in negative territory following the New York Fed manufacturing index data. The index fell to -8.7 in June from -3.2 in May. Meanwhile, economists had been expecting slight improvement. The June indices for new orders, shipments, and unfilled orders were all below May's levels. The index is often viewed as an early indication for what the Institute for Supply Management's national factory survey will show. The next ISM survey is due out on July 1st.

The market found itself at decent price and moving average support by the time the opening bell rang and it immediately reacted to those support levels. The action was a bit on the sloppy side, but the market still managed to push higher. The Nasdaq Composite ($COMPX) was the first to close its morning gap around the same time as the 10:15 ET correction period. This was followed by a pullback in the indices and another push higher out of the 10:45 ET correction period.

The S&P 500 ($SPX) was the second of the three major indices to fill its morning gap. It closed it into 11:00 ET, which is yet another correction period in the market. The Nasdaq had shot to new intraday highs at this time and was running into resistance at the 15 minute 200 period simple moving average, as well as closing in on its 20 day sma. The weaker Dow Jones Ind. Ave. ($DJI) also struck its own 15 minute 200 sma with the 11:00 ET correction period and the S&P 500 was completing its third wave of buying at this time. All of these traits helped push the indices into a larger correction off highs into mid-day.

Dow Jones Industrial Average ($DJI)


The stronger Nasdaq held up the best over noon on Monday. The morning rally was significantly stronger-than-average, so the index had a difficult time pulling back off the 11:00 ET highs. The Dow, on the other hand, pulled back very quickly and the S&Ps also fell more rapidly. Both indices pulled back to the 5 minute 20 sma levels where they began to congest. The Nasdaq formed a higher level congestion at the same time so that each of the three indices created Avalanche short setups into noon. The light volume throughout the congestion assisted the market in breaking lower fairly well into mid-day.

Corrective moves within a larger trend often form with two waves in the direction opposite the primary trend. On Monday that trend was higher. The Avalanche into noon formed the second wave of correction off the morning highs on a 5 minute time frame. Unfortunately, the pullback off highs was also on the strong side. This meant that in order to be able to continue the trend easily the market would need some shift in momentum. This was brought about by a longer period of congestion and several false starts. Finally, around 13:10 ET on the heels of a 13:00 ET report out from the National Association of Home Builders, the market broke free of its range and headed to new highs on the day.

The NAHB/Wells Fargo housing-market index fell one point to 18 with only about 1 in 5 builders considering the current market to be favorable. This matches the record low since the survey was created 22 years ago. The largest decline in sentiment was felt in the Northeast and the West, while it remained relatively flat in the Midwest and actually rose slightly in the South.

S&P 500 ($SPX)


The early afternoon rally was just what the Dow needed to be able to close its morning gap. It did so around 13:30 ET and hit additional resistance from Friday's highs. The Nasdaq ran into equal move resistance on its 5 minute time frame as compared to the rally into 11:00 ET at the same time as the Dow was closing its gap. This was also its 30 minute 200 sma zone, which was yet another strong level of resistance. These zones worked together to stall the bulls once again into the second half of the afternoon.

Given the pace of the buying, the correction off highs was once again on the slower side and similar to that of the move out of 11:00 ET in the Nasdaq. This time, however, it was echoed in the Dow and S&Ps as well. The 5 minute 20 sma was support, but like earlier in the day, congestion along this level broke after awhile to trigger another 5 minute Avalanche in the final hour of trade. The late day pullback off highs was felt the most in the Dow and took it back into negative territory.

Nasdaq Composite ($COMPX)


The Dow closed lower by 38.27 points, or 0.3%, on Monday at 12,269.08. Telecommunications led the decline. Verizon Comm. (VZ) lost 2.9%, while AT&T (T) shed 1.4% for the day. Financial companies, however, posted strong gains. Citigroup (C) rose 2%. Bank of America (BAC) climbed 1.81%. JP Morgan Chase (JPM) added 0.91%. The S&P 500 gained 0.11 point on Monday and closed at 1,360.14. Broker/dealers also faired well on the day, as did information technology. LEH and MS were among the NYSE's best performers. Energy stock such as MEE also performed well. The tech sector fueled the Nasdaq though. It gained 20.28 points, or 0.8%, and closed at 2,474.78.

The market is looking a bit bearish into the open on Tuesday on the 60 minute time frames. I am still looking at the week's action as a whole to most likely bring the indices higher, but it is looking like its going to continue to be a choppy climb to get there. We are definitely seeing the greater back and forth action intraday that I had mentioned in yesterday's column and this is likely to continue throughout the week.

Commentary and Trade Wrapup 20080616

09:30 Toni: market is opening into support
09:31 Toni: mid-range level though so not so sure its going to hold well
09:36 Toni: futures hit first resistance
09:41 Toni: 2nd resistance in the futs hitting

09:55 Toni: DBA up strongly today
09:55 Toni: they are talking about near 100% crop loss in iowa
09:56 Toni: yesterday 83 of the 99 counties were declared disaster zones
09:57 Toni: well declared earlier but that was the latest number i have heard

09:53 norancho: CQB having a bad banana day
09:58 Toni: FDP in play with CQB
09:58 Toni: CQB actually showing support here

10:10 Toni: NQ hs 5 min short setup forming (no trigger)

10:16 Toni: financials fnally showing some real strength the past two trading days

10:18 Toni: NQ held support and is now back to testing the day's highs
10:18 Toni: premarket

10:59 Toni: market resistance in here

13:15 Toni: POT base at highs

Markets Rally Following a Week of Choppy Selling

Good day! I hope that you had a wonderful weekend! After a tumultuous week of trading, the market ended the week last week on a positive note. On Friday, June 6th the market had taken a rather sharp turn. The Nasdaq Composite ($COMPX) had repeated a daily pattern that the Dow Jones Industrial Average ($DJI) had first formed on May 19th with a nice double top. Of course, it was not too nice if you were a bull since the pattern swiftly led to another week of downside. The indices had completed the pattern's typical follow through on Thursday, however, and this left the door open for a bit of a recovery into the weekend.

On Friday the Dow gained 165.77 points, or 1.4%, and closed at 12,307 with 28 of its 30 components green on the day. For the week overall, the Dow climbed 102 points, or 0.8%. The S&P 500 ($SPX) rose 20.16 points, or 1.5%, last Friday and closed at 1,360, leaving it right about where it had been a week earlier. The Nasdaq Composite climbed 50.15 points, or 2.1%, on Friday and closed at 2,454. Although this was the strongest of the three on Friday, it had been beaten down throughout the week on heavy tech selling. Keep in mind that the Nasdaq had been holding up better than the overall market over the past month, but this relative strength came with a price: It also meant that it had the greatest room to move on the downside. The result was a loss on the week of 0.8%.

Dow Jones Industrial Average ($DJI)


The economic data on Friday was rather interesting because the news was not terribly promising, and yet, combined with the market's larger daily support, the indices were still able to take it in a positive light. Ahead of the open the consumer price index was released, revealing a rise of 0.6% in May. This was more than the 0.5% anticipated, although the core CPI, which excludes food and energy prices, rose 0.2% as expected. The modest gains in core inflation helped ease concerns that the Fed would soon begin to hike rates, which have become widely anticipated to take place several times by year end.

The indices opened higher following the CPI data. The opening price levels were mid-range within the price action of the previous two days and into the 5 minute 200 simple period moving average resistance in the S&P 500 and Dow Jones Industrial Average. Almost immediately this gap began to close, but volume declined at the same time as the price action, suggesting that there was no panic to the selling. This made it very easy for the buyers to regain control when the University of Michigan/Reuters consumer sentiment survey came out ahead of 10:00 ET.

Once again, the morning data was dismal on the surface because consumer sentiment slipped further in June to a 28-year low of 56.7, but at the same time this eased concerns of inflation for the year to come. One-year inflation expectations dropped from 5.2% in May to 5.1% in June. The market established its strongest move of the session following this news.

S&P 500 ($SPX)


The market rally that followed the consumer sentiment news took the indices into the gap zone from last Wednesday morning. The S&P 500 and Dow Jones Ind. Ave. closed this gap first. The Nasdaq had more room to move before that level hit, which I feel contributed to its ability to put in a stronger showing on Friday than the other two. By 10:30 ET each of the three indices had come into Wednesday's gap zone for price resistance and the move was now very extended on a 15 minute time frame. This allowed the indices to roll over throughout the remainder of the morning and into the early afternoon.

Since the upside in the morning was stronger than average and the support levels that were hitting were on larger intraday and daily time frames, this meant that the market would have a more difficult time correcting quickly in terms of price. The result was a pullback into 10:45 ET followed by congestion along the 5 minute 20 sma as the momentum shifted with a triangle formation along the highs. Within the triangle itself was an Avalanche into 11:30 ET and finally a breakdown into 12:30 ET where the momentum was able to increase somewhat on the smaller time frames. The larger bias held, however, and the indices rolled back over to favor the bulls with the onset of the pivotal 14:00 ET correction period. The indices closed at afternoon highs.

Nasdaq Composite ($COMPX)


The breakdown last week completed a two-wave pullback in both the S&P 500 and Dow Jones Industrial Average coming off the mid-May highs. When trend moves are comparable they tend to come in wave of two or three. This has me expecting more upside this week as a reaction to the support zones which hit on Wednesday and Thursday and held into the weekend. The 20 day simple moving average is resistance if the market chops slowly up off the support, but we could easily see the market push back into the congestion from two weeks ago. This should be a pretty decent market this week for daytraders since we will likely see some nice back and forth action as the indices try to push back up into that zone.

Economic Reports and Earnings Events This Week

Economic Reports and Events This Week

Monday, June 16, 2008
8:30a.m. Jun NY Fed Manufacturing Index: Expected -1.5. Previous: -3.23.
9:00a.m. Apr Treasury International Capital Flows: Previous: $80.4B.
1:00p.m. Jun NAHB Housing Market Index: Previous: 19.

Tuesday, June 17, 2008
7:45a.m. ICSC Chain Store Sales Index For Jun 14: Previous: +1.7%.
8:30a.m. 1Q Current Account Gap: Previous: -$172.9B.
8:30a.m. May Producer Price Index: Expected +0.1%. Previous: +0.2%.
8:30a.m. May PPI, Ex-Food & Energy: Expected +0.2%. Previous: +0.4%.
8:30a.m. May Housing Starts: Expected -5.5%. Previous: +8.2%.
8:55a.m. Redbook Retail Sales Index For Jun 14:
9:15a.m. May Industrial Production: Expected +0.2%. Previous: -0.7%.
9:15a.m. May Capacity Utilization: Expected 79.7%. Previous: 79.7%.
5:00p.m. ABC/Wash Post Consumer Conf For Jun 15: Previous: -45.

Wednesday, June 18, 2008
There are no economic indicators scheduled for today.

Thursday, June 19, 2008
8:30a.m. Initial Jobless Claims For Jun 14 Week: Expected -9K. Previous: +25K.
10:00a.m. May Conference Board Leading Indicators: Expected 0%. Previous: +0.1%.
10:00a.m. Jun Philadelphia Fed Business Index: Expected -11. Previous: -15.6.
10:00a.m. DJ-BTMU Business Barometer For June 7: Previous: 0%.

Friday, June 20, 2008
There are no economic indicators scheduled for today.

Key Earnings Announcements This Week:

Monday, June 16, 2008
After: ADBE, LZB

Tuesday, June 17, 2008
Before: BBY, FDS, GS
After: CLC

Wednesday, June 18, 2008
Before: KMX, CMC, FDX, LNN, MS, SMTS
After: CWST, HWAY, IHS

Thursday, June 19, 2008Before: ATU, CCL, CC, GRB, SJM, MESA (?), PIR, PRGS
After: HRB (?), NINE (?), SMOD, PAY (?)

Friday, June 20, 2008
Before: WGO

Note: All economic numbers and earnings reports are in line with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column and some companies have not confirmed their time, so always double check when taking positions overnight during earnings season! (?) = Not yet confirmed at the time the list was compiled.

Why was I expecting selling last week?

Question via email: How did you come to the conclusion that by the end of the week, there will be continued selling?

Answer: Hi! Good question! The analysis was based upon the daily time frame. The indices had just triggered a setup on that time frame and follow through was slated for 5 days, which, given that the trigger was the previous Friday, it put day 5 on Thursday. This is comparing the previous daily drop which began on 5/19 to the one which began on the 6/6.

Trade Wrap 20080609

Hey gang,

I will not be in much this week intraday because my kids' brother whom I had in foster care with them is flying down with my mom for vacation for the next two weeks before all four of them head back to Iowa for July. I was only in for the afternoon on Monday with a trade in BRS from $47.02 short into $46.50 zone. I then posted the market support with the Dow at Friday's lows at 14:24 ET which was followed by the NQ support I had targeted in the morning column. The BRS short was my only trade for the day though. I will be around part of the day on Tuesday and Wed., but then gone all day on Thursday and Friday. I hope you have a wonderful trading week!

All my best,
Toni

Market Extends Losses Intraday

Good day! Although Monday's session ended mainly in positive territory, that fate was not well-established until the final hour of trade. The bears held the helm throughout a large portion of the session. Heading into the morning we had been expecting the potential for a bit of corrective action off Friday's afternoon lows, but followed by greater downside. The correction up off support was a little split though. The Nasdaq ($COMPX), which had extended gains to a much greater degree on a daily time frame, thus creating a bull trap type of pattern on Friday, had a harder time than the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI). Both of these indices hit highs three weeks to a month ago.

It is often said that one should short stocks or sectors showing the greatest relative weakness and buy those displaying the greatest relative strength. In truth, however, this is not always the best strategy. Often those securities which hold on the longest to a bias can have the strongest moves once they give way to the pressure already at play in the broader market. The greater the extension, the faster the rebound can be. Over the past two sessions, that has been the fate of the Nasdaq Composite.

Dow Jones Industrial Average ($DJI)


Both the S&P 500 and Dow Jones Ind. Ave. gapped slightly higher on Monday into the opening bell. The index futures had rallied on Sunday, accounting for the gains. The indices had then chopped around in Monday's premarket action, but the Nasdaq fell apart at the bell. Friday's selloff resumed on a large scale and the index plunged lower in the first 20 minutes of trade. The S&Ps and Dow also pulled back in the first 20 minutes off the highs of the opening bell, but the corrections were very minor. In the Dow it was more of a trading range, which broke higher with a strong move back into the previous 15 minute high from Friday around 10:15-10:30 ET.

S&P 500 ($SPX)


At the same time as the Dow ran into price resistance at earlier 15 minute highs, the S&Ps and Nasdaq also landed at the doorstep of resistance. The S&Ps remained stronger than the Nasdaq and pushed through the 5 minute 20 period simple moving average and into the 15 minute 20 sma. Meanwhile, the Nasdaq could not shake its own 5 minute 20 sma, which served as strong resistance near the zone of the opening prices. The market pulled back off these levels, but volume declined and the momentum was gradual in both the S&Ps and Dow. The downside continued to be stronger in the Nasdaq, which retested the morning lows at the same time as the stronger Dow hit its 5 minute 20 sma support.

Following this initial back and forth action in the indices, the market's momentum continued to shift. The upside slowed, while the downside picked up. This shift reached completion into the 13:00 ET correction period. At that point the S&Ps and Nasdaq were testing the 15 minute 20 sma resistance intraday on a third wave within the congestion. This is a typical point for a break from a range to give way and it did so quite well on Monday. Unfortunately I didn't make it back from a mid-day errand to catch the drop myself, but it was nearly textbook and brought with it some of the additional downside we had been expecting this week. In fact, it took it right smack into the first Nasdaq Emini (NQ) support zone that I gave yesterday of 1950 with a low at 1950.50... just two ticks off.

Nasdaq Composite ($COMPX)


The Nasdaq hit its larger support at the same time as the stronger Dow found support once again from Friday's lows. This came shortly after 14:00 ET around 14:15. The Nasdaq had a small 2B pattern on a 2 minute chart at that time with a lower low of just a tick or two on that time frame that helped form a small reversal pattern. This ended up being a rather decent move on a 5 minute time frame as well though and the Dow and Nasdaq both popped back into their 15 minute 20 sma levels. The S&Ps hit the 5 minute 20 sma at the same time and the market pulled back into 15:00 ET. News from Apple (AAPL) relating to its latest phone rocked the market a bit in the final two hours of trade. It had appeared that the market may attempt another push lower into the 15:30 ET correction period, but the boost in the tech stocks helped the indices close up off the lows.

The Dow gained 70.51 points on Monday and closed at 12,280. The S&P 500 gained 1.08 points and closed at 1,361.76. The Nasdaq Composite lost 15.10 points and closed at 2,459.

After two days of selling, the market was was shaping up for another bounce off support on a larger time frame. I had been hoping that we would see the 15 minute 20 sma hold as resistance past the closing bell since 2-day trend moves that hold this resistance level often offer strong intraday reversals on the third day of the trend. Despite the move lower in afterhours trade, the 60 minute time frames are starting to look like we will see a larger correction off support this week. There is room for another lower low first, however, with 2B potential on the Nasdaq. The larger weekly charts also remain bearish, which means that corrections off the 60 minute support levels can easily be very temporary. We will have to see how the momentum action plays out here though to get a better feel for the next wave of action to come. Slightly lower lows on a 60 minute chart with slower selling than the past two days will more likely pop the market sharply higher and this would not be as ideal for the bears unless it can then roll over at highs.

NQ (Nasdaq 100 Emini) support levels are 1950 and 1900. ES (S&P 500 EMini) support is at 1338. YM (mini-sized Dow Jones Ind. Average) support levels are 12000 and 11800.

Economic Reports and Events This Week

Economic Reports and Events This Week

Monday, June 9, 2008
10:00a.m. Apr Pending Home Sales Index: Expected: 0%. Previous: -1.0%.

Tuesday, June 10, 2008
7:45a.m. ICSC Chain Store Sales Index For Jun 7: Previous: -0.8%.
8:30a.m. Apr Trade Balance: Expected: $60B. Previous: $58.21B.
8:55a.m. Redbook Retail Sales Index For Jun 7: Previous: +1.9%.
5:00p.m. ABC/Wash Post Consumer Conf For Jun 8: Previous: -45.

Wednesday, June 11, 2008
There are no economic indicators scheduled for today.

Thursday, June 12, 2008
8:30a.m. Initial Jobless Claims For Jun 7 Week: Expected: +13K. Previous: -18K.
8:30a.m. May Import Prices: Expected: +2.7%. Previous: +1.8%.
8:30a.m. May Retail & Food Sales: Expected: +0.5%. Previous: -0.2%.
8:30a.m. May Retail & Food Sales, Ex-Autos: Expected: +0.7%. Previous: +0.5%.
10:00a.m. DJ-BTMU Business Barometer For May 24: Previous: -0.1%.
10:00a.m. Apr Business Inventories: Expected: +0.5%. Previous: +0.1%.

Friday, June 13, 2008
8:30a.m. May Consumer Price Index: Expected: +0.5%. Previous: +0.2%.
8:30a.m. May CPI, Core: Expected: +0.2%. Previous: +0.1%.
9:55a.m. Mid-Jun Reuters/U Mich Sentiment Index: Previous: 59.8.


Key Earnings Announcements This Week:

Monday, June 9, 2008
Before: BRKS
After: ASHW, NX, SHFL

Tuesday, June 10, 2008
Before: PBY, STEI
After: OXM, QSII, RENT

Wednesday, June 11, 2008
Before: KFY, BRLC (?)
After: CASY, CYBX, NAVR, SEH

Thursday, June 12, 2008
Before: AIXD, CMED, FLOW (?), FRPT (?), LEH (?), MEAS, MESA (?), SCHS
After: NDN (?), FNSR, HRLY, IUSA (?), NINE (?), RVI (?), SWHC, TMA (?), PAY (?)

Friday, June 13, 2008
Before: -
After: -

Note: All economic numbers and earnings reports are in line with those compiled by Briefing.com. Occasionally changes will occur that are made after the posting of this column and some companies have not confirmed their time, so always double check when taking positions overnight during earnings season! (?) = Not yet confirmed at the time the list was compiled.

Oil Prices Surge, While Market Dives

Good day! Oil hit record highs on Friday with crude futures trading as high as $139.01 in electronic trading on Globex. July crude rose $10.75, or 8.4%, to close at $138.54 a barrel on the New York Mercantile Exchange. Highs were hit at $138.80. They had been trading around $122 on Thursday. This really shook up a market that was already reeling in premarket trade thanks to a huge hit following the early jobs data. The Labor Department reported that unemployment in May rose to 5.5%. This was a jump of 0.5%, which is the largest seasonally adjusted increase in unemployment in 33 years. The unemployment had been expected to rise 0.1%.

The premarket data sent the index futures tumbling into the open. The bias on the larger time frames, however, as I pointed out Thursday evening, were still very bearish. Heading into the day I had been expecting a downtrend throughout the session. Given the extent of the gap, however, I had been looking for the selling to slow more in the afternoon than it did thanks to mid-day action later on.

The session began on Friday with opening prices in the zone of Thursday afternoon lows. This created some initial support right away. Now, as I've explained many times over the years, when the market has extreme opening gaps, they have a greater tendency to fill. A notable exception is in a major trend reversal on the daily and weekly time frame. It is also imperative that the indices show signs of closing the gap within the first 15 minutes. So, if the indices gap lower, such as on Friday, and sell a little and base at lows, the odds are very small that the gap will fill that day and more likely we will see a trend day in the direction of the gap. This is exactly what happened on Friday.

Dow Jones Industrial Average ($DJI)


When the opening bell rang on Friday, the market was still selling off as it reacted to the premarket data. This continued for several minutes before things settled. The indices fell lows with slightly declining volume on a gradual slant higher to form a little bear flag on the all-sessions time frames that triggered a continuation pattern to lows at 10:00 ET. The market continued to step lower throughout the morning before hitting some larger time frame support around 11:30 ET.

As mid-day trading began the indices were all hitting price levels conducive to forcing them into a larger correction than seen up until that point in the day. The Dow was back at Wednesday's lows, the S&Ps had closed the prior day's gap, and the Nasdaq was hitting its 15 minute 20 period simple moving average and nearing Wednesday afternoon's lows.

S&P 500 ($SPX)


The market failed to bounce adequately off mid-day support levels and failed to round off at lows at the support. As a result, the bias in the indices remained bearish. The volume dropped as the indices congested at the support. A continuation triggered with the onset of the 13:00 ET correction period. The break was similar to earlier moves to begin with, but another congestion move into 14:00 ET gave way much more quickly and plunged the S&P 500 through the lows of the congestion from the past two weeks. Both the Dow and Nasdaq also experienced a surge in selling pressure as volume increased.

Nasdaq Composite ($COMPX)


The indices attempted to roll over into the final hour of trade, but only the Nasdaq experienced a lower low into 15:00 ET. The S&P 500 and Dow Jones Industrial Average both held 14:15 ET lows, so they created another set of bear flags or breakdowns despite the Nasdaq's attempt. All three failed to hold and continued fear from the bulls led to some additional panic into the closing bell as traders liquidated positions ahead of the weekend.

The week ended on Friday with a 394.64 point, or 3.1%, loss in the Dow Jones Ind. Ave. ($DJI) on the day and a 3.5% loss on the week. The S&P 500 ($SPX) fell 43.37 points, or 3.1%, on the day for a weekly loss of 2.9%. Financials fell 4.8%, while consumer discretionaries fell 4.3%. The Nasdaq Composite ($COMPX) dropped 75.38 points, or 3%, on Friday for a weekly loss of 1.9%.

The market has room for a bit of recovery action early on this week, but my larger bias is towards continued selling by the end of the week. NQ (Nasdaq 100 Emini) support levels are 1950 and 1900. ES (S&P 500 EMini) support is at 1338. YM (mini-sized Dow Jones Ind. Average) support levels are 12000 and 11800.

Emini Trading Data

Question:

How can I track what the future markets (i.e. S&P, DOW and NAS) are doing pre-market open? Do they trade throughout the night? I was told by Scottrade that they don't provide access to futures. Do I need / do you recommend I open an account with an on-line service like Interactive Brokers?

Answer:

Hello!

Yes, the index futures trade nearly 24 hours a day and begin trading at18:00 ET on Sunday evenings.

The S&P 500 symbol is ES. You must then select the current active month and year. For instance, September futures under the symbol ESM are currently trading with 8 as the year. Different platforms will have somewhat different ways in which this data is entered. They change once a quarter with September expiration followed by December, then March, then June. Some platforms have continuous contracts so you do not have to change once a quarter. The Nasdaq 100 symbol is NQ and the Dow Jones. Ind. Ave. is YM.

In order to monitor futures trading afterhours and in premarket trade, you need to have a charting platform that provides this data. You must also be subscribed to the exchange and be permissioned to view the data.

There are many brokers and charting platforms that allow this and IB is one of them. If you plan on trading futures, I would suggest test-driving a few of the more popular platforms and see what works best for you.

All my best,
Toni

How I locate setups

Question:

> Some more questions came to mind...What source
> do you use for new ideas / stocks to put on your watch list? as well as
> research and to follow breaking news? Do you use one source or multiple
> sources?
>
> There are so many resources out there from Bloomberg to IBD, MarketWatch,
> Briefing.com etc. that I often find myself overwhelmed by all the options
> and commentary and experience info overload! How do I cut out all the
> "noise" and focus on what's really pertinent?

Answer:

=) No problem!

I tend to keep things really simple. In terms of scanning, I primarily
monitor the gapping stocks and the intraday % and $ gainers and losers, as
well as stocks trading near day's highs or day's lows. This generally gives
me plenty of trade opportunities to monitor and it is pretty rare anymore
that I look further than that. If I am not finding much in those lists then
it means I'm looking too much because the market risk is obviously higher
than average. Sure, I will still find a couple of things if I pour through
other sources, but it's often not even worth it.

In terms of news sources, I don't even mornitor them. It's not so much what
the news is after all, but what the reaction is. You usually don't need to
know what the news is, but there can be some risks to not knowing. These
would include if the stock is a buyout, since you can get stuck in a gapper
that just goes nowhere because of the buyout, or if the news is
rumor-related and may easily be recanted or lead the stock to be subject to
a trading halt.

All my best,
Toni
http://www.tradingfrommainstreet.com

Establishing a work/study routine

Question:

> I'm trying to establish a solid / consistent daily routine to track, learn
> and gain a real grasp of the markets (i.e. start following futures from
> 5am, follow news and global markets, look for setups etc.) any
> recommendations on how to best manage or standardize this workflow?

Answer:

Hello! One thing to be careful of regarding your work habits and routine is to not
set yourself up to burn out. This can be very difficult. Many newer traders
take on more than they can really handle. It is true that the more time you
spend with the market, the more you will lean the nuances of the market.
However, in order to really study the market, you need to learn how to
analyze it and this is done by trying to put together studies of comparable
price action.

What I would suggest is trying to pick out several strategies or patterns
and then compile a notebook with printouts when you locate setups that fit
the criteria you are looking for. Be particularly sure to print out both
those that confirm and work out as well as those that fail.

A good plan would be to spend the morning locating examples and trading them
with a simulated account or trading with very small risk. Print out those
you see that don't trade as well as those that you do. Then take the
afternoon to print them out, write out pros and cons and begin to categorize
them to place those with the most similar characteristics and follow through
together. From this, you can then perfect your system by creating rules
based upon your observations.

The CD course that I put together outlines what building blocks you should
look for in developing a system and analyzing the pros and cons of your
setups and system as a whole. (http://www.swingtrader.net)

All my best,
Toni

Action Choppy Despite Trend Day

Good day! The market experienced its first real uptrend day since May 12th on Thursday where it opened near the day's lows and closed right into the zone of the day's highs. As in the prior two days of action, the morning started out on a strong note. Ahead of the open the Labor Department released its report on first-time claims for unemployment benefits. They fell by 18,000 last week, hitting its lowest levels in just over a month and provided the market with some positive news ahead of Friday's jobs data.

The market did pull back off premarket highs following the data, but when the opening bell rang this quickly turned back around. The indices moved higher almost immediately and continued at a strong clip until about 10:45 ET. The Nasdaq stalled at 10:15 ET, but held highs while the S&P 500 and Dow Jones Industrial Average continued to step higher. Action on the upside, while steady on a 15 minute, quickly became a lot more choppy after approaching initial resistance at Tuesday's morning highs in the S&P 500.

Dow Jones Industrial Average ($DJI)


The market rolled over slightly into 11:00 ET when the S&Ps formed a tiny pennant short pattern, but the 5 minute 20 sma was near at hand and served as resistance. The indices hugged this support level and began to creep higher into noon. We had seen similar action in the market on both Tuesday and Wednesday. In each of those sessions the market experienced upside throughout the morning with slowing momentum mid-day, a strong reversal lower into the afternoon, and a bounce into the end of the session.

Although the market technically looked like it was going to go for yet another repeat of this same activity, I was highly skeptical. Typically if a set of patterns in the market repeats two days on end, even if it begins the same on day 3, the second half of the day is highly unlikely to play out in a similar manner as the prior two. In fact, I cannot recall ever seeing this happen. The Nasdaq tried to give it a go and break higher into 14:00 ET to bust the pattern, but the pressure from the slowing upside in the majority of the indices was simply too much and the market did give way to selling into that time zone with an Avalanche (http://www.tradingfrommainstreet.com/techanalysis.html) pattern on both the S&P 500 and Dow Jones Ind. Average.

S&P 500 ($SPX)


Despite the strong downside into about 14:20 ET, I was still not willing to commit to watching for another continuation on the downside, which was what I had done in each of the prior two sessions. The result of this trend placement meant that support would hold more easily with either a range into the close or even a continuation of the larger uptrend.

Although identifying support into 14:30 ET was relatively easy due to the day's highs from Wednesday in the Dow and Nasdaq futures, the market did not form strong reversal setups up off the support such as rounded lows or a Phoenix. Instead the market just crept higher into 15:00 ET. It paused there for a minute and then the trend accelerated as it broke through the day's highs. The momentum again slowed into the close, but the indices still ended the session at the zone of the day's highs.

Nasdaq Composite ($COMPX)


Thursday's session closed at 12,604.45 with a gain of 213.97 points in the Dow ($DJI), up 1.7%. A lot of stocks trended higher throughout the day on Thursday, but Wal-Mart (WMT) was one of the main headline-grabbers after it reported a 3.9% increase in same-store sales. The S&P 500 ($SPX) rose 26.85 points, or 2%, on the day, closing at 1,390.63. The Nasdaq Composite ($COMPX) rose 46.80 points, or 1.87%, and closed at 2,549.94. Tops sectors included the airlines, natural gas, securities/broker dealers, and oil services. It is rather interesting to note that the market climbed higher even though oil and energy were also rallying. We don't see that very often.

I am going into Friday's session with the expectation of highs holding within about the first 15 minutes of the day. The jobs data might affect this somewhat, since ideally I want to see a relatively unchanged open or slight upside gap for this to happen. A gap on the upside can easily hold right away and begin to fill immediately. I am then anticipating a correction with a pullback off highs throughout most of the day. It may end up correcting more through a trading range, but the bias is favoring downtrend action.

Trade and Commentary Wrapup - 20080605

09:33 Toni: both ES and NQ are coming off highs premarket that were at the resistance of yesterday's highs

09:37 Toni: NUE on upside breakout watch list
09:37 Toni: some good daily action
09:45 Toni: NUE not holding up
09:50 Toni: NUE recovering so will keep it on watch list
11:42 Toni: NUE resistance at 80

09:42 Toni: MT on upside watch list

09:43 Toni: oil stocks recovering a bit today

09:44 Toni: ADCT on upside watch list
09:44 Toni: you already on top of that one
09:44 Toni: futs at resistance freom yesterday afternoon highs

09:46 Toni: hmm.. futures rallying but not much for morning gappers action

09:50 Toni: NQ back at morning high

10:16 Toni: EOG 5 min "D" setup for upside potential
10:23 Toni: i got stopped on EOG

10:18 Toni: ES closing in on prior 15 min highs from tuesday
10:19 Toni: futs resistance here
10:42 Toni: futures holding quite well off the 15 min resistance

11:01 Toni: CF wide range base at highs
11:34 Toni: CF from 145.5 breaking hitting some wohle number resistance 147
11:42 Toni: CF 148 next resistance zone

11:03 Toni: MTL base at highs
12:22 Toni: MTL slow....
12:23 Toni: resistance just under 55

11:10 Toni: futs coming into first support here
11:10 Toni: 1990.75 ES

12:04 Toni: ES hitting next resistance level
12:05 Toni: 1396
12:15 Toni: 12:15:25 Market Alert: indices 2T on the 5 min
12:15 Toni: 12:15:28 2T: This is the reverse of a 2B and is a form of double top. For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis.html#2
12:17 Toni: for the past two days the market has rolled over over noon with 2T setups
12:17 Toni: that makes me a bit more concerned this time
12:17 Toni: since larger market action rarely repeats three days in a row 12:19 Toni: in this case the action is morning upside with some strong pops, rollover midday with double tops and 2T and such and then sharp drops followed by a bounce into the close
12:19 Toni: i do not expect the afternoon to repeat the afternoon from the last two days
12:28 Toni: 1399.5 is next ES resistance
12:28 Toni: and 2058.5 NQ
12:33 Toni: market never bothered with the 2T trigger.. can see it has been working to break the pattern of the last two days as i said
12:33 Toni: this would mean that higher odds it will try to hold up this afternoon
12:33 Toni: so will want to be less aggressive on shorts
13:06 Toni: market keeps acting like it wants to roll over but i dont trust it to
13:40 Toni: well.. i tried the NQ long but got stopped on flush
13:40 Toni: i know this thing has room to move fast
13:46 Toni: i know momentum is shifting larger time frames
13:46 Toni: so this bias of mine is because of the trend and not the momentum
13:47 Toni: usually momentum rules, but there are many times the trend does
13:47 Toni: will see...
13:54 Toni: figured a pop would have come on that two wave pullback
14:02 AoN: can we see the mkt rolling over here TOni?
14:04 Toni: well.. was not planning on it so not sure because its certainly starting to try to roll over anyway
14:56 Toni: can see how the market is not repeating the action from the last two days even though it tried.. instead looking to still hold up
14:57 Toni: this is next futs resistance from the earlier congestion
15:11 Toni: ES into resistance
15:12 Toni: NQ 2058.5 is still next level
15:13 Toni: this rally.. its because so many people started thinking the market was gonna repeat a third time ... trapped em
15:16 Toni: both levels holding
15:18 Toni: the strong momentum is going to make corrections overall more difficult to get going
15:18 Toni: so slower
15:18 Toni: more choppy

14:10 Toni: MATK 5 min avalanche
15:11 Toni: MATK has to hold here
15:36 AoN: finally MATK
15:36 Toni: yeah
15:36 Toni: first support here
15:36 Toni: 35

Morning Rally and Afternoon Reversal Repeats

Good day! Although the action on Wednesday was not as extreme as Tuesday, the indices had a lot in common on both of these days. The morning action was to the upside, boosted by positive news on the data front. When this euphoria wore off over noon the market turned, heading lower throughout most of the afternoon and then bouncing back into the close. The momentum of the repetition, however, was not the same. The market had a stronger upside in the morning and weaker downside action into the afternoon.

Ahead of the open on Wednesday the ADP employment report showed a 40,000 increase in jobs in the private sectory in May with about 20,000 in the government. Nonfarm payrolls rose by about 60,000 in May. Economists had anticipated 50,000 decline. In another report, the Labor Department revised the productivity of U.S. nonfarm businessses higher for the first quarter from 2.3% last month to a 2.6% annual rate in the first quarter.

At 10:00 ET the Institute for Support Management released its May data for its composite index of non-manufacturing businesses. The index slipped from 52% in April to 51.7% in May. Since this was still above 50%, however, it indicates growth for the second month in a row. In the three months prior the index had fallen short of this key level and was in a contraction phase. The news from this report did not cause a strong immediate response in the market, but the gains solidified within the 30 minutes that followed and the congestion which began ahead of the data finally broke to new highs around 10:20 ET.

Dow Jones Industrial Average ($DJI)


The indices struggled with confidence until 10:35 ET. At that point a small continuation pattern that had been forming broke higher. The opening momentum returned and the indices moved steadily higher into the 11:15 ET correction period where they starting running into larger time frame resistance levels. The 5 minute 200 period simple moving averages were hitting in both the S&Ps and Dow and the Nasdaq had hit the prior day's highs. Meanwhile the S&Ps and Dow were also testing price resistance from Tuesday in the early afternoon where the market had congested before falling sharply lower. This led to an initial reversal pattern into 11:30 ET.

The market moved slowly lower into noon where the 5 minute 20 sma zone served as support. Volume was light on the pullback, creating what appeared to be a bull flag other than the fact that the intraday trend was very extended with equal move resistance on the 15 minute charts hit in both the S&Ps and Dow. The market was simply at too much resistance to sustain a decent move off the 5 minute support. My focus by this time had shifted lower once again. Throughout the morning the stocks I had traded had been shorts in PBR and MTL, but up until 11:15 ET I had been bullish in the indices. Even though the market made an attempt to move strongly again off the 5 minute 20 sma, the Nasdaq only broke by a hair to create a bull trap I call a 2T (2-top) where the second high is slightly higher than the first at a strong resistance level.

S&P 500 ($SPX)


Although momentum was on the strong side off the 20 sma, it lacked volume to confirm the move. The momentum was thus able to shift into the early afternoon. Volume picked up when the 5 minute 20 sma broke lower. It was not much in the Nasdaq, but was stronger than the upside in the S&Ps and Dow. The indices found support with the 13:00 ET correction period at the breakout level from the highs of the 10:30 range in the S&Ps and Dow. The reaction off this support was again on light volume. The S&Ps and Dow hugged their 15 minute 20 period simple moving averages as they crept higher, creating Avalanche setups on this time frame that triggered into the 14:00 ET correction period.

The market moved very well coming off this second wave of selling on the 5 minute time frames. Support hit within 20 minutes when the S&Ps hit support from around 10:15 ET and the Dow hit its morning lows. at about 14:15 ET. The third wave in the trend came off the 5 minute 20 sma at about 14:45 and took the market lower into the 15:00 ET correction period. Although the corrections between each of the waves of selling were not comparable in terms of how long they took to form, the market was still able to establish a larger correction off the lows. The 5 minute 20 sma had hit as resistance a final time into 15:30 ET and I did scalp this move, but the pullback was only a fraction of the prior upside move before the 5 minute 20 sma broke higher into the close.

Nasdaq Composite ($COMPX)


Due to the morning rally and late day reversal, the Dow Jones Ind. Ave. ($DJI) only lost 12.37 points on Wednesday to close at 12,390.48. The S&P 500 ($SPX) lost 0.45 point to close at 1377.2. The Nasdaq Composite ($COMPX) rose 22.66 points and closed at 2503.1. The index futures held the late-day reversal and continued higher into the early hours of trading on Thursday. This leaves the market looking bullish into Thursday morning. I am looking for the indices to test the 10 and 20 day sma resistance levels before again stepping lower. The Nasdaq has opened the door for another slightly higher high on the daily time frame.

Trade and Commentary Wrapup - 20080604

CHART FOR MORNING MARKET CALLS USING YM



09:44 Toni: the futures here just popped into the premarket highs from around 2:30 am for price resistance initially in here
09:44 Toni: The Nasdaq is closing in on yesterday's last 30 min highs

09:52 Toni: this is some fib resistance on the NQ

10:32 Toni: NQ and ES hitting resistance
10:35 Toni: futs pulling in off the resistance

10:50 Toni: YM is fomring 100 tick "A" buy setup
10:50 Toni: 10:50:24 Breakout Template: For information on A, B, C, D, or Z template patterns, please see http://tradingfrommainstreet.com/images/roomexamples/BREAKOUT_TEMPLATE.gif The green circle is the entry with the red bar as the stop
10:53 Toni: YM first resistance
10:53 Toni: 12470
10:54 Toni: NQ is at yesaterday's highs zone
10:58 Toni: second resistance zone hitting 12480
10:58 Toni: YM
10:59 Toni: trigger on this buy was 12453
11:01 Toni: nice job with YM... still have concern we can keep testing highs a bit longer but hard action to read

11:30 Toni: Dow trying to roll over
11:30 Toni: ES is at resistance
11:36 Toni: YM first support
11:50 Toni: YM is at the second support btw


STOCKS: 2 MORNING CALLS (PBR AND MTL SHORT)
STOPS - 0

10:08 Toni: PBR base at lows
10:13 Toni: PBR going well
10:14 Toni: coming into first support zone
10:14 Toni: 66 is the whole number support
10:15 Toni: 66.04 last
10:15 Toni: 66.01 low
10:17 Toni: PBR :)
10:23 AoN: nice job on PBR toni
10:23 Toni: second support level PBR
10:23 Toni: taking gains



10:33 Toni: MTL potential 5 min avalanche
10:42 Toni: MTL still forming
10:51 Toni: this is 5 min 20 sma zone on MTL so i want to see it react off it
11:00 Toni: MTL "D" trigger in the base triggered... channel trigger close
11:02 Toni: am looking for 51.75-52 on mTL




12:00 ET
... at this point I took off for a few hours due to a migraine ...


15:10 Toni: MTL is breaking down again this afternoon i see
15:29 Toni: MTL hit 51 zone

15:26 Toni: 6 min 20 sma hitting here on the futs gang
15:26 Toni: also 10 sma on the 15 min
15:27 Toni: that is 5 min sry
15:27 Toni: not 6 lol
15:27 Toni: not using funky time frames i promise
15:28 Toni: ("psst.. you see that.... she using 6 min time frame... no wonder i am having problems with my trading... gotta use a 6 minute! its the holy grail!")
15:28 Toni: ok... maybe not....
15:29 Toni: first support on futs off that sma
15:50 Toni: rest of futs hit stop

15:51 Toni: 15 min 20 sma almost hit in the futs here ahead of the close (resistance)

Premarket Gains Receive Boost by Factory Orders, but Fail to Hold On

Good day! Market action was mixed for the first half of the day on Tuesday. Although the morning trend was to the upside, the indices struggled to make new highs after about 10:05 ET. The session began with a modest upside gap in the indices which left the S&P 500 ($SPX) and Nasdaq Composite ($COMPX) back at 50% retracement levels as they bounced off Monday's lows back towards Thursday's highs. This left the indices at resistance into the opening bell and since gaps of this size tend to fill it did not take long for the market to start selling off.

Early morning support hit as the gap zones closed and the 9:45 ET correction period hit. The market began to chop around at that point. They started to favor an upside bias within the chop, but it took the 10:00 data to provide the market the boost it needed to break free. The Commerce Department reported that April orders for U.S.-made factory goods climbed 1.1%. This better-than-expected news sent the market flying... at least initially.

Dow Jones Industrial Average ($DJI)


The market rally out of the 10:00 data did not last long. The ES (S&P 500 Emini futures contract) was hitting a third high on an 800 tick chart and this signaled the beginning of trend exhaustion. The indices turned over relatively quickly, but the momentum slowed as the indices came into the lower end of the all sessions uptrend channel. This hit at about the same time as the 10:45 ET correction period. Since the market was making slightly lower lows at this time on the small intraday time frames such as the 1 minute chart, it created a rounded low into the support which allowed the market to rally fairly quickly.

Coming off the 10:45 zone lows I began to watch for the indices to retest the morning highs for reversal patterns such as a double top or 2T, which is a type of double top that breaks slightly to trap bulls and flush out bears. The Nasdaq was the first to succumb to this pattern. It formed a double top into the 11:15 ET correction period. It then fell into a congestion level to form a small 2 minute Avalanche into noon which the S&Ps (ES) triggered its own reversal with a 2T at the 12:00 ET correction period. Setups such as this that show up on a 15 minute time frame will make it very difficult for the market to hit new highs on the day, particularly if the setups form over noon or into the early afternoon since they are trend-breaker patterns.

S&P 500 ($SPX)


Perhaps "trend-breaker" was a bit of an understatement. The market fell throughout the early afternoon. Given the larger pattern, I was watching for the setup to form a continuation pattern on the 5 minute time frame to continue lower. The 15 minute 20 sma was the support the indices needed to create that continuation pattern. The market congested along the support until about 13:30 ET. This was a relatively brief reprieve.

When the 15 minute 20 sma gave way it did so in a major way. The bottom completely fell out in the market. The Dow hit the prior day's lows first, but that didn't phase the bears at all. Next the S&Ps tried their prior day's lows, but this also broke in a matter of minutes. Finally the Nasdaq was testing its own lows from Monday. This zone held a little better, but the momentum was so strong it made it very difficult for the bulls to gain a foothold. The Russell 2000 was holding up the best on the day and this test of lows in the Nasdaq was the late afternoon low in the Russell from Monday with a bit of room to go before it's morning lows. As with the other indices, however, it did not take much of a pause in the market before its way was also paved to retest that level and break to new lows on the week.

Nasdaq Composite ($COMPX)


Finally, around 14:25 ET, the indices looked like they might be done with the strongest of the downside. At this time the ES (S&P EMini) was hitting its lows from the 27th. This was also the highs from the 22nd in the NQ (Nasdaq 100 EMini). Among several of the news events for the day was the firming up of Barack Obama's campaign for the White House when he won the Democratic nomination for the presidency. Another was a report by the Wall Street Journal that Lehman Brother (LEH) is facing its first quarterly loss since it went public in 1994 and would likely have to sell up to $4 billion in common stocks to raise capital. When the indices hit the support ahead of 14:30 ET it slowly reacted to the support due to the strong downside. This changed at 15:00 ET, however, when LEH denied rumors that it was going to try to access the Fed's discount window to help with its capital crunch. This led to a quick pop in the indices which eventually led them into the 15 minute 20 period simple moving average as resistance at 15:30. The indices pulled slightly off this resistance going into the close.

Despite the substantial losses in the second half of the session, the early morning gains and late day rally helped the market's overall results appear not very significant. The Dow $(DJI) closed lower by 100.97 points, or -0.8%, at 12,402.85. The range from highs to lows was more than 200 points though. Remarkably, only 20 of the Dow's 30 components posted losses. The S&P 500 ($SPX) lost 8.02 points, or 0.6%, and closed at 1,377.65 on Tuesday. The Nasdaq Composite ($COMPX) shed 11.05 points, or 0.4%, and closed at 2,480.48. Crude futures continued to slide, falling $3.45 to $124.31 a barrel. Gold also lost ground, shedding $11.5 (1.3%) to close at $885.5 an ounce. The prices have had no affect on gasoline prices, however, which remain at record highs of $3.98 a gallon for regular unleaded.

As the week progresses, I am still focused primarily upon corrective action coming down from those highs a few weeks ago. Right now it is looking like we will stair-step lower in the Dow and S&Ps at least so look to prior daily lows as support levels and the 10-20 day sma zone as resistance. Corrections can last two to three waves. I am leaning towards three this time around with the second one currently under way. It will still take a week or so though before this plays out enough to give us a better indication if that action will still form.

Trade and Market Commentary - 20060503

09:50 Toni: futures sandwich between 5 min 200 sma support all sessions and 30 min 20 sma resistance all sessions

09:54 xeno: leh is a done duck
10:00 Toni: yeah.... LEH followed through but took until today

10:02 Toni: futs popping on factory orders data
10:02 Toni: hitting first resistance here
10:02 Toni: also have futs fib resistane
10:02 Toni: ES 50% retracement
10:06 Toni: futs second resistance

10:04 Toni: CF, MOS and AGU from yesterday on the daily upside breaks are still going
10:05 Toni: ipi turning back orth

10:47 Toni: indices are hitting the lower channel from the uptrend... ES has three highs so wont be likely to see a new high off this support

11:16 Toni: morning highs zone is futs resistance
11:18 Toni: indices have 2T potential
11:38 Toni: futs doing a decent job of holding prior highs... NQ was withing a tick
11:38 Toni: this is first support with 5 min 20 sma
11:55 Toni: futs initial support held well.. ES going for double top/2T or so
12:26 Toni-awa: ES going well off 2T setup
12:26 Toni-awa: NQ still holding double top
12:26 Toni-awa: 15 min 20 sma is support
12:26 Toni-awa: nice moves....
12:27 Toni-awa: fist bit of support showing here
12:28 Toni-awa: 1389es 2018.25nq
12:30 Toni-awa: market does look lower to hold correction into the afternoon so would watch for 5 min cont setups
12:45 Toni-awa: 12:45:43 Market Alert: ES hitting 15 min 20 sma
12:45 Toni-awa: for those trading the 2T this is a good place to take some off
12:46 Toni-awa: NQ is coming into prior 15 min lows for those that took its earlier double top also
12:46 Toni-awa: very nice action off these larger time frame patterns today
12:59 Toni-awa: NQ also at the 15 min 20 sma now
12:59 Toni-awa: support
13:28 Toni-awa: getting our cont in the futures... nice break
13:32 Toni-awa: NQ hitting 30 min 200 sma
13:33 Toni-awa: this is next support off that 2T double top in the indices
13:39 Toni-awa: ES making a run for yesterday's lows
13:49 Toni: heres that ES support at yesterday lows
13:53 Toni: sure is a wicked move....
13:53 Toni: not going to be any fast relief for this
13:55 Toni: NQ hitting yesteday lows
14:21 Toni: ES coming into last week's lows now
14:22 Toni: ER finally made it to mondays lows
14:22 Toni: hitting that zone here
14:30 Toni: this is the 27th lows on the ES btw
14:35 Toni: this is decent larger term support so will see how it holds
14:36 Toni: last lows ES on the daily
14:36 Toni: and 22nd highs in the NQ

15:02 xr3: LEH denial of borrowing from fed
15:03 charlie: that should pop it
15:04 Toni: popped the market anyway

Market Correction Escalates; S&P Ratings for LEH, MER and MS Dropped

Good day! The market took a hit on Monday. Heading into the session I had been expecting a pullback off last week's highs due to short setups that had been forming on the 30 minute time frames as I mentioned in the weekend column. These patterns triggered with several strong breakdown setups in afterhours trade. On Sunday the index futures broke lower into 20:00 ET. They then fell into a base until 3:00 am ET Monday when they broke sharply lower once again. Finally, another base or congestion zone from 5:00 am into the open gave way with the opening bell. This confirmed the trigger on the 15 and 30 minute time frames as well as confirming the larger bearish bias. Strong volume on the break lower also benefited the bears.

The indices continued lower in the morning after a brief pause with data at 10:00 ET. April construction spending and the May ISM Manufacturing Business Index came out at that time. Construction spending fell 0.4% in April and March's decline was revised to a 0.6% decline. The Institute of Supply Management reported an increase in manufacturing activity, rising its index level from 48.6 in April to 49.6 in May. Despite the better-than-expected numbers, the market was not able to withstand a larger correction off the support due to the larger technical bias favoring further downside.

Dow Jones Industrial Average ($DJI)


After the breakdown into 10:15 ET, the next correction period was 10:45 ET. The market was coming into support levels at this time from earlier last week and I was beginning to look at potential for a larger correction off the support going into mid-day. To accomplish this we needed to see some rounded lows. The momentum bias remained weak into 11:00 ET and the Nasdaq broke lower at this time. This was also a correction period, so it is a typical time to see such moves.

The momentum began to shift a little after 11:00. The downside slowed and we began to see some rounding off. Volume was light on the upside, however, and this created concern for bulls. The market began to base along the 5 minute 20 sma at noon. This created the start of a potential Phoenix buy setup. Volume dropped off even more, which was a pro for a Phoenix. Standard & Poor's threw a big wrench into the initial attempt by the market to show a correction up off support mid-day. It cut its debt ratings on three of the large brokerages. Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley (MS) were all hit. LEH lost 8%, while MER fell 2.8%, and MS fell 2.5% on Monday.

S&P 500 ($SPX)


Index prices plummeted following the financial sector assault. This did have the advantage of flushing out the market, however, which created the potential for a correction off lows into the afternoon. The 13:00 ET correction period was the next time level for such a move to begin. Since the momentum was sharp on the downside, it took a bit of time for the indices to begin to move higher. Volume was light as the indices crept into the 15 minute 20 sma even though the sharp volume into the afternoon on the downside was good for exhaustion.

I began to watch for a buy setup late afternoon. The pattern that the market was favoring was a shallow Phoenix. This means it is a Phoenix pattern that comes after a slow ascent off lows, followed by congestion along a 20 sma and then it typically breaks higher with a strong pop when the resistance gives way. It initial began to look like we would see a move out of 15:00 ET, but this proved to be a bit early and the market tried to pull lower off the 15 minute 20 sma. The momentum shifted enough on the smaller tick charts though to still give us that pop into the close going into the final correction period of the day around 15:30 ET.

Nasdaq Composite ($COMPX)


After losing so much ground early on, the late day reversal still left the Dow ($DJI) with triple digit losses. It closed lower by 134.5 points, or 1.06%, at 13,503.82. 28 of its 30 components posted losses, led by the financials. The S&P 500 ($SPX) lost 14.71 points, or 1.05%, to 1,385.67. The Nasdaq Composite ($COMPX) fell 31.13 points., or 1.23%, and closed at 2,491.53.

In terms of the outlook coming out of Monday's action, the daily bias I posted for Monday still rings true: If the indices try to break lower right away early this next week with a lower low on the S&Ps or Dow then we will be dealing with higher chance the market to bounce again on a larger time frame with more of a 2B type of action (a form of double bottom with a slightly lower second low that creates a trap for the bears). This would be particularly true if it is a slower decline than the ones two weeks ago. Or it could kick off a smaller downtrend, such as the one from 10:30 am to 11:10 am Friday morning on a 5 minute time frame in the ES and YM where the market would be heading into the second wave down.

Since the market did indeed break lower early in the morning on Monday, what we are left waiting to see is whether it breaks last week's lows a bit or holds them in favor of a longer range on the daily time frame. Although the indices hit strong support mid-day on Monday, there is still room to try those lows if the momentum shift from Monday' afternoon does not hold. I would actually favor such action for the bulls since it would help round the lows off a bit better once again. The mid-day flush created this added potential.

Trade and Market Commentary Wrapup - 20080602

09:40 Toni: MEE great daily to watch for cont upside patterns
10:05 Mykonos: MEE been fluched
10:06 Toni: yep.. it formed an ascending pennant on the 1 min
10:06 Toni: still keeping an eye on it for later though
10:06 Toni: nice 15 min base would be good
10:06 Toni: re MEE
10:14 Mykonos: MEE running more than a scalp :-)
10:16 Mykonos: outa MEE :-)
10:20 norancho: yeah, MEE nice for me too
10:21 Toni: bbiab gang
10:21 Toni: MEE 70 here is some price resistance



10:09 Mykonos: CF nice I missed it :-(
10:10 Toni: yeah i had NMX on my swing list going into the day .. that was my big miss
10:11 Toni: MOS and AGU were ones i had as same daily type action as CF btw

09:40 Toni: 2021.25 is next NQ support zone
09:42 Toni: this is 50% retracement from 28th lows to 29th highs on the ES here

09:46 Toni: COST 60 minute breakdown pattern forming



09:50 Toni: ES next support level is 1389-1390
09:55 Toni: ES support hitting 1389
09:57 Toni: NQ also hit support level
09:58 Toni: Monday, June 2, 2008
09:58 Toni: 10:00a.m. Apr Construction Spending: Previous: -1.1%.
09:58 Toni: 10:00a.m. May ISM Manufacturing Business Index: Previous: 48.6.
10:00 Toni: initial boost off our support with the data
10:02 Toni: the market is poised for a correction off the lows mid-day
10:02 Toni: into mid-day
10:05 Toni: ER i had fib support marked at 738.43
10:05 Toni: it held that almost exact



10:04 Toni: GOOG is just starting to form a 15 min avalanche



10:09 Toni: SHPGY is a short to keep an eye on ... good daily gap but it is an ADR so gaps are typical



10:11 Toni: 10:11:36 Market Alert: potential for 2B in the indices on the 1 min (No Setup)
10:11 Toni: 10:11:44 2B: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis.html#2

10:12 Toni: YM is in mid-range from the 28th lows congestion here
10:13 Toni: this is support here with the lows at the 12493 the next level if it step down one more time this morning
10:13 Toni: again, i am expecting correction off the lows going into mid-day
10:13 Mykonos: hope so
10:14 Toni: Dow is the weakest of the indices today
10:14 Toni: NQ here is 50% retracement off highs of the 28th-30th move
10:15 sngdncman: I got on a little bit...hopeful of that mid day correction
10:15 Toni: YM tick charts have little momo reversal of this support
10:16 Toni: off
10:17 Toni: 10:45 ET is next correction period for the market ... current is still showing reaction tothe 10:15 correction period that hit with the support
10:18 sngdncman: thks



14:40 Toni: ATI base at lows 5 min (72.10-.20)
14:54 Toni: want to see 72.35ish hold as highs on ATI in 5 min 20 sma zone
14:55 Toni: ATI was actually on my position trade scan list
14:55 Toni: based ont he weekly range
15:08 xr3: ati melting
15:10 Toni: 72.30 is ATI resistance now
15:11 Toni: first bit of support here
15:11 Toni: 71.75
15:23 Toni: ATi looking to take gains on this move
15:23 Toni: 71.60 last
15:23 Toni: 71.50 is the half number support (71.55 low just just after post)
15:24 Toni: nice....
15:27 Toni: ATi couldnt have timed that better haha
15:27 Toni: yikes



14:48 norancho: Toni, we were discussing the where this market closes today, ie, up or lower from here, do you have any thoughts on that?
14:53 Toni: re the market.... i think this afternoon is probably going to be more choppy but can retest lows once more

14:35 Toni-away: WLT basing at highs on the 5 min
14:55 Toni: momentum in the range in WLT is not holding up very well

14:56 Toni: NQ is trying to form a shallow Phoenix
14:56 Toni: 5 min
14:56 Toni: 14:56:21 Phoenix: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis2.html#17
14:58 Toni: indices have the 15 min 20 sma right overhead
14:58 Toni: that is a con on Phoenix
14:59 Toni: think it should have gone by now...

15:02 Toni: looking like we wont get it and market can more easily pull blower again... bear flag 15 min... want to be careful because if it just slides lower it can pop fast into the close
15:26 Toni: futures just chopped lower so this is that pop i mentioned (trigger 1996.75 NQ, 1380.75 ES)
15:29 Toni: first futs resistance on pop (2004.25 NQ, 1384.25 ES)
15:48 Toni: this was a strong pop into the close... started a few min ahead of the reversal period.. but nice move
15:49 Toni: this is second reistance in that pop (2007 NQ,1386 ES)



15:17 Toni: LEH base at lows 5 min($34.00)
[15:47] LEH I want to see hold in here since not much time left so i'd rather take more of a scratch at this point than wait and end up with a potential loss (trading $33.94)
15:59 Toni: had to scratch pretty much o LEH.. ran out of time :(
15:59 Toni: 33.90 here
15:59 Toni: 33.85

Friday's Charts Posted

Hi gang,

Charts from Friday's market/trade wrapup are now posted:
http://www.tonihansen.com/blog/2008/05/trade-and-commentary-wrapup-20080530.html

Room login info: http://www.tradingfrommainstreet.com/roomsetup.html

All my best,
Toni

Question Regarding My Background and CD Course

Answer to a question regarding my background and CD course found at http://www.swingtrader.net (No, it's not just for swingtraders!)

Hello ----,

I would be happy to help you with any questions you may have! I've been trading full time for 11+ years and teaching trading to newer traders for about 10 of those years. After I began trading I started a free site at swingtrader.net where I just posted things I was learning as well as the picks I was making. It gained a rather large following very quickly and one of the educational sites back in the day asked me to write a newsletter for them since I had a very strong track record of picks. This is where I ended up in the "teaching" end of things. By doing the newsletter for them and eventually a chatroom as well I was forced to explain exactly why I was making my decisions since we ran the room as an educational and trade room and site. So, I detailed all the reasons behind the trades as well.

From that point I went on to working one-on-one with traders and found that I was constantly repeating the same material based upon my form of technical analysis where I look at building blocks of pattern development, which are more important than what the completed pattern looks like. The building blocks are what I detail in the CD course. Essentially what I do is cover how price patterns develop in the market and the components which go into each pattern and determine the odds of success or failure as well as target potential, methods for minimizing stops, etc.

The course then details specific combinations of these building blocks to give you strong patterns to incorporate into your own trading plan. One of the pdfs (Successful Market Timing) shows a large number of these patterns with examples that list not only the ideal pros and cons, but also examples where I detail the pros and cons of each of the trades so that you can understand how to apply the building blocks in live trade. I personally trade securities and commodities, but many of those I have worked with also trade options and forex using the same system of analysis. If you have any questions at all, please don't hesitate to ask!

All my best,
Toni

Question on Economic Reports

Question: Hi Toni, could you tell me where I can get from the "real time" economic reports? Thanks!

Answer:

I am not quite sure what you mean? Do you mean where can you get the day's current economic reports?

Briefing.com is a good site to get constantly updated news, but there are a lot of other sites out there that also do live releases.

In terms of understanding the importance of each report, Yahoo.com offers explanations of the different types of economic reports, as well as rankings of how they tend to affect the market. http://biz.yahoo.com/c/e.html is the main link and if you click on a report title it will take you to a description and explanation of that particular report.

In terms of actually trading the reports, it can be difficult to guess ahead of time where a given report will send the market at times, so I try to sit out ahead of many of the major ones and play the reactions to the news instead. Sometimes the news itself will trigger a technical setup that was forming into the news. This is the best action to see. I hope this info helps!