Target Levels

Question:

Great presentation last night (Wednesday's webinar), as a newbie I found it very useful.
One area I am having difficulty with is exit strategy. I find that my gains turn into small wins
or even losses. In the webinar you mentioned exiting in three stages, do you always do this?
If so how do you exit if the move fails to make target 1, or makes target 1 but not target 2,
or target 2 but not target 3?

Answer:

I do often exit in 2 to 3 stages, however, this is certainly not always the case and I often will add back into positions in which I have taken partials as a continuation pattern forms. The real trick to this is to identify the larger trend placement and pace action. Depending on this traits, there will be the potential for larger gains in certain cases than in others.

Unfortunately there is no quick way to go into details on this.

You will find the support and resistance sections dealing with equal moves to be particularly helpful for most circumstances (referencing the CD course he purchased and was discussing).

The greater the momentum out of a setup, the greater potential it will also have.

Also, the less resistance, the higher the odds.

If the overall market is also favoring the direction of the setup then the odds will be higher as well, unless it is something like energy or oil which can trade against the larger market.

These are some of the basic things I will look at to determine not only what a likely target will but, but also how willing I am to hold part of the position past an initial resistance level to hit the targets. I hope this helps to some degree!

News & Event Driven Price Action

Question:

Technical Analysis vs. News & Event Driven Price Action. Perhaps I’m over-analyzing this issue however, it seems that price action is usually driven by the events of the day. How can one rely upon historical Technical Analysis as a predictor of the future when events are so unpredictable?

Answer:

It is true that price action is a reflection of the sentiment of the day, but think in terms of psychology: Similar triggers create similar responses. If a loved one becomes sick you will start to worry. As their condition deteriorates your emotional reponses will also heighten. Should they pass away then you will also react in a predictable manner which psychologists call the stages of grief. The markets are merely a reflection of human emotions. Charts show the visual progression of this range of emotions as market participants react to the current sentiments. As such, technical analysis is a highly valid means of measuring and predicting price action which is merely a reflection of repetitive human nature.

Trade and Market Commentary 20080725

The following is a wrapup of all my market calls and trade posts for July 25, 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

12:12 Toni: energy is the leading sector

12:21 Toni: BIIB base at lows
13:10 Toni: BIIB still basing at lows
13:14 Toni: BIIB trying
14:21 Toni: first BIIB support
15:13 Toni: those holding partials on BIIB move stop over 70.10 on the rest
15:33 Toni: BIIB stop over .90 now
15:47 Toni: .83 (over) for trialing on BIIB now
15:47 Toni: not much time left...
15:47 Toni: was hoping for 69 today
15:47 Toni: but hmm...
15:55 Toni: over. 75 now on biib trailing
15:56 Toni: but really can just start to look to take the rest off since we only have a few min
15:56 Toni: the pattern intraday is ok for an overnight hold but things are gappy these days and the daily is iffy
15:56 Toni: so wouldnt take the risk
15:57 Toni: if the upside pace had not been as steep on the daily it would have been better for a hold




12:25 Toni: 12:25:18 Market Alert: futures watching for 5 min bear flag
12:29 firstbrain: @Toni: I'm new here, Could you explain a bit further what your last comment means. pls?
12:31 Toni: sure thing
12:32 Toni: it just means that in the index futures I am watching for a bear flag to form. This is a lower level range or slight upside move on lighter volume than the selloff
12:32 Toni: when the channel breaks it would trigger a short
12:32 Toni: you want the upside off this support overall, however, to be more gradual than the decline
12:32 firstbrain: on a 5 min timeframe?
12:34 Toni: correct
12:34 Toni: this would be about the 400 tick chart
12:34 firstbrain: ah ok thank you very much
12:35 Toni: yw
12:45 Toni: so far the upside pace is a bit stronger than i'd like to see for a bear flag in the futures... would need to see it hold here and fall more sideways




13:19 Toni: i get the feeling the market is just going to chop around the rest of the day


13:27 Toni: CB low-leve base
13:44 Toni: CB first bit of support
15:33 Toni: CB coming off second support level




14:09 Toni: NQ resistance in here prior highs and third push on a 50 tick
14:28 Toni: nice scalp off the futs resistance




13:46 Toni: COLM low-level base
15:34 Toni: COLM still pretty much basing

Chart Patterns Guide

Dear Trader,

I am away on holiday until August 3rd, so in the interim I shall be continuing the Chart Patterns series to be sent automatically each day to my email list while I am away. Here is the first of the week's lesssons. Sign up at http://www.tonihansen.com/ on the left to receive the rest!

All my best,
Toni Hansen

Toni's Market Action Newsletter : Special Chart Patterns Edition #10

For more information, go to http://www.swingtrader.net/


Breakout Buy Setup

Description: Also called a “rectangle”, this pattern is based upon a sideways trading range breaking higher. It is most commonly traded as a continuation pattern which is then called a consolidation, but a sideways range can at times also break in the direction opposite of the trend that had been in place heading into the trading range. In this description the traits will be discussed as if they are in a continuation buy setup, but they can easily be reversed in order to use them in a short setup.

Criteria: The criteria for a rectangular breakout pattern from a sideways trading range is very similar to a triangle range breakout. Most of the same criteria, as well as pros and cons will apply. The difference is that there are more comparable highs and lows, as opposed to a narrowing range or trend channel. There must be at least two highs and two lows within the range to be identified as a trading range if there is back and forth action. If there is just a lot of overlap from one bar to the next, then these waves of buying and selling will be more difficult to discern.

Entry: As in a triangle pattern, there are several entry techniques that work well on this pattern. The technique which is the most widely taught is to draw a line connecting the highs of the range to each other and connecting the lows of the range. In the case of an upside range breakout, the trigger would occur when that upper trend line breaks higher. This is one of the least preferred methods to entering a breakout, second only to taking a breakout from the absolute highs of the range.

1. Another method in the case of a buy setup is to enter above the previous high once at least two highs are established.


2. A third setup, which is the one that will generate the highest reward compared to risk, is to watch the moves within the range and monitor the pace of each of the moves. When the security pulls back more gradually off the highs then before, or hugs the upper trend line, then use a break higher from that smaller downtrend or sideways trend within the larger trading range for an entry trigger.

Stop: Under the last pivot low within the range, or if it bases on a smaller time frame within the larger trend channel, then a stop can be placed under the lows of that smaller range. Use greater caution when keeping a tighter stop such as this if the security is very volatile, meaning there is a lot of back and forth action and overlap even as it trends, if the pace has yet to change within the range when it breaks, or if the security is thinly traded.

Target: The targets on a breakout will depend upon whether they are continuations or reversals of the previous trend.

• In the case of a continuation buy pattern, when the pace or momentum on the breakout move is comparable to that of the move heading into the trading range itself, then a target is an equal or measured move. This involves taking the move into the range, from the lows of that move to the highs at the start of the range, and then comparing that to the lows at the start of the breakout and projecting them higher. If the momentum is slower than the previous rally, then it will be more difficult to hit that equal move and it will be necessary to identify closer resistance levels. If the momentum is stronger than that previous move, then a larger than equal move can form.


• When the breakout from the range is a reversal pattern off lows, however, then monitor the price and moving average resistance levels overhead. If a downtrend preceded the base at lows and then it turned around and headed higher, then the level at which a previous bear flag broke lower would be resistance and a strong initial target, as would a resistance level such as a 200 period simple moving average, although any number of major moving averages can come into play on multiple time frames to serve as resistance. The resistance will be much stronger if several resistance levels are hitting at about the same time.
  

  Toni Hansen's Online Bookstore As you know, my online trading room, classes, and market articles are all free. One way I make this possible is through my Trader's Library affiliated bookstore. Every month they provide special offers not available anywhere else on the net, often beating Amazon's prices, so if you are looking for your newest free reading title in the markets or some more interactive resources, please check it out! Click here to view the current specials.

  
  
  Ideal 5 Tech Tools Traits on a Breakout from a Trading Range:
  
  Pace: As a trading range begins, it is common for the initial downside move(s) to be average or stronger than average. As the range progresses, however, the odds are highest when the pullbacks from the highs are more gradual than the upside moves within the range. A base near the highs of the range or move with only a very slight downside slant off the upper end of the range is preferred.
  
  Volume: Watch for declining volume throughout the pattern's development with higher volume on the upside moves within the range and lighter volume on the downside as the pattern progresses. The best ones are when the volume is at its lightest level of the day just prior to the breakout as it bases at highs or pulls back gradually (in the case of a daytrade).
  
  Correction Periods: It is ideal when the last pivot low within the range, or the breakout from the range occur at the same time as a correction period.
  
  Support/Resistance:
  
• As a continuation pattern this setup is most ideal when it forms into the uptrend line on a larger trend, or moving average support such as a 20 period sma. Check to see if that level was also support on a previous correction, or if this is the first correction in a new uptrend, then look to see what the previous moving average resistance level was that broke to create the first higher high.


• If there is strong resistance on a larger time frame, such as the range forming intraday on a 15 minute time frame and there is a 50 day sma overhead that will be hitting for the first time in the trend move, then that level will have a more difficult time breaking. The same is true if it forms on a 5 minute chart and has a 5 minute 200 sma shortly overhead.

Trend Placement/Trend Development: A breakout is typically considered to be a continuation pattern, but can also be a reversal pattern.

• As a continuation pattern, it is best if the uptrend has only has one or two waves of upside.


• As a reversal pattern it helps if the pace of each of the downside moves in the previous downtrend is slower then the one that preceded it and that there were three waves of selling within that downtrend.


• A typical breakout tends to take place on the third or fourth test of the upper trend line for the trading range.
  
  
  The material presented in this email are expanded upon in Toni Hansen's in depth Trading Made Simple CD series. To learn more about this course, go to http://www.swingtrader.net/. Included is a pdf file detailing all setups in the Chart Pattern Editions of this newsletter (titled Successful Market Timing Guide). Thank you for your support!
  
  
  

© 2008 Trading From Main Street. All rights reserved.

DISCLAIMER: Trading in securities may not be suitable for all individuals. Consult your broker or other professional to determine your suitability. The discussions provided by Trading From Main Street are for educational purposes only and should not be taken as a ecommendation to buy or sell the referenced security. Past performance is not indicative of future results.

Market Reclaims Most of the Week's Gains

Good day! The indices were hugging their 15 minute 20 period simple moving averages heading into the open on Thursday. This congestion had formed throughout the second half of the day on Wednesday and it created a bearish bias going into Thursday morning on a 15 minute time frame. As I mentioned in yesterday's column, if the breakdown from this pattern followed through gradually, it would have created a bullish pattern to push the indices into larger daily resistance from about a month ago before creating the daily pullback off resistance. The breakdown, however, ended up being stronger than the decline late Wednesday morning in both the S&P 500 EMini futures contract (ES) and the mini-sized Dow futures (YM). Although the Nasdaq EMini (NQ) was more gradual overall, the rest of the market weighed heavily upon it and the market failed to create a two-wave pullback buy setup on a 15 minute time frame.

The economic data which came out on Thursday was not very favorable. The biggest of these was the 10:00 ET existing home sales data. The market had triggered the 15 minute short setup shortly after open. These losses deepened, however, when the National Association of Realtors reported that resales of U.S. single-family homes and condos fell 2.6% in June. This brought it to a seasonally adjusted annual rate of 4.86 million, which is the lowest level in about 10 years. Resales are now down 15.5% over the past year and down 33% since they peaked in 2005. Sales of single-family homes fell 3.2%, while sales of condos rose 1.7%.

In a separate report, the Census Bureau stated that about 25% of housing units available for rent that were built in the last decade are vacant, while about 10% of homes are. The median sales price fell 6.1% in the past year to $215,1000 while the inventory of unsold homes on the market rose 0.2% to 4.49 million. This is an 11.1-month supply at the current sales pace and is the second-highest inventory level since the 1980s. About 1/3 of current sales are distressed sales, meaning that they are either foreclosures or short sales.

The House approved legislation on Wednesday aimed at assisting the flailing housing market. It includes support for Fannie Mae (FNM) (-19.9%) and Freddie Mac (FRE) (18.4%), assistance for homeowners needing to refinance high-interest loans, and a $7,500 tax credit for first-time home buyers. FNM and FRE had opened higher on the session, but then trended lower following the 10:00 ET data throughout the remainder of the day and ended up being the third and fourth worst performers in the S&P 500 ($SPX).

Dow Jones Industrial Average ($DJI)


The selloff in the indices which took place immediately after the housing data found support by the 10:15 ET correction period. They then fell into a low-level base as volume dropped off into 11:00 ET. This created a strong short setup leading to new lows into 11:30 ET. The Nasdaq EMini (NQ) hit support at Wednesday's afternoon lows at this point, while the S&P 500 (ES) hit support from Tuesday's mid-day highs. This pushed the market into another correction over noon. The Nasdaq continued to show the greatest relative strength, but the S&Ps and Dow paced lower.

The 5 minute 20 period simple moving average served as resistance throughout the entire session in both the S&Ps and Dow, although the extent of the selling declined mid-day. The market then broke sharply lower again, however, coming out of 14:00 ET when that correction period hit. A final bear flag developed into the last hour of the day with the Nasdaq finally joining the S&Ps and Dow. All three of the indices closed at the zone of the day's lows.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) fell 283 points, or 2.4%, on Thursday and closed at 11,349. 26 of the Dow's 30 industry components finished the day in the red. General Motors (GM) fell 11.1%, while Boeing (BA) shed 6.3%. The five financial stocks in the Dow, however, accounted for more than 1/3 of the Dow's decline (108 points). These were American International Group (AIG), American Express (AXP), Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM).

The S&P 500 ($SPX) dropped 29.65 points, or 2.3%, and closed at 1,252. As you have probably guessed, the financial sector fronted the losses. It was down 7%, while consumer discretionary followed with a 4% loss. Information technology dropped 3%.

The Nasdaq Composite ($COMPX) lost 45.77 points, or 2%, and closed at 2,280. Share of Qualcomm (QCOM) took off after settling a patent and royalties dispute with Nokia (NOK). QCOM gained 17%, while NOK rose 2.2%. Amazon was up 11.6% after it reported better-than-expected earnings for the second quarter. Among the top losers in the Nasdaq were Sirius Satellite Radio (SIRI) (-9.7%), Broadcom Corp. (BRCM) (-9.65%), Wynn Resorts (WYNN) (-8.24%), and Sandisk Corp. (SNDK) (-7.21%).

Nasdaq Composite ($COMPX)


Thursday's session ended at support in the indices from the end of last week and the beginning of this at prior highs and congestion zones. This creates higher potential for a bounce in the morning. On the whole though, I am favoring further downside into next week for that larger daily flush lower that we had been looking at forming going into this week. The S&Ps and Dow can both easily drop back into the zone of the month's lows before they are able to bounce back again.


NOTE: I will be in Iowa retrieving my kids from a month at the grandparents next week, so the Daily Market Action Letter will not be sent out next week. It will resume on Monday, August 4th. I hope you have a wonderful week and you'll hear back from me then!

Question on Tick Charts

Hey gang... I was not able to get to all of the questions from my webinar yesterday, so I will be answering them as time permits here on the blog. I had a number of question on "Tick charts."

Tick charts are different from time frame charts where each bar or point on the chart represents a certain period of time, such as 5 minutes or 1 day. Instead, they measure the number of trades and mark a point or create a bar for each time that number of trades or ticks has gone off. For instance, on a 100 tick chart it is representing 100 ticks for each bar or point made on the chart. Volume is not helpful on tick charts, but tick charts can even out the charts and show action more clearly than on a time frame chart. As such, I really love to use them as a primary means of charting on the index futures with the time frame charts as supplementary to show me volume activity and I use them to help with timing on stock charts.

One question was whether or not you can use tick charts in forex. Well, technically wouldn't they be called "pip" charts? hmmmm :) Actually, I've never heard of them used in forex. I would assume that you can, but it is going to depend on your charting platform. I don't think I've ever seen this form of charting offered on forex charts, but it doesn't mean they don't exist. As long as you can find them, then yes, they would work well for timing and you are likely to find them more useful than the regular time frame charts in that market.

Another question was whether or not my course (www.swingtrader.net) discusses how to read tick charts. The answer is yes, because everything other than volume is going to apply no matter what type of charting is used. My charts for the No Indicators portion of the course is primarily futures, so that is where you will see the most examples of this method.

Oil Continues to Slide while Stock Prices Rise

Good day! The Dow Jones Industrial Average ($DJI) closed higher by 29.88 points, or 0.3%, on Wednesday. It closed at 11,632.38 with 21 of its 30 index components higher on the day. American International (AIG) led the gainers, up 7% on the day. Boeing (BA) weighed somewhat against the gainers, dropping 3.7% following a reported 19% decline in its quarterly profit.

The S&P 500 ($SPX) rose 5.19 points on Wednesday, or 0.4%, and closed at 1,282.18. Consumer discretionary fronted the gains, up 2.8%, with financials coming in second with a 2.4% gain. It is deemed likely that President Bush will sign the pending housing legislation which has helped boost the financials. Fannie Mae (FNM) rose 11.9%, while Freddie Mac (FRE) gained 11.3%. Energy shares led the downside, falling 4.9%, with utilities down 2%.

Crude oil fell nearly $4 to settle at $124.44 a barrel on the New York Mercantile Exchange, off more than 15% since its high of $147.27 on July 11th. It had recovered mid-day after breaking to new intraday lows on the inventories data, which fell less than expected. This reversal formed a nice continuation pattern in the form of a Phoenix in oil and many of the stocks which trade in tandem to crude, including energy. The recovery reversed in the second half of the session at about 12:30 ET, however, and prices ended at lows. Airlines continued to soar as oil fell. The benchmark index has gained nearly 80% since July 15th. The retail price of gasoline, however, remains over $4 a gallon at $4.042 on Wednesday. It had hit highs of $4.114 on July 17th.

The Nasdaq Composite ($COMPX) climbed 21.92 points, or 1%, and closed at 2,325.88, easily surpassing the gains in the other two indices. Amazon (AMZN) rose 3.8% on the day ahead of earnings due out after the bell, while Yahoo Inc. (YHOO) fell 4.7% after it failed to meet earnings expectations. Shares of AMZN traded higher after-hours after the company reported that second-quarter profit doubled since a year ago to 37 cents a share with a 41% jump in revenue. This was much stronger than the 26 cents per share that had been anticipated. It also guided higher for the third quarter from 29% for the same period last year to 36% this year.

Dow Jones Industrial Average ($DJI)


The session began on Wednesday relatively unchanged from the prior day's close. The indices then congestion for most of the initial 30 minutes of the day, but the Nasdaq peaked its head higher to begin to display greater relative strength very quickly out of the opening bell. It continued to gain momentum over the course of the next hour with the S&Ps and Dow tagging along from about 10:15 ET onward. All three of the major indices continued to rally until striking price resistance on the daily time frame. In the nasdaq this mean last week's highs, while in the S&Ps it meant the highs from the beginning of July. The Dow pushed ahead even further to test the lows from June 24th. Prices peaking just ahead of the 10:45 ET correction period.

The market's reversal was nearly as sharp as its rally. In fact, the initial downside momentum was just as strong heading into 11:00 ET. This correction period held, however, as the indices hit their 5 minute 20 period simple moving averages for intraday price support. They congested along this support on declining volume to form a 5 minute Avalanche short pattern which took the indices down to their opening price levels and their 15 minute 20 period simple moving averages. When an Avalanche hugs its 5 minute 20 sma, the 15 minute 20 sma is a typical target level for the breakdown.

S&P 500 ($SPX)


After such strong upside and reversal moves intraday, the market was left rather uncertain of what to do with itself for the remainder of the session. Prices hugged the 15 minute 20 sma, but instead of triggering an Avalanche on this larger time frame the momentum failed to confirm a shift and continued to hug the support into the close. Part of this was due to the larger time frames at play. The 60 minute continuation which triggered the prior afternoon still has room to move before it hits larger resistance and the two wave correction off highs on a 5 and 15 minute time frame created a bullish pattern into the afternoon, despite the lack of follow-through.

Nasdaq Composite ($COMPX)


We are looking at prices currently in the middle of a congestion zone going into Thursday's session. Within that congestion itself there is a bearish bias in terms of the pace of action since there is only one low on a 30 minute time frame. The market is attempting to pull up into a second high. If it can make a second low on that time frame with lighter volume and a more gradual pace than Wednesday's intraday pullback, then it will allow the indices to break through this week's highs ahead of the weekend. 2400 is the next main resistance level in the Nasdaq Composite, while 11,800 is the Dow's next resistance zone.

Logs and ppt for my webinar: Choosing the Right Trading Strategy

Dear Trader,

I hope that you had a chance to make it to my webinar Wednesday afternoon, titled "Choosing the Right Trading Strategy." The session was extremely well-attended and a wonderful success! I know some of you were not able to make it to the session, so I was able to upload the audio/video logs from the class onto my site for you to view at your leisure. The link is as follows:
http://www.tradingfrommainstreet.com/presentations/video/20080723_Choosing1.html

I also uploaded the power point itself to the site so that you can print it out or use it along side the video for larger versions of the charts shown in the video. The power point link is:

http://www.tradingfrommainstreet.com/presentations/ChoosingRightStrategy.ppt

The class ran for about 90 minutes with Q&A following it. Unfortunately I was not able to catch all of the questions as I was going through the commentary during the session, so for those I missed I will start answering on my blog tomorrow and over the weekend.

There are a number of other question & answer posted throughout the blog, so please feel free to look around! My main site also has a number of free classes:

http://www.tradingfrommainstreet.com

The strategies and techniques that I touched upon in this class, as well as the others I have done over the years can be found in my Trading Made Simple CD Series, featuring my 5 Technical Signals You Cannot Trade Without, located at:

http://www.swingtrader.net

I hope you enjoy the above material! I look forward to presenting another webinar in the near future!

All my best,
Toni Hansen

Market Extends Itself on the Downside With Strong Gap on Weak Earnings

Good day! As we expected, the market opened sharply lower on Tuesday morning following disappointing earnings reports from several heavyweights. After trading lower in overnight trade, Apple (APPL) opened down 12% at $149 after topping its quarterly earnings expectations, yet falling short on its fiscal fourth-quarter outlook. It had closed at $166.29 on Monday. Texas Instruments closed at $28.52 on Monday, yet it opened at $24.89 on Tuesday with continued selling out of the open to hit lows of $23.43 early in the session after it reported lower-than-expected earnings and lowered its third quarter guidance. After stronger-than-expected earnings from financials such as JPMorgan (JPM) and Bank of America (BAC), eyes were on American Express (AXP) and Wachovia (WB), but both disappointed Wall Street.

Dow Jones Industrial Average ($DJI)


As I discussed in yesterday's column, when the market experiences a substantially larger-than-average gap overall, the general tendency is for the gap to fill. The trick to being on the right side following the gap is to stand by and just watch the action for the initial 15-20 minutes of the day. On a sharp downside gap, if the 15-20 minute high breaks soon afterwards, then the odds are favorable that the gap in the indices will fill in AT LEAST one of the major indices within the next two hours. If the 15 minute highs hold, however, and are followed by a break lower, then the odds favor a morning trend on the downside which will often be followed by a trend day lower.

The Dow Jones Industrial Average ($DJI) was down approximately 58 points 15 minutes into the day. The Nasdaq Composite ($COMPX) was down nearly 24 points. The S&P 500 was down about 10 points. The session began at equal move price support as compared to Monday morning's decline. Prices had stabilized following the open as they held this support, creating a base-like formation with congestion in the initial 15 minutes. The momentum was gradual on the downside, creating favor for a break higher out of that range. This took place coming right out of the 9:45 ET correction period.

Once the gap began to fill, the Dow mini-futures (YM) did not stop until it had fulfilled that goal. It was the first of the three indices to close their gap. This gap closure level served as initial resistance and a minor correction followed. When the 10:15 ET correction period hit the market again took off. This second wave higher closed the S&P EMini gap (ES). Once again the gap closure marked a strong intraday resistance level. A second correction followed, but the magnitude of this second correction was stronger than the first. This allowed it to correct further with a two-wave pullback on the 5 minute time frame. The 5 minute 20 sma acted as support for the ES and YM, holding both waves of correction. Light volume confirmed the continued presence of a bullish bias and the indices broke higher again out of the 11:00 ET correction period.

S&P 500 ($SPX)


The Nasdaq EMini (NQ) was having a more difficult time holding on following the gap since the techs left it with more ground to make up. It had fallen off its 5 minute 20 period simple moving average after running up with the rest of the market and this turn lower took it back into that initial morning breakout territory. This level of action did a decent job of holding as support, so it was able to rally out of 11:00 ET as well. While the ES and YM broke to new intraday highs and positive territory, however, the NQ fell short.

The three indices began to correct again into noon. This pushed the market into a very long period of congestion. The NQ caught a little action out of 13:00 ET on a two-wave pullback on the 5 minute, but it failed to get past earlier highs and was followed by a rapid, albeit minor, flush out of 14:00 ET.

Although the pace shifted on a 5 minute time frame at 14:00 ET, the market's larger price bias remained bullish. Upside pace picked up one the market was able to break its prior 5 minute highs soon after 14:30 ET. A base formed from that point into about 15:15 ET. Volume was light throughout the base, lending itself to a bullish bias for the breakout. By this point Apple and a number of the other strong downside gappers had also formed high-level intraday bases and broken higher. These movers helped hold up the market as it broke the range and rallied into the close.

Nasdaq Composite ($COMPX)


Given the extent of the gap in the NQ, I was actually quite surprised that it managed to make such a come-back. By the close the NQ had managed to fill its gap. The Nasdaq Composite ($COMPX) faired substantially better than its futures counterpart. The Composite closed its gap early in the session with the rest of the market. It was able to tack on a 24 point gain by the close, ending the session up 1.1% at 2,304.

The Dow Jones Industrial Average ($DJI) gained 135.16 points on Tuesday, closing higher by 1.2% at 11,602.5. 21 of its 30 components closed in positive territory. The financials were among both the biggest gainers and losers on the day. American Express (AXP) closed lower by 6.5%, while Bank of America (BAC) climbed 13.3%. Merck & Co. (MRK) weighed down the Dow to some degree with losses of 11.3% on the day after its earnings report.

The S&P 500 ($SPX) rose 17 points, or 1.4%, and closed at 1,277. Financials overall gained 5.9%. Washington Mutual (WM), despite its gap lower in the morning, closed higher by 6.8%. Wachovia (WB) gained 27.4%. E-Trade Financial Corp. (ETFC) gained 11%. Consumer discretionary climbed 3.1%. Energy fronted losses, down 3.3%.


At one point, crude oil was down more than $5 to under $126 a barrel on the New York Mercantile Exchange. September delivery for crude closed at $127.95 a barrel, down $3.09. The Amex Oil Index ($XOI.X) closed lower by 1.6%, while the Amex Natural Gas Index ($XNG.X) fell 4%. Crude and gasoline are both down more than 13% off their July 11 intraday highs. The national average retail price of gasoline, however, has not budged and stands at $4.055 a gallon.

Heading into this week I was looking for a larger daily correction off the 20 day sma resistance which had hit in the market heading into the weekend. The congestion along highs, however, broke on the upside on Tuesday following the gap recovery and it's now looking as though that pullback is going to take a bit longer to develop. The Nasdaq even has an inverse head and shoulders pattern on the 60 minute time frame. Last week's highs in the Nasdaq and the gap from the 26th in the Dow and S&Ps will now serve as the next main resistance level.

Also be sure to register for this Wednesday's FREE webinar! 4:30 pm ET
Choosing the Right Trading Strategy: Position, Swing, Scalping... The list goes on. It is often a daunting task for an individual market participant to determine which style of trading is best suited for their own personality. Join veteran trader Toni Hansen in this enlightening session as she explores the ins and outs of trading on different time frames. Her expertise can guide you to select a style to fit you perfectly. There is no better opportunity than this to learn some of the tricks to successful trading that are unique to each level of market participation, as well as how to employ these strategies for maximum profit! Register https://www2.gotomeeting.com/register/120913682

Slow Beginning to the New Week

Good day! The index futures traded higher in premarket heading into Monday with a sharp spike higher at 7:00 am ET following Bank of America's (BAC) earnings announcement. The company beat by $0.19 for a second-quarter earnings of $0.72 a share. Even though the bank reported a 41% decline in net income for the quarter, it beat Wall Street's estimates and helped further boost the financials, which had initially began to recover early last week. BAC closed higher by 3.89% on Monday. Wells Fargo (WFC), JPMorgan (JPM) and Citibank (C) had similar reports the week before. Two more large regional banks due out on Tuesday are Wachovia Corp. (WB) and Washington Mutual Inc. (WM). The market was already extended heading into the new week as a result of that strong recovery, so it made it difficult for it to hold onto the gains past the open.

The Nasdaq Composite ($COMPX) started the intraday session at a strong resistance level from Friday's highs, creating a two-wave correction off Friday's morning lows on a 15 and 30 minute time frame. This is a traditional short setup, but the market did not turn until the 10:00 ET leading indicators data was released. The Conference Board of leading indicators slipped 0.1% in June, in line with expectations. May's reading was revised lower, however, from a 0.1% gain to a -0.2% loss. The data points towards continued economic pressure as the year unfolds and the market did not take kindly to that thought.

Dow Jones Industrial Average ($DJI)


The market found initial support when the morning's gap zone closed at about 10:30 ET. Volume was lighter than out of recent opens, which, given that it took place following a multi-day run but with strong downside pace, suggested further downside to come. It dropped off even further between 10:30-11:30 ET. The indices formed a two-wave correction off the intraday lows with the 5 minute 20 period simple moving average holding the upper end of the price range. Continuation patterns often form with this two-wave pullback and the declining volume again pointed towards lower prices. The breakdown triggered at about 11:30 and the market sold off solidly for another 30 minutes to mirror the initial turn lower off the morning highs.

Equal move support hit at the same time as the 12:00 ET correction period in the market. The market lacked an exhaustion move, indicating that the bulls were not eager to pick up new positions, while the bears were now willing to hold on. The market did recover to an extent with another two-wave correction. This time it lasted longer and took the form of two waves of upside as opposed to two waves within a range. The first wave brought the market into the 5 minute 20 sma in the Nasdaq and 15 minute 20 sma in the S&P 500 and Dow, while the second wave pushed the Nasdaq through the 5 minute 20 sma with a Phoenix. The S&Ps and Dow had been stronger to begin with, so they had less room to move on the continuation. All three held the earlier congestion from the first correction off morning lows into 11:30 ET as resistance.

The market resistance hit around 13:45 ET. This is not a typical correction, but the price resistance was enough to hold back further upside. The Nasdaq Composite had also hit equal move resistance on the 5 minute time frame at this point, whereby the move out of the Phoenix was comparable in both time development and price development when compared to the initial rally out of 12:00 ET.

S&P 500 ($SPX)


Action slowed down quite a bit into Monday afternoon. Volume declined even more and the market began to experience a greater degree of chop with prices on a 5 minute and 15 minute time frame overlapping to a large extent from one bar to the next. Support hit with the 15:00 ET correction period at earlier morning lows, but the S&P 500 and Dow Jones Industrial Average pushed through these to a small degree to create a 15 minute 2B pattern. This is a form of a double bottom with the second low is just slightly under the first to create a trap pattern. The typical price action resulting from such a trap is a move higher once the channel from the move into the second low breaks. This happened shortly after 15:00 ET, but the setup lacked any volume confirmation and the indices merely chopped somewhat higher into the closing bell.

A lot of market participants were unwilling to hold a great deal on the short-term time frames overnight due to some rather hefty earnings announcements after the bell and ahead of Tuesday's open. Since many of these same players would have also lightened the load into the weekend, it meant that a lot of swingtraders sat out the session on Monday. This "wait and see" attitude partially contributed to the lighter action throughout the day, although the greater reason remained the strong upside exhaustion from the prior week.

Nasdaq Composite ($COMPX)


The Dow Jones Industrial Average ($DJI) lost 28.99 points, or 0.2%, on Monday to close at 11,467.34. 21 of its 30 index components closed in negative territory. Merck & Co (MRK) led the downside after delaying their second-quarter earnings until after the bell following concerns about the effects of their cholesterol-fighting drug Vytorin. The result was a 6.24% drop in share price, while the fellow drugmaker Schering-Lough (SGP) fell 12.1%. JPMorgan (JPM) came in second with a loss of 3.42% in the Dow. American Express (AXP) followed, down 3.06% ahead of earnings. Following the bell, it reported earnings of 56 cents a share, quite a bit lower than the 83 cents per share that Wall Street had been expecting. Revenue was up 8% to 7.48 billion. On the positive side was American Intl. Group (AIG) which gained 5.82%. BAC came in second, but Caterpillar Inc. (CAT) also had a strong move of +3.3%.

The S&P 500 ($SPX) slipped a fraction of a point again to close at 1,260.00. Financials led the decliners, down 1.4%, while consumer discretionary fell 0.9%. Out of the S&Ps 10 industry groups, energy climbed 3.9%, while materials rose 1.3%. Oil prices climbed thanks to both an exhaustion move lower into the weekend which took it into price support, as well as some increased concerns as a result of a tropical storm making its way into the Gulf of Mexico. August delivery for crude oil climbed $2.16 a barrel to $131.04.

The Nasdaq Composite ($COMPX) fell 3.25 points, or 0.1%, and closed at 2,279.53. Shares of Yahoo (YHOO) fell 3.5% after shareholder Carl Icahn was chosen to sit on its board. Apple (AAPL) managed to recover from a strong love lower in the morning to squeak by with a 0.69% gain going into earnings, but the larger daily and weekly charts are in the middle of a two-wave continuation short pattern which began to form mid-June. The company didn't need a technical reason to head lower, however, once earnings came out after the bell. The session closed with AAPL trading at $166.29. It is nearly two hours after the closing bell, and AAPL is trading heavily afterhours at less than $148/share.



I am still favoring a larger correction off the daily resistance zone in the markets which began to hit late last week. The index futures are trading significantly lower following Monday's earnings news, so chances are high for a large downside gap. In such a case, if the market breaks the first 15 minute lows, then odds are higher for at least a trend morning lower, if not a trend day. On the other hand, should the market break the 15 minute highs, then the odds increase that the gap will fill. It will usually do such within the first two hours when this scenario develops. A small base favoring the direction of a 15 minute break, such as a little downside out of the open and then a base at lows ahead of a breakdown and vice versa for the long side will increase the odds of the setup.

Check out my blog at http://www.tonihansen.com/blog for detailed comparisons of the current daily price development to similar occurrences of price development in the past.

Also be sure to register for this Wednesday's FREE webinar! 4:30 pm ET
Choosing the Right Trading Strategy: Position, Swing, Scalping... The list goes on. It is often a daunting task for an individual market participant to determine which style of trading is best suited for their own personality. Join veteran trader Toni Hansen in this enlightening session as she explores the ins and outs of trading on different time frames. Her expertise can guide you to select a style to fit you perfectly. There is no better opportunity than this to learn some of the tricks to successful trading that are unique to each level of market participation, as well as how to employ these strategies for maximum profit! Register https://www2.gotomeeting.com/register/120913682

Free Webinar - Choosing the Right Trading Strategy

Hey gang!

I am holding a free webinar this coming Wednesday. The details are as follows:


CHOOSING THE RIGHT TRADING STRATEGY
with Toni Hansen


When: Wednesday, July 23, 2008 at 4:30 ET (You can login beginning at 4:00 ET) The class will last for approximately an hour with Q&A to follow.

Where: Go here to registar: https://www2.gotomeeting.com/register/120913682

Description: Position, Swing, Scalping... The list goes on. It is often a daunting task for an individual market participant to determine which style of trading is best suited for their own personality. Join veteran trader Toni Hansen in this enlightening session as she explores the ins and outs of trading on different time frames. Her expertise can guide you to select a style to fit you perfectly. There is no better opportunity than this to learn some of the tricks to successful trading that are unique to each level of market participation, as well as how to employ these strategies for maximum profit!


System Requirements:

PC-based attendees
Required: Windows® 2000, XP Home, XP Pro, 2003 Server, Vista

Macintosh®-based attendees
Required: Mac OS® X 10.4 (Tiger®) or newer

Mixed Trading Ahead of the Weekend

Good day! The market was all over the place on Friday with a large divergence between a strong Dow and a weak Nasdaq thanks to the effects of quarterly earnings reports from the prior afternoon, as well as premarket. A number of major tech stocks disappointed, leading to greater relative weakness in the tech-heavy Nasdaq Composite ($COMPX) on Friday. Google (GOOG) fell sharply afterhours on Thursday after it failed to meet expectations. On Friday it ended the session down 52.12 points, or 9.8%, and closed at $481.32. Microsoft's (MSFT) earnings also fell short, resulting in a 1.66 point, or 6%, price decline with shares closing at $25.86. Another big-name tech stock that lost ground was Advanced Micro Devices (AMD), which fell 12.3% to close at $4.65.

The Nasdaq Composite ($COMPX) shed 29.52 points, or 1.3%, on Friday, closing at 2,282.78. This meant a weekly gain of 2% with the year-to-date loss coming in at 13.9%. A large chunk of the losses took place into the open with a strong gap lower on the earnings data. The Philadelphia Semiconductor Index ($SOX) lost 0.7% on the session, while the Morgan Stanley High Tech 35 Index (MSH) fell 0.5%. Gilead Sciences (GILD) fell 10.60% on the day. Other top Nasdaq losers included Whole Foods (WFMI) (-5.06%), Expedia (EXPD) (-4.57%), and Amazon (AMZN) (-4.15%).

The Dow Jones Industrial Average ($DJI), on the other hand, gained ground once again on Friday. It climbed another 49.91 points, or 0.4%, and closed at 11,496.57. This marked a weekly gain of 3.6% with a year-to-date loss of 13.3%. 19 of the Dow's 30 index components closed in positive territory. The gains were led by Citigroup (C), which was up 7.7% after reporting a better-than-expected quarterly loss. For the week, C gained 19.5%. Bank of America (BAC) followed with a 3.74% gain on Friday. International Business Machines (IBM) defied the tech trend and closed higher by 2.66%.

The S&P 500 ($SPX) was relatively unchanged on Friday. It gained a fraction of a point to close at 1,260.68. This led to an overall gain on the week of 1.7%, which puts it down 14.1% for the year to date. Telecommunication services were up 1.7%, leading the advancers for the day, followed by energy (+1.1%) and financials (+0.9%). Consumer staples fell 0.8%, while consumer discretionary lost 0.4%. In the energy sector, Schlumberger Corp. (SLB) gained 3.9% following second quarter net income growth of 13%.

Dow Jones Industrial Average ($DJI)


After spiking on Tuesday with the downside exhaustion gap in the indices, the volume in the market dropped off quite a bit on Friday. It came in at 1.7 billion shares on the New York Stock Exchange. Advancers outpaced decliners by 8 to 7, while decliners beat out advancers by 5 to 4 on the Nasdaq. Volume on the Nasdaq came in at just over 1 billion shares traded.

In commodities, crude oil futures again slipped lower on Friday, although the selling did manage to exhaust itself in the short term. Crude for August delivery came in 41 cents less than the prior day to end at $128.88 on the New York Mercantile Exchange. For the week overall crude fell 11.3%. Wholesale gasoline was also down 11% for the week, although the average retail price of gas still tops $4 a gallon. Gold futures on the Nymex lost $12.70 an ounce to close at $958 an ounce, down more than 1%.

S&P 500 ($SPX)


From a technical standpoint the market was very sloppy on Friday. After several days of strong upside the indices were exhausted into daily resistance at the 20 day simple moving averages. The upside pace began to turn on Thursday when the gap higher was followed by a correction into the afternoon before the indices turned higher once again.

The S&P 500 and Dow Jones Ind. Ave. both gapped higher into Friday morning. The gaps were minor, however, and came on the heels of a rally into the closing bell. The gap itself took the S&Ps back into the previous day's highs, which served as price resistance. Meanwhile, the Nasdaq Composite experienced a stronger gap lower. This took that index into the zone of the prior day's lows into the open.

The market sold off immediately out of the opening bell. This downside continued steadily into 10:00 ET. Prior lows served as support, along with the 15 minute 20 sma in the S&Ps and Dow. The market rolled over at this support, leading into a Phoenix buy setup on the S&Ps and Dow and a 2B reversal on the Nasdaq. A Phoenix is a pattern whose named I coined about a decade ago to describe a reversal pattern which takes place immediately following a low. It can take place within more widely know patterns such as a cup-with-handle or inverse head and shoulders pattern, or following a "V" style pivot low such as on Friday. A 2B is a form of double bottom whereby the second low is slightly lower than the first and serves as a form of trap.

Nasdaq Composite ($COMPX)


The market followed through strongly when the morning reversal patterns triggered coming out of the 10:45 ET correction period. The Dow was the first to hit the morning highs within minutes of triggering. This allowed it to form another continuation pattern to break to new intraday highs while the S&Ps and Nasdaq working on making their own ways back to highs. This feat was accomplished as the 11:15 ET correction period rolled around.

The sharp upside pace made it difficult for the market to simply roll over. Instead, the Nasdaq managed to create a shallow Avalanche breakdown setup on a 5 minute time frame, where as the S&Ps and Dow slid lower with a great deal of chop and overlap from one back to the next within the pullback.

The indices began to slow at morning support at 12:30 ET, but the S&Ps and Dow added one more slightly lower low on a 5 minute time frame into 13:00. This is another major correction period intraday and, combined with the price support, it led to another correction off lows into the afternoon. The Nasdaq corrected through time, hugging the support throughout the remainder of the day with narrow and choppy trading for well over 3 hours. Things were not a great deal smoother in the rest of the market, but it did experience some slightly better price swings. The S&Ps and Dow both pulled back into 15:00 ET from about 14:15 ET, but then rallied back into the close. That final rally is what took the S&Ps back into positive territory, albeit only to a minor degree.

This coming week is going to be dominated by earnings data. The price bias heading into Monday favors a correction lower on a daily time frame this coming week which could easily return the market to the lows of this past week. The larger bias, however, favors such support holding and leading to another wave of upside which would break through the 20 day sma resistance. I posted several examples of how this price action can play out on my blog at http://www.tonihansen.com/blog.

So far the Russell 2000 and Nasdaq Composite are playing along the best with the templates displayed there utilizing previous examples of similar lead-up price action. The typical pullback tends to be an upside-down "V" or pivot off resistance, but the S&Ps and Dow have not quite done this and are basing instead. This may indicate that they are not yet ready to begin the corrective phase and may push this currently trend a little higher before they join in.

Economic Reports and Earnings Events This Week:

Economic Reports and Events This Week

Monday, July 21, 2008
10:00a.m. Jun Conference Board Leading Indicators: Previous: +0.1%.

Tuesday, July 22, 2008
7:45a.m. ICSC Chain Store Sales Index For Jul 19:
8:55a.m. Redbook Retail Sales Index For Jul 19:
10:00a.m. Jul Richmond Fed Manufacturing Index: Previous: -12.
5:00p.m. ABC/Wash Post Consumer Conf For Jul 20:

Wednesday, July 23, 2008
10:35/35a.m. Crude Inventories
2:00p.m. Fed's Beige Book

Thursday, July 24, 2008
8:30a.m. Initial Jobless Claims For Jul 19 Week:
10:00a.m. Jun Existing Home Sales: Previous: +2.0%.
10:00a.m. DJ-BTMU Business Barometer For Jul 5:

Friday, July 25, 2008
8:30a.m. Jun Durable Goods: Previous: Unch.
10:00a.m. Jun New Home Sales: Previous: -2.5%.
9:55a.m. End-Jul Reuters/U Mich Sentiment Index:


Key Earnings Announcements This Week:

Monday, July 21, 2008
Before: ALDN, ALB, AME, ASTE, BMI, BAC, CACH, CRNT, DSL (?), GBE (?), HAS, HIFN, RX, MRK, NVR (?), PETS, RPM, SGP, UB, WFT
After: AMLN, AAPL, ARTC (?), BSX, CNI, CX (?), EXP, EFX, RE, FNB, FWRD, HPC, HXL, LNCR (?), LOGI, MSPD, MHK, OMCL, OMI (?), PKG, PGI, QLGC, RGA, SNDK, SFG, STLD, TXN, VRTX (?), VLTR, WGOV, ZRAN (?)

Tuesday, July 22, 2008
Before: AKS, AXE, ARB, ALV, AVY, BHI, BIIB, BJS, CP, BEAT (?), CSL, CAT, CE, CNC, CHKP, CME, CPO, DRH, DPZ, DD, FITB, FCFS (?), FMER, FRX, GNTX, HAL, IBKC, ICLR, IEX, IMN, JEC, JEF, JBLU, JRN, KELYA (?), KEY, KVHI, LXK, ERIC (?), LMT, MICC, OMC, OXPS, PCAR, PMTC, PNR, PAS, PTEC, PCP, DGX, RJF (?), RYN, RF, ROK, RCL, SWK, STI, TLAB, UAUA, UNH, UPS, LCC, USG, WAB, WB, WAT, WU, WTNY, XTO
After: RNT (?), AMSG, ANAD, AXYS, BXP, BRCM, BTUI, CHRW, CAMD, CRI, CXCD (?), CEC, CERN, CSGS, DFG, DST, ETFC, EW, WIRE (?), EPIQ, FULT, HBHC (?), ILMN, INFN, ISRG, JLL (?), LRCX (?), LLTC (?), MANH, MEOH, MRH, NBR, NARA, NSC, ORLY, PTV, PNRA, PLT, PTP, PPDI, SEAB, SIAL, STM, SUPX, TRMK, USNA, VMW, VOCS (?), WM, WCN, XL (?), YHOO, ZHNE

Wednesday, July 23, 2008
Before: APD, ATI, ALGT, ABK (?), ABFS, ARW, T, ATMI, BA, CEVA, CNH, COP, CVG, CYBI (?), DOV, EMC, ETH, FCX (?), GD, GENZ, GSK, HSY, LII, LECO, MPX, MCD (?), MNC (?), NYT, NIHD, NWA, NYB, BTU, PEP, PFE, PM, PX, PDS, PRSP, RDWR, RIMG, RES, R, SEIC (?), SLGN, SLAB (?), SLM, SPNC (?), SY, TCB, SNAK, MDCO, TRV, UIS, WLP, WHR, WYE, ZBRA
During: BUD
After: AEA (?), AEIS, AFL, AEM, ARG, ACL, ALL, DOX, AGP, ARBA, ASIA (?), BIDU, BZP (?), BDN (?), CBT, CDNS, CRA, CTHR (?), CHIC, CMG, CRUS, CTXS, CNS (?), CVGI (?), CPTS, CNW, CLB, EXBD, DGII, EGP, EQIX, FFIV, FIC, FNF, FADV, FR, GDI (?), GGB (?), ROCK (?), GGG, GKK, GSIC, IKAN, BLUD (?), ICO, ISIL, IRBT, KRC, KEX, KFN (?), KNX (?), LHO, LSI, MTSN, MCK, MLNX, WFR, MMSI, MOH, MTSC, NTGR, NFX, NHWK (?), NE, NTRI (?), NUVO, NVEC, OMTR, OSIP, PNSN, PSSI, PHM, QCOM, QDEL, RMBS (?), RRC, RHI, RRR (?), RUSHA, RYL, SANM, SSW, SCSS, SWIR, STMP, SRDX (?), TISI (?), TER, TEX, TNB (?), TLGD, TMK (?), TSCO, TRMA, TQNT, TUP, VARI, VAR, VASC, WRB, WSTL

Thursday, July 24, 2008
Before: MMM, AMG (?), ALK, ABC, ABI, ACAT, (?), ARTG, ASH, ASPM, AGIX (?), AUO, AN, BLL, BKUNA (?), BDX, BDC, BHE (?), BBI, BMY, BC, BBW, BG (?), BNI, CCMP, CSH, CELG, CPS (?), CBR, CXG (?), CMCO, CCUR (?), CNMD, CNX (?), CBE, CVTI (?), CFR (?), DAI (?), DO, DHX, DRAD, DDE (?), DVD (?), DOW, DSPG, DEP, ELON (?), ECL, ELN, LLY, EMCI, ECA, ESV, EPD, SSP, EXC (?), FSNM, FLIR, F, FCL, BEN (?), GMT, GR, GHL (?), HHS (?), HTV (?), HUBG, HUB.B (?), ICTG (?), IKN, IPCC, IDC, IVC, IVZ, IVGN, IONA (?), ESI, JAKK (?), JNS, KEI (?), KMT, KMB, KCI, FSTR, LLL, LH, LEE, LM (?), LVLT, LTM, MBI (?), MNI, MWV, MHS, MEDE (?), MSTR (?), MKSI, MNRO, MWRK (?), NCC, NEM, NCX, OXY, ODFL, ORI, OHI (?), PTC (?), PCCC (?), PENN (?), PCZ, PFCB (?), PLUG (?), POT, PCH, PLD, QLTI (?), RSH (?), RTN, FRZ (?), REDF (?), RGC (?), ROH, RBCN (?), SCHL, POOL, SMI (?), SI (?), SII, SNA, LUV, SPAR, SPR (?), HOT, STFC, STE (?), STRA, SU, SNV, SYNT, TASR, TDY, TRA, TMO, TSCM (?), TRAD (?), UTEK, UNP, USAP, UST, VDSI, VIGN, WCC, WMAR, XRX, ZMH, ZOLL (?)
During: COHR (?), EGN (?), GRC, HTLD (?)
After: ABAX, ACTS (?), ACXM (?), AFFX, AYE (?), AMX (?), ANSV (?), ANGO, ARNA (?), AVID, BEZ, BBSI (?), BJRI (?), BMC, BKHM, BUCY, BLDR (?), BLG (?), COG, CLS, CENX, CPHD, CHRT, CAKE (?), CIM (?), CB, CYN, COBZ, COHU, COLM, CPWR (?), CCI, CW, CYBS, CYMI, DDUP, DECK (?), DDR, BOOM (?), EMN, ESIO, EPIC, EZPW, FALC, FII, FLEX, FTI, FDRY, GNW (?), GPN, HITT, IM, INSU, IBNK, ISSI (?), IBKR, IWOV, XXIA, JJSF, JNPR, KLAC (?), LDSH (?), LCRD (?), LSCC, LDIS, MTD (?), MCRL, MCHP (?), MSCC, MTX, MCRI, NTY (?), NETL, NTCT, NUVA, OLN, PCTI, PKI, PXLW (?), PLXS, PRAA, POWI, PWER, RMTR, RSG, RVBD, RCKY, ROP, SGMO (?), SBCF, CKH (?), SIMG, SIRF, SKX (?), SONO, PCU (?), SOV (?), STNR (?), SRCL (?), SYMM (?), TCO, TNL, TZOO, TRMB, TGI, TYL, VSEA, WOOF, CHIP (?), VISN, VLCM, WDC, WYNN, YRCW

Friday, July 25, 2008
Before: ACPW, ALEX, AXL, ACI, B, BEC, BLC, BDK, CRDN, SUR, CVH, FSS, FO, IDXX (?), LNCE, MBFI, MOG.A, NFLX, NS, NWN, SAIA, SRP, TROW, VVI
After: PAR (?), GU (?)

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.

Comparative Price Action - Potential for Upcoming Market Move

Hey gang... Here are some charts showing comparative price action for the daily Nasdaq Composite. This gives us an outlook for the next couple of weeks should the pace of the market action on the daily time frame repeat the intraday pace. It is something to keep an eye on! The downside on the daily NQ was obviously more substantial than the intraday action in the first example, so I would not expect as strong of a reversal off lows as seen in the bottom chart, but the overall template remains in play. The final chart here shows an example of a cont. on the downside with similar price development.



Another similar development:



Similar development which led to a break lower as opposed to seeing the support hold:



Close-up of the support failure:



Another variation without the pullback from this point lasting more than what would be a day or two:

Oil Drops, Stocks Rally with Financials Recovering

Good day! The market has been able to string together three solid days of upside since hitting lows on Tuesday morning. The session began on Thursday with a gap higher into the open. The index futures had been trading in a range throughout most of the overnight session, but broke sharply higher at 6:30 am ET following a buy pattern into 5:30 am ET. Even though they pulled back off highs around 7:30 ET, news on the housing front took the futures back to the premarket highs.

At 8:30 am ET the Commerce Department reported that overall construction starts rose 9.1% in June, boosted by a change in building permit rules for multifamily units in New York City. New construction of single-family homes, however, declined 5.3% to a 17-year low. Excluding the Northeast, which was the only area affected by the new construction code, housing starts as a whole dropped 4%.

In a separate report, the government announced that jobless benefits climbed 18,000 last week to 366,000. The four-week average fell 4,500 to 376,500. Continuing claims fell to 3.12 million last week, down 81,000. The four-week average rose 16,500 to 3.14 million, which is the highest level since February 2004. For the same period last year continuing claims came in at 2.56 million.

The early morning data was unexpected and the market was still able to rally on the news. A cup-with-handle pattern formed along the highs and led to a final push on the upside into the opening bell. This extended the rally from Wednesday's trend day and left the market exhausted in the short term after following through into the 9:45 ET correction period.

After the morning reversal, additional data from the economic front did not help the bulls and aided the market's pullback from highs. Manufacturing in the Philadelphia region weakened once again for the eight straight month according to the Federal Reserve Bank of Philadelphia. Economists had anticipated a slight improvement this month. The Philly Fed index rose from negative 17.1 in June to negative 16.3. Readings under zero imply that the firms participating in the survey reported declining business levels for the month. Three-fourths of them stated increased costs, while only a third raised their own prices to compensate for the difference.

Dow Jones Industrial Average ($DJI)


The Nasdaq Composite ($COMPX) had the most severe drop off morning highs. It had returned to its 5 minute 20 period simple moving average and gap closure zone by 10:00 ET. The data pushed it under that support, while the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) were able to hold the 5 minute 20 sma following 10:00. A level of congestion along the intraday lows developed into 10:30 ET. This created an Avalanche short setup on the 5 minute time frame which led to a second wave of downside into 11:15 ET.

When the market is in a strong uptrend, a two-wave pullback offers the perfect opportunity to position oneself in the direction of the trend. The 15 minute 20 period simple moving average on the S&Ps and Dow corresponded to an equal move and the approaching 11:15 ET correction period to assist with the continuation pattern. Even the weaker Nasdaq had support at this time, pulling back into Tuesday's highs for a strong price support level.

The market was able to pop quickly off these zones and continued to rally strongly for the next 30 minutes. This meant that the upside move was about twice as strong as the prior decline. The significance of the change of pace was that another two-wave correction on a smaller time frame began to develop. The overall pace of the pullback on this two-wave correction was more gradual than the first one, resulting in an inverse head and shoulders pattern on a 5 minute time frame. The buy setup triggered just before the 13:00 ET correction period, but waited until after it to gain momentum. The 15 minute 20 sma was again support on the S&Ps and Dow and the setup triggered coming directly off that support level.

S&P 500 ($SPX)


The strongest move of the session was the direct result of this 5 minute buy pattern. The indices easily hit equal move resistance. They did not stop there, however, and instead a small continuation pattern formed into 13:30 ET to push the market to new intraday highs. The pace began to shift at that point. The 20 day sma finally hit in the Dow and Nasdaq. This strong daily resistance level helped end the intraday rally. The Nasdaq also had resistance at that point at the morning's highs.

An initial reversal pattern triggered coming off the highs at 14:30 ET. A congestion formed in the Nasdaq along the 5 minute 20 sma. This created an Avalanche setup again on that time frame. Instead of the inverse "V" followed by the Avalanche such as the one from the morning, in this case it was an inverse cup-with-handle. This took the Nasdaq lower into 15:30 ET, although the market recovered slightly into the closing bell.

Nasdaq Composite ($COMPX)


Despite the turn around into the close, the market still posted strong gains on Thursday. The Dow Jones Industrial Average ($DJI) rose 207.38 points, or 1.9%, to close at 11,446.66. Out of the Dow's 30 index components, 24 posted gains. Financials led the rally with a 16.9% rally in Bank of America (BAC) fronting the Dow's gains. JPMorgan Chase (JPM) came in a close second with a 13.52% gain. General Motors (GM) was also one of the top leaders and posted an 11.93% gain. Citigroup (C) came in fourth with a 9.11% gain, while AIG (AIG) followed with a 7.04% gain. On the losing side, Coca-Cola (KO) fell 3.82% following earnings, while Alcoa (AA) dropped 2.99%.

The S&P 500 ($SPX) rose 14.96 points, or 1.2%, on Thursday. It closed at 1,261.12. Financials rose 6.9%, followed once again by consumer discretionary, which were up 3.6%. Energy was again on the downside, falling 3% on the day. Top S&P stocks included Huntington Bancshares Inc. (HBAC) (+40.25%), Mgic Invt Corp. (MTG) (+39.02%), Wachovia Corp. (WB) (+27.51%), Regions Financial (RF) (+22.22%), Barr Pharmaceuticals (BRL) (+22.11%), Freddie Mae (FRE) (+21.96%), and Fannie Mac (FNM) (+18.16%). eBay (EBAY) (-13.88%), Nucor (NUE) (-11.08%), and Safeway Inc. (SWY) (-10.76%) were the major losers.

The Nasdaq Composite ($COMPX) rose 27.45 points, or 1.2%, to closed at 2,312.3 on Thursday. A number of large tech names were slated to report earnings following the closing bell, which led to some of the greater weakness in the afternoon as profit-taking took place ahead of the data. Microsoft (MSFT) and Google (GOOG) both released earnings after the bell. Those that didn't protect ahead of the close are probably wishing they did! Earnings results from both companies were disappointing and came in under expectations. Merrill Lynch (MER) also reported after the close and also failed to meet expectations. Shares of all three companies were off more than 6% in after-hours trade. The index futures also fell on the news. The Nasdaq futures even broke through the morning lows.


A lot of the activity in the morning is going to be driven by the reactions to Thursday's afterhours earnings releases. Citigroup (C), Honeywell (HON) and Schlumberger (SLB) also report ahead of the open and will be in play for the day. The market is slated to gap substantially lower into the open. After two-three days of upside it is typical for the market to form a larger correction to that trend, so the gap is going to assist with that correction. As long as the indices can break the 15 minute high soon after it occurs, however, that gap will have an easy shot at closing. Once an extreme gap begins to close, then it will usually complete that closure before the morning is over.

On a daily time frame, given the current price development, what I am expecting from the indices is a pullback for several days, possibly even back into the zone from the week's lows. After that point I am looking at another bounce off support. A second bounce has the potential to last for about 8-10 days back into the mid-June price zone.

Trade and Commentary Wrapup 20080717

The following is a wrapup of all my market calls and trade posts for July 17, 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

13:16 Toni: bit of futs resistance here

13:08 Toni: ATHR base at highs
13:18 Toni: athr having trouble with that 22.30 sheesh
13:46 Toni: ATHR scratch
13:46 Toni: +.10ish
13:46 Toni: should have gone
13:50 * Toni trouts ATHR



13:38 Toni: futures resistance here at prior highs zone
13:43 Toni: NQ exhaustion move

14:14 Toni: market is so extended here.. hard to find much for setups since larger bias is bullish on a daily time frame but short term its prett extended into resistance
14:14 Toni: 15 min charts are favoring a correction
14:15 Toni: but can easily just be chop
14:15 charlie: but is that u or the 8 ball saying that?
14:15 Toni: lol
14:16 Toni: ok "will be fall apart into the close?"
14:16 Toni: uh oh... what happens if it doesnt answer you
14:16 Chris: I'm getting "Concentrate and ask again"....lol
14:16 charlie: lol
14:16 Toni: "outlook good"
14:16 Toni: yikes
14:16 Toni: i asked again
14:16 Toni: "signs point to yes"
14:36 aOn: any news out or just exhaustion?
14:37 Toni: market is just exhaustion
14:37 aOn: i mean mkt wise
14:37 Toni: just rounding off at highs
14:37 Toni: plus my 8-ball says its going down :)

15:27 Toni: NQ avalanche potential 5 min
15:38 Toni: avalanche target
15:38 Chris: nice call on da avalanche T



16:30 Toni: futs gap down... big surprise :)
16:30 Toni: NQ under day's lows
16:39 Toni: this futs opened at 5 min equal move support on the ES
16:39 Toni: but pace is still bearish

Oil Continues to Slide While Banks Bounce Back

Good day! Bank and brokerage stocks climbed higher on Wednesday after Wells Fargo (WFC) reported a 10% increase in its quarterly dividends to accompany its quarterly earnings report. WFC climbed 32.8% on the day. This kicked off a widespread rally in the market that led to the largest one-day point and percentage gains in the Dow Jones Industrial Average ($DJI) and S&P 500 ($SPX) since April 1st. It was also the largest one-day gain for the Nasdaq Composite ($COMPX) since March 18th.

The Dow Jones Industrial Average ($DJI) rose 276.74 points, or 2.5% on Wednesday. It closed at 11,239.28 after a steady trend day. 26 of the Dow's 30 components closed in positive territory. Bank of America (BAC) led the Dow, following the lead from WFC, and closed higher by 22.1%. The banking rebound was quite extreme. The KBW Bank Index ($BKX) rose 17% for its largest one-day percentage gain ever. Another Dow component, General Motors (GM) also had another strong session and closed higher by 16.4%. Oil-related stocks did not fair as well with crude continuing to slip off the all-time highs made just a couple of days ago. Chevron Corp. (CVX) was the greatest Dow decliner, down 3.4%. The Amex Oil Index ($XOI.X) fell 2.1%, while the Philadelphia Oil Service Sector Index ($OSX.X) dropped 1.1%.

Dow Jones Industrial Average ($DJI)


The largest decline intraday in oil-related stocks came at 10:30 am ET. The Energy Department reported that crude oil inventory increased by 3 million barrels last week. In contrast, a 3 million barrel decline had been anticipated. The reaction was decisively negative as crude and oil-related stocks took a rapid plunge on the heels of the news. Crude oil for August delivery fell $6.74 to an intraday low of $132, which is the lowest level in over a month. It managed to recover somewhat ahead of the close, however, and ended the session lower by $4.14, or 3%, at $134.60 a barrel.

The S&P 500 ($SPX) climbed 30.45 points, or 2.5%, on Wednesday and closed at 1,245.36. Financials as a whole climbed 11.1%. Consumer discretionaries also showed a lot of strength, up 5.2%. Some of the major companies in the consumer discretionaries are WMT, HD, DIS, CMCSA, NKE. Out of the S&P's 10 industry groups, only utilities and energy lost ground. Both fell 1.5%.

The Nasdaq Composite ($COMPX), led by the tech sector, scored the largest percentage gains out of the three major indices. It gained 69.14 points, or 3.1%, on Wednesday to close at 2,284.85. Sun Microsystems Inc. (JAVA) climbed 4.1% after posting better-than-expected earnings late Tuesday. Intel Corp. (INTC) also gained ground, albeit to a lesser degree, on Wednesday following earnings. It rose 0.9%. eBay Inc. (EBAY) added 4.5% ahead of earnings.

The two big names making the news on a daily basis again had substantial swings on Wednesday. Fannie Mae (FNM) closed higher by 30.8%, while Freddie Mac (FRE) gained 29.9%. Fed Chairman Ben Bernanke helped lift the shares as a result of testimony before a congressional committee regarding the government's plan to help ease their pain.

In other news, airlines closed strongly higher. While under pressure due to rising fuel costs, both AMR Corp. (AMR) and Delta Airlines (DAL) beat estimates although they still reported second-quarter losses. AMR rose 32%, while DAL climbed 26.6% on the day.

S&P 500 ($SPX)


On the economic front, the Labor Department reported that the consumer prices index rose an unexpected 1.1% in June. The core CPI, which excludes food and energy, rose 0.3%. This was the greatest upswing since January. Factory outputs, meanwhile, increased by 0.5% in June after declining 0.7% in April and 0.2% in May. The annual rate of industrial production is down 3.1% following this most recent quarter.

Nasdaq Composite ($COMPX)


The market was relatively unchanged by the opening bell on Wednesday despite moving higher the previous evening. The index futures had been selling off in premarket trade. This downside continued into the open for the initial 15 minutes of the day. The first correction period held well, however, and the market popped quickly at 9:45 ET. This marked a change of pace on the smaller time frames which was confirmed when the indices pulled back slowly into the 10:15 ET correction period.

At 10:30 ET the market jumped

Trade Wrapup 20080716

The following is a wrapup of all my market calls and trade posts for July 16, 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

Just one trade today. Was experiencing computer problems.

12:07 Toni UBB base at highs
12:45 Toni UBB coming into first resistance $125 zone
12:47 AoN nice

Market Turns Positive on Bush's Comments, Overcoming Early Losses

Good day! The market took a plunge Tuesday morning. The selloff began in afterhours trade on Monday and continued into Tuesday's opening bell. The extreme gap in the market was followed by congestion for the first 15 minutes of the day, but the support quickly gave way with a sharp continuation lower into 10:00 ET. President Bush spoke for some time on the state of the economy. His words were not taken in a positive light until he began to focus upon the exploration and development of national oil reserves. On that note, oil futures began to tank while the overall market turned quickly higher. At one point crude oil fell under $138 a barrel on the largest dollar decline in 17 years and the largest percentage decline since April 2005. It closed down 4.4% at $138.74 a barrel, but is still up 45% this year.

In related news, U.S. gasoline demand fell 5.2% last week. This marks the 12th straight demand has fallen. With the retail price of gasoline at $4.109 a gallon, this is no surprise. I am hearing more commercials these days on public transportation than ever before. Interestingly, this is not always the best option. My local television station has been running a series on alternative means of transportation. My conclusion is that public transportation in many cities still has a long way to go in order to be an affordable, as well as timely, option. Sure, it may only cost a dollar each way, but if it takes you four hours to get to and from your destination when driving would take 30 minutes, is it really worth it? I think it would be safe to assume that for many it would definitely not unless they can take their work with them to help you pass the time. Hmm.... makes me appreciate the fact that my office is a mere hop, skip, and a jump across my courtyard... Even if the housing disaster means I may have to live here until I am as old as most of my neighbors... *grin*

Dow Jones Industrial Average ($DJI)


After taking off and gaining momentum around 10:45 ET, the Dow Jones Industrial Average ($DJI) and Nasdaq Composite ($COMPX) quickly closed their morning gaps. This was accomplished shortly after 11:00 ET. The indices then proceeded to correct somewhat, pulling lower into their 5 minute 20 period simple moving averages. Although the correction was strong, the overall momentum on the 15 minute time frame had turned bullish on very strong volume. The indices were able to roll over at the support and continue to step higher on a 5 minute time frame.

After three waves of buying the market hit resistance once again. The S&P 500 ($SPX) had now closed its own gap and was testing the 5 minute 200 period sma. All three indices were also at price resistance from the previous afternoon. They broke the trend channel from 11:45-13:15 ET, but prior 5 minute lows held at 13:30. This created a higher probability that the indices would form a two-wave correction for continued upside later in the afternoon. This took place shortly after 14:00 ET, but the market was unable to gain much momentum with the move and resistance held at the 15:00 ET correction period.

S&P 500 ($SPX)


When the indices turned at 15:00, they had now established three waves of upside on a 15 minute time frame. This exhausted the larger trend and allowed it to break lower into the close. The Dow Jones Industrial Average ($DJI) had gone from down 227 points in the morning to positive territory in the afternoon and back down to close lower by nearly 93 points at 10,962.54. This was the first close under 11k in 2 years. American International Group (AIG) lost another 8.5%, while Bank of America (BAC) also broke the 8% level, down 8.1% at the close. Chevron Corp. (CVX) fell 3.6%, while Exxon Mobil Corp. (XOM) lost 3.8%. General Motors (GM) rose 4.9% after announcing cost cutting measures included salary cuts.

Nasdaq Composite ($COMPX)


The S&P 500 ($SPX) fell 13.39 points on Tuesday to close at 1,214.91. The energy sector lost 3.9%, followed by the industrials which fell 1.5%. Six of the index's 10 sectors closed in negative territory. The gainers were led by health care, which rose 0.9%. The Nasdaq Composite ($COMPX) managed to close higher by 2.84 points, at 2,215.71. Intel's (INTC) afterhours earnings expectations helped hold up the techs. INTC gained 1.2% on the day.

Some additional news on Tuesday was also cited as contributing to the rally off Tuesday's lows. The Securities and Exchange Commission said that it would try to limit naked shorting in the major financials, such as Fannie Mae (FNM), Freddie Mac (FRE), Merrill Lynch (MER), Morgan Stanley (MS), and Goldman Sachs (GS). All closed lower on the day with FNM down 27.1%, and FRE down 26%.


Even though the market displayed another strong intraday showing on the upside on Tuesday, it has yet to offer any confirmation. Volume was high on Tuesday, but we still need to see some change of pace on a 60 minute time frame to support any larger correction off lows.

Trade and Commentary Wrapup 20080715

The following is a wrapup of all my market calls and trade posts for July 15, 2008

Instructions for Use:

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

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

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


WRAPUP

10:56 Toni: futs resistance 5 min 20 sma
11:05 Toni: market is going nuts
11:06 Toni: happy i guess that he is really pushing to open up oil reserves here
11:06 AoN: oil down 9
11:07 Toni: exhaustion move here on oil
11:08 Toni: Nasdaq gap closed
11:08 Paul_Strides: Oil is getting smashed
11:08 Toni: exhaustion here in market too
11:08 Toni: should see pace shift
11:11 Toni: futs held perfectly
11:32 Toni: futs initial support
11:58 Toni: futs back to resistance at highs
11:59 Toni: held initial support level and rounded off at it
11:59 Toni: was 5 min 20 sma
12:07 Toni: 12:07:23 Market Alert: 2T 5min futures
12:22 Toni: E