Toni Hansen's Online Trading Blog: September 2008

Tuesday, September 30, 2008

Market Exhaustion Leads to Partial Recovery

Market Exhaustion Leads to Partial Recovery

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

Good day! The market experienced a rather large partial recovery on Tuesday following record-making downside on Monday when the government's attempted economic rescue package failed to pass. Although many are reporting that the cause of Tuesday's rally is based upon renewed hopes that at some point this week a rescue package will indeed pass, a quick look at the charts reveals the technical reasons behind the move. Over the weekend I had shown you how the indices were forming a setup for a breakdown into the beginning of this week from a technical point of view. The news on Monday accelerated the breakdown, but the indices had already triggered it in both the Nasdaq and S&Ps before the votes had even been cast. Perhaps a passage of the bill would have turned things around, perhaps not. We shall never know. Regardless, the market followed through on the breakdown in a nearly textbook technical fashion.

A quick glance at the daily charts of the indices reveal that the breakdown on Monday brought the indices into support in the form of an equal move. This is a concept that I have been teaching for many years, but still is one that a lot of newcomers have yet to grasp. When any security forms a continuation pattern, that pattern has a target based upon a move equal to the trend move leading into the base or more gradual counter-trend that forms the setup. By taking that prior move and applying it to the continuation move, you can project a reasonable target.

Targets based upon "equal moves", however, are subject to another concept that you will not find spoken of very often, yet is absolutely indispensable: pace. Although quite an obvious concept in hindsight, just as the equal move concept is, it is also not one that has garnered much wordplay. Since the breakdown on Monday was stronger than the move lower in the previous week, it opened the door for a somewhat larger than equal move in the indices for this week. As a result, heading into Tuesday morning I mentioned that we had some wiggle room even though we were at this support zone. Notice in the chart below of the QQQQ that this index indeed pushed past an exact equal move. It was assisted by news of downgrades in Apple (APPL) that shook up the rest of the tech sector.

Nasdaq Composite ($COMPX)

Although the markets continued lower immediately following the close on Monday, things began to turn around afterhours. The index futures climbed steadily into the 4:00 am ET correction period as markets overseas turned higher. This rally took the S&P 500 and Dow Jones Ind. Ave. futures smack into their 38% Fibonacci retracement levels based upon the move lower off Sunday's highs into Monday's lows. They held this Fibonacci level perfectly at the same time as the correction period hit, pushing the indices into a correction off that level and that time zone. This correction continued throughout the remainder of premarket trade and into the opening bell on Tuesday. To learn more about utilizing fibonacci levels in your trading, check out my articles on Trading Markets:

(http://www.tradingmarkets.com/.site/stocks/how_to/articles/-75282.cfm)

Both the S&Ps and Dow slid lower on their premarket correction into the opening bell. The Nasdaq futures, however, began to stabilize around 7:00 am ET with this premarket correction period. While the S&Ps and Dow reacted to it briefly, they resumed their selloff into 8:00 am. The Nasdaq, on the other hand, had bounced out of the correction period and then formed a base. This created a nice Phoenix-style buy setup with the base forming from approximately 7:40 am ET into 9:15 am ET. It triggered a buy ahead of the open, but confirmed the setup with increased momentum right out of the opening bell. The S&Ps and Dow continued to lag, coming around finally at about 9:55 ET.

Dow Jones Industrial Average ($DJI)

The markets formed a solid trend day on Tuesday, but action was tricky. The price development from the open into 12:00 ET would typically have triggered a break lower into the afternoon if that same price pattern formed on an extended uptrend of two-four previous waves of buying, or had taken place on the first or second correction of a new downtrend. Given the downside exhaustion, however, it never had a chance. It would have had to have held highs into 13:00 ET, but instead the market congested and the 5 minute 20 period simple moving average zone held. The uptrend confirmed shortly thereafter. The failure to trigger in the classic short setup meant that the market was now positioned for an uptrend the remainder of the session.

Now, as those of you who have known me for a long time can attest to, I really dislike trend days such as the one which took place on Tuesday. When the markets hold the 5 minute 20 sma zone throughout the entire session, it means that moves on the smaller time frames are very scalpish and will often have a great deal of overlap. This creates a lot of false triggers, brief flushes, and fewer strong moves of follow-through. Although it's wonderful if you are trading setups on a 15 minute time frame that you may have caught early on in the session, if you like to trade setups on 5-15 minute charts intraday you will find it much more difficult. Notice how, even though the market did trend higher into the close, it stepped higher with a lot of back and forth. The last "clean" setup was the one I posted intraday as a bull flag triggering just after 14:00 ET. I greatly prefer action such as Monday's. Although quite rapid, the moves were cleaner.

Price action going into Wednesday remains bullish, but expect the 5 minute 20 sma to finally break early on in the session. Interestingly, the door is still wide open from a technical standpoint for yet another move lower on a 60 minute time frame within about a week from now. I am sure this is not what many investors would like to hear! In terms of recovery potential, however, it would actually be nice to see a move to a slightly lower low again on a 60 minute S&P and Dow chart. This would allow the pace to shift better on this time frame to allow a more rapid recovery off the lows. Without that additional flush lower, the markets can more easily creep higher and then continue lower on a weekly time frame. This would be even worse news for investors!

S&P 500 ($SPX)

Now, for the stats: The Dow Jones Industrial Average ($DJI) closed higher on Tuesday by 485.21 points, or 4.7%, at 10,850.66. Of the Dow's 30 components, 29 closed higher. This was the largest single-day gain for the index in 6 years. Bank of America (BAC) rallied 15.7%, while Citibank (C) came in at a close second with a gain of 15.6%. J.P. Morgan Chase (JPM) climbed 13.9%. The S&P 500 ($SPX) gained 58.32 points, or 5.3%, and closed at 1,164.74. Financials led the gainers, but all 10 of the index's industry groups closed in positive territory. The Nasdaq Composite ($COMPX) closed higher by 98.6 points, or 5.0%, at 2,082.33.

On the economic front, outside of the hype for the proposed rescue package, a number of reports came out on Tuesday. The Case-Shiller home price index, released by Standard & Poor's, paced the decline in home prices greater than seen the previous month. Overall values are shown to be 16.3% lower over the course of this past year. They even sent me a nice notice about my property taxes. Due to the latest assessed value, they MIGHT consider lowering my taxes for next year! (Of course, they also said that they MIGHT raise them again, but hey, they had never even hinted at lowering them before!) In other news, the Chicago PMI suggested that business activity in the Chicago region expanded "nicely" in September, while the Conference Board reported that U.S. consumer confidence rose in September for the third consecutive month. The overall level of confidence, however, remains relatively low.

Monday, September 29, 2008

Dow Sets Records with Losses Topping 777 Points

Dow Sets Records with Losses Topping 777 Points

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

The market was on pins and needles throughout Monday's session. The morning began with an extreme gap on the downside. Over the weekend I showed you the strategy to employ in the case of such gaps and it worked quite well. Initially I had been leaning more towards a large gap lower and then upside in the afternoon before the two-wave pattern short we have been following over the past several days could offer a trigger. The market had other things in mind however. The Sunday and early Monday morning premarket selling continued right into the opening bell when the indices broke sharply to the downside following a long premarket base at lows that had been forming since 4:00 am ET.

Due to the gap, as soon as the 15 minute lows broke, it triggered the gap pattern I laid out yesterday for a short to continue the move in the direction of the gap as opposed to an attempt to close the gap. This break also meant the trigger on two-wave short on both the S&P 500 and Nasdaq Composite on a 60-minute time frame. The Dow Jones Industrial Average had held up more favorably and its morning downside still placed it within the channel of the two-wave formation. It would not be until the government's rescue plan began to unravel later in the session that the Dow was able to follow the lead of the two weaker indices.

Nasdaq Composite ($COMPX)

Although the market was able to sell off sharply out of the open, the move exhausted itself relatively early on as well since an average day's range was established within the first 30 minutes of the trade. Technology shares bore the brunt of the morning's decline. Morgan Stanley cut Apple (AAPL) from "overweight" to "equal weight" in anticipation of the effects of slowing demand. AAPL closed lower by 17.9% with its largest percentage decline since July 2001. Meanwhile, Qualcomm (QCOM) fell 13% and Google (GOOG) lost 11.6%, breaking the $400/share level.

Dow Jones Industrial Average ($DJI)

When the 10:15 ET correction period hit, the market began to pull higher, but the move did not get far. The indices fell into a trading range as market participants awaited the results of a vote on the proposed $700 billion deal aimed at stabilizing the financial sector and the economy as a whole. Well, much to the shock of Wall Street, the House of Representatives voted against the deal. 205 voted in favor of the "bail-out" package, while 228 voted against. Among Democrats 140 voted in favor, while 95 were against it. Among Republicans, 65 voted in favor, while 133 voted against.

The blow was felt immediately by the market as prices plunged. Despite the shock, the market traded incredibly well from a technical standpoint. Price action for the remainder of the day was nearly textbook. The indices recovered from their immediate collapse, but the congestion level that had been in place before the news served as a strong resistance level. Many had hoped that a new vote would be forthcoming, however, as the afternoon wore on it became more apparent that this would not happen on Monday at least.

The market consolidated in a narrowing range into the middle of the afternoon. the 5 minute 20 sma served as resistance and the channel break lower into the final hour of trade. Prices slid back into lows before popping into the final 30 minutes of the day to extend the congestion into the close, leaving it favoring another break lower in afterhours trade.

S&P 500 ($SPX)

By the time the dust had settled on Monday, the Dow Jones Industrial Average ($DJI) closed lower on the day by 777.68 points, or 7%, at 10,365.45. Every single one of Dow's 30 components was in the red. Both Bank of America (BAC) and American Express (AXP) fell 17.6%. The S&P 500 ($SPX) fell 106.85 points, or 8.8%, and closed at 1,106.42. The Nasdaq Composite ($COMPX) lost 199.61 points, or 9.1%, and ended the session at 1,983.73.

Although volatility will remain high on Tuesday as the markets continue to ponder over a new plan from Congress, we should not experience as strong of a price decline. There is still a bit of room to move on the downside before a daily equal move hits, but it is not much. I would again like to urge extreme caution in Tuesday's trade. It is great to see "orderly conduct" by the market even in the midst of a loss of nearly 800 points in a single day, but don't take it for granted!

Saturday, September 27, 2008

Tech Stocks Pull Market Lower Following RIMM Earnings, but Market Recovers Throughout Remainder of the Day

Tech Stocks Pull Market Lower Following RIMM Earnings, but Market Recovers Throughout Remainder of the Day

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

The market opened sharply lower on Friday morning following in line earnings from Research in Motion (RIMM), but a lower profit outlook. About a week ago I described how to approach such extreme gaps in the indices themselves. We have seen quite a few examples of this activity in recent weeks and Friday's open was very similar.

The Strategy: The first thing to do with any larger-than-average gap in the indices is to have patience. Sit on the sidelines for the first 15 minutes of the day. Then mark the highs and lows of those first 15 minutes. The direction in which those prices break has an incredibly high probability of serving as the primary trend bias throughout the remainder of the morning. More often than not this trend also will continue into the afternoon. There is a higher tendency for extreme gaps in the indices to favor closure in at least one of the three main indices than there is for the move to continue in the direction of the gap. That tends to occur more often if there is a larger setup in place that also favors a move in the same direction, such as the breakdown setup on September 15th.

On Friday morning the indices were already set to open into the support zone I talked about in yesterday's column, which was the trading range from Wednesday. In other words, the larger price pattern favored a gap closure as opposed to a continuation. Still, it is typically best to wait the 15 minutes in order to increase your odds of making a successful decision. Once the initial 15 minutes had passed on Friday morning, it was not long before the highs were taken out.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) experienced the greatest strength on the break higher. It had the least distance to travel before its own gap would close, while the Nasdaq was weighed down by technology thanks to RIMM. The Dow was perhaps also boosted by assurance early in the day by President Bush that the bailout plan will go through, with a deal most likely in place before Monday's opening bell.

On the one hand, one might wonder why the impact of overnight news regarding Washington Mutual (WM) was not more widely felt. Regulators seized the bank and $1.9 billion in assets are being sold to J.P. Morgan Chase (JPM). On the other, the news of the failure of WM was not exactly unexpected and had been speculated upon for weeks. Even though JPM also gapped lower into the open, It closed its gap very quickly and proceeded to trend higher throughout the session, posting gains of 11% by the closing bell. In order to boost its capital position, JPM is selling at least $8 billion in stock.

The Dow followed in the footsteps of JPM and closed its own gap zone by the time the 11:00 ET correction period hit. The index had experienced two waves of upside out of the open and the second one that completed the gap closure was more gradual than the first. This allowed the market to pull back and correct for awhile into the early afternoon. Although the immediate drop off highs was rapid for a few minutes, the pace did not sustain itself and instead the market rolled higher off mid-day lows going into the afternoon.

Dow Jones Industrial Average ($DJI)

The early afternoon continuation on the upside was stronger in the S&Ps and Nasdaq than earlier in the session. They tried to play "catch-up" with the Dow and did a rather decent job at it. The rally continued for approximately the same amount of time as the earlier upside in the S&Ps and Dow, hitting resistance shortly before 14:00 ET at previous highs in the Dow on a 15 minute time frame and the prior afternoon lows in the S&P 500. The gap from Thursday morning in the Nasdaq also closed at this time and the Nasdaq hit moving average resistance in the form of a 5 minute 200 sma. All of these factors came together to pull the market lower again into the second half of the afternoon.

The afternoon correction lower off mid-day highs lasted for about as long as the late-morning correction. This is no coincidence. The symmetry of these corrections can be used to help time reversals and continuation patterns. Once a comparable amount of time had passed, the market was also hitting nice support from the breakdown level of 12:30 ET from where the early afternoon move higher triggered. This came after three waves of downside on a 5 minute time frame in the S&Ps and Dow and equal move support on a 5 minute chart of the Nasdaq, which had broken lower into 15:00 ET on a 2-wave continuation short pattern.

Following this second pullback off highs on a 15 minute time frame, the indices were again able to continue the rally. The momentum increased further into the final 45 minutes of trade and the indices easily established another equal move on the 15 minute time frame, but in a shorter period of time than it took for the early afternoon rally to form in the S&Ps and Dow. The S&Ps broke the previous day's highs, but the weaker Nasdaq could not quite close the morning's gap and held resistance into the close at the equal move level and 15 minute 200 simple moving average resistance. These levels corresponded to Wednesday's highs as well.

S&P 500 ($SPX)

The session ended on Friday with the three major indices all closing within the zone of the day's highs. The Dow Jones Industrial Average ($DJI) closed higher on the day by 121.07 points, or 1.1%, at 11,143.13. Of the Dow's 30 component, 19 closed higher. Following JPM's lead, Bank of America (BAC) gained 6.8%, while American Express Co. (AXP) came out ahead by 4.4%. The S&P 500 ($SPX) rose a mere 4.09 points, or 0.3%, and closed at 1,213.27 on Friday. Consumer staples and health care were top performing sectors, while energy, materials, and utilities moved to the downside. The Nasdaq Composite ($COMPX) closed virtually unchanged, down 3.23 points, or 0.1%, and ended the session at 2,183.34. On the week as a whole, the Dow fell 2%, while the S&P 500 dropped 3.2%, and the Nasdaq Composite lost 4%.

My outlook heading into the new week of trade is essentially the same as for Friday on the 60 minute time frame. Going into Friday morning I was looking at a move on the upside to serve as a second wave of buying on that time frame. This opens the door for a two-wave continuation short setup on this level. We do still have to see how it handles the second wave higher from Friday, however, before anything is more certain. The momentum is strong on the upside on a 15 minute time frame, but this is not necessarily enough to allow us to dismiss the pattern. It would need to pull back sharply, however, to give us confirmation. A slower correction up off the lower end of the channel made from the 24th to 26th would then be ideal to allow for a break to new daily lows or at least a retest of the prior low. This market is going to remain more tricky, because larger weekly and monthly time frames are at a strong support zone. Since these are such large time frames, there is quite a bit of wiggle room for the market to move and still be considered as holding the support. The ongoing credit and banking crisis is also going to keep things stirred up for the time being.

Economic Reports and Earnings Events This Coming Week

Economic Reports and Events This Week

Monday, September 29, 2008
8:30a.m. Aug Personal Income: Previous: -0.7%.
8:30a.m. Aug Personal Spending: Previous: +0.2%.
10:30a.m. Sep Dallas Fed Mfg Production Index: Previous: 0.0.

Tuesday, September 30, 2008
7:45a.m. ICSC Chain Store Sales Index For Sep 27: Previous: -1.6%.
8:55a.m. Redbook Retail Sales Index For Sep 27: Previous: -1.1%.
9:00a.m. Jul S&P/Case Shiller Home Price Index: Previous: -17%.
9:45p.m. Sep Chicago PMI: Previous: 57.9.
10:00a.m. Sep Conference Board Consumer Confidence: Previous: 52.8.
5:00p.m. ABC/Wash Post Consumer Conf For Sep 28: Previous: -41.

Wednesday, October 1, 2008
12:00a.m. Auto and Truck Sales
8:15a.m. ADP Employment: Previous: -33K.
10:00a.m. Construction Spending For Aug: Previous: -0.6%.
10:00a.m. ISM Index For Sep: Previous: 49.9.
10:35a.m. Crude Inventories For Sep 27

Thursday, October 2, 2008
8:30a.m. Initial Claims For Sep 27
10:00a.m. Factory Orders: Previous: 1.3%.

Friday, October 3, 2008
8:30a.m. Average Workweek For Sep
8:30a.m. Hourly Earnings For Sep
8:30a.m. Nonfarm Payrolls For Sep
8:30a.m. Unemployment Rate For Sep
10:00a.m. ISM Services For Sep: Previous: 50.6.

Key Earnings Announcements This Week:

Monday, September 29, 2008
Before: CC, HMX (?), OHB (?), SCS, WAG
After: -

Tuesday, September 30, 2008
Before: PBG
After: LNDC, XRTX

Wednesday, October 1, 2008
Before: ATU, WWW
After: BLUD, MU, MOS, SMSC

Thursday, October 2, 2008
Before: STZ, MAR, MTRX, NSSC (?)
After: ANGO, ARTC (?), DMAN, GPN, LWSN, RECN, ZZ (?), TISI

Friday, October 3, 2008
Before: CI (?), CREL, FDO

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.

Friday, September 26, 2008

CurrencyShares

Great tool for positioning in currency markets for folks that don't have a forex account or are looking for an alternative. The CurrencyShares as as follows:

Australian Dollar (FXA)
British Pound Sterling (FXB)
Canadian Dollar (FXC)
Euro Trust (FXE)
Japanese Yen (FXY)
Mexican Peso (FXM)
Swedish Krona (FXS)
Swiss Franc (FXF)

Position Trade: FXY

For the past year we've been treating the market very cautiously on the long side. Although we've found a couple of strong positions, for the most part a lot of stocks were setting up for larger corrections as I mentioned last summer and we are starting to see those really begin to play out. For awhile we were able to catch some really strong downside moves, but a lot of these have also become extended. The market is not, however, really giving us much at all for decent buy setups again. Many stocks have fallen so quickly that corrections off support would tend to be more through time than price and many others simply have not corrected long enough compared to their upside moves on a monthly time frame to easily sustain breakouts at this time. This is the main warning I have given on the long setups we have been watching develop in our watch list. Some stocks gave early triggers, but the monthly charts created risks of further corrections and we are starting to see that play out.

I want to continue to be very cautious at this time, since I am having a very difficult time locating setups either on the long or short side that catch my eye. I suspect that this is going to remain the case for at least several months and likely longer, but hopefully we will find some decent exceptions to this in the meantime.

One of the areas of the market that has caught my eye is the Japanese yen (CurrencyShares Japanese Yen: FXY). Beginning this past spring, the yen has corrected off highs. Unlike many of the other currency corrections, however, it began a bit earlier and the pace slowed into August after three waves of downside. An initial buy setup triggered in the yen heading into the beginning of September. The volume increase this month is a positive development in support of a larger upside move. With this particular three way correction, continuation patterns can offer another opportunity to enter the position. The action itself may even pull back to form a 2B on a weekly time frame later this year. Otherwise a base can form and break higher. Both of these possibilities are drawn on the weekly chart. The highs of the year are strong resistance, but over the course of a year or so, another correction along those highs can lead to another breakout, such as is displayed on the monthly chart. As a result, this has long term potential as an investment, as well as shorter term potential as a multi-month position trade.

Question on Gap Plays

Hey gang, I had a question earlier today from a client that I am working with on trading morning gap and momentum plays. He was having a hard time finding a lot of the types of gaps that I look for and have been teaching him to look for. Everything right now is pretty much hanging on the outcome of new coming out on the credit and banking crisis right now, so indeed there have been a lot fewer of the momentum gap moves in individual stocks. Keep in mind that we are also between earnings and warnings seasons, so there just is not a lot coming out from that direction either to really get things moving.

I actually have been trading primarily afterhours lately due to a project I'm working on and haven't been around much intraday to have to deal with the slop. (Somewhat intentionally as well.) I did trade RIMM short mid-day from $72.51-$71.52 short, but got out at 12:19 at that early morning support for a position that lasted only about 30 minutes as just a scalp on the initial move lower into lunch. I would not be surprised, however, to see it continue lower this afternoon to somewhere around $70. The breakdown coming out of their earnings announcement yesterday afternoon has held down techs overall and the Nasdaq is vastly underperforming the rest of the market, even though the Dow actually managed to form the gap closure setup I often talk about in my Market Action Letter this morning and did so in nearly a textbook manner. I'll review the strategy again in this evening's commentary as well.

Thursday, September 25, 2008

Market Rollover Leads to a Strong Day of Buying, but Turns Lower into the Close and Beyond

Market Rollover Leads to a Strong Day of Buying, but Turns Lower into the Close and Beyond

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

The indices were rounding off at lows over the past several days of trade. This can be seen the most easily on a 30-60 minute time frame. It created a bullish bias from the technical side into Thursday's trade. The wild card, of course, has been the constant threat of news. In this case, however, the market saw little to fuel greater concern and was able to embrace the technicals. Later in the session Senator Christopher Dodd offered assurance that Congressional leaders had reached an agreement on the core aspects of a package, estimated at $700 billion, to bail out the financial industry.

Although the details have yet to be disclosed, the Wall Street Journal has reported that some of the key elements of the plan appear to be the infusion of funds in phases, limits on executive pay, the possible rights to the government acquisition of shares in the company's receiving assistance, and strong government oversight.

Nasdaq Composite ($COMPX)

The day's upside kicked off around 4:00 am ET in premarket trade. This broke the upper end of the downtrend channel from the prior two days. The buying resumed at about 8:00 am ET, but pulled back one final time into the open following early morning economic data. Weekly initial jobless claims rose by 32,000 last week to 493,000. According to the Labor Department, this is the highest level in seven years. The number of continuing claims remained steady at 3.54 million at a 5-year high. Meanwhile, the Commerce Department reported that orders of durable goods fell 4.5% in August.

The indices broke higher again into the open after pulling back into support from earlier congestion. The break higher increased in both momentum and duration. The 10:00 ET new home sales data was quite dismal, but did nothing to forestall the rally. Sales in new homes fell by 11.5% in August, the lowest level since January 1991. Sales were down 34.5% last month as compared to a year earlier.

Dow Jones Industrial Average ($DJI)

When the 10:15 ET correction period hit, the S&P 500 and Dow Jones Industrial Average were testing Tuesday afternoon's highs, while the Nasdaq was hitting Tuesday's morning highs. These are strong market resistance levels given their occurrence on a 15 minute time frame. The momentum intraday, however, helped sustain the move. In order for such a rally to correct, the momentum often needs to shift in some way or another. The reversal off lows on a 60 minute time frame heading into Thursday morning is a great example of this. Intraday on Thursday was a smaller version of the same concept. The indices held the 5 minute 20 simple period moving average and slowly continued to climb higher into mid-afternoon.

At about 14:00 ET the gradual uptrend channel on the 5 and 15 minute time frames broke lower. The afternoon highs also held resistance. Highs from Tuesday morning in the S&P 500 and Dow Jones Industrial Average and a pivot high on Monday afternoon held in the Nasdaq. The Dow had gained more than 300 points early on in the afternoon, but gains started slipping away in the final two hours of trade.

S&P 500 ($SPX)

The Dow Jones Industrial Average ($DJI) closed up on the day by 196.89 points, or 1.8%, at 11,022.06. The gains were fronted by J.P. Morgan Chase (JPM), which closed with a 7.3% gain. General Electric (GE) also recovered some of its recent losses, up 6.2%, after it cut its earnings outlook and called off a stock buyback. General Motors (GM) led the Dow's losers, down 3.1% into the close. The S&P 500 ($SPX) rose 23.31 points, or 2%, and closed at 1,209.18 on Thursday. Telecoms and financials led the gainers with all 10 of the S&P's industry groups closing higher on the day. The Nasdaq Composite ($COMPX) climbed 30.89 points, or 1.4%, and ended the session at 2,186.57.

After the close, the afternoon turn to the downside continued. The index futures sold off steadily, erasing all of the Nasdaq's gains and most of those in the Dow and S&Ps by 8:30 pm ET. Research in Motion (RIMM) posted earnings following the close, earning 86 cents a share, which was in line with expectations, however, it lowered its profit outlook and shares took a beating afterhours, down more than 19% by 6:30 pm ET.

The market's turn to the downside leaves the potential open for that larger continuation lower that I postulated in yesterday's column. It will depend upon how it reacts to the evening support from the previous day. Although it can bounce back again into Friday, if it again takes a more rapid turn lower then it will not likely be able to bounce for a third time on a 60 minute all-sessions chart of the futures. Instead the indices can quickly break the lows of the week and move past those of last week as well before being able to bounce back again on a daily time frame.

Wednesday, September 24, 2008

Market Grinds to a Halt, Metaphorically Speaking

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

Volume has been lighter so far this week as the market awaits the outcome of talks regarding the proposed passage of an economic bailout plan by the U.S. government to purchase "toxic" debt and stave off a more severe economic downturn. Components of the plan so far have been met with a great deal of contention and the result of the closed-door negotiations is uncertain, although Bernanke seems set against another interest rate cut and has rejected allegations that the Treasury would "simply print money" to pay for the proposal. He did, however, express that this is the greatest threat the economy has faced since World War II.

Early in the day on Wednesday Warren Buffett went on air in support of Treasury Secretary Paulson's plan. The presidential candidates are also entering the debate with McCain announcing that he is temporarily canceling campaign events to return to Washington to help address the issues, while Obama is urging campaign events, including Friday's debate, to continue as planned. The whole thing reminds me of chess-like strategy game, but with more than two players attempting to move the pieces around and the sides uncertain other than the fact that they each want to come out ahead. All the while, the clock is ticking...

Nasdaq Composite ($COMPX)

As traders moved to the sidelines following the strong move lower off Friday's highs, the indices fell into a session of choppy action. As I mentioned yesterday, trends tend to break their 15 minute 20 period simple moving average intraday once they've held it for about 2.5-3 days. This took place on Tuesday afternoon and the trend continued to show correction off the support zone into Wednesday as well. The S&P 500 and Dow Jones Industrial Average both broke to slightly lower lows early on the morning on a 15 minute time frame, although the Nasdaq managed to hold the prior day's lows.

Dow Jones Industrial Average ($DJI)

The homes sales data was rather dismal, but then again, many had anticipated it to be so and after a substantial move lower over the prior several days it had little impact on the session. The National Association or Realtors reported that resales of single-family homes and condos fell 2.2% in August. This brought the seasonal annual rate to approximately 4.91 million, less than the 4.93 anticipated. After pulling briefly lower, the indices held the 10:15 ET correction period and fell into more of a sideways trading range throughout the remainder of the morning and into the early afternoon. Volume continued to decline and the range narrowed into a symmetrical triangle. This range broke higher with the 13:00 ET correction period, but the move lasted for only a short time before the pace again turned lower. The zone of the earlier lows held and the indices managed to bounce into the close.

S&P 500 ($SPX)

The market ended the session with very little change. The Dow Jones Industrial Average ($DJI) fell 29 points to close at 10,825. The losses were led by Citigroup (C), which fell 5.1%. The S&P 500 ($SPX) fell 2 points to close at 1,186, while the Nasdaq Composite ($COMPX) gained 2 points to end at 2,156. Technology shares continued to hold up better than the rest of the market overall. Google (GOOG), Apple (AAPL), and Microsoft (MSFT) were among the gainers on Wednesday, although the gains were modest. American International Group (AIG) and Washington Mutual (WM) both again suffered substantial losses. AIG closed lower by 33% after agreeing to take the $85 billion assistance from the Fed. WM lost 29.4% when Standard & Poor's cut its counterparty credit ratings.

Following the initial descent off last week's highs, I had suspected that after a few days of choppy action that we would see lower lows again before the market managed to show a greater correction off lows on a weekly time frame. The slightly rounded lows made by the descent out of the 10:00 ET existing homes sales data, however, does open the window for a bounce on Thursday. If it fails to materialize, however, and the lows from Wednesday give way, then another sharp round of selling will likely follow that would lead to a new low on the month.

pssst... find me on facebook!

Hi gang, I started a profile on FaceBook this week to post random market goings-ons and keep in touch. Feel free to befriend me! I don't bite! :)

http://www.new.facebook.com/people/Toni_Hansen/1539661020

Tuesday, September 23, 2008

Market Pullback Continues

Important Announcement:

Good day! Just a reminder: The "Daily" Market Action Video is updated each weekend by the open on Monday is posted at the following url: http://www.tonihansen.com/marketactionvideo/.

All my best,
Toni

Market Pullback Continues

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

The market ran into strong price resistance last Friday on the heels of an announcement that Uncle Sam was putting together a plan to come to the rescue of struggling institutions, aimed at those related to finance and insurance. This was coupled with a temporary ban, until Oct. 2, on short selling in nearly 800 financial firms. The resistance hit at the highs of congestion which took place earlier in the month and is shown in dark red on the daily charts posted below.

The gap into these price levels held well as investors began to speculate on the outcome of the plan under development by the Federal Reserve and the U.S. Treasury Department. It is estimated that the plan will involve the use of about $700 billion in taxpayer funds to buy "toxic" investments from banks and other financial institutions. The main concern is that this will be nowhere near enough to have a strong enough impact to keep the economy from continuing to head downhill. American International Group (AIG) alone was counterparty to an estimated $422 billion in derivatives.

The derivatives market is one of the areas that has borne a lot of blame over the past year for the current financial crisis, which has been a long time in the making. Companies and countries alike have used derivatives, which are investments that derive their value from another more fundamental investment, as an insurance policy against their primary investments. If the counterparty writing the derivative, however, can no longer back up the positions, such as with Lehman Brothers and American International Group, they become essentially worthless. While LEH went under like the Titanic, AIG, ready to succumb to a similar fate, was rescued, with the help of the government, earlier last week.

Nasdaq Composite ($COMPX)

As I mentioned at the beginning of this week, upside moves such as the one which occurred into the weekend are often difficult to sustain. At the very least they correct with a range, but a larger pullback in price, followed by lower lows, is quite common. They can, however, be the beginning of the end, at least temporarily, and prices often stabilize several weeks following the extreme price and volume action. In the current market environment, however, the risk of new news affecting the market is a constant concern. Volume has been lighter over the past several days of trade while the market has continued to slip off Friday's highs. It had taken back nearly 70% of the gains from Thursday into Friday over the past couple of days of trade.

On Tuesday the Dow Jones Industrial Average ($DJI) closed lower by 161.84 points, or 1.5%, to 10,854.17. The S&P 500 ($SPX) shed 18.87 points, or 1.6%, and closed at 1,188.22. The Nasdaq Composite ($COMPX) lost 25.65 points, or 1.2%. It closed at 2,153.34. All 10 of the economic sectors ended in negative territory, but energy and materials led the decline. Technology shares had held up rather well throughout the morning, but suffered under the weight of a larger market descent mid-day and again into the close. Nevertheless, Intel (INTC) and Microsoft (MSFT) still managed to close slightly up on the day. Of the Dow 30, American Express (AXP) was the only other "winner." General Motors (GM), down 7.4%, and General Electric (GE), down 4.6%, were the top losers, followed closely by Alcoa (AA), down 4.5%.

Dow Jones Industrial Average ($DJI)

Crude oil, which had risen sharply on Monday coming off a rally that began the previous Tuesday, dropped once again on Tuesday. This reversal came after striking price resistance on a daily time frame from a multi-week congestion zone the previous month. Corresponding to the pullback was a correction off comparable resistance in the euro and modest bounce in the U.S. dollar. Crude oil for November delivery fell $2.76 a barrel on the day to closed at $106.61. The euro to dollar is currently trading around 1.46-1.47. Meanwhile, gold also dropped after its recent monumental climb. It closed down $17.80 an ounce at $891.20 in NY.

S&P 500 ($SPX)

From a technical standpoint, the market held onto the prior afternoon's late-day support early on in the day on Tuesday. This was a gap closure level on the Dow and S&P 500 futures. Another correction took place off this support which was similar to the one from mid-day on Monday. It lasted approximately as long, creating a short pattern as it formed two waves of upside into the 15 minute 20 period simple moving averages. The initial wave was a decent price bounce into about 10:30 ET, which was followed by a second correction off lows out of the 11:00 ET correction period and into the early afternoon. The second wave had some initial upside price action, but was followed by more of a congestive move while volume dropped off, signifying a weakening base, which confirmed on a break down into 12:30 ET.

A solid move lower took place into the first half of the afternoon on Tuesday. The selling intensified into the 13:00 ET correction period when the Nasdaq came into price support from Thursday afternoon. Volume spiked at this time to indicated exhaustion, but the momentum of the more forestalled a strong reaction off the support zone. In addition to the price support from a prior high, this was also an equal move support level as compared to the breakdown the previous afternoon.

The markets rolled over gradual off the mid-afternoon lows. Volume dropped as the indices formed a series of slightly lower lows... three to be exact. This created a momentum reversal buy setup out of the 14:00 ET correction period which swiftly returned the indices to the late morning and early afternoon congestion of the second wave of morning correction. This level hit at about 15:00 ET and the indices again reversed off this zone in the final 45 minutes of so of trade. The reversal once again took the indices into negative territory just prior to the closing bell.

Markets almost never continue to hold a trend one way or the other for more than about 2.5-3 days before a 15 minute 20 simple period moving average breaks. This break took place on Tuesday afternoon following the morning reversal on Friday, making it close to that 3rd day. This does not mean that the indices are now going to be able to sustain a larger reversal off lows just yet. The break in that resistance level, albeit briefly, was enough to allow the market to again continue lower into Tuesday's close. The afterhours announcement that Berkshire Hathaway (BRK.A) plans to invest $5 billion in preferred stock in Goldman Sachs (GS), as well as the announcement that GS is looking to raise $2.5 billion in common stock, took both GS shares higher, as well as the index futures. This further broke the downtrend of the past several days. Although the market may be able to hold this support awhile longer mid-week, the larger momentum is still favoring lower lows into the weekend and early next week. Of course, given the current news-influenced moves, be aware that circumstances can change rather swiftly in this market environment and overnight holds will continue to be higher risk.

Monday, September 22, 2008

Commodities Soar While Broader Market Plummets

Oil futures jumped a whopping 15.7% and closed at $120.92 a barrel for the October delivery. November crude closed at $109.37. Gold and gold-related stocks also rose sharply. Gold futures closed at $909 an ounce, up $44.30 from Friday. Closely related was the falling dollar. In Monday's session the dollar fell 2% against the euro, which amounted to its largest single day drop ever. It seemed that there was speculation all around that the government's plans to block a larger economic meltdown may not be enough.

Dow Jones Industrial Average ($DJI)

The market held a steady downtrend throughout the day on Monday. Soon after the opening bell rang the first short setup triggered in the indices when the channel on the 5 minute chart into Friday's close broke lower. A series of bear flags followed into the afternoon. The market hit its first major support around 13:35-13:40 ET when price support from the previous afternoon hit. This was also the third low intraday on a 5 minute time frame, which can lead into a larger momentum reversal. On a larger 60 minute chart, however, the indices had not quite corrected enough off last week's highs to sustain a large rally. Although the market made an attempt, the move failed to confirm and another short setup triggered out of 14:30 ET.

Although somewhat difficult to see on the 5 minute charts, both the S&P 500 and Dow Jones Industrial Average formed a momentum reversal short between the 13:35 lows and the 14:30 highs with three small waves of buying within the larger bear flag. A smaller continuation pattern followed with congestion into about 15:15 ET and then the indices dropped sharply into the closing bell.

S&P 500 ($SPX)

By the end of the day, the Dow Jones Ind. Ave ($DJI) had fallen 373 points, or 3.3% and closed at 11,016... back at the 11k zone. The S&P 500 ($SPX) lost 48 points, or 3.8%, and closed at 1,207. The Nasdaq Composite ($COMPX) fell 95 points, or a staggering 4.2%, to close at 2,186. The focus on Tuesday will likely remain on Treasury Secretary Hank Paulson's rescue attempt and what news we may see coming out of Congress. Although I risk sounding like a broken record at the moment, use utmost care and consideration when trading in the current market environment. This is particularly true of those focusing upon the forex, commodities and futures markets since the added volatility more greatly affects risk management prospects for the smaller Average Joe day and swingtrader.

Those trading stocks still have more possibilities in that they can more easily just adjust their share size lower to keep their risk levels more comparable to what they were in the past, but they are still going to be subject to greater odds of having market stop orders and the like getting taken out only to have the position then follow through as anticipated! I have seen this become quite common in recent weeks and is likely to continued for the near futures until this period of news-driven markets has passed.

Hmmm.....

This summer oil and euro prices grabbed the market's attention. Over the last several weeks, however, the financial sectors have taken over with one surprise after another shaking up not only the financials themselves, but the market as a whole. Early in the week the Federal Reserve made an emergency move to lend insurance giant American International Group (AIG) some much needed support, to the tune of an $85 billion loan. The market was not immediately impressed.

Monday morning had begun with a strong gap lower that, despite an initial attempt, failed to fill. The gap lower had negated a potential momentum reversal buy setup in the Nasdaq Composite. By doing such, it triggered a short instead. The indices continued to work their way lower throughout the first half of the week despite a ban by the SEC against naked short selling. This form of short selling involves the sales of a short without shares or contracts necessarily being held available for shorting or borrowing. Rumors began to circulate that the SEC would move to place additional bans on short selling. This helped to turn things around Thursday afternoon, but the technical pattern on the 60 minute charts also created a reason to buy.

The repetition of gap after gap lower and a choppy trend channel into lows this week created a shift in the larger momentum of the market. This was the same concept that had been at play in the Nasdaq heading into last week which had failed to materialize. This time, however, the market triggered the setup and did so with a great deal of strength in both the S&P 500 and Dow Jones Ind. Ave. The upside momentum continued into Friday morning when the ban on short-selling was confirmed. An end date for the ban, which affects nearly 800 financial stocks, is set on October 2, 2008. The market gapped significantly higher on Friday, but failed to sustain the momentum and held price resistance at highs from several weeks prior. The exhaustion intraday as a result of the prior afternoon's rally and subsequent upside gap was followed by congestion into the close.

To continue the plethora of financial-related news, over the weekend, the last two independent investment banks were turned into bank-holding companies thanks to the Federal Reserve. Goldman Sachs (GS) and Morgan Stanley (MS) are now both subject to new capital requirements and additional oversight and will now allow both companies to accept deposits.

Dow Jones Industrial Average ($DJI)

Even though the indices closed off highs on Friday, the move off the week's lows and into Friday was the largest two-day point gain in both the S&P 500 and Dow Jones Ind. Ave. since March of 2000. From Thursday's low into Friday's close the Dow was up over 930 points. The Dow Jones Industrial Average closed at 11,388.44 on Friday. Despite the end-of-week gains, this was a loss of 0.3% from a week prior. The S&P 500 gained 0.3% from the previous Friday's close and closed at 1,255.07, while the Nasdaq Composite closed at 2,273.90 for a gain of 0.6% on the week.

S&P 500 ($SPX)

As I perused the various sectors of the market over this past weekend I couldn't help but notice how many sectors are at major support zones on the weekly and monthly time frames after having pulled back over the past several months. The sharp rally at the end of last week would also seem like a favorable trait for a larger market recovery. Unfortunately, such false hope is common at lows such as this. When a stock or the market as a whole has a rapid rally such as the one from Thursday into Friday, it can be difficult to sustain them. More often than not they will pull back and can even lead to a slightly lower low and flush out those that had bet on it holding. Even when this does not happen, overhead resistance after just two to three days of upside will tend to push the security into more of a choppy daily range. Even if there is a trend, the overlap from one day to the next can cause increased difficulty, particularly for swingtraders. Expect volatility to remain high and risk as well.

Economic Reports and Events This Week

Monday, September 22, 2008
No major economic indicators scheduled.

Tuesday, September 23, 2008
7:45a.m. ICSC Chain Store Sales Index For Sep 20:
8:55a.m. Redbook Retail Sales Index For Sep 20:
10:00a.m. Sep Richmond Fed Mfg Survey: Previous: -16.
5:00p.m. ABC/Wash Post Consumer Conf For Sep 21: Previous: -41.

Wednesday, September 24, 2008
10:00a.m. Aug Existing Home Sales: Previous: +3.1%.
10:35a.m. Crude Inventories

Thursday, September 25, 2008
8:30a.m. Initial Jobless Claims For Sep 20 Week:
8:30a.m. Aug Durable Goods Orders: Previous: +1.3%.
10:00a.m. Aug New Home Sales: Previous: +2.4%.
10:00a.m. DJ-BTMU Business Barometer For Sep 13:

Friday, September 26, 2008
8:30a.m. 2Q Final GDP: Previous: +3.3%.
8:30a.m. 2Q Revised Corporate Profits: Previous: +1%.
10:00a.m. End-Sep Reuters/U Mich Sentiment Index: Previous: 63.0.

Key Earnings Announcements This Week:

Monday, September 22, 2008
Before: AZO, KMX, NSSC (?)
After: COMS

Tuesday, September 23, 2008
Before: FDS, LEN
After: FUL, WOR

Wednesday, September 24, 2008
Before: NEOG, OHB (?)
After: BBBY, NKE, PAYX, RHT

Thursday, September 25, 2008
Before: ALOG, CHTT (?), CRAI, DFS, MKC, RAD, SCHL, MTN
After: ACN, CBK, CPRT (?), DMND, FINL (?), INTV (?), RIMM, SMOD, SNX, TIBX

Friday, September 26, 2008
Before: AM, AZZ, HMX (?), JBL, JBH

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.

Sunday, September 21, 2008

Market Action Video - Sept. 22

Hey gang,

To view this week's video, go to http://www.tonihansen.com/marketactionvideo/.

All my best,
Toni

Toni's Position Trader - ABMD

Abiomed (Nasdaq:ABMD) develops devices to assist or replace the pumping function of the heart during high risk surgery. Recently its 2.5Liter Impella device received FDA approval. So far the PROTECT II Clinical trials are showing the 2.5 Liter product to have excellent results, and the feeling is that the Impella device will become the new standard, taking over from the 1.5 Liter products currently on the market, in its niche.

Whenever you get a smallish company who releases a product with a potentially massive market that takes over that market, the impact can be huge. Abiomed has had the same management team in place for some time, and they have continued to follow their game plan with good effect.

Technically speaking the chart looks very good. When we are looking for stocks we start off by sorting for relative strength leaders. This simply means we want to find a stock that do not show as much of a decline as the average stock in the market during periods of market weakness. This shows a degree of buying interest and strength in the stock, and very often when the market recovers, stocks that “held up” during the decline are the leaders when the market recovers. As you can see with ABMD when the market pulled back last week, it was a stock that held up relatively well.

Overall the weekly chart remains in a nice, strong, uptrend, making higher highs and higher lows. Since its peak in late July AMBD has pulled back in a nice and orderly manner, forming a clear bullflag pattern. This pullback has brought AMBD to an area of both moving average and price support. Charts that have multiple forms of support often see the strongest bounces. We will be looking to buy shares of AMBD on a close above $19.00 per share.

- Brandon Fredrickson & Toni Hansen

Watch List - New Additions:
Long: SMCI, BSX, LPNT, MKC, BF.B

Brandon Fredickson's Blog: http://p5equities.blogspot.com/
Toni Hansen's Blog: http://www.tonihansen.com/blog

Saturday, September 20, 2008

Quote by Donald Rumsfeld

"Success tends to go not to the person who is error-free, because he also tends to be risk-averse. Rather it goes to the person who recognizes that life is pretty much a percentage business."

Wednesday, September 17, 2008

A Look into the Financial Sector Maneuverings of 2008 and a Glance at the Future

A Look into the Financial Sector Maneuverings of 2008 and a Glance at the Future

The news wires have been abuzz in recent weeks by the upheaval in the financial sector. Over the past year the subprime mortgage problem has morphed into a global crisis that has rocked companies that have been long-held as the cornerstones of the financial industry. The U.S. government began to accept the need for large-scale measures in order to prevent the collapse of the U.S. financial market.

The first step in which the government began to intervene directly took place back in March when the Fed lent assistance to JPMorgan Chase (JPM) in its takeover of investment bank Bear Stearns. It is only over the course of the past several weeks, however, that the government’s intervention has escalated. On September 7th, the Treasury Department made a historic move and announced the indefinite takeover of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE). Together, these two companies either own or guarantee nearly half of the U.S.’s approximately $12 trillion in home loans and are the nation’s largest suppliers of mortgage capital. After a week of extreme losses in the market, the news helped slow the pace of the market’s downside, but the fear remained that this was just the beginning of more widespread maneuvering in the financial arena in order to stay afloat.

Unfortunately, not everyone managed to stay afloat. Last weekend the New York Fed called an emergency session which convened to discuss the possibility of rescuing the rapidly sinking ship widely known as Lehman Brothers (LEH). Like the Titanic, Lehman was taking on water fast! Participants in the weekend session included representatives from the Federal Reserve, the Treasury Department, and executives from several Wall Street Banks, such as Citibank (C), JPMorgan Chase (JPM), Morgan Stanley (MS), Goldman Sachs (GS), and Merrill Lynch (MER). Despite rumors of a buyout possibility, Lehman Brothers (LEH) did not attend the meeting and came out of the weekend with the surprising announcement that it had opted to file for Chapter 11 bankruptcy. Barclay’s (BSC), which was one contender for an LEH buyout, later came out with news that while it declined to buy LEH outright, it would be purchasing LEH’s U.S. investment bank and capital-markets businesses.

Another surprising development over the past weekend was the deal struck between Bank of America (BAC) and Merrill Lynch (MER). BAC made a bid for MER for a proposed $29/share. It has closed on Friday at $17.05 and opened Monday morning at $21.02. With the deal still in the works, MER closed on Tuesday at $22.18.

The market did not react well to the weekend’s developments as panic spread over speculation regarding how deep the damage has spread and who would be the next to go under. On Monday the Dow Jones Industrial Average experienced its largest down-day since the 9/11 attack in 2001. It closed lower by 504 points for a loss of 4.4%. The S&P 500 posted a jaw-dropping 4.7% decline on the day, while the tech-heavy Nasdaq Composite came out with a “mere” 3.6% decline.

Following shortly on the heels of the LEH and MER news was another giant in the spotlight: American International Group (AIG). The world’s largest insurance company was well on its way down the same path taken by LEH earlier this week. Many had speculated that without outside assistance that it too would have filed for bankruptcy before the week’s end. The Federal Reserve disappointed many market participants on Tuesday when it left interest rates unchanged at 2%. Many had hoped to see them lowered and the Dow dropped 131 points following the announcement. News reports regarding the fate of AIG, however, began to provide the market some relief and the indices even managed to finish in positive territory.

Speculation grew that while the Fed failed to offer LEH a life vest, that the dire straits of AIG’s situation left it with little choice if it wished to avoid even greater fallout due to the widespread reach of this giant. Soon after the market closed the reports were confirmed. The central bank had put together an $85 billion loan package which involved the Federal Reserve taking over 80% of the company. The New York Times labeled the move “the most radical intervention in private business in the Fed’s history.” The estimated interest rate for the loan is 11.31%, which may shift somewhat based upon the LIBOR. It is to be repaid through the sale of AIG’s assets, which stood at about $1 trillion at the end of the second quarter, all of which would be pledged as collateral. AIG had peaked in December of 2000 at $103.69. It closed on Tuesday at a mere $3.75/share and was trading lower at $2.16 afterhours.

The foreign markets were largely positive following the news, but the react was not extreme. The U.S. index futures had also been trading higher, but pulled back in the early morning hours Wednesday.

On Tuesday the financial sector faired rather well given the recent uncertainty. After testing the upper end of the summer’s range on September 8th, the financial sector, represented by Select Sector SPDR XLF (Financial), began a sharp descent, but the action in the first half of the week exhausted the selloff and the sector was able to recover from a larger-than-average downside gap Tuesday morning. The session ended with 74 of the sector’s 87 stocks posting gains. It is currently poised to close Monday’s gap as well, but the overall market experienced similar action off the lows on the 5th and volatility will remain high as the month continues with more financial leaders making headlines. On a smaller scale, for instance, was the downgrade by Standard & Poor’s of Washington Mutual on Tuesday to junk status.

Nevertheless, given the current panic mode of the market, exhaustion action on the larger monthly time frames is now under way and stabilization into fall is within reach. Although many companies will continue to face continued losses, the momentum will slow with only the most aggressive or stubborn of participants remaining. For those that remember the larger market collapse which began in 2000, recall the great lengths it took for the market to begin to recover off lows. The financial sector at this point is quite similar to the downside exhaustion heading into March of 2001 in the Nasdaq Composite (shown in blue). As the crisis continues to unfold, the path towards recovery will likewise be a difficult one.

If you enjoyed this article, please drop by Toni Hansen’s website at http://www.tradingfrommainstreet.com/ or check out her Online Trading Education Course at http://www.swingtrader.net/. Don’t let the name fool you! It’s not just for swingtraders! You can also contact Toni directly at toni@tradingfrommainstreet.com.

Toni Hansen (http://www.tradingfrommainstreet.com/ and http://www.tonihansen.com/swingtrader.net) is one of the most respected technical analysts and traders in the industry with a high reputation for accuracy in both bull and bear markets. Her style of trading and market analysis transcends both time as well as market vehicles, making it attractive to investors and trader of stocks, futures, options, ETFs, and even the FOREX market. Toni is a frequent lecturer at trading clubs and industry expos. She is also a popular market columnist and is a repeat contributor to SFO Magazine. She recently co-authored High Profits in High Heels from Marketplace Books and SFO’s Personal Investor Series book Online Trading.

Tuesday, September 16, 2008

Toni's Sept. Bookstore Specials

Hi Gang!

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!

http://www.invest-store.com/tradingfrommainstreet/tl090108.html

HUGE WAREHOUSE SALE!!!

These titles and many more are overstocked and must go:

Analyzing Bar Charts for Profit: Technical Analysis As an Aid to Decision Making for the 1990s and Beyond

A W.D. Gann Treasure Discovered: Simple Trading Plans for Stocks & Commodities

The New Traderâ€™s Tax Solution: Money-Saving Strategies for the Serious Investor, 2nd Edition

Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders

Option Volatility Trading Strategies

The Insider's Guide to Forex Trading

Trading Systems Explained: How to Build Reliable Technical Systems

Option Spreads Made Easy Course Book with DVD

How to Select Stocks Using Technical Analysis

Technical Analysis for Short-Term Traders, 2nd Ed.

The Money Making Power of Gold: Timeless Strategies for Profits

You Got Screwed!: Why Wall Street Tanked and How You Can Prosper

Jack Schwager's Complete Guide to Mastering the Markets

To check out all titles and details on this month's promotions, go to http://www.invest-store.com/tradingfrommainstreet/tl090108.html

FREE SHIPPING on orders over $50!!!

Thanks again for your continued support!

All my best,
Toni Hansen

Monday, September 15, 2008

Choppy Week of Trade Dominated by the Constantly Shifting Tide of the Financial Sector

Important Announcement:

Good day! Just a reminder: The "Daily" Market Action Letter has become a weekly letter at this time. It will resume, however, as a regular daily column on September 22! In the meantime, I will be resuming the Weekly Market Action Video, which will be updated each weekend by the open on Monday is posted at the following url: http://www.tonihansen.com/marketactionvideo/.

All my best,
Toni

Choppy Week of Trade Dominated by the Constantly Shifting Tide of the Financial Sector
(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

Volume was heavy in this past week of trade, coming on the heels of the government takeover of Fannie Mae (FNM) and Freddie Mac (FRE), which was announced this past Sunday. Financials were very hard-hit this past week and the increased activity in this sector accounted for a lot of the volume influx. On Friday alone American International Group Inc. (AIG) closed lower by 30.8%, while Lehman Brothers (LEH) fell another 10.9%. AIG opened on Monday at $24.47 and closed on Friday at $12.14 for a loss of about 50%, while LEH opened on Monday at $17.62 and closed on Friday at $3.65 for a loss of nearly 80%. One of the few exceptions in an industry that was pummeled was Zions Bancorportation (ZION). It gained 11.5% on Friday and closed at $37.47 after closing the previous Friday at $32.97.

After the FNM and FRE news on the 7th, the focus shifted to the fate of Lehman Brothers (LEH). It has been heavily invested in assets tied to bad home loans and word had spread that it had put itself up for sale. On Friday evening the New York Fed called an emergency session was convened to discuss how to rescue the troubled company. The meeting continued throughout the weekend. Those present included officials from the Federal Reserve, the Treasury Department, and executives from several Wall Street banks, including Citibank, JPMorgan Chase, Morgan Stanley, Goldman Sachs, and Merrill Lynch. Missing from the mix were representatives from Lehman Bros itself. U.S. Treasury officials stated that the government would not bail out the company and other efforts would need to be initiated to prevent its collapse.

Also subject to discussion were similar problems at American International Group Inc. (AIG) and Washington Mutual Inc. (WM). Despite the expected upheaval ahead of Monday's open, it caught many by surprise when Lehman, recently the number 4 U.S. investment bank, announced that it was filing for bankruptcy. Shares of S&P 500 futures were down 3.4% after they opened for trade Sunday evening. The Lehman bankruptcy will be the highest profile bankruptcy since 1990. Even more of a surprise, however, was Bank of America's (BAC) buyout of Merrill Lych (MER) for $29/share. This is almost $12/share higher than where it closed on Friday.

The recent maneuvering in the financials has many on edge that the takeover of FNM and FRE was not enough to flush out the financials and turn the tide, but rather still the tip of the iceberg with more surprises to come. This sector has been the area for higher risk speculators for the past year and has escalated as such since the buyout of Bear Sterns. Lately that risk is higher than ever. At the moment of greatest fear, panic, and disillusionment will come the shifting tide, but far less volatile markets will provide greater security if your focus is greater than the intraday market action.

Nasdaq Composite ($COMPX)

Although the financials certainly fell apart this part week, the rest of the market managed to hold up fairly well. This was mainly thanks to the large gap higher on Monday morning. When the day began on Monday, we were again experiencing a substantially larger-than-average gap in the indices. In last week's column I laid out how such gaps should be approached. To begin with, mark the first 15 minute highs and lows. When one of those gives way, the market is most likely to continue in that direction throughout the morning. Often the trend will continue past the morning as well. I had been leaning more towards a continuation higher last week, but the panic in the financials obviously had not quite ran its course. The indices did not even wait 15 minutes before they began to sell off. The bias had shifted on the all-sessions charts and helped it roll over off premarket highs into the open.

The 15 minute lows broke in the indices soon after that time had passed. The Nasdaq Composite ($COMPX) closed its gap because its heavy tech influence left it reacting less strongly to last Sunday's news. The indices continued lower into noon with the S&Ps nearly closing their gap, but the mid-day support held and the market recovered somewhat into the afternoon before resuming the selloff the following day.

Dow Jones Industrial Average ($DJI)

The Nasdaq became rather interesting on a 60 minute time frame on the 9th. That afternoon it established the third low in as many days. It barely broke through low from the previous day on the move lower that third day. This had been the case the day before as well and this action shifted the momentum on the 60 minute chart as compared to the selloff of the prior week. The resulting pattern is a bullish one. It was supported by the fact that the volume was lighter going into that third low than the previous one. One implication of this was that fewer people were using the break of the previous low to short. Another is that the break of the previous low was causing less panic than the earlier one, meaning that many of those holding on the long side were more secure in their conviction than when it busted the prior low.

The S&P 500 and Dow Jones Industrial Average did not experience a similar shift in momentum. The market had gapped lower again on Thursday, but the Nasdaq was better-positioned to cope with such a gap. As on Monday, the 15 minute mark passed without the indices able continue in the direction of the gap. The break in the opening zone highs led to a buy setup that kept the market moving higher throughout most of the session. Thursday closed in the zone of the day's highs. This was resistance on a 60 minute time frame, however, and the indices fell into a range into the weekend.

For the week as a whole this past week the Dow gained 1.9% to close at 11,421.99. Alcoa Inc. (AA) and General Motors (GM) stood out in a positive light on the day on Friday after two days of upside. The S&P 500 gained 0.8% last week, ending on Friday at 1,251.70. The Nasdaq Composite rose 0.2% and ended the week at 2,261.27.

S&P 500 ($SPX)

Meanwhile, crude oil hit the initial price target zone we have been following over the last several weeks, testing the $100/barrel zone briefly. The prices can still push in the $90/barrel zone, but an initial reaction to whole number level should be expected. Another market we have been following closely is the euro. It has also held support and bounced quickly higher into the weekend while the dollar fell sharply off highs. These levels should both hold for the time being and are likely to lead to larger weekly corrections at this time off these zones.

As far as the broader market is concerned, it will not take much at all to break to new lows on the month. The session will begin on Friday with another larger-than-average gap and will be subject to the same rules as this past Monday. In other words, pay attention to those first 15 minutes. Both this past Monday, as well as Thursday are good examples. The bias tends to go in the direction of whichever way that first 15 minutes breaks with relatively few exceptions.

Thursday, September 11, 2008

Economic Reports and Earnings Events Sep. 15-19

Economic Reports and Events This Week

Monday, September 15, 2008
8:30a.m. Sep NY Fed Manufacturing Index: Previous: 2.77.
9:15a.m. Aug Industrial Production: Previous: +0.2%.
9:15a.m. Aug Capacity Utilization: Previous: 79.9%.

Tuesday, September 16, 20087:45a.m. ICSC Chain Store Sales Index For Sep 13:
8:30a.m. Aug Consumer Price Index: Previous: +0.8%.
8:30a.m. Aug CPI, Ex-Food & Energy: Previous: +0.3%.
8:55a.m. Redbook Retail Sales Index For Sep 13:
9:00a.m. Jul Treasury International Capital Flows: Previous: $36.6B.
1:00p.m. Sep NAHB Housing Market Index: Previous: 16 .
2:15p.m. FOMC Policy Statement
5:00p.m. ABC/Wash Post Consumer Conf For Sep 14:

Wednesday, September 17, 2008
8:30a.m. Aug Housing Starts: Previous: -11.0%.
8:30a.m. 2Q Current Account Balance: Previous: -$176.4B.
10:35a.m. Crude Inventories

Thursday, September 18, 2008
8:30a.m. Initial Jobless Claims For Sep 13 Week:
10:00a.m. Aug Conference Board Leading Indicators: Previous: -0.7%.
10:00a.m. Sep Philadelphia Fed Business Index: Previous: -12.7.
10:00a.m. DJ-BTMU Business Barometer For Sep 6:

Friday, September 19, 2008
No economic indicators.

Key Earnings Announcements This Week:

Monday, September 15, 2008
Before: DFS (?),NSSC (?),TITN
During: -
After: PLL

Tuesday, September 16, 2008
Before: BBY, CBRL, GS, KR
After: AIR, ADBE, DRI

Wednesday, September 17, 2008
Before: BRC, GIS, MS, OHB (?),SMTS
After: APOG, CKR, CLC (?), CMTL (?), DBRN, DDMX, MLHR

Thursday, September 18, 2008
Before: CCL (?),CAG, CRAI (?), FDX, PIR (?), PRGS, SCHL (?), SIFY (?)
After: ARTC (?), CTAS, EGLS, HSTX, IHS, OPTM (?), ORCL, PALM, RAE (?)

Friday, September 19, 2008
Before: -

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.

Labels: earnings, earnings reports, economic calendar, economic reports

Monday, September 8, 2008

Bull Market Rallies

If you were told that if you took out 50 dollars from your wallet and ran to the other side of the room that there would be a woman waiting there who would give you 500 dollars in return for hitting a big red button on the wall on the other side. Would you attempt to make it to the other side of the room?

What if you were told that if you were one of the last 10 people out of 30 to attempt to make it there that you would lose your 50 dollars and receive nothing in return? Would you still attempt it?

What you may know in the back of your head is that if you are already one of the furthest from the other side of the room that in the effort to be one of the first 20 people to get make it across that you may injure yourself, get sent to the hospital and end up paying 500 dollars or more to get patched up again?

Initially it may like a brilliant idea to attempt to be one of the first 20 to claim the reward, but when you start to see people push each other aside and become more and more desperate to hit that red button, it may begin to seem wiser to simply forego your 50 dollars…

Labels: bull market, rally

Sunday, September 7, 2008

Market Channel Break Burst Bull's Bubble in Last Week's Trade, While Market Rallies into this week on FNM and FRE Government Takeover

Important Announcement:

Good day! Just a reminder: The "Daily" Market Action Letter has become a weekly letter at this time. It will continue as such until after the Forex Expo in mid-September, after which it will resume on a daily basis. In the meantime, I will be resuming the Weekly Market Action Video, which will be updated each weekend by the open on Monday and will be posted at the following url: http://www.tonihansen.com/marketactionvideo/.

All my best,
Toni

Market Channel Break Burst Bull's Bubble in Last Week's Trade, While Market Rallies into this week on FNM and FRE Government Takeover

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

This past week was a wicked one for the bulls. Heading into the week we were looking at the potential for two scenarios. The first involved a third slightly lower low in the Nasdaq Composite ($COMPX) on a 60 minute chart. Had the index been able to break the upper end of the trading channel connecting the highs from 8/22/2008 to 8/28/2008 then it would have triggered a momentum reversal buy setup. If the 50 day simple period moving average, on the other hand, gave way, then it would trigger another sharp wave of selling. This would also mean that the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) would also trigger short setups of their own with a two-wave reversal pattern.

As you can tell by taking a quick look at the 60 minute and daily time frames, the second scenario was the one which triggered. The two-wave highs in the S&Ps and Dow were from 8/22/2008 and 9/2/2008. The lighter volume throughout the range of these two waves higher also support a breakdown. It looked like the pattern in the S&Ps and Dow was going to try to trigger coming off the highs on the 28th, but a gap higher into last Tuesday morning created a very slightly higher high. It wasn't enough, however, to trigger the larger buy setup on the Nasdaq because the 15 minute highs held and the gap took the typical way out for its size and closed. I will return to this gap closure strategy once again at the end of this column since we are dealing with another scenario heading into this Monday as well.

Nasdaq Composite ($COMPX)

Once the selling began last week, it continued nearly unabated. From late Tuesday afternoon throughout the day on Wednesday the S&P 500 formed the same price action the Nasdaq Composite had formed on the daily time frame from 8/21/2008 - 8/28/2008. It stepped lower with two lows and two highs following each low. The pace of the downtrend channel slowed. It could have also formed a momentum reversal pattern as a buy had the upper end of its channel broken, but like the Nasdaq, both triggered breaks lower and the momentum increased substantially on the breakdown. Notice the similarities in the bottom chart in the above Nasdaq with the chart below which displays the SPY (S&P 500 ETF). Even through the time frame on the Nasdaq begins to form the setup on 8/15/2008 into lows on 9/5/2008, notice that the pattern is the same as the SPY pattern that begins on 9/2/2008 with lows on 9/5/2008.

SPDR TR (SPY)

Dow Jones Industrial Average ($DJI)

Oil prices last week failed to rise as many had feared with the approach of Hurricane Gustov. The storm had a relatively minor impact on oil activities in the Gulf and prices again began to fall this past week, kicking off the a strong gap lower Tuesday morning following the weekend's storm. The price continued to inch lower throughout the week and closed on Friday at $106.23 a carrel. It had hit a low of $105.13 during the session, down 8% on the week and 24% for the quarter. After a 54% gain on the year in mid-July, it is up "only" 10.7% on the year to date. This is the weakness we had been expecting to see continue as we move into fall. The $90-$100 a barrel zone is where I continue to see the largest support. Again, this is the trading range from late last year into early this year. Currently oil is hitting the first support I mentioned in last Tuesday's column, which is the 50 week simple moving average. This is the zone it closed at on Friday. With Hurricane Ike once again causing concern, it is likely that this level will hold for a few days at least.

S&P 500 ($SPX)

The biggest news heading into this new week comes once again from Fannie Mae (FNM) and Freddie Mac (FRE). The index futures are up strongly off Friday's close following the Sunday morning announcement by the Treasury Secretary Henry Paulson that the government would be taking over the two mortgage giants indefinitely. The companies will be placed in a government conservatorship with the Treasury purchasing up to $100 billion in each company to allow them to maintain a positive net worth and inject the companies as needed with additional funds by purchasing either convertible preferred shares or warrants in the two companies. Although shares in the two companies will continue to trade, stockholder rights will be suspended, taking a back seat to those of the government, and dividends will be eliminated. Fannie Mae and Freddie Mac own or guarantee almost half of the U.S.'s approximately $12 trillion in home loans.

In addition to the index futures for the Dow, S&P and Nasdaq trading higher on Sunday, Asian markets were also up on the news, particularly the financials. As of 9:20 p.m. ET the Nikkei was up 3%, while the South Korean Kospi rose 3.6%. Australia also saw strengthening with the Aussie S&P/ASX 200 up 3.2%. The Dow Jones Ind. Ave. had closed lower by 2.8% last week at 11,220, while the S&P 500 had fallen 3.2% on the week and ended on Friday at 1,242, and the Nasdaq Composite had lost 4.7% and closed at 2,255.

With the markets set to open higher on Monday morning, the big question of the day will be: Can it sustain those gains? Typically when the indices post an extreme open either way there is a decent chance that the gap will begin to fill by about 15 minute after the opening bell and proceed to close until at least one of the major indices has completed the gap closure during the morning's trade. This is exactly what happened on Tuesday the 2nd. Trend days in the direction of the gap closure are quite common. A major exception to this tends to be at larger market reversal points on a daily time frame. Given the extreme selloff of this past week and the news in the financial sector, this can easily be one of those exceptions. The key will be what happens after the first 15-20 minutes. Generally speaking, when the gap on an extreme gap day intends on filling, it will hold a 15 minute pivot or base into 9:45 ET. When that 15 minute low breaks, it triggers the start of the gap closure and hence a short setup. If the 15 minute low holds, however, then in the case of a gap higher the odds favor a continuation of the gap momentum and a trend morning with a decent chance of a trend day on the upside.

Should the market follow through and hold the gap, moving higher on strength in the financials, then the indices still risk this action on the weekly time frame serving as part of a two-wave correction. In other words, the market can then continue higher or hold the longer range to play out the 4-month correction off July lows into late October, which will put the corrective move on common ground as the previous correction off lows earlier this year. This can then be followed by another break lower. I do not expect, however, that such a move would be as strong on the downside in the S&Ps as the previous two declines on the monthly time frames since last year's highs. Nevertheless, the next major support zone is the congestion from 2005. In the Dow Jones Industrial Average this is the 10,000-10,500 zone.

Toni's ISE Webinar Logs and Power Point for Sept. 3, 2008

Dear Trader,

I hope that you had a chance to make it to my webinar Tuesday afternoon, titled "Successful FX Strategies for Any Market Condition." I know some of you were not able to make it to the session, but don't worry! The session was recorded and can be viewed at:

http://www.ise.com:80/WebForm/viewPage.aspx?categoryId=361&header4=true&menu1=true&link5=true

I also uploaded the power point itself to the site so that you can print it out or use it alongside the video for larger versions of the charts shown in the video. If you use the "open" option instead of the download, please note that it may take a minute to load. The power point link is:

http://www.tradingfrommainstreet.com/presentations/ISE_TimeFrameAnalysis20080903.ppt

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
http://www.tradingfrommainstreet.com

Saturday, September 6, 2008

Position Trader Newsletter - INTU long

Intuit, Inc. (INTU) provides business and financial management solutions for small and medium sized businesses, financial institutions, and accounting professionals in the United States and internationally. It offers QuickBooks accounting and business management software for small businesses.

INTU was trading in narrowing triangle from 1999-2005. At the end of 2005 it broke free from the triangle and rallied throughout 2006. Since the end of 2006, however, it has been correcting once again. It completed the second wave of a correction early this year and has been making its way back to the upper end of the corrective channel. A break from this channel will trigger a buy on the monthly time frame. The last low within the channel will serve as support. Initial target zone of $40.

Sector: Technology
Industry: Application Software

Watch Stocks:
Long: TDC, KFT, GPS, PM, AGN

Economic Reports and Earnings Events This Week

Key Earnings Announcements This Week:
Monday, September 8, 2008
3:00p.m. Jul Consumer Credit: Previous: +14.3B.

Tuesday, September 9, 2008
7:45a.m. ICSC Chain Store Sales Index For Sep 6: Previous: N/A.
8:55a.m. Redbook Retail Sales Index For Sep 6: Previous: N/A.
10:00a.m. Jul Wholesale Trade: Previous: +1.1%.
10:00a.m. Jul Pending Home Sales: Previous: +5.3%.
5:00p.m. ABC/Wash Post Consumer Conf For Sep 7: Previous: -47.

Wednesday, September 10, 2008
10:35a.m. Crude Inventories

Thursday, September 11, 2008
8:30a.m. Initial Jobless Claims For Sep 6 Week: Previous: N/A.
8:30a.m. Jul Trade Balance: Previous: -56.77B.
8:30a.m. Aug Import Prices: Previous: +1.7%.
10:00a.m. DJ-BTMU Business Barometer For Aug 23: Previous: N/A.
2:00p.m. Treasury Budget

Friday, September 12, 2008
8:30a.m. Aug Retail Sales: Previous: -0.1%.
8:30a.m. Aug Retail Sales, Ex-Autos: Previous: +0.4%.
8:30a.m. Aug Producer Price Index: Previous: +1.2%.
8:30a.m. Aug PPI, Ex-Food & Energy: Previous: +0.7%.
10:00a.m. Jul Business Inventories: Previous: +0.7%.
10:00a.m. Mid-Sep Reuters/U Mich Sentiment Index: Previous: N/A.

Key Earnings Announcements This Week:

Monday, September 8, 2008
Before: AHII, ARST, GNET, KFY
During: PNY
After: AVAV, GIII, OXM (?), SHFL, PAY

Tuesday, September 9, 2008
Before: STEI
After: GCOM, SEH, GROW

Wednesday, September 10, 2008
Before: ISLE, JOYG, KFY (?), SPLS, UNFI
After: CWST, CASY, PSS, GES, HRB, HOV, MR, SAI

Thursday, September 11, 2008
Before: CPB, CRAI (?), LULU, MEI, OHB (?), SIFY (?)
After: ARTC (?), ASHW (?), CAO (?), RVI (?)

Friday, September 12, 2008
Before: -

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.

Tuesday, September 2, 2008

Free FOREX Webinar - Sept. 3, 2008

Hi gang!

It's that time again! Another FREE webinar hosted by the International Securities Exchange (ISE)! I would like to invite you to join me this afternoon at 4:30 EDT on Successful FX Strategies for Any Market Condition. As always, it doesn't matter whether you specialize in FX or not! My strategies apply to all markets, so you will learn something regardless of your own preference!

In this week's session I will be reviewing key concepts covered in July's webinar, as well as follow up on the progress of the USD/CAD buy setup I gave you at the time. We will also take a look at where some of the key FX pairs are heading from here!

To register for this free event, simply go to https://ise.webex.com/ise/onstage/g.php?t=a&d=711489034

Even if you cannot make it to the session register anyway since you will then be able to access the logs!

I look foward to "seeing" you there!

All my best,
Toni Hansen

Monday, September 1, 2008

Nasdaq Leads Week of Losses

Important Announcement:

Good day! Just a reminder: The "Daily" Market Action Letter has become a weekly letter at this time. It will continue as such until after the Forex Expo in mid-September, after which it will resume on a daily basis. In the meantime, I will be resuming the Weekly Market Action Video, which will be updated each weekend by the open on Monday and posted at http://www.tonihansen.com/marketactionvideo/. Please remember, however, that neither the video nor the Position Trader are published on holiday weekends, but don't worry, both will return next Monday! Have a wonderful shortened trading week!

All my best,
Toni

Nasdaq Leads Week of Losses

(Note: Unless otherwise stated, the index action described below relates to the EMini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.)

The S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) both fell 0.7% last week. The S&Ps closed on Friday at 1,282.84, while the Dow closed at 11,543.55. The Nasdaq Composite ($COMPX) faired worse, losing 2% to end the week at 2,367.52. Action in recent weeks has been marked by steady rallies followed by sharp selloffs. One such rally had taken place ahead of Monday's open, but the indices had been rolling over at highs on Friday and gapped strongly lower Monday morning. Strong downside action continued to drag the market lower into Tuesday, but the pace rolled over at lows and another intraday recovery began.

The market turned back around mid-week, pushing higher once again. The indices held the daily correction off resistance which we have been following over the last several weeks since the indices first ran into the daily and weekly resistance zone between August 11th-15th. The S&Ps and Dow attempted to push through it on Thursday when the latest rally took place on a 60 minute time frame, but volume was light on the attempt and the Nasdaq failed to break through its own upper trend channel resistance. Failing to confirm the breakout attempt, the indices fell back sharply on Friday, kicking off once again with a strong gap lower.

This break lower on Friday marks the third move on the downside on a 60 minute time frame in the Nasdaq Composite. Since each push lower has created a very slightly lower low, it is possible that a momentum reversal pattern can form, resulting in a break higher late Tuesday or into Wednesday. If the lower end of the channel breaks, along with the 50 day simple moving average, however, then the upside moves since August 21st would then be viewed as just two waves of a correction from the move lower which began on the 15th and the Nasdaq, along with the S&Ps and Dow, could then break lower for a move equal to the initial drop off August highs into the lows of the 21st of August. Such a break would take the market to at least the lows from July 28th in the S&Ps and Dow and Aug. 4th in the Nasdaq.

Nasdaq Composite ($COMPX)

On a weekly time frame not much has changed as far as the market's bias since last week. The Nasdaq is continuing to form a potential cup-with-handle, while the indices are continuing to show a strong inclination to continue to hold the previous weekly lows from early July for about two more months. A good example of how the current market action on a weekly time frame can play out is to compared the weekly charts of the S&Ps and Dow to the currently 60 minute chart of the Nasdaq. The highs in September/October on the S&Ps and Dow would be the pattern equivalent of the highs from the 15th on the Nasdaq, while the correction off lows earlier this year into May would be comparable to the bounce from Aug. 21-22 in the Nasdaq on the 60 minute. The current weekly chart would thus be similar to the the action 26th, which peaked on the 28th. Should this current weekly action continue play out like it did on the 60 minute, then we can expect another break lower in the fall.

Despite weekly losses, the market still managed to close higher on the month. The S&P 500 gained 1.2%, while the Dow Jones Ind. Ave. added 1.5%, and the Nasdaq Composite climbed 1.8%.

Dow Jones Industrial Average ($DJI)

In other markets, the euro and dollar are also continuing to follow through as expected in that they have both held their respective resistance and support levels on a weekly time frame and congested. As I stated before, however, both can push these levels a bit further still before a larger price correction takes place. This means room for slightly higher highs on a daily chart of the dollar and slightly lower lows for the euro on that same time frame. If this momentum shift continues to form in that manner, then each currency can easily reverse sharply in the fall as well. The dollar would pull back quickly, while the euro jumped once again. The extent of these moves, however, is going to depend upon how strongly the pace of the price action shifts. A more gradual move higher at this point, followed by a sharp pullback off the highs in the dollar, for instance, can more easily create an Avalanche continuation pattern that would then lead to a second wave of strong selling that would likely be larger than the first later on in the year or into early next year. Vice versa for the euro.

S&P 500 ($SPX)

Oil is another market that is constantly in the headlines. It has also hit a larger support level, like the euro, in recent weeks. It has weaker support, however, than the euro and I can more easily see it having a stronger break lower within the next few weeks. The next support level in oil is March's congestion, which will be about the 50 week sma, followed by the largest congestion from late last year into February of this year. This is about $90-$100 a barrel.

Economic Reports and Earnings Events This Week

Economic Reports and Events This Week

Monday, September 1, 2008
No economic indicators.

Tuesday, September 2, 2008
10:00a.m. Jul Construction Spending: Expected: -0.5%. Previous: -0.4%.
10:00a.m. Aug ISM Manufacturing Business Index: Expected: 49.5. Previous: 50.0.
5:00p.m. ABC/Wash Post Consumer Conf For Aug 31: Previous: N/A.

Wednesday, September 3, 2008
7:45a.m. ICSC Chain Store Sales Index For Aug 30: Previous: +0.2%.
8:55a.m. Redbook Retail Sales Index For Aug 30: Previous: -1.8%.
10:00a.m. Jul Factory Orders: Previous: +1.7%.

Thursday, September 4, 2008
8:30a.m. Initial Jobless Claims For Aug 30th Week: Expected: -5K. Previous: -10K.
8:30a.m. 2Q Revised Productivity: Expected: 3.9%. Previous: +2.2%.
8:30a.m. 2Q Revised Unit Labor Costs: Expected: -0.3%. Previous: +1.3%.
10:00a.m. Aug ISM Non-Manufacturing Composite Index: Expected: 49.0. Previous: 49.5.
10:00a.m. DJ-BTMU Business Barometer For Aug 16: Previous: -0.5%.

Friday, September 5, 2008
8:30a.m. Aug Nonfarm Payrolls: Expected: -30K. Previous: -51K.
8:30a.m. Aug Unemployment Rate: Expected: 5.8%. Previous: 5.7%.

Key Earnings Announcements This Week:
Monday, September 1, 2008
Before: -
After: -

Tuesday, September 2, 2008
Before: DHT
After: DCI, NCS, SNDA

Wednesday, September 3, 2008
Before: ISLE, JOYG, KFY (?), SPLS, UNFI
After: CWST, CASY, PSS, GES, HRB, HOV, MR, SAI

Thursday, September 4, 2008
Before: CMRT, BRLI (?), BTH, CIEN, CRAI (?), JTX, MDZ, MEI (?), MOV, SIFY (?), TOL, UTIW, VOL
After: ABM, ADCT, AVAV (?), ARTC (?), CAE, COO, IIG, MATK, PEC, TUTR, ZQK, SEAC, SWHC, TTWO, ULTA

Friday, September 5, 2008
Before: NSM, SCMR

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.

Toni Hansen's Online Trading Blog

Tuesday, September 30, 2008

Market Exhaustion Leads to Partial Recovery

Monday, September 29, 2008

Dow Sets Records with Losses Topping 777 Points

Saturday, September 27, 2008

Tech Stocks Pull Market Lower Following RIMM Earnings, but Market Recovers Throughout Remainder of the Day

Economic Reports and Earnings Events This Coming Week

Friday, September 26, 2008

CurrencyShares

Position Trade: FXY

Question on Gap Plays

Thursday, September 25, 2008

Market Rollover Leads to a Strong Day of Buying, but Turns Lower into the Close and Beyond

Wednesday, September 24, 2008

Market Grinds to a Halt, Metaphorically Speaking

pssst... find me on facebook!

Tuesday, September 23, 2008

Market Pullback Continues

Monday, September 22, 2008

Commodities Soar While Broader Market Plummets

Hmmm.....

Sunday, September 21, 2008

Market Action Video - Sept. 22

Toni's Position Trader - ABMD

Saturday, September 20, 2008

Quote by Donald Rumsfeld

Wednesday, September 17, 2008

A Look into the Financial Sector Maneuverings of 2008 and a Glance at the Future

Tuesday, September 16, 2008

Toni's Sept. Bookstore Specials

Monday, September 15, 2008

Choppy Week of Trade Dominated by the Constantly Shifting Tide of the Financial Sector

Thursday, September 11, 2008

Economic Reports and Earnings Events Sep. 15-19

Monday, September 8, 2008

Bull Market Rallies

Sunday, September 7, 2008

Market Channel Break Burst Bull's Bubble in Last Week's Trade, While Market Rallies into this week on FNM and FRE Government Takeover

Toni's ISE Webinar Logs and Power Point for Sept. 3, 2008

Saturday, September 6, 2008

Position Trader Newsletter - INTU long

Economic Reports and Earnings Events This Week

Tuesday, September 2, 2008

Free FOREX Webinar - Sept. 3, 2008

Monday, September 1, 2008

Nasdaq Leads Week of Losses

Economic Reports and Earnings Events This Week

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