Economic Reports and Earnings Events This Week

Economic Reports and Events This Week

Monday, December 29, 2008
10:00 a.m. Nov Help Wanted Index: Previous: -70K.
10:30 a.m. Dec Dallas Fed Mfg Production Index: Previous: -21.
12:00 p.m. Nov Chicago Fed Midwest Mfg Index: Previous: -1.0.

Tuesday, December 30, 2008
7:45 a.m. ICSC Chain Store Sales Index for Dec 27: Previous: +2.6%.
8:55 a.m. Redbook Retail Sales Index for Dec 27: Previous: -0.7%.
9:00 a.m. Oct S&P/Case Shiller Home Price Index: Previous: -18.6%.
9:45 a.m. Dec Chicago PMI: Expected: 33.0. Previous: 33.8.
10:00 a.m. Dec Conference Board Consumer Confidence: Expected: 45.5. Previous: 44.9.
5:00 p.m. ABC/Wash Post Consumer Conf for Dec 27: Previous: -48.

Wednesday, December 31, 2008
7:00 a.m. MBA Mortgage Application Refinance Index for Dec 26: Previous: +62.6%.
8:30 a.m. Initial Jobless Claims for Dec 27 Week: Expected: -11K. Previous: +30K.
10:00 a.m. DJ-BTMU Business Barometer for Dec 19: Previous: -0.5%.
10:35 a.m. US Energy Dept Oil Inventories for Dec 26
10:35 a.m. API Oil Industry Report for Dec 26
12:00 p.m. Natural Gas Inventories for Dec 25

Thursday, January 1, 2008
No economic events are scheduled for today.

Friday, January 2, 2008
10:00 a.m. Dec ISM Mfg Index: Expected: 35.7. Previous: -36.2.


Key Earnings Announcements This Week:

Monday, December 29, 2008
Before: -
During: -
After: RICK

Tuesday, December 30, 2008
Before: -
During: -
After: ASH (?), SHFL (?)

Nothing the remainder of the week.

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

Oil Falls Under $40 for the First Time in 4 Years

Oil Falls Under $40 for the First Time in 4 Years

(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 opened relatively unchanged on Thursday as it held the zone of Wednesday's lows. The Labor Department announced ahead of the open that filings for initial jobless claims fell 21,000 last week to 554,000. They are up 59% from this same time last year. Continuing claims fell 47,000 to 4.38 million, up 66% from last year. The news had little impact upon the market. In fact, the market had a difficult time finding anything to get it going either way on Thursday morning.

Nasdaq Composite ($COMPX)


Following the opening bell, the indices congested for a few minutes and then continued lower. The index futures now had two clear highs in place on a 60 minute time frame with a slower paced move into the second high. This change of pace on the upside confirmed when the pullback off Wednesday's highs was a great deal stronger than the rally into them. What the market favored next for a larger price reversal off highs was a third slower upside move. Although it failed to create such third more gradual uptrend, the indices nevertheless complied with the pace change. After hitting morning lows at approximately 10:00 am ET, the indices fell into a triangle on the 15 minute time frame.

Volume declined throughout the morning as each wave of upside with the 15 minute triangle paced itself more gradually than the previous one and the downside maintained a more rapid momentum. This, combined with the rounded 60 minute highs, left the market with a strongly bearish bias into the afternoon on Thursday. The triangle first began to break lower out of the 12:00 ET correction period. The lower channel still held, however, and the indices fell into a base along that lower trend channel. It finally broke free around 13:30 ET.

When the triangle broke, the pace of the selling increased. Volume increased as well, which confirmed the breakout and the bearish bias for the afternoon. Both continued to build upon each other throughout the afternoon. The session ended on Thursday in the midst of last week's trading range.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) lost 219.35 points, or 2.5%,and closed at 8,604.99. 25 of the Dow's 30 index components closed in negative territory on Thursday. The decliners were led by General Motors (GM), which fell 16.25% on reports that it was in merger talks with Chrysler. Meanwhile, General Electric (GE) fell 8.2% after Standard & Poor's lowered the rating outlook on the company's financial-services sector.. Other top losers included Intel Corp. (INTC), which fell 6.55%, and Alcoa Inc. (AA), which lost 5.6%. Caterpillar (CAT), J.P. Morgan & Chase (JPM), DuPont (DD), Citigroup (C), and Exxon Mobil (XOM) all lost more than 5%. The S&P 500 ($SPX) fell 19.14 points, or 2.1%, on Thursday and closed at 885.34. Crude oil continued to stumble, down approximately 10% to close at $36.22 a barrel. Crude oil prices are now down more than 75% since peaking in July. The Nasdaq Composite ($COMPX) shed 26.94 points, or 1.7%, to close at 1,552.37.

S&P 500 ($SPX)


Over the past several days we have been looking at the potential for a continuation short pattern forming on the daily time frame. The indices had pushed higher with two waves on light momentum into last week, but even though it triggered the third wave attempt on Tuesday with the Fed announcement, its had a difficult time continuing that third wave. Although the indices broke free of the channel of the pullback last week, the market was not able to break to a higher high. This is not what I had wanted to see in order for the momentum reversal to take place to pull the market back into a third low, but the Dow in particular is still at risk. To continue to favor this occurrence, some additional downside into the weekend would be most likely, followed by congestion early next week before another break lower.



Note: I'll be out of town over the next week for the holidays, but my Daily Market Action letter will resume at the start of the new year! Have a wonderful break!

Market Struggles to Digest Fed News

Good day! The market action on Wednesday was rather choppy following Tuesday's strong Fed day rally. The FOMC dropped lending rates to record lows on Tuesday and this propelled the indices higher into the closing bell. It also left them rather exhausted heading into Wednesday. The index futures had rolled over off higher in premarket trade and opened lower on Wednesday. They congested out of the open with the 5 minute 20 period simple moving average serving as resistance before giving way to further selling into 10:00 am ET.

Support held at the 10:15 ET correction period when the weaker Nasdaq came into support from Tuesday's mid-day trading range and the S&P 500 and Dow Jones Industrial Average came into their 20 period simple moving averages intraday. The correction period held well and the market climbed into the 5 minute 20 sma. At that resistance level they fell into a trading range, forming a 5 minute Phoenix buy pattern. Volume was light in the congestion and this supported an upside breakout bias. That breakout began into 11:45, but picked up momentum shortly after noon. The strongest intraday buying followed.

Nasdaq Composite ($COMPX)


The bulls remained in control throughout the first half of the afternoon, but the upside was accomplished in short-lived bursts, followed by a lot of price retracement. This slowed the overall pace of the buying and allowed for a stronger reversal pattern to form intraday going into the 14:00 ET correction period. The market began to hug the lower end of the uptrend channel and then broke lower out of the correction period. Earlier congestion served as support, but the congestion at the previous highs also served as resistance and a bearish range formed with a 2-wave short setup triggering on a 5 minute time frame into the closing bell.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) lost 99.80 points, or 1.1%, and closed at 8,824.34. 24 of the Dow's 30 index components posted gains in Wednesday's session. The main losers were Citigroup (C) down 4.86%, Bank of America (BAC) down 3.18%, and General Electric (GE) down 2.96%. Leading the gainers were General Motors (GM) up 2.82%, Caterpillar (CAT) up 1.94%, and Verizon (VZ) up 1.64%. The S&P 500 ($SPX) fell 8.76 points, or 1.0%, on Wednesday and closed at 904.42. Crude oil prices took a dive when the Organization of Petroleum Exporting Countries (OPEC) announced that it felt that large production cuts would not offer much relief for falling prices, which are down over 70% since last summer. Crude oil surplus rose last week in part because prices have been cheaper for near-month crude than future delivery. January crude oil futures closed at $40.06 on Wednesday, down 8.1%. Gasoline prices are currently averaging $1.667 a gallon. The Nasdaq Composite ($COMPX) shed 10.58 points, or 0.7%, to close at 1,579.31. Apple (AAPL) weighed heavily on the index with a 6.5% price decline on speculation over the health of CEO Steve Jobs after news that he would not be speaking at the MacWorld trade show in January. It accounted for about half of the Nasdaq-100's losses. 51 of the Nasdaq 100's stocks closed with gains, but the index still fell 1.4%.

S&P 500 ($SPX)


The momentum reversal pattern that I've described over the past several days and drew on the Nasdaq on the daily time frame is still developing well. The slow upside on Wednesday off intraday lows showed that the market is still uncertain whether or not to hold the daily lows and the risk remains for a third test. The monthly support zone, however, remains very strong. A third low would actually be helpful in turning the market more sharply higher off the support than an attempt to continue to hold the current low.

Fed Cuts Rates to Record Low

(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 was off to a strong start heading into Tuesday's Fed day trading. The indices had popped higher into Monday's closing bell and then proceeded to fall into a trading range afterhours. The futures continued to trade in a narrow sideways base until the 3:00 am ET correction period when the 15 minute 200 period sma hit on the all sessions time frame. At that point they pulled higher off the lows of the trading range and then held the upper end of the range more snugly. This created a bullish bias for a breakout of the range.

The breakout itself took place out of the 4:00 am ET correction period and quickly gained momentum. The upside was not quite as strong as the late afternoon pop the day before, however, so the early morning rally fell short of an equal move as compared to the previous rally. At about 4:45 ET the futures market began to correct off highs, forming a two-wave pullback into the 15 minute 20 sma in premarket trade. This served as another major support zone and helped the market once again pull higher, taking both the S&P 500 and Dow futures back into congestion zone of the premarket triangle from Monday morning.

Ahead of the open, the markets shrugged off the news that consumer prices fell by a non-seasonally adjusted rate of 1.9% in November. This was the fastest decline since the heart of the Great Depression in 1932. When seasonally adjusted, a practice which began in 1947, the U.S. consumer price index fell 1.7%, which is the largest decline its had since that practice was instituted. Unfortunately for consumers, prices of necessary goods such as food, medical care, and clothing all rose this past month. Medical care alone is up 2.7% this past year.

Nasdaq Composite ($COMPX)


When the opening bell rang on Tuesday the indices had a difficult time figuring out what to do. The market had confirmed its desire for a third push higher on the daily time frame by continuing to shift its momentum with slower downside on Monday, followed by a sharper upside move, but it was still having trouble breaking the upper end of the daily range. This was the level I had pointed out in yesterday's column as moderate price resistance and it was enough to push the indices into yet another trading range which lasted throughout the better portion of the day.

The market did continue to favor bullish action within the range itself. At about 10:15 ET it had a shallow two-wave correction off morning highs into the 5 minute 20 period simple moving average. It held this support and pulled back to the highs of the range on stronger momentum out of 11:00 ET and another small, shallow base into 11:30 ET. It then repeated this same pattern on a larger scale into the 15 minute 20 sma and was tightly hugging the highs of the day when the 14:15 ET FOMC rate announcement was made.

Dow Jones Industrial Average ($DJI)


At 2:15 ET the Fed made the historic decision to drop its key federal funds rate to a record low of 0-0.25%. It had been 1%. It also cut its discount rate for short-term loans from 1.25% to 0.5%. In addition, it announced that it would push more money into the economy to help attempt to stimulate the housing market in particular. The market took off on this unexpected news and pushed through the upper end of the daily trend channel to trigger the third push higher that I drew on the S&P chart yesterday. The rally continued with a strong bullish triangle on the 5 minute time frame shortly after 15:00 ET and closed at highs despite another range into the closing bell.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) added 359.61 points, or 4.2%, and closed at 8,924.14. All of the Dow's 30 index component closed higher. Financials were the strongest. J.P. Morgan & Chase (JPM) rose 13%, while Citigoup (C) added 10.8%. The S&P 500 ($SPX) rose 44.61 points, or 5.1%, on Tuesday and closed at 913.18. Financials, telecommunication services and consumer -discretionary sectors led the gains which stretch to all 10 if the index's industry groups. The Nasdaq Composite ($COMPX) added 81.55 points, or 5.4%, to close at 1,589.89.

The price pattern I drew on the S&Ps yesterday has the third push higher on the daily time frame, but it also shows the risk involved if the momentum does not remain strong on the upside. The futures are currently trading lower in premarket trade and three pushes to the upside tend to correct with a break in the lower channel of the uptrend. This means that unless there is a strong surge to break the upper end of this daily channel over the next two trading days that we can still be susceptible to a third push lower on the larger weekly time frames. This would essentially create a pattern that would be the mirror opposite of the smaller daily one and would mean a possible third low before the market could then correct more strongly off this monthly support zone into January.




I will be relaunching my very popular 5 Technical Signals CD course in early 2009. At this time I will also be increasing the price of this course, so be sure to act now if you wish to purchase it at the current price of $279. Those who have already purchased the course, or who do so by the end of the month, will be sent free course updates ahead of the relaunch!

To learn more, please visit http://www.swingtrader.net.

Market Reverses Friday's Move with Similar Play

(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 is trading higher in premarket action after Monday's session provided nearly the mirrored opposite of last Friday's action. On Friday the indices were trading strongly lower into the open and the strongest move of the day took place coming off those lows into highs at about 11:00 AM ET. A series of three slightly higher highs then formed on a 15 minute time frame with the market correcting off the third high in the final hour of trade. Monday the main move was on the downside out of the open. A series of three lows then followed with each slightly lower that the prior one. The indices corrected off the third low in the final hour of trade.

This type of three wave pattern is typical in the markets. When the initial move, or wave, is sharper than the second and third ones, then a reversal or correction coming out of the third high or low can be quite rapid. This is one of my favorite reversal strategies and is one we currently have a decent chance of seeing develop as a short setup on the daily time frame over the past couple of weeks with wave two already complete and the potential for a third wave up now at hand. We also have this pattern potential on a weekly time frame where we have two waves lower already in play and should the short setup trigger on the daily coming off a third high, then it can lead to a third low on the weekly time frame.

Nasdaq Composite ($COMPX)


We've been monitoring this daily move off last month's lows rather closely. In order to prevent the odds of a retest and possible lower low on the weekly time frame, the market needs to gain strong momentum on the upside over the next couple of days. Even then, however, this would still be a third wave higher coming off the lows, so a break of the uptrend channel that has been in place over the past several weeks should be coming up within a week or so.

The fact that the three wave move lower on Monday formed with slower overall downside momentum that the three waves of upside on Friday supports the odds that the market will try for a third move higher on the daily, but it is still too early to take a great guess at how quick the follow through will be. Even on an upper channel break from the past several weeks, the early November highs are substantial price resistance and will not likely break easily without a larger weekly correction.

Dow Jones Industrial Average ($DJI)


Today is a Fed meeting day and the main focus throughout the session will be in anticipation of that 2:15ish ET afternoon announcement. The premarket upside is holding with the larger bias on FOMC days to push higher in the morning, but the upper zones of the daily congestion last week will serve as moderate price resistance and likely slow any strong push into that level. Expect volume in the market to drop off a great deal over noon and leading into the mid-afternoon news. Use added caution to not keep open any unnecessary charts or quotes going into the report, since the influx of volatility can have a tendency to lock up charts and deliver delayed quotes. Following the news, expect three waves of reaction. This will typically take place first on a 1 minute time frame and then repeated on the 5 minute. Support and resistance levels hold extremely well on Fed days, but you have to add a bit more cushion to the support and resistance zones than usual to accommodate the volatility. This is mean larger price stops in many cases, so be sure to adjust share and contract size accordingly.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed lower on Monday by 65.15 points, or 0.7%, at 8,864.53. 20 of the Dow's 30 index components finished higher on Friday. The financials had the most difficult time. J.P. Morgan & Chase (JPM) fell 7.5%, wile Bank of America (BAC) closed lower by 5.5%, and American Express (AXP) lost 4.9%. Citigroup (C) also posted a loss, down 3.9%. The S&P 500 ($SPX) fell 11.16 points, or 1.3%, on Monday and closed at 868.57. In the S&Ps the telecommunications sector was the hardest hit, losing 4.2%, while financials came in second for a loss of 3.6%. Crude oil finished lower by 3.8% for January delivery at $44.51 a barrel. The Nasdaq Composite ($COMPX) lost 32.38 points, or 2.2%, to close at 1,540.72.

Market Continues to Brush Off "Bad News"

(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 opened sharply lower on Friday morning following a strong afternoon breakdown from a 2-wave sell formation Thursday afternoon on the 15-60 minute time frame. It gained momentum coming out of the 13:00 ET correction period and continued strongly in afterhours trade when the Senate failed to pass the automaker bailout package following its approval by the House. The gap resulting from the afterhours selling extended the losses to the point of exhaustion. They traded back into the congestion from the trading range that formed at the start of the month on the daily time frame, which also served as a substantial support zone.

Nasdaq Composite ($COMPX)


The best way to play gaps such as the one which took place on Friday morning is to mark the 15 minute highs and take a break of that high. Due to the previous afternoon's strong trend and the larger time frame support, the odds were in favor of a decent morning uptrend and closure of the opening gap. Earlier entries are also possible on these types of gaps, however, if there is a setup forming into the open based upon premarket trade. This was the case on Friday when the indices had begun to slowly roll over off the lows into midnight and then based until just after 9:00 am ET. They broke sharply out of this base and formed a small 2-wave pullback on a 1 minute time frame into the open to offer an initial intraday trigger at 9:33 am ET. The 15 minute break of highs to trigger the more "traditional" gap setup was also out of a small 2-wave correction on a 1 minute time frame that triggered at 9:50 am ET.

Dow Jones Industrial Average ($DJI)


The opening rally resulting from these early morning gap setups continued into previous day's intraday lows and the 5 minute 20 period simple moving averages on the S&P 500 and Dow Jones Industrial Average futures. These resistance levels hit at about 10:00 ET and the indices pulled back along the resistance to form a 5 minute Phoenix pattern. Volume declined as the indices corrected and formed the congestion for the Phoenix. The continuation buy setup triggered strongly out of the 10:15 ET correction period and by 11:15 ET the morning gaps zones had closed in the S&Ps and Dow. The gap zone served as price resistance, while the stronger Nasdaq Composite, which had closed its own gap early on, hit resistance at the lower end of the multi-day base from earlier in the week and its 15 minute 20 sma zone.

A third intraday swing to the upside on Friday took place coming off the second 5 minute pullback. This time the Nasdaq was hugging its 15 minute 20 sma. The pace of the move was a bit strong, but still weaker than the prior bounce. The pullback was on light volume and triggered another intraday buy setup into noon. The stronger pullback in the Nasdaq made it more difficult for the rally itself to gain strength out of noon and it had trouble pushing through the previous highs. A more gradual correction on the Dow, on the other hand, allowed it to easily break the morning highs into the early afternoon. All of the indices still climbed steadily for about an hour until the 13:00 ET correction period. At this point they were testing price and moving average resistance once again on 5 and 15 minute time frame and quickly kicked off a third intraday pullback from highs.

S&P 500 ($SPX)


The afternoon correction off highs was the strongest of the day. The pace shifted with the benefit of a small 1 minute Avalanche and it took only about half the time for the indices to give back the afternoon's gains as it took to make them. Support from the prior buy trigger zone and 15 minute 20 sma hit around 13:30 ET. The greater strength on this pullback meant that a trading range would follow, but the outcome remained uncertain. Even though the 15 minute charts still favored a longer time correction off the day's lows, it could have still done so by falling into a range with the earlier lows zone as support. This was the bias I had favored the evening before, but the upside out of the open was stronger than the rally into Thursday afternoon, meaning that if the intraday uptrend channel held into the afternoon, then a break of its lows would not be as great as the breakdown on Thursday.

The afternoon range began to favor a congestion breakout bias almost immediately after the pullback hit support. The indices popped sharply into the 14:00 ET correction period, but they did not rally quite far enough to allow a strong afternoon upside breakout pattern to form. A 2B developed instead into 14:30 ET. Even though this was still a bullish pattern and followed through into its typical target zone which hit at 15:00 ET, the lesser rally at 14:00 ET made it again difficult to bust the prior intraday high and the market spent the final hour of the day in a choppy range along the 5 and 15 minute 20 smas.

The market finished relatively unchanged on the week this past week despite strong gains to to kick it off on Monday and strong losses into Friday morning. After falling on Thursday and into Friday on a trading range breakdown, assisted by disappointment by the automakers of a failed bailout package, the Dow Jones Industrial Average ($DJI) closed higher on Friday by 64.59 points, or 0.8%, at 8,629.68 for a weekly loss of just under 0.1%. 21 of the Dow's 30 index components finished higher on Friday, but both gainers and losers were rather tame. Intel (INTC) rose 5.28%, while United Technologies (UTX) rose 3.70%, Hewlett Packard Co. (HPQ) rose 3.42%, and J.P. Morgan & Chase (JPM) climbed 3.34%. On the losing side, General Motors posted the largest loss, down 4.37%, while Boeing (BA) fell 2.66%, and Johnson & Johnson (JNJ) lost 1.72%.

The S&P 500 ($SPX) rose 6.14 points, or 0.1%, on Friday and closed at 879.73, up 0.4% on the week. 7 of the 10 industry groups posted gains on Friday, led by financials, information technology and materials on the upside with energy, telecommunication services, and health care on the losing end. Crude oil, which tends to heavily influence the energy sector, fell on Friday, but posted a weekly gain of $5.47 a barrel, or 13.4%, and ended the session at $46.28 a barrel on the New York Mercantile Exchange.

The Nasdaq Composite ($COMPX) had the greatest strength amongst the three major indices on Friday, rising 32.84 points, or 2.2%, to close at 1,540.72, up 2.1% for the week. The index was powered by positive action in internet shares. Amazon.com (AMZN) posted gains of 6.2% on Friday, while eBay Inc. (EBAY) rose 3.5%, and Yahoo. Inc. (YHOO) climbed 3.3%). The Morgan Stanley High Tech 35 Index (MSH) rose 2.4% on Friday, but paled in comparison to the Philadelphia Semiconductor Index ($SOX), which climbed 4.7%. One of the best performing semiconductor stocks was Fairchild Semiconductor (FCS), which rose 12.9% after it announced a proposed workforce cut of 12%. The technology underachievers on Friday included the likes of Dell Inc. (DELL), down 1.8%, and Microsoft Corp. (MSFT), down 0.5%.

Despite the weak follow through on last Monday's daily Phoenix formation, since the indices did not just climb slowly throughout last week and instead held highs early on in the week, this will help the bulls try to regain control this week. The base last week was not quite as long as the previous daily base, so we may see the congestion hold for another day or two first, but the the current bias favors the market holding the zone of last week's lows. If the pace is slow heading higher out of this most recent congestion, then this will more easily form three waves on the daily coming off November lows into the 9100-9200 level in the Dow followed by another faster pullback for the potential of weekly reverse head and shoulders on the Dow. On the other hand, a sharper break higher will place the next major Dow resistance at the 9600-9700 zone. This is the zone of price action from the start of November.


NOTICE

I will be relaunching my very popular 5 Technical Signals CD course in early 2009. At this time I will also be increasing the price of this course, so be sure to act now if you wish to purchase it at the current price of $279. Those who have already purchased the course, or who do so by the end of the month, will be sent free course updates ahead of the relaunch!

To learn more, please visit http://www.swingtrader.net.

Economic Reports and Earnings Events This Week

Economic Reports and Events This Week

Monday, December 15, 2008
8:30 a.m. Dec NY Fed Manufacturing Index: Previous: -25.4.
9:00 a.m. Oct Treasury International Capital Flows: Previous: $57.2B.
9:00 a.m. Nov Industrial Production: Previous: +1.3%.
9:15 a.m. Nov Capacity Utilization: Previous: 76.4%.
1:00 p.m. Dec NAHB Housing Market Index: Previous: 9.

Tuesday, December 16, 2008
7:45 a.m. ICSC Chain Store Sales Index For Dec 13:
8:30 a.m. Nov Consumer Price Index: Previous: -1%.
8:30 a.m. Nov CPI, Ex-Food & Energy: Previous: -0.1%.
8:30 a.m. Nov Housing Starts: Previous: -6.3%.
8:55 p.m. Redbook Retail Sales Index For Dec 13:

Wednesday, December 17, 2008
8:30 a.m. 3Q Current Account Balance: Previous: -$183.1B.

Thursday, December 18, 2008
8:30 a.m. Initial Jobless Claims For Dec 13 Week:
10:00 a.m. Nov Conference Board Leading Indicators: Previous: -0.8%.
10:00 a.m. Dec Philadelphia Fed Business Index: Previous: -39.3.
10:00 a.m. DJ-BTMU Business Barometer For Nov 10:

Friday, December 19, 2008
No economic events are scheduled for today.

Key Earnings Announcements This Week:

Monday, December 15, 2008
Before: IPSU
During: -
After: ABM, CPII, SWHC, TITN

Tuesday, December 16, 2008
Before: BBY, FDS, GS
During: RTK
After: AIR, ADBE, APSG, HOV, PAY

Wednesday, December 17, 2008
Before: CMC, CAG, GIS, JOYG, LNN, MDZ, MS
During: -
After: APOG, HWAY (?), HEI, MLHR, MU (?), NKE, NDSN, PAYX, SMSC (?), SEH (?), TTWO

Thursday, December 18, 2008
Before: ATU, CCL, DFS, FDX, LEN, MCS, PIR, PRGS, RAD, SCHL, VOL (?), WGO, WOR
During: -
After: COMS, ACN, DRI, FSII (?), ORCL, PALM, PLAB, ZQK, RIMM, RICK (?), SHFL (?), SMOD, TK (?)

Friday, December 19, 2008
Before: KMX, CTAS, JBL, STEI
During: -
After: -


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

Intraday Discussion on S/R from back in Sept.

Hello... Here is a discussion showing a live demonstration of support and resistance levels and their use as price develops which took place in my chatroom back in September that I promised to dig up to accompany the discussion from intraday today. The previous post is from today and deals more with momentum. In the following "r" means resistance and "s" means support when posted solo. "futs" means index futures. YM is Dow, ES is S&Ps and NQ is Nasdaq. And, no, I don't actually draw all these lines on my charts =), but rather they are a visual representation of the interpretations I am making in my head and posted as a learning tool. Nor did I take the setups discussed below since it is rather difficult to teach AND trade at the same time, esp. in a text format while trying to make charts, although I did manage to catch the one setup today in the process. I felt this was a great opportunity to show how I look at certain things, however, and how I use that info in my trading. I kept the time stamps in place to show the live unfolding of price to accompany the discussion. I hope you find it useful in your quest for a better understanding of how to read price action!

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

DISCUSSION ON TECHNICAL ANALYSIS (T/A) & SUPPORT & RESISTANCE (S/R):
13:57 Toni: t/a holding really well
13:57 Toni: the whip back up was right smack into the congestion
13:58 Toni: if you look at a 5 min
13:58 Toni: compared the drop this am
13:58 Toni: adjust it for pace
13:58 Toni: and you have equal move
13:58 Toni: style support
13:58 Toni: at that low int he 10450 zone
13:59 Toni: two waves of upside off the low
13:59 Toni: second wave slower than first
13:59 Toni: back into that congestion resistance
13:59 Toni: now back into the area between the two waves
13:59 Toni: where it stalled
13:59 Toni: so... fast insane market in that regard
13:59 Toni: but completely orderly from a technical analysis standpoint
14:00 Toni: i will post a chart
14:00 Toni: just a min
14:01 Toni: 10500 was actually the equal move target
14:01 Toni: went past just because of the pace of the selling
14:07 Toni: http://www.tradingfrommainstreet.com/images/trades/EqualMoveDow.gif

14:08 trauma: thanks Toni
14:08 Toni: just now hitting that blue target i drew
14:08 Toni: again though on stronger pace than initial drop
14:09 Toni: initial meaning about 13:55
14:09 Toni: initial blue drop on the smaller time frame
14:09 Toni: second chart
14:09 Toni: just hit target
14:09 Toni: notice i was able to draw it on the chart
14:09 Toni: BEFORE it even gave a setup
14:14 Toni:
http://www.tradingfrommainstreet.com/images/trades/SRDow2.gif
14:23 Toni: futs R
14:25 Toni: -468
14:25 Toni: holding R
14:28 Toni: no second vote today
14:29 Toni: http://www.tradingfrommainstreet.com/images/trades/SRDow4.gif

14:38 Toni: i dont usually draw all these lines on myself...i just eyeball them
14:38 Toni: but these are what my eyeballs identify :)
14:38 Toni: so you can see technically speaking
14:38 Toni: what the s/r levels are i have been using
14:40 opw3:with so many lines my brain starts to smoke
14:40 Toni: :)
14:41 Toni: r here
14:41 opw3:I have to close at least one eye
14:41 Toni: getting smaller time frames
14:41 Toni: as range narrows....
14:41 Toni: like i said...i dont draw :) it gets confusing lol
14:42 Toni: i dont even use the moving averages
14:42 Toni: just put them on to show you there is support there
14:42 Toni: see... YM holding
14:42 Toni: R
14:45 Toni: http://www.tradingfrommainstreet.com/images/trades/SRDow7.gif

14:53 Toni: this larger pattern on the 300 tick is bearish
14:54 Toni: want is to hold that upper triangle and purple level
14:54 Toni: let me show you time outlook...
14:56 Toni:
http://www.tradingfrommainstreet.com/images/trades/SRDow93.gif

15:01 Toni: you see.....
15:01 Toni: perfect
15:02 norancho:that is one crazy blue lined looking chart
15:02 Toni: :)
15:02 Toni: http://www.tradingfrommainstreet.com/images/trades/SRDow95.gif

15:59 Toni: http://www.tradingfrommainstreet.com/images/trades/SRDow96.gif
15:59 Toni: see
15:59 Toni: the pivot high
15:59 Toni: same time
15:59 Toni: leave market bearish afterhours
16:00 Toni: leaves
16:00 Toni: everyone see that?
16:01 bbk: no
16:02 Toni: ok... earlier in the day i drew the line for the first chart SRDow93
16:02 Toni: the red line projects outwards
16:02 bbk: same length of time as congestion, see that .. why bearish?
16:02 Toni: i said the triangle would break
16:02 Toni: but the bounce back up
16:02 Toni: to amount to that same amount of time
16:03 Toni: so
16:03 Toni: the second chart
16:03 Toni: the SRDow96
16:03 Toni: shows that same red line
16:03 Toni: and how it hit exactly
16:03 Toni: same amount of time as i projected
16:03 Toni: and now...
16:03 Toni: market falling afterhours
16:04 bbk: thank you. much easier to see on this chart.
16:04 Toni: 15:59 Toni:the pivot high
16:04 Toni: 15:59 Toni:same time
16:04 Toni: 15:59 Toni:leave market bearish afterhours
16:04 Toni: 16:00 Toni:leaves
16:05 Toni: yw
16:06 Toni: 14:56 Toni:so.. it can break the lower triangle
16:06 Toni: 14:56 Toni:in fact it will break the triangle soon
16:06 Toni: 14:57 Toni:but then bounce back
16:06 Toni: 14:57 Toni:and not really put in a more substantial move
16:06 Toni: 14:57 Toni:until that same amount of time has passed
16:06 norancho:yeah, interesting, I would not have seen that, ok, you can stay for another day
16:06 Toni: (meaning not able to break lows for another wave on the larger time frames
16:07 Toni: )
16:07 norancho::)

Intraday Discussion on Price Development

14:09 Toni: pace of this bounce will make a range here on the 5 min highly probable so would watch for 2-wave setup
14:10 lionsharecapital: 2min setup long or short?
14:13 Toni: better test of last high will favor a buy
14:14 lionsharecapital: hey norancho we might be getting that H&S now
14:14 Toni: its the last upside and downside move that will really determine it
14:14 Toni: because then you can see the pace shift
14:21 xr3: whipsaw central here
14:21 lionsharecapital: 5min H&S on indices?
14:22 Toni: the bounce so fast is what is leading to this range here... hence the higher odds for that two-wave since it would make a triangle
14:23 Toni: you have this "V" type of action which is indicative of trading range beginning
14:23 Toni: would have been better for the bulls had it pulled up a bit higher though back into that 13:00 high
14:23 Toni: and then pulled back
14:24 lionsharecapital: will this range be the daily between dec2-5?
14:24 Toni: by "v" what i mean to start is if you look at the run from noon into 1
14:24 Toni: then the pullback
14:24 Toni: the pace was pretty similar
14:24 Toni: a little faster up
14:24 Toni: but not much
14:24 Toni: so this creates this peak
14:24 Toni: and it retraces more than half the prior rally
14:25 Toni: so this clues you into more of a range potential
14:25 Toni: it could have formed more of a low-level base at that 5 min support i posted
14:25 Toni: but had that little 2B on the 100 tick to shif pace on the smaller time frame
14:26 Toni: creating second bounce and then confirming longer range to come
14:26 Toni: so at this point i posted to watch for the 2 -wave pattern
14:26 Toni: since the pace was favoring upside in this congestion so far
14:27 Toni: had it pulled up a little more we would have most likely seen the second wave on a pullback off highs
14:27 Toni: be more gradual than that first from 13:00
14:27 Toni: creating a 2-wave buy
14:27 Toni: conversely, since it did not make it that far back up
14:27 AJ: tx Toni - great explanation
14:27 Toni: it makes potential for smaller 2-wave short
14:27 Toni: which would look kinda like an avalanche
14:27 Toni: i will draw charts fast
14:28 Toni: since this is probably a bit confusing
14:28 Toni: then you can reread along with it
14:28 lionsharecapital: going forward from here on the 2min/5min (looking for avalanche?)
14:28 AJ: will you post this to your blog as well?\
14:28 Toni: juset sec
14:33 Toni:
14:33 Toni: those were the two things i was watching to see if we would have develop
14:34 Toni: the top had it pulled up a bit more
14:34 Toni: just a sec
14:35 Toni:
14:35 lionsharecapital: so it is now the second chart formation you are favouring? the short setup?
14:36 Toni: now since it pulled back without a pace change on the second wave in top scenario though
14:36 Toni: the earlier highs now are resistance
14:36 Toni: so we have to watch the pace off this low
14:36 Toni: if it pops
14:36 Toni: it can lead to a slanted "a" setup still for upside but want a shift in the congestion
14:36 Toni: 14:36:42 Breakout Template: For information on A, B, C, D, or Z template patterns, please see The green circle is the entry with the red bar as the stop.
14:39 Toni: u guys see that?
14:39 AJ: yes\
14:41 Toni: ranges can be tricky because the bias will sometimes shift within the range itself
14:41 Toni: it can start out with a faster drop for instance
14:41 Toni: and then as the range progresses the downside slows and upside increases
14:41 Toni: so you can have something that at first glance might look more likely to develop into a short
14:42 Toni: but then creates the reverse because of the pace shift in the range at the end
14:42 Toni: esp if the slower pace move is on lighter volume
14:42 Toni: then it suggests a breakout is most probable the opposite direction of that slower paced move
14:42 Toni: the larger time frame is always a guide
14:43 Toni: but if the larger time frame is not clear cut and had potential for a larger range, then the intraday ranges can be more tricky
14:43 Toni: since we are coming off that huge drop yesterday into this morning
14:43 Toni: it tells us that a correction off that would would have to round off at the low and upside is more likely to be with wider swings on smaller time frames unless it rounded off well
14:43 Toni: we had some rounding off premarket
14:44 Toni: but not enough to get the momentum to sharply reverse
14:44 Toni: we would have needed slightly lower lows on an 800 tick or so
14:44 Toni: es
14:44 Toni: to have gotten any larger pop
14:44 Toni: and since the momentum drop was so steep on the move into this morning
14:45 Toni: even a shift at the lows and fast pop today would not have broken the range from yesterday
14:45 Toni: congestion from intraday would have held from that 60 min range
14:45 Toni: and just pushed it back into another range
14:46 Toni: as it is we have a larger than 50% bounce so thos premarket lows wont break as easily if they try to hit fast again without a two-wave pattern on the 800 tick with this am as first wave up
14:47 Toni: so to get a sharp break of the lows we'd have to see pull back into premarket congestion
14:47 Toni: second bounce
14:47 Toni: then the break
14:47 Toni: like a repeat of the move that led to the breakdown yesterday
14:49 Toni:
14:49 Toni: the blue is the 2-wave setup that triggered yesterdays srop
14:50 Toni: the red is what would be most ideal if we were to see any stronger breakdown pattern of the lows this week
14:50 Toni: slightly lower lows would make for more of a 2b
14:50 Toni: 14:50:24 2B: For more information on this setup, please see http://www.tradingfrommainstreet.com/techanalysis.html#2
14:51 Toni:
14:51 Toni: so
14:51 Toni: that would be if the morning highs held and pace shifted
14:52 Toni: those would be the patterns to have watched on the larger
14:52 Toni: so you can see
14:52 Toni: that market analysis is an ongoing process... you have a set of scenarios that can unfold
14:52 Toni: based upon the earlier price action
14:52 Toni: then as the price action develops
14:52 Toni: you can weed down the scenarios
14:52 Toni: to fewer options
14:53 Toni: typically resulting from pace shifts
14:53 Toni: you can see we got a version of that "a" setup
14:53 Toni: 14:53:19 Breakout Template: For information on A, B, C, D, or Z template patterns, please see The green circle is the entry with the red bar as the stop.
14:53 Toni:
14:53 Toni: because of that lower low on the pullback
14:53 Toni: but heading into the pullback we were looking at basically three options
14:55 Toni: r here
14:55 Toni: 2 min equal move
14:55 Toni: and earlier highs zone
14:55 Toni: can be minor
14:55 Toni: with another push higher
14:56 Toni: since upside into noon was three waves
14:56 Toni: and this is only the second on this coming off the 14:30 lows
14:56 Toni:
14:56 Toni: so... the bottom is the template i drew
14:57 Toni: on
14:57 Toni: as it was hitting the second low
14:57 Toni: and you can see that on
14:57 Toni:
14:57 Toni: we had very similar development
14:57 Toni: as the template
14:58 Toni: blue arrows show the corresponding lows on the template vs the price action that developed
14:58 Toni: cool eh?
14:58 JKnPA: Like snow
14:58 Toni: but its always ongoing... you start with a small handful of potential outcomes based upon the larger time frames
14:59 Toni: typically about 3 possibilities
14:59 Toni: then as it develops you can narrow it down based upon the smaller time frames
15:00 Toni: it really is annoying when i write something on friday and then people harp on me that it didnt play out the same, but what they dont see is that the pace shifted so as sunday/monday trade rolled around i actually changed my outlook based uon the smaller time frames... shows they dont seem to understand the relationship between the time frames...
15:01 Toni: its like saying.. well if you live in the north, it will snow in the winter
15:01 Toni: you can make that conclusion quite far in advance
15:01 Toni: but predicting days and amounts only become more exact as it gets closer
15:02 Toni: here is that third wave on the 2 min btw
15:02 Toni: 14:55 Toni: r here
15:02 Toni: 14:55 Toni: 2 min equal move
15:02 Toni: 14:55 Toni: and earlier highs zone
15:02 Toni: 14:55 Toni: can be minor
15:02 Toni: 14:55 Toni: with another push higher
15:02 Toni: 14:56 Toni: since upside into noon was three waves
15:03 Toni: ES coming into 5 min 200 sma now
15:03 Toni: so would consider target zone hit on the 2-wave buy from 14:#0
15:03 Toni: 30
15:03 Toni: well... hope you guys get a chance to read this if you havent already.... i'll post it on the blog
15:04 lionsharecapital: ty toni
15:04 billgi: ty
15:04 AJ: tx
15:06 Toni: since pace was stronger on the 5 min off 14:30 than into noon, expect potential for slightly higher highs into the resistance which can then round things off for a pullback into the lst 30-45 min
15:07 Toni: NQ and YM btw both tested their 5 min 200 strongly, just ES was trailing
15:08 AJ: why would the stronger pace result in the pullback? would have thought slower pace will set that up?
15:09 Toni: no, stronger pace meant that it can shift momentum at the highs instead of necessarily pivot sharply off the highs
15:09 AJ: k
15:09 Toni: opened door for slightly higher highs
15:09 AJ: so it need another pus?
15:09 Toni: momo reversal on like a 300 tick
15:09 AJ: push
15:09 Toni: instead of sharp reversal off this high
15:09 AJ: k
15:09 AJ: got it
15:09 Toni: even though this was the target
15:10 Toni: so.. best place to take gains was on that third push
15:10 Toni: but might have seen slightly higher highs
15:10 Toni: didnt.. but it left that potential open
15:10 AJ: and shorting?
15:11 Toni: it would have made it higher risk to have traded a pivot short
15:11 AJ: better not to?
15:11 Toni: since you could have gotten flushed out
15:11 Toni: because the momo did not shift
15:11 AJ: due to pace?
15:11 AJ: cool
15:11 Toni: correct
15:11 Toni: so it was target on the long
15:11 Toni: but higher risk for a short
15:11 AJ: did 3 surges not shift momo?
15:11 Toni: make sense?
15:11 AJ: very much
15:11 Toni: no.. because the overall three pushes higher was stronger pace than prior three pushes higher
15:12 Toni: i will show
15:12 Toni: just sec
15:12 Toni:
15:12 AJ: great - been doing lots of work on those momo shifts
15:13 Toni: so i didnt short and reverse my postion even though i knew it was resistance
15:13 Toni: i just covered the long
15:13 AJ: what time did you enter long?
15:14 Toni: 14:34
15:14 Toni: basically when i posted that chart for the potential "A"
15:14 AJ: toni - thanks for sharing - really appreciated
15:14 Toni: yw
15:14 lionsharecapital: yes ty ..your awsome!
15:14 AJ: on the 2b
15:14 Biegs: toni i'm reading too and thank you greatly... plan to review this log extensively this weekend
15:14 Toni: yes, on the 2B
15:16 Toni: i'm actually done for the day... have to deal with some phone calls to be made, but will get this log posted as soon as i get a chance so you can study it
15:16 sewbee: yes will study, tx!
15:17 Toni: since we didnt get that small momo on like the 1 min or 50 tick or whatever.. that makes this pullback slower like we are seeing
15:17 Sherry: tks would like to study log too
15:17 Toni: it will be at http://www.tonihansen.com/blog
15:17 Toni: probably within the hour
15:18 Toni: btw... notice on the 800 tick ES that we have a momo shift trying to take place since those premarket lows... all the slightly higher highs today vs the sharper rally into 10
15:19 Toni: sry.. can see perhaps best on nq
15:20 AJ: momo down?
15:20 AJ: 3 pushes etc
15:20 Toni:
15:20 JKnPA: Comments on 2T at 879 on 5min. chart?
15:21 Toni: those are two of the typical developments if the lower channel breaks
15:24 Toni: btw... i apologize for the dec charts here in these.. switched my ib but not my charts on this page so prices are a bit different.. i trade off the charts and tend to not look at price in futures :)
15:24 Toni: updated them on my other pages but forgot this one
15:24 Toni: current symbol is H9 ending for march
15:24 Toni: jk... what time frame
15:25 Toni: i mean what time was the 2T
15:25 Toni: there wwere several today witht he main one on that resistance we were looking at as the target on the last setup
15:25 Toni: into 15:00
15:26 JKnPA: 1pm and 3pm
15:26 JKnPA: 5min. chart
15:27 Toni: might have taken it at 15:06 on the tiny avalanche but was busy typing hehe
15:27 Toni: didnt take initial r because of the potential for the momo shift smaller time frames
15:27 Toni: and closing open position
15:27 Toni: did offer shift with an avalanche smaller time frames
15:27 Toni: but i didnt see it in time
15:27 Toni: also had to expect slower choppier follow through at least to start
15:28 Toni: because the lack of momo shift on the smaller time frames
15:28 Toni: would have first target here with the 5 min 20 sma
15:28 Toni: again.. didnt take it
15:29 Toni: ok gang... gotta go... will post logs after done with phone
15:29 Toni: see ya next week!
15:29 Toni: have a great weekend!
15:29 lionsharecapital: g wkend
15:29 norancho: have a great weekend
15:29 raneman: c ya T
15:39 Toni:
15:39 Toni: cant talke but there is chart for 2T
15:40 Toni: can see the greater tisk because it had 2 momo shifts into that 5 min 20 sma as it was
15:41 norancho: adios amigos
15:48 Toni:

pattern development comparison 2

Tug-of-War Continued in Light Trade, but Bears Take the Upper Hand

(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 bearish bias we were seeing on the 60-minute times frames within the trading range which formed from Monday through Wednesday continued into Thursday's morning trade. The indices gapped lower on the short setup I described yesterday that formed into the closing bell on Wednesday, but the lows of the larger trading range held and the indices closed their gaps and returned to the late afternoon highs by the 10:45 ET correction period. At this point the indices were hitting both price and moving average resistance with earlier highs and congestion levels and the 5 minute 200 sma intraday. The pace then began to shift throughout the remainder of the morning.

Nasdaq Composite ($COMPX)


As in Wednesday's session, the large degree of overlap on the morning pullback as compared to the prior 5 minute rally made it difficult for the previous highs to break. They established slightly higher highs, but then fell back. A two-wave correction led to another pop into noon, but the second wave was stronger than the first and this again prevented the previous highs from breaking to any strong degree. Once again this third slightly higher high meant that the pace on the 15 minute time frame was slower than average. In fact, it was even slower than the set of three waves higher that had taken place the previous morning. The slower pace meant that while the indices were able to break sharply lower on Wednesday afternoon, they had even greater potential for downside strength on Thursday. This was particularly true given the light volume which accompanied the upside move to indicate a lack of confident buyers.

Dow Jones Industrial Average ($DJI)


The pace of the reversal into Thursday afternoon picked up following a 5 minute Avalanche short setup out of the 13:00 ET correction period. The indices quickly returned to the mid-day lows. At that point they based briefly into the 5 minute 20 sma zone on light volume before resuming into the 14:00 ET correction period. It wasn't until the final 105 or so minutes of the day that volume finally began to increase. This was long after the market turned to the short side, but when 14:30 ET lows gave way the market plummeted. It attempted to recover slightly at 15 minute 200 sma support into the close, but still ended the session near the day's lows.

On Thursday evening, the expectations that the auto-maker bailout was under attack and likely to fail in the Senate was confirmed. The indices had broken lower with a strong 2-wave breakdown pattern on the 30 to 60 minute charts that afternoon, but the news really took it over the edge. The index futures continued to crash in afterhours trade, returning the indices to the support zone from last week's congestion and confirming the original upside concerns I'd expressed heading into this week's trade.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed lower on Thursday by 196.33 points, or 2.2%, at 8,565.09. The financials led the downside with J.P. Morgan & Chase (JPM) closing lower by 10.68% and Bank of America (BAC) down 10.67%, but General Motors came in at a close third with a loss of 10.43%. Among the Dow 30, only Chevron (CVX) (+1.30%) and Johnson & Johnson (JNJ) (+0.78%) posted gains. The S&P 500 ($SPX) fell 25.65 points, or 2.8%, and closed at 873.59. Crude oil futures jumped higher by 10.2%, which boosted the energy sector, while the dollar weakened on the expectation that a large production cut will be announced by OPEC next week. The Nasdaq Composite ($COMPX) was the hardest hit of the three major indices, falling 57.65 points, or 3.7%, to close at 1,507.88.

The price range from last week offers a decent support level to allow the now-exhausted Thursday afternoon and evening sell-a-thon a chance to catch its breath. The pace of the selling, however, will make any substantial recovery difficult at this point intraday since upside momentum will be more gradual, such as the move off December 1st's lows. The only way to adequately shift that momentum to allow for a stronger upside move would be for the market to round off with slightly lower lows on a 30 minute time frame. This would be opposite of the action from November 24th's highs into November 30th's highs for instance. The pace could also shift like it did this week as well if you flip the pattern over. In either case, it tends to take much longer to correct than it did to make the stronger momentum move in the first place. Should the market correct with a trading range and hold Thursday's lows, then it keeps the door open for another strong move lower on the 60-minute time frame. This is what I am viewing as the most likely scenario to unfold.




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Indices Trade in 60-Minute Range Along Highs

(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 was all over the place on Wednesday, although the S&P 500 and Dow Jones Industrial Average remained in positive territory throughout most of the session. The indices gapped higher into the open after closing near Tuesday's lows. This helped confirm the creation of a more gradual correction off Monday's highs with stronger favor towards a predominantly sideways trading range for the day.

The indices began to pull back immediately out of the open on the gap. The Nasdaq easily filled its minor gap while the S&Ps and Dow found support at the 5 minute 20 period simple moving average. The Nasdaq held lows at the 9:45 ET correction period, but the S&Ps and Dow did not test support until about 10:00 ET. At that point the indices shot strongly higher on a 5 minute time frame, but the larger price correction off the previous highs by at least 50% made it more difficult for them to strongly break those previous highs. Equal move resistance hit at about the same time as the 10:15 ET correction period and the market once again pulled back. The highs also held price resistance in the S&Ps and Dow from the previous day's mid-day congestion zone.

Once again the pullback was on the strong side, retracing a large portion of the prior 5 minute rally before coming into support at the 11:00 ET correction period. Despite the strength of the pullback, the indices again bounced quickly. This created a third wave higher on the 5 and 15 minute time frame and, even though each wave higher was stronger than average, the overall pace of the trend channel on the 15 minute time frame since pivoting off Tuesday's lows was slower than average. This indicated that the market would likely fall back sharply into the afternoon.

Nasdaq Composite ($COMPX)


A smaller series of three highs took place on a 2 minute time frame with the first wave higher beginning at 11:00 ET and two lesser waves taking place into noon. This provided an extra impetus for an afternoon reversal, which kicked off sharply following the third test of upper channel resistance on the 15, 5 and 2 minute time frames. Initial support hit at 12:30 ET at the 15 minute 20 sma, as well as 5 minute 200 sma in the Nasdaq and morning price support.

At this point I began to watch for an Avalanche formation. Unfortunately, when the indices made a slightly lower low on the 2 minute time frame into 13:00 ET I took my eye off the futures figuring it had a higher chance of just chopping around at that point. Instead, the Avalanche held with two waves off the initial support, but the pattern was less-than-ideal as a result of the lower low and the faster upside off the second low. Nevertheless, the larger bias triumphed and a second strong wave of selling took the market back into the lower end of the 60 minute trading range heading into the 14:00 ET correction period.

Dow Jones Industrial Average ($DJI)


The market did not quite test the previous lows at 14:00 ET, but the back and forth "V" action on the 15 minute time frame made it most likely that the support zone would hold and the market would correct off that zone. It took another test of the lows into 14:30 ET, however, with a 2B formation on a slightly lower low, to kick off that correction in full gear. This took the indices into a better test of the support and helped shift the 15 minute momentum at the support zone. The 5 minute 20 sma served as resistance, but the indices formed a nice triangle along that high with a two-wave continuation on the 2 minute time frame leading to another move higher shortly after 15:00 ET. The action was similar to the morning move on the 5 and 15 minute time frame, but this time took place on a 2-5 minute time frame. The upside moves were strong, but the corrections also hit hard and retraced most of the prior gains. This created a smaller version of the 3-wave upside action we had seen earlier and set the market up for another turn lower into the closing bell. This setup continued into afterhours trade in the indices.

At this point, the action within the 60 minute trading range is predominantly bearish. The rounded highs earlier in the week and slower upside moves followed by stronger downside moves will make it difficult for the market to move strongly higher out of the range. If it attempts to breakout on the upside without a change of pace within the range itself then it has a higher risk of serving as a trap. In this case it can quickly pull back into the range and reverse course, even breaking through last week's range for a retest of the year's lows. Conversely, if it can manage to shift the pace over the next day or so, then it can break the highs of the range more securely to confirm that we have in fact seen the year's lows. Slower downside momentum will indicate less fear and a greater willingness to hold on throughout the corrections, which in turn will generate greater confidence in a break higher. Lighter volume on such a correction will also provide added confirmation for this bias.

An additional factor that may weigh on the market in Thursday's session is the bailout proposal for the auto industry that will now be heading before Senate. The House of Representatives passed an emergency loan plan late Wednesday evening, but it has been causing quite a stir and the decision by the Senate remains less than certain.

S&P 500 ($SPX)


Trading was very mixed in the Dow, which should come as no surprise given the intraday swings. The Dow Jones Industrial Average ($DJI) rose 70.09 points, or 0.8%, on Wednesday to close at 8,761.42. Nevertheless, about a third of the Dow's 30 index components posted losses for the session. American Express (AXP) had the largest percentage decline for the session, ending lower by 7.43%, followed by AT&T (T), which lost 3.7%. Alcoa Inc. (AA) had the largest gain, up 6.81%, followed by Home Depot (HD), which closed higher by 4.7%. The S&P 500 ($SPX) rose 10.57 points, or 1.2%, and closed at 899.24. Crude oil futures closed higher by 3%, boosting energy shares, while the materials sector also added to the gains. The Nasdaq Composite ($COMPX) rose 70.09 points, or 0.8%, and closed at 1,565.48.




I will be relaunching my very popular 5 Technical Signals CD course in early 2009. At this time I will also be increasing the price of this course, so be sure to act now if you wish to purchase it at the current price of $279. Those who have already purchased the course, or who do so by the end of the month, will be sent free course updates ahead of the relaunch!

To learn more, please visit http://www.swingtrader.net.

Pattern Development Comparisons

See under the charts for discussion:





conversation in pvt msg regarding second chart (continues a conversation regarding the first chart in another pvt msg format which i unfortunately can't get logs of):

toni_hansen13: the top one is a 60 min
toni_hansen13: the bottom one is similar to a 2 min
toni_hansen13: but shows action better than a 2 min
toni_hansen13: so the 60 min is showing you what ha forming now on the daily
toni_hansen13: but a little more detail
toni_hansen13: the bottom is showing you this afternoon
toni_hansen13: same type of pattern
toni_hansen13: and what happened
toni_hansen13: i bought the ES today at 14:24
toni_hansen13: coming out of that circle
toni_hansen13: and again at 14:35 coming off the second low in green with the arrow
toni_hansen13: what you can see here
toni_hansen13: is that in the bottom chart
toni_hansen13: the second arrow
toni_hansen13: has a slightly lower low than the first arrow
toni_hansen13: whereas in the top chart the second low is actually a bit higher
toni_hansen13: that is why it couldnt get going and hold on for a stronger move
toni_hansen13: whereas in the bottom one
toni_hansen13: it came up into that high of the range
toni_hansen13: slowed a little in the pace of the move
toni_hansen13: then pushed higher
toni_hansen13: we are in that slowing phase
toni_hansen13: that is like around 14:36ish intraday
toni_hansen13: but its basing instead
toni_hansen13: so the red on the 200 tick
toni_hansen13: is like that base on the daily or 60 min
toni_hansen13: this week
toni_hansen13: but because of the lower low
toni_hansen13: in green
toni_hansen13: it only slowed the upside momentum
toni_hansen13: instead of halting it
toni_hansen13: then it continued once that slowing broke
toni_hansen13: so we still have more upside now as very possible coming off this base
anonymous: seems like this would be hard to recognize as its happening
toni_hansen13: but beacuse of this action it can be much slower
toni_hansen13: not get that same momentum
toni_hansen13: it can be... the more you see it the easier it is
toni_hansen13: i posted it real time in my chatroom
anonymous: true with everyhting i guess
toni_hansen13: it's just getting used to seeing it
toni_hansen13: this same price development repeats all the time on different time frames
if we get a slow move down at the end of this 60 min base
toni_hansen13: then it can break out more strongly
toni_hansen13: so if you see a slower move down
toni_hansen13: tomorrow
toni_hansen13: or into tomorrow
toni_hansen13: or hugging highs of the range tomorrow
toni_hansen13: then it can pop higher more quickly
but
toni_hansen13: with no downside pace change
toni_hansen13: then it will most likely chop higher
toni_hansen13: out of the range
if it creeps higher
toni_hansen13: then it can flush faster back down
toni_hansen13: that is what would be what would happen to get another test of lows
anonymous: so if i get understand we need a slower day tomorrow for a nice pop
toni_hansen13: if tomorrow is strong up yes
toni_hansen13: because it will most likely create a trap
toni_hansen13: trap bulls then wipe them out
toni_hansen13: the move higher this afternoon
toni_hansen13: was similar in pace
toni_hansen13: to the early afternoon drop
toni_hansen13: so.. no increase in upside momentum
toni_hansen13: and since the drop was sharper than the morning upside
toni_hansen13: it means the pace is still more bearish in the range
toni_hansen13: so that means an attempt to break higher
toni_hansen13: is more risky
toni_hansen13: unless the pace changes

Phoenix Fails to Confirm as Latest Earnings Disappoint

Phoenix Fails to Confirm as Latest Earnings Disappoint

(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! After a strong rally on Friday, the market attempted to break higher on the daily time frame with a gap higher into Monday's open. As I talked about over the past two days, the breakout carried extra risks with it for bulls looking to take advantage of a multi-day continuation. Ideally, it would have been better if the indices had established a slightly lower low within the daily range and done so on declining volume throughout the range. Neither of these took place and yet the market attempted to break higher anyway. This added greater risk that the move would fail to hold up well and that any upside to follow would be more gradual with greater overlap from one day to the next. This had played out in Monday and Tuesday's trade, whereby slightly higher highs in the indices on a 15 minute time frame have been met with larger price corrections back into earlier 15 minute lows.

Nasdaq Composite ($COMPX)


On Tuesday the market continued the late day correction off highs into the opening bell with a gap lower into the strong price support from the lows of the prior afternoon. The action on a 15 minute time frame resembled an upside-down "V", so this meant that the previous lows would likely hold for at least a temporary reprieve from the selling on that time frame. Typically such action will lead to a triangle and this is exactly what happened in the S&P 500 and Dow Jones Industrial Average, although the Nasdaq Composite outperformed either of these two indices and managed to hit a new high for the month into the 11:00 ET correction period.

Dow Jones Industrial Average ($DJI)


The pace of the buying began to shift around 10:30 ET. The upside slowed and began to round off. This created a momentum reversal pattern that triggered out of the 11:00 ET correction period in the S&Ps and Nasdaq. The Dow was also hitting strong resistance at this time at the 15 minute 20 sma. This late-morning reversal off the intraday highs continued steadily into the 15 minute 20 sma support in the Nasdaq and prior 15 minute lows in Dow.

A repeat of this same price action on the 15 minute then took place on a 5 minute time frame. Compare Monday's afternoon highs in the S&Ps and Dow to the 11:00 ET highs intraday on Tuesday. The drop lower into Tuesday morning in the S&Ps and Dow on the 15 minute time frame is then comparable to the drop into 11:30 intraday. Both the larger setup and the smaller setup merged over noon to create a strong short setup out of the 13:00 ET correction period. The selling dominated the next 90 minutes with Dow closing the period day's gap and the stronger Nasdaq finding support at morning lows around 14:30 ET. The indices held this support into the close, but ended the session near the day's lows.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) fell 242.85 points, or 2.7% at 8,691.33. 27 of the Dow's 30 components ended the session with losses. J.P. Morgan & Chase (JPM) fronted the losses, down 6.93%, while General Electric (GE) followed with a loss of 5.83%, and Disney (DIS) came in third with a loss of 5.58%. Intel (INTC) posted gains of 2.58%, while Citigroup (C) and DuPont (DD) both close higher by less than 1%. The S&P 500 ($SPX) fell 21.03 points, or 2.3% and closed at 888.67. The financials, consumer discretionary, and telecommunication services led the losses. Crude oil futures closed lower by $1.64 at $42.07 a barrel on the New York Mercantile Exchange. The Nasdaq Composite ($COMPX) fell 24.40 points, or 1.5% and ended the session on Tuesday at 1,547.34.



My outlook into Wednesday remains similar to that of yesterday. The Phoenix remains in play, but the rounding highs on the 15 minute will make strongly higher highs difficult and more susceptible to larger price swings with intraday corrections such as on December 1st. The next resistance levels intraday come in at the 9160 and 9495 zones in the YM (mini-sized Dow), 967 in the ES (S&P 500 EMini), and 1267 zone in the NQ (Nasdaq-100 EMini). Another wave of correction on a 30 minute time frame with a base and breakdown back into the daily range is possible, however, as long as upside into the morning is stunted.

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Indices Gap Strongly Higher, Exhausting the Bulls

Indices Gap Strongly Higher, Exhausting the Bulls

(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 index futures climbed steadily higher on Sunday and these gains continued into the early morning hours on Monday. This left the indices opening strongly higher into Monday's opening bell. Given the extent of the rally on Friday, combined with the gap itself, I was quite leery of placing myself in new positions on the upside in the short term and was favoring closure of the gap had the indices opened into premarket highs. With this degree of upside extension, it limited the potential to favor buy setups merely on a scalpish time frame until a correction could take place at least on a 15 minute time frame.

The indices did not, however, attempt to close the morning gap early on. In fact, the market held up very well out of the open. The index futures had been pulling back off premarket highs at that time and the market was hitting support from previous congestion levels at 9:30 am ET. A two-wave continuation pattern formed for a buy setup on the all-sessions time frames with the indices trading in a two-wave triangle along the highs that broke higher following the 10:15 ET correction period. The trend placement for such a pattern was less than ideal, so the momentum on the upside breakout was nowhere close to as strong as the earlier upside and it led to only a slightly higher high on the 15 minute time frame.

Nasdaq Composite ($COMPX)


The highs of the early morning continuation hit at the same time as the 10:15 ET correction period. This created a third high on the 15 minute time frame following the index futures premarket pullback into 5:00 am ET. Although this led to a mid-day correction, the momentum on that correction remained weak. The indices formed another two-wave pullback, similar to the one on the 5 minute into the open. This time, however, the second wave established a slightly lower low instead of a triangle with the S&P 500 and Dow Jones Ind. Ave. hugging their 5 minute 20 sma resistance on the second wave lower.

By sliding down the 5 minute 20 sma on the second pullback off the highs the indices formed yet another buy setup into the afternoon. The setup corresponded to both a move off the 15 minute 20 period sma support, as well as the 14:00 ET correction period. As in the earlier setup, however, the upside remained more gradual than the buying from Friday afternoon and the market once again broke to relatively slightly higher highs on a 15-30 minute time frame. This rounding off at highs allowed the market to fall back quickly into the mid-day range in the final hour of trade. The market closed at that level of price support. Although it was well off the highs, it still up at least 3.5% in each of the major indices.

Dow Jones Industrial Average ($DJI)


Each of the three indices had gains comparable to those on Friday. The Dow Jones Industrial Average ($DJI) closed higher on Monday by 298.76 points, or 3.5% at 8,934.18. It flirted with the 9k level for the first time in nearly a month, hitting intraday highs of 9,026.41. On Saturday, president-elect Obama stated that he would be supporting a heavy investment in the nation's infrastructure. The news was cited as one of the reasons the market was able to add the gains so easily. Despite the larger market gains, only 23 of the Dow's 30 index components closed in positive territory. General Motors (GM) finished higher by 20.8% on the expectation that a federal bailout is in the works. Also on the upside: Alcoa Inc. (AA) finished higher by 17.56%, while Bank of America (BAC) rose 17.06%, American Express (AXP) rallied 12.21%, and Caterpillar Inc. (CAT) gained 10.87%. 3M (MMM) led the decliners, down 4.13% after it lowered its earnings outlook for the year and announced job cuts. McDonald's (MCD) fell 2.87% despite reporting in the premarket same-sales growth of 4.5% in the U.S., 7.8% in Europe, and 13.2% in the Asia/Pacific, Middle East, and Africa division.

S&P 500 ($SPX)


The S&P 500 ($SPX) rose 33.63 points, or 3.8% and closed at 909.70. Energy, materials and financials led the gainers. January crude oil futures climbed $2.90, or 7.1%, to end the session at $43.71 a barrel on the New York Mercantile Exchange. Although this was a typical correction day off lows following over a week of downside, the move was also attributed to speculation out of OPEC that they are looking into substantially cutting production. One the main movers in the energy sector was Chesapeake Energy Corp. (CHK). It rallied 24.4% after it canceled plans for issuing stock and cut back on its capital spending. The Nasdaq Composite ($COMPX) added 62.43 points, or 4.1% and ended the session on Monday at 1,571.74. Since Nov. 20th's lows, the Dow is up 18.3%, the S&P 500 is up 20.9%, and the Nasdaq is up 19.4%.



As the market attempts to hold its daily Phoenix setup, in the back of my mind I am still worried that this could end up being another two-wave continuation pattern on the downside in the larger correction off the weekly lows. Although such a pattern is bearish, it would likely continue to round the indices off at the lows and lead into the larger weekly to monthly correction off the support on these time frames. Both the S&P 500 and Dow Jones Ind. Ave. are testing the zone of the lows from 2002-2003. If the market can hold onto the daily Phoenix into Wednesday, the next resistance levels intraday come in at the 9160 and 9495 zones in the YM (mini-sized Dow), 967 in the ES (S&P 500 EMini), and 1267 zone in the NQ (Nasdaq-100 EMini).

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Indices Congest Along 20 Day Simple Moving Averages

(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 continued into the second 60-minute low we were looking out for very early on in Friday's session. By the 10:45 ET correction period the Dow was off nearly 300 points. Support hit at this zone from the previous 60 minute lows and the slower pace into this support than the previous afternoon helped round off the market into the support and allow it to begin to correct off the lows into the second half of the morning.

Nasdaq Composite ($COMPX)


The intraday reversal continued when the market hit its 5 minute 20 period simple moving average, based along that resistance level on declining volume, and then broke higher out of this 5 minute Phoenix buy formation. Even when the pace shifted at the 15 minute 20 sma resistance it was unable to pull lower. The 15 minute time frames still needed a longer correction off the lows. The indices attempted to do so with a trading range mid-day by starting to form an Avalanche along the 5 minute 20 sma. The lows of the range did not break to trigger the move, however, and the indices again popped higher out of 13:00 ET.

For the remainder of the day the market had a one-track mind. Even though the major 5 and 15 minute resistance levels stalled the indices each time they hit, such as the S&Ps and Dow at the 5 minute 20 sma around 14:00 ET, the correction merely offered a chance for late-arriving bulls to get on board. Momentum increased on each wave higher on the 5 minute charts until the indices were testing the prior day's highs. This level of resistance finally slowed the pace of the buying, but it continued into Sunday's trade in the index futures.

Dow Jones Industrial Average ($DJI)


It is currently mid-night, heading into Monday's session, as I write this. At this point the indices are attempting to round off at premarket highs. Even though we have a daily Phoenix buy trigger in the indices now, I have to admit that I am still a bit skeptical on how well it will hold up and follow through. There was no volume decline with the base, the momentum had slowed into the 20 day sma instead of hitting it steadily and then correcting, and the downside last Monday meant that the indices would ideally have established a second low on the 60 minute time frame that was slightly lower than the first instead of the more exactly double bottom that formed. Any one of these reasons alone will increase the odds of false breakouts or slower-paced breakouts that can pull back quickly. This leaves me favoring a closure of any upside gap into the open on Monday.

Even though my weekly and monthly outlook still favors a correction up off this larger time frame support, the way this Phoenix pattern has formed still leaves me thinking that we might just still have another low. Since the daily Phoenix is a buy pattern, in order for the market to pull back again strongly we would most likely see a relatively light volume and more gradual move higher. We would not need a lower low on the indices to help it would off at this support better, but a more clear-cut low again on the daily would help!

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed higher on Friday by 259.18 points, or 3.1% at 8,635.42. The rally on Friday allowed the index to trim its weekly losses to 2.2%. The S&P 500 ($SPX) rose 30.85 points, or 3.7% and closed at 876.07, down 2.3% on the week. The Nasdaq Composite ($COMPX) added 63.75 points, or 4.4% and ended the session on Friday at 1,509.31, down 1.7% for the week.



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Market Turns Lower Once Again on the 60 Minute

Market Turns Lower Once Again on the 60 Minute

(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 was sloppy throughout much of the session on Thursday as the indices geared up for that 60-minute pullback I talked about in yesterday's column. The session began with a gap lower into the opening bell. After the indices pulled back gradually from the closing highs on Wednesday they ran coming out of the 3:00 AM ET correction period to form a double top into 5:30 AM ET. They rolled over off these highs as well, taking back the early morning gains and hitting new premarket lows ahead of the opening bell.

After 8:00 AM ET the momentum of the premarket selling slowed. The index futures then began to round off at lows, creating a momentum reversal type of pattern into 9:00 AM ET. Thus, by the time the opening bell rang, this reversal pattern had already triggered. The market used this change in momentum to continue to move strongly higher out of the opening bell. The rally allowed the indices to easily close their morning gaps, but the earlier premarket highs still served as strong resistance. The market fell back into 10:15 ET and then tried the highs again. By this time the market was beginning to show another shift in momentum. This time it was off the highs. The 5 minute 20 sma served as support throughout the morning, but by constantly testing that support level the market displayed underlying weakness. Highs held intraday at the 11:00 ET correction period and the bears began to creep in.

Nasdaq Composite ($COMPX)


Although the pullback off the second high at 11:00 ET provided the first trigger for the larger 60-minute correction lower that we were looking for, the break in the morning's uptrend channel provided the first confirmation. The upside momentum was still on the strong side, but it continued to shift mid-day. Light volume on a mid-afternoon buy setup at 13:30 ET showed that the bulls were not participating very well any longer. Even though the S&Ps and Dow spiked higher, without the volume confirming the move, it continued to support our bias for a larger 60-minute correction off highs. It took nearly the entire day for the momentum to finally pick up on the downside, but a small 2 minute 2T reversal pattern just prior to 15:00 ET helped provide a key for timing another setup in that direction. Once the selling was under way it continued very strongly back into Wednesday's afternoon lows.

Dow Jones Industrial Average ($DJI)


A small momentum reversal on a 2 minute time frame into 15:30 ET helped the indices pop higher into the close off the 15 minute support. The market will likely continue this correction off 15 minute lows into Friday morning, but the larger 60 minute corrective bias off the week's highs remains in tact. Slower upside or congestive action will help create a continuation pattern on the downside on that larger 60 minute time frame. The 15 minute 20 sma will serve as initial resistance intraday. If the market continues strongly into this level in the morning then the second wave lower in a 60 minute two-wave pattern can be more of a choppy base and continue holding the 20 day sma.

On the other hand, a slower pull higher or base closer to Thursday's lows will allow the market to break the lows from Monday very easily. It is currently 10:00 PM ET and so far the pace is strong on the upside off premarket lows, but that can still shift prior to the open.

So far the market is doing a splendid job of holding our bias from earlier in the week for greater overlap from one day to the next without any strong daily trend this week. I am expecting that to continue into the weekend. In order for the market to be able to sustain any upside break of the 20 day sma we need to see it put in another low on the 60 minute time frame. So far we only have one low on Monday. Any early attempt to break without that second low will be a great setup for another sharp daily drop back into and even through the prior daily lows, particularly in the Nasdaq, before a larger daily reversal off the support can finally take hold. On the other hand, as long as we get that second low within this congestion it will more easily favor a daily Phoenix with a daily buy trigger when the upper channel of the daily congestion breaks. Ideally volume will decline in this scenario as the congestion continues.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed lower by 215.45 points, or 2.5% on Thursday to give back a large portion of the previous day's gains. It ended the session at 8,376.24. 35 of the Dow's 30 index components ended the session in negative territory. General Motors (GM) fronted the losses, down 16.1%, while they, along with Ford and Chrysler, continued to plead for federal aid. Alcoa Inc. (AA) came in second among the decliners, falling 13.24%, while Intel (INTC) came in third with a loss of 6.52%. J.P. Morgan & Chase (JPM) rose 2.74% to front the gainers. McDonald's (MCD) rose 2.17%, while Home Depot (HD) rose 2.02%, WalMart (WMT) gained 1.34%, and DuPont inched higher by 0.34%.

The S&P 500 ($SPX) fell 25.52 points, or 2.9% on Thursday and closed at 845.22. 9 of the 10 S&P industry groups posted losses. Energy and information technology led the downside. Consumer discretionary was the only index group to post gains. The Nasdaq Composite ($COMPX) lost 46.82 points, or 3.1%, and ended the session on Thursday at 1,445.56.

Crude oil futures fell to three year lows this week, trading under $50 a barrel. It closed at $43.67 on the New York Mercantile Exchange. It is currently hitting strong monthly support, but the pace of the selling off the year's highs will keep it from being able to sustain any strong daily bounce off lows.

I will be relaunching my very popular 5 Technical Signals CD course in early 2009. At this time I will also be increasing the price of this course, so be sure to act now if you wish to purchase it at the current price of $279. Those who have already purchased the course, or who do so by the end of the month, will be sent free course updates ahead of the relaunch!

To learn more, please visit http://www.swingtrader.net.

20 Day SMA Continues to Taunt the Indices

20 Day SMA Continues to Taunt the Indices

(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 continued to hold the weekly trading range in Wednesday's session with the 20 day simple moving average serving as upside resistance. As on Monday, the indices were met with another larger-than-average gap into the open. Unlike Monday, however, the gap was not a trigger for a larger pattern on the daily time frame, but instead took place within a new daily congestion zone. This made it easier for the market to favor a closure of the gap zone. The index gap strategy that I've talked about a lot in this column worked quite well. The market had begun to close the gap right away out of the open, but then stalled at the 9:45 ET correction period. This led to a pullback into 10:00 AM ET. The gap strategy is to take the break of the 15 minute highs, but the gradual pullback intraday also offered a better entry when the upper channel from that pullback broke higher.

Nasdaq Composite ($COMPX)


The bulls dominated throughout most of the morning with only minor corrections on a 2 minute time frame until the 11:15 ET correction period hit. At this point all three of the major indices were testing their 62.8% fibonacci retracement levels from the highs last week. This, combined with the correction period and earlier levels of price resistance, put a halt to the strong morning trend and the indices began to correct off the highs into noon.

At first the mid-day correction was gradual, but the extent of the rally meant that the market would need to at least pull back into the 15 minute 20 period simple moving average before it could sustain another strong upside move. The pace shifted enough on the 5 minute time frame, however, that when selling hit at 13:00 ET on a 5 minute Avalanche it eventually led to an increase in the downside momentum which easily pulled the market under the 15 minute 20 sma. This provided confirmation for that the larger congestion we were expecting on the daily time frame with continued extreme volatility.

Dow Jones Industrial Average ($DJI)


The market found support on this sharp drop from congestion earlier in the week, but more clear-cut was the 15 minute 20 period simple moving average on the all-sessions time frame in the indices. Both intraday charts with moving averages and charts which show moving averages on all time frames work very well, so a 15 minute 20 sma intraday is just as strong as one that takes into account afterhours data. As as result, I like to look at both. In this case it held almost perfectly at the same time as the onset of the 14:00 ET correction period. A 2B on a 2 minute time frame triggered the start of another strong intraday rally.

The market rallied strongly back into the zone of the morning highs. This resistance stalled the rally, leading to a correction into the 5 minute 20 sma. The pace on the pullback was sharp to begin with, which meant that the indices could have formed an Avalanche on the 5 minute time frame, but the market fell into a triangle and eventually broke higher to continue the afternoon rally. It concluded when it hit an equal move as compared to the morning rally into the early afterhours highs, leading to another pullback following the close.

S&P 500 ($SPX)


The Dow Jones Industrial Average ($DJI) closed higher by 172.60 points, or 2.1% on Wednesday at 8,591.69. 26 of the Dow's 30 index components closed in positive territory. They were led by the financials. Citigroup (C) gained 8.31%, while Bank of America (BAC) followed with a gain of 7.12%. J.P. Morgan & Chase (JPM) gained 6.03%, while American Express (AXP) added 5.36%. Coca-Cola (KO) recouped Tuesday's losses and gained 5.03%. Alcoa (AA) fronted the losses, down 4.82%, with Chevron coming in second with a loss of 1.06%.

The S&P 500 ($SPX) rallied 21.93 points, or 2.6%, to close at 870.74. Financials also led the gainers in the S&Ps. They were followed by consumer discretionary and information technology. The Nasdaq Composite ($COMPX) gained 42.58 points, or 2.9%, and ended the session on Wednesday at 1,492.38.



Going into the weekend I am watching for another pullback on the 60 minute time frame off Wednesday's highs. This would create a two-wave buy setup on that time frame. Had we seen more selling on Wednesday it would have continued to have held the door open for another attempt at the daily lows like I warned about earlier this week with a possible three-wave momentum reversal off that low, but the pace shift intraday will reduce that risk.



I will be relaunching my very popular 5 Technical Signals CD course in early 2009. At this time I will also be increasing the price of this course, so be sure to act now if you wish to purchase it at the current price of $279. Those who have already purchased the course, or who do so by the end of the month, will be sent free course updates ahead of the relaunch!

To learn more, please visit http://www.swingtrader.net.

Market Holds a Wide Trading Range Following Monday's Freefall

Market Holds a Wide Trading Range Following Monday's Freefall

(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 markets experienced extreme volatility on Tuesday following Monday's sharp decline. The indices had rolled over off lows in afterhours and premarket trade with a shallow 15 minute Phoenix triggering into 4:00 AM ET. This allowed the index futures to pop higher in the early morning hours. The Nasdaq led this premarket recovery and rallied strongly into the previous day's mid-day trading range before stalling after three waves of upside on the 5 minute time frame into the 7:00 AM ET correction period. At this same time the S&P 500 futures ran into price resistance from the former lows that hit and later broke from about 14:25 PM ET on Monday. The Dow futures did not quite make it back into this prior day's price zone, but it also completed a third wave of upside on the 5 minute time frame into this correction period and began to pull back off these highs along with the other indices.

When the opening bell rang on Tuesday the indices were triggering an Avalanche setup on the 5 minute time frame in premarket trade. They had pulled back sharply but briefly off the 7:00 AM ET highs and then fell into a trading range with two wave of upside within the range. They were then testing the lows for a third time into the open, so although the market gapped strongly higher, the bias was in favor of the short side coming out of the opening bell.

Nasdaq Composite ($COMPX)


The market fell back into the premarket congestion from the Phoenix range out of the open, but that level served as support and held soon after the open. In the Nasdaq futures this created a slightly lower low compared to Tuesday's close, creating a 2B reversal pattern while the S&Ps and Dow formed intraday Phoenix patterns on the 5 minute time frame. Both of these indices then continued higher into the 10:45 ET correction period before stalling and falling into an upper level trading range with the 5 minute 20 sma serving as support.

The trend remained bullish throughout the morning, but the pace of the buying slowed into the early afternoon. The zone from Tuesday's mid-day congestion served as very strong resistance and the indices rolled over off these highs into mid-afternoon. The 5 minute 20 sma hit as support around 13:00 ET, but the indices congested along this support on light volume, thereby creating a 5 minute Avalanche pattern that set up at about 13:30 ET and led to a strong decline over the course of the next hour. This mimicked the opening action, but on a larger time frame. The earlier congestion once again served as support and the market quickly recovered into the close.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) closed higher by 270 points, or 3.3% on Tuesday at 8419. The gains were led by General Electric (GE) which announced cost cuts in order to hit its fourth-quarter guidance and maintain its dividend. The financials followed next with Citigroup (C) up 11.94%, Bank of America (BAC) up 11.83%, and J.P. Morgan & Chase (JPM) up 9.23%. Only 3M Co. (MMM) and Coca-Cola Co. (KO) closed lower on the Dow.

The S&P 500 ($SPX) rallied 33 points, or 4%, to close at 849. The financials fronted the gainers, but Goldman Sachs (GS) strayed from the group when it fell 1.2% after the Wall Street Journal reported that its fourth-quarter loss could be up to five times what had been previously anticipated.

The Nasdaq Composite ($COMPX) gained 52 points, or 3.7%, and ended the session on Tuesday at 1,450. The retailers made a comeback after losses following Friday's Black Friday initial reports with Sears Holdings (SHLD) up 13.4% after announcing third-quarter losses and declining sales, but coupled that news with a stock buyback. Meanwhile, Staples (SPLS), which reported a 43% profit decline over the past year, closed higher by 7.9% on flat earnings.

S&P 500 ($SPX)


I want to take a moment to clarify my commentary from earlier this week. Heading into Monday I had posted that I was expecting a correction after that 5-day run we had experienced the week before. This may have seemed at odds with the larger bias I have for a greater move off the weekly and monthly support with some confusion resulting from me referring to two different time frames.

You see, when moves off support or resistance unfold, the pace or momentum serves as a guide for how the corrective patterns develop. When last week concluded, I was expecting a slower intraday correction off the highs into this week, within the context of a larger correction off support, or lows, on the weekly and monthly time frames. The smaller time frames offer more immediate follow-through, so it is easier to predict the nature of them without getting too wrapped up in the more minute moves within the corrections themselves.

Because the market pulled back more quickly than expected on Monday, due to a premarket development where the pace shifted, this opens the door for a triple bottom as opposed to a double bottom on the weekly time frame. Since the weekly and monthly support is on such a large time frame, there is a great deal of wiggle room at these levels, and by falling more sharply on Monday it means that the market now has the potential to try the prior lows, although this is not at all a certainty. This would most likely happen by having the indices slide lower along the 20 day simple moving average. This is what I meant by greater overlap from one day to the next in prices and is why we had the market pull up on Tuesday within Monday's range. In other words, it overlapped Monday's range.

It would not be surprising to see this type of overlap continue for up to two weeks. This time frame would push the indices into that slightly lower third low. This, of course, is not an absolute. Shifts in momentum on smaller time frames intraday can change this outlook as those smaller time frames unfold. Thus, the smaller time frames are always going to be a guide to the larger time frames. While the larger time frames offer a general guidance as to when and where corrections off of support or resistance take place, the smaller time frames determine how they take place. So, by shifting in the premarket into Monday morning, it made me more bearish intraday and focused almost solely on setups on the short side into the close (as seen in my chatroom), offering words of caution to buyers mid-day, whereas a more gradual correction would have had me playing moves off support levels intraday more aggressively. Instead I waited until afterhours to buy any of the indices (at 16:53 and 16:54 on the ES).

My bias for the remainder of this week remains the same as heading into Tuesday. There is still a greater possibility of a correction along that 20 day sma with a slower pullback in price and a greater degree of overlap from one day to the next. The potential still remains for a third test of lows on the daily time frame, but the lighter volume will allow the market to quickly gain momentum when the daily pullback breaks its upper channel resistance which is currently in the zone of the 20 day sma.

Stocks Take a Plunge on Global Economic Woes

(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 new week got off to a very rough start on Monday. Although we were expecting a price correction into the beginning of the week, the move was much larger than I had originally anticipated. It kicked off in the premarket trade when the index futures formed an Avalanche setup on the 30 minute all sessions time frame into 3:00 AM ET. The selling took the strongest index, the Dow, back into support at Friday's lows before it stalled, but the substantially weaker Nasdaq broke very swiftly through that zone. The selling stalled shortly after 5:30 AM ET, but this was just a temporary reprieve. The indices congested at premarket lows into the opening bell.

The larger-than-average gap, which took place after momentum had slowed on the upside, set up the perfect conditions for one of my favorite gap strategies in the indices. A break in the 15 minute low confirmed that the market would trend lower throughout the morning at least, and the daily setup assured a larger bearish bias into the afternoon as well. Even though the markets slowed their selling pace into the afternoon, triggering a minor Phoenix on a 5 minute time frame, I shied away from attempting reversals due to the larger bias and instead positioned myself for a breakdown into the close. This afternoon continuation took place in the final hour of trade with the 15 minute 20 period simple moving average acting as upside resistance ahead of the breakdown.

Nasdaq Composite ($COMPX)


The extreme decline on Monday has been attributed to overwhelmingly negative news abroad, which was later echoed stateside. Manufacturing data in China, mainland Europe and the U.K. all showed substantial declines. Even though the trend was expected, the extent of the downside was much larger than had been anticipated. This helped kick off the premarket losses. The downside continued following our own Institute for Supply Management's index release which fell to 36.2% in November from a reading of 38.9% in October. This is the lowest reading since 1982 and was nearly twice the decline economists were expecting. Readings of under 50% indicate that the majority of firms polled are reporting diminishing conditions.

Dow Jones Industrial Average ($DJI)


The Dow Jones Industrial Average ($DJI) plunged 679.95 points, or 7.7%, on Monday after last week's record gains. The index ended the session at 8,149. Every single one of the Dow's 30 components closed in negative territory. The financials led the decline with Citigroup (C) down 22.2%, Bank of America (BAC) down 20.92%, J.P. Morgan & Chase (JPM) down 17.50%, and American Express (AXP) down 15.74%. Alcoa Inc. (AA), General Motors (GM), Du Pont (DD), and Caterpillar Inc. (CAT) all also posted double digit percentage losses. McDonald's (MCD) had the best performance out of the 30, but it still closed lower by 4.39%.

The S&P 500 ($SPX) fell 80.06 points, or 8.9%, on Monday and closed at 816.21. It was also led lower by the financials, which fell 17%. These losses were followed by a 13% decline in energy issues, and a 10% decline in materials. Crude oil futures fell 9% on the day, closing under $50 a barrel at $49.28 on the New York Mercantile Exchange. Also making headlines were the yields on the 10-year Treasury bonds (UST10Y), which fell 6.2%. These are used to benchmark mortgage rates, which are at record lows of 2.706%.

The Nasdaq Composite ($COMPX) fell 137.50 points, or 8.9%. It closed at 1,398.07. All of the Nasdaq-100 components also closed in negative territory.

S&P 500 ($SPX)


My outlook this week is now much weaker than it had been heading into the weekend. I don't expect the market to continue to drop sharply to new lows, but the door is now further open for a third low on the daily time frame. In order for the market to bounce decently, it would be ideal for such a low to hit in a couple of weeks. This would round things off at this larger weekly support. It would also mean more choppy trading for several weeks with a greater degree of overlap in price from one day to the next. I am not, however, strongly bearish at this point and would urge greater caution on the short side other than on the intraday time frames right now.