Toni Hansen's Online Trading Blog: March 2009

Monday, March 30, 2009

broken foot... ow

Hey gang... I'm going to be offline a few days while I nurse a broken foot (kids are dangerous!!!) I'll be checking back in towards the second half of the week when hopefully the swelling has gone down and I can manage to use the computer for longer than 30 min. at a time! Until then! have a wonderful trading week!

All my best,
Toni

Sunday, March 29, 2009

Economic Reports and Earnings Events This Week

Economic Reports and Events This Week

Monday, March 30, 2009
10:30 a.m. Feb Dallas Fed Mfg Production Index: Previous: -36.1.

Tuesday, March 31, 2009
7:45 a.m. ICSC Chain Store Sales Index For Mar 28: Previous: -0.4%.
8:55 a.m. Redbook Retail Sales Index For Mar 28: Previous: -0.2%.
9:00 a.m. Jan S&P/Case-Shiller Home Price Index: Previous: -19.2%.
9:45 a.m. Mar Chicago PMI: Expected: 34.5. Previous: 34.2.
10:00 a.m. Mar Conference Board Consumer Confidence: Expected: 27.7. Previous: 25.
4:30 p.m. API Oil Industry Report For Mar 27
5:00 p.m. ABC/Wash Post Consumer Conf For Mar 28: Previous: -49.

Wednesday, April 1, 2009
7:00 a.m. MBA Mortgage Applications For Mar 27: Previous: +41.5%.
8:15 a.m. Mar ADP Employment Survey: Expected: -646K. Previous: -697K.
10:00 a.m. Mar ISM Manufacturing Index: Expected: 35.8. Previous: 35.8.
10:00 a.m. Feb Construction Spending: Expected: -2%. Previous: -3.3%.
10:00 a.m. Feb Pending Home Sales: Expected: 0.1%. Previous: -7.7%.
10:30 a.m. U.S. Energy Dept Oil Inventories For Mar 27

Thursday, April 2, 2009
8:30 a.m. Initial Jobless Claims For Mar 28 Week: Expected: +3K. Previous: +8K.
10:00 a.m. Feb Factory Orders: Expected: +2%. Previous: -1.9%.
10:00 a.m. DJ-BTMU Business Barometer For Mar 21: Previous: -0.9%.

Friday, April 3, 2009
8:30 a.m. Mar Non-Farm Payrolls: Expected: -671K. Previous: -651K.
8:30 a.m. Mar Unemployment Rate: Expected: 8.5%. Previous: 8.1%.
10:00 a.m. Mar ISM Non-Manufacturing Index: Expected: 42. Previous: 41.6.

Key Earnings Announcements This Week:

Monday, March 30, 2009
Before: LAYN, PRSC
During: -
After: OXM

Tuesday, March 31, 2009
Before: FUQI, GMTN (?), GIGM, LEN, MOV (?), SAH, SCS
During: FACE
After: APOL, EXFO, GIII, FUL, HLYS, SGK (?), ZZ, TBSI (?)

Wednesday, April 1, 2009
Before: ACGY (?), WOR
During: -
After: TTGT (?), UNF

Thursday, April 2, 2009
Before: ALI, BTH (?), KMX, CREL, HLCS (?), LNN, MON, MSM, RAD, SCHN (?), VIP (?)
During: -
After: ANGO, CAE, CHINA (?), DMAN, EXM (?), GPN, LWSN, MU (?), RIMM, TK (?)

Friday, April 3, 2009
Before: AZZ
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.

Rally Stalls into Weekend on Choppy Trade

(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 had a difficult time on Friday as the month, as well as the quarter, wind down. All three of the major indices closed in negative territory, but most of the losses were out of the open and the remainder of the day was quite choppy. In Thursday's session the market struggled to push higher after gapping upwards for a stronger test of the daily resistance zone from the second half of January and first half of February that we have been following. It had tried once again to push into that level and the Dow came in at less than 100 points short of 8k.

In afterhours trade the indices managed a very slightly higher high on a 5 minute time frame after creeping higher mid-day. This created a 2T reversal pattern on that time frame into afterhours trade. A 2T is a type of double top where a slightly higher highs creates a bull trap. When the pace of the move into the second high is weaker than the move into the first high then the correction will be strong. In this case there was not a lot of difference in terms of the pace due to the increase in pace into the first high after it began more gradually. This kept the index futures congested near the highs immediately afterhours, but the bias remained bearish thanks to a pace shift on the smaller time frames. The downside pace was stronger than the upside pace and the futures congested to form a 5 minute Avalanche™ along the 5 minute 20 period simple moving average. It triggered around 18:30 ET and increased the momentum on the afterhours selling. A bear flag then followed with a trigger at 21:30 ET.

After pushing lower into the end of the 24-hr day, the indices futures fell into a trading range heading into midnight on Thursday and congested until about 5:30 am ET Friday morning. At this point the downside resumed once again. This breakdown took the market into support from 15:00 ET the day before, but it was not enough to hold in the bears. The breakdown had triggered a larger bearish bias on a 15 minute time frame and the markets continued to fall out of a bear flag at 8:00 am ET. It was this decline that the indices were dealing with when Friday's opening bell rang.

Although the pace of the selling slowed well before Friday's open, the market kept pushing into slightly lower lows directly ahead of the open. This pace shift contributed strongly to the intraday congestion and inability of the markets to establish a strong intraday trend out of the open. The markets tried to form a 5 minute continuation pattern on the downside after 30 minutes of congestion, but the indices were already hitting equal move support on the 15 minute time frame and price support from the zone of the previous day's lows. This level held and the market turned higher around 10:15 ET.

Despite the 15 minute support, the market never managed to pick up the pace on the upside on Friday morning. Instead, the market crept higher on the 5 and 15 minute time frames with a lot of overlap in price from one bar to the next. This move was on lighter volume and it confirmed a continuation of a bearish bias intraday. The 15 minute 20 sma served as very strong resistance. When the market creeps higher in such a manner it makes it very easy for that slow uptrend channel to break lower very quickly. In fact, such a move is worth watching for channel breaks when larger time frame resistance hits, such as the 15 minute 20 sma.

On the 15 minute charts the market had retraced about 50% of the drop of the previous day's highs. This is a little large for a true Avalanche™ short setup on that time frame, since this pattern prefers to hug support near an immediate term low, but it was the first gradual upside correction after the trend began to attempt to reverse, so it remained a variation of that pattern, although the level of retracement meant that previous lows would remain strong support.

The best moves of the session on Friday came mid-day when the variation of the 15 minute Avalanche™ triggered. The 15 minute charts still experienced a lot of overlap, but this is because the stronger downside moves on the 5 minute time frame mid-day still formed smaller corrections into the 5 minute 20 sma. The selloff continued into the 14:00 ET correction period, which held perfectly.

Even though there were a couple of buy setups on a 5 minute time frame between 14:00-15:00 ET, the volatility remained high and follow-through on those time frames was short-lived. The first setup was a 2B in the Nasdaq where a slightly lower low formed a type of bear trap. The second was a 5 minute Phoenix™ when the indices hugged the 5 minute 20 sma and then broke higher out of the 15:00 ET correction period. After that the indices held morning resistance and just chopped around into the close. The indices all ended the day near the session's lows.

The Dow Jones Industrial Average ($DJI) fell 148.38 points, or 1.9%, and closed at 7,776.18 on Friday. The Dow ended the week higher by 6.8% and is up 10.1% for the month. The Dow also just posted its best 3-week rally since 1982 and is up 18.5% off the year's lows.

The S&P 500 ($SPX) fell 16.92 points, or 2.0%, and closed at 815.94. The S&Ps were up 6.2% for the week and is up 11.0% for the month. It has also had its best 14-day run since July 1938 and is up 20.6% off the year's lows. Crude oil futures closed lower on Friday at $52.38 a barrel.

The Nasdaq Composite ($COMPX) fell 41.80 points, or 2.6%, and closed at 1,545.20. The Nasdaq finished the week higher by 6.0% and is up 12.2% so far this month. It is up 21.8% off the year's lows.

As we head into the final two days of the quarter, the market still has yet to show the strongest test of the resistance with the 8k level in the Dow and 100 day simple moving averages in the S&Ps and Dow. This is still acting as a magnet and I think there is room for once more final push into that level. The 15 minute 200 sma served as support on the last correction off highs, which is approximately the 10 day sma as well. This will remain support early this week. Until we get a final push I will remain cautious of holding anything overnight on the short side and will stick to daytrades for new positions either way. If the market can manage that stronger test of resistance, then we should see the market react quickly to that level. This can easily lead to a stronger break lower again on the daily and weekly time frames.

Thursday, March 26, 2009

Dow Closes in on 8k

The market continued higher into Thursday's opening bell after the late afternoon reversal on Wednesday into the close. The run put the indices right into strong price resistance from Wednesday's highs within the first 15 minutes of the day and the 9:45 ET correction period held with the resistance level perfectly. The pace of the rally prevented the indices from falling sharply off the resistance. The S&Ps and Dow closed the gap zone, pulling into the 5 minute 20 sma support by 10:15-10:30 ET. This smaller time frame support held.

In order to create another sharp upside move on a 15 minute time frame the market needed to hold a trading range along the highs throughout the morning and into the early afternoon. It didn't quite manage to do this. Instead, the market chopped back up into the morning highs, but pushed higher in the Nasdaq. When the indices did correct off highs at 12:30 ET they only corrected for about 30 minutes into the 13:00 ET correction period and failed to form a second pullback on the 15 minute time frame.

S&P 500 ($SPX)

After the sharp move to new highs, the indices started to correct once again around 13:30 ET. The pace was slower with a lot of overlap and included a sloppy 5 minute Avalanche™ at 14:30 ET when the indices hugged the 5 minute 20 sma and then broke lower. The volume didn't confirm the turn lower, however, and the move did not last long enough to adequately break the 15 minute support levels to allow the mid-day reversal to continue into the close. The market held the 15:00 ET correction period once again and turned higher into the close. Even though the pace was not as extreme as in Wednesday's late day turnaround, the indices still closed at the highs of the day with the Nasdaq testing the zone of previous highs and the S&Ps and Dow closing in for a stronger test of the daily resistance we've been following from prior congestion and 100 day sma levels.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) rose 174.75 points, or 2.3%, and closed at 7,924.56 on Thursday. The Dow is now up 21% off the year's lows. The banks were the only losers in the Dow. Citigroup (C) fell 4.75%, followed by a loss of 1.56% in Bank of America (BAC). General Motors (GM) had the strongest gains. It closed higher by 14.05%. Transportation stocks were among the strongest Dow components. The Dow Jones Transportation Average was up 8.2%.

The S&P 500 ($SPX) rose 18.98 points, or 2.3%, and closed at 832.86. The S&Ps are up 23% off the year's lows. All 10 sectors of the S&P 500 posted gains, but select financials struggled in this index as well. Wells Fargo (WFC) fell 2.9%, while US Bancorp (USB) fell 3.7%. Crude oil futures closed at $54.34 a barrel on Thursday.

The Nasdaq Composite ($COMPX) gained 58.05 points, or 3.8%, and closed at 1,587.00. The Nasdaq has had the strongest upside since hitting lows earlier this year. It is up 25%. Technology stocks were the clear leaders for the year. On Thursday some of the top gainers included Intel (INTC) (+5.9%), Microsoft (MSFT) (+5.3%), Research in Motion (RIMM) (+4.9%), and Apple (AAPL) (+3.2%).

At this point that larger daily target zone is still the magnet for the markets. The indices turned lower afterhours, but still have strong potential for pulling up further on the 60 minute time frame into the S&P and Dow 100 day simple moving averages. I remain more cautious on larger daily corrective setups on the short side until those daily resistance levels hit more solidly. The risk is still quite high that once those levels hit, however, that we can see a stronger daily selloff as profit-taking takes hold. The pace of the selloff would be enhanced if the indices slow and shift pace into the resistance to hit it more gradually than the average pace of the upside to date. A strong test of the resistance would more likely create a slower initial reaction in terms of price.

Wednesday, March 25, 2009

Market Whips Around at Daily Resistance

Market Whips Around at Daily Resistance

(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! Wednesday's economic data once again proved positive for the market heading into Wednesday morning after a weak close the day before. This confirmed the bias for a stronger test of the daily resistance. The session began after the Commerce Department reported that durable goods orders were up in February by 3.4%. The market gapped higher into Wednesday's open, but then congested above the 5 minute 20 period simple moving average. When the housing data came out at 10:00 ET the indices pushed higher once again. The government revisited January's new home sales to 322,000 units. This was 13,000 higher than reported earlier.

Although positive in the short term, the new homes sales data was still the second lowest level on record, however, and down 43.8% compared to one year earlier. Although inventory has fallen, it's still much higher than last February as well. The market overlooked these facts initially and the indices popped on the heels of the housing data. This pushed them to new highs for the month. It was not enough to sustain the move though.

Dow Jones Industrial Average ($DJI)

The push to new highs was the third evenly spaced high on the 15 minute time frame, creating a momentum reversal setup on that time frame. A second slightly higher high on the 5 minute time frame in the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) also created a 2T™ trap into the 10:45 ET correction period. The market continued to round off at highs on the smaller time frames.

After pulling lower again at the 11:00 ET correction period with a small move off the highs, the indices began to base along the 5 minute 20 period simple moving average. This started to create a typical Avalanche™ formation. The next thing to look out for was a drop in volume, which took place into noon, confirming the creation of this short strategy. The 12:00 ET correction period held as the highs in the congestion and the market soon broke lower with accelerating momentum.

S&P 500 ($SPX)

The market remained weak throughout most of the afternoon. The indices showed very little reaction to initial support levels from Tuesday's lows and even the mid-congestion zone from Monday. The pace finally began to shift on the selloff from 14:30-15:00 ET as the indices approached 15 minute 200 sma support intraday. The support held perfectly with the 15:00 ET correction period. The downtrend channel broke soon thereafter and triggered a reversal setup. After slowing at initial resistance, the pace of the buying picked up sharply in the final 30 minutes of trade. Even though the indices spent a larger portion of the afternoon in negative territory, the rally into the close brought all three of the major indices back into positive territory prior to the close. This late day rally was much sharper than I had expected and was fueled by the financials.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) rose 89.84 points, or 1.2%, and closed at 7,749.81 on Wednesday. 2/3 of the index components posted gains. The financials whipped the Dow around quite a bit. They were up in the morning, down in the early afternoon, and back up sharply into the close. J.P. Morgan (JPM) was the strongest with a gain of 8.18%, followed by a 6.65% gain in Bank of America (BAC). General Motors (GM) was the only index component to post more than a 2% loss. It fell 6.56%.

The S&P 500 ($SPX) rose 7.63 points, or 1%, and closed at 813.88. Crude oil futures remained stuck in the range that began on Monday at strong intermediate price resistance on the daily time frame.

The Nasdaq Composite ($COMPX) gained 12.43 points, or 0.9%, and closed at 1,528.95. Approximately 2/3 of the Nasdaq-100 components also posted gains.

The market still has potential over the next several days to continue to push higher. The 100 day simple moving averages in the S&P and Dow are still just overhead and will serve as resistance, as will the previous daily highs on the Nasdaq. At that point, however, the risk remains high for another strong reaction off the resistance and a rapid pullback that could easily test the lows of the year-to-date.

Tuesday, March 24, 2009

Slow-down Kicks In

Good day! One day after the market experienced its largest move of the year-to-date, the indices had to pause to collect their breath. Each of the three major indices (the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite) have begun to test the weekly resistance levels we had been following throughout most of the month. This is the price zone from the late-January to mid-February congestion.

As I mentioned in yesterday's column, the market was becoming overdone and would need a chance to slow the pace of the recent buying. The market itself is not very different from a sprinter. While a sprinter can run quite quickly in short bursts, he or she would be unable to sustain that speed for long. Slower moves in the market will more often resemble those of a cross country racer. They can maintain a more steady pace and can last much longer than a sprinter. Recently the market has been sprinting and this was particularly true in Monday's session on the heels of the Treasury Department's plan for a joint public-private purchase of toxic banking assets and better-than-expected housing data.

Dow Jones Industrial Average ($DJI)

Tuesday's session began with a strong gap lower into the open. The lows made with the first 15-20 minutes held, however, which led to the market favoring a gap closure. The S&Ps and Dow were more eager to comply than the Nasdaq. Both of these made strong progress attempting to close the opening gap as soon as the 2 minute channel out of the open broke higher. The Nasdaq was much sloppier and lacked the solid shift in momentum that the other two indices experienced off the 5 minute 20 sma support intraday that served to cushion the markets into the open.

Despite the gap closure bias, the extended daily chart and fact that the gap was a downside gap following a strong upside move made it more likely that the upside intraday would be more gradual and the gap closure itself would serve as extremely strong resistance. The S&Ps and Dow did well with this after retesting the opening lows at the 10:45 ET correction period. The Nasdaq, on the other hand, congested along the 5 minute 20 sma and formed an Avalanche™ short setup on that time frame that triggered out of the 10:15 ET correction period. It hit its equal move target at the same time as the S&Ps and Dow were testing the support at the morning lows and helped turn the market back higher into the second half of the morning.

S&P 500 ($SPX)

The slower upside on the 15 minute charts meant some nice swings back and forth on the 5 minute time frames intraday. The 10:15 ET correction period prices served as resistance on the 10:45 push higher. Another pullback formed into noon. The three indices had held the 15 minute 20 sma as support earlier in the morning and this held again into noon.

The 12:00 ET correction period led to the final push higher on the 15 minute time frame. The gap zone closed with this move, which is rather similar on the 5 minute time frame as the action forming in the indices on the daily time frame. At 13:30 ET the market turned off this larger time frame resistance. It pulled back, congested in the zone of the 5 minute 20 sma and 15 minute 20 sma, and then triggered a continuation of the selling around 14:30 ET. A bear flag formed on the 5 minute charts into 15:30 ET with the 5 minute 20 sma as resistance, and the selling then continued into the closing bell.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) fell 115.65 points, or 1.5%, and closed at 7,660.21 on Tuesday. Only Du Pont (DD) (+1.93%), Boeing (BA) (+1.69%), and Kraft (KFT) (+0.09%) closed in positive territory. The financials led the losers by giving back a chuck of their prior day's gains. J.P. Morgan & Chase (JPM) fell 8.52%, followed by a loss of 7.44% in Bank of America (BAC).

The S&P 500 ($SPX) fell 16.67 points, or 2.0%, and closed at 806.25. Crude oil futures changed very little from Monday's close. They ended higher by 18 cents at $53.98 a barrel on Tuesday.

The Nasdaq Composite ($COMPX) gained 39.25 points, or 2.5%, and closed at 1,516.52. 14 the Nasdaq-100 components posted gains.

My bias in Wednesday's session remains the same as on Tuesday. I still think that we can see a stronger test of the weekly resistance zone this week, but that pace will slow into that zone in a manner than is similar to the action into 13:30 ET on the 5 minute time frames.

Market Rebounds on Optimism from Treasury Dept. and Housing Data

(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 ending this past week on a weak note, the markets took off on Monday thanks to news from several fronts. The most influential heading into the session was the release of details from the Treasury Department of plans to remove bad assets from banks' balance sheets. This entails the creation of a series of public-private investment funds to purchase $500-$1000 billion in illiquid assets.

The indices opened strongly higher above the 5 minute 200 period simple moving averages and into price resistance from Friday morning. This interplay between the support and resistance levels did not last for long, however. At 10:00 ET the National Association of Realtors provided another jolt to an already giddy market. Existing home sales in February rose 5.1% month-over-month to a seasonally adjusted annual rate of 4.72 million. Analysts had been expecting a 0.9% drop to 4.45 million. Of course, a substantial portion of these sales were distressed properties, but incentives also have begun to lure in first-time home buyers. Even a large number of my friends whom I'd categorized as renters for life have been looking into making the transition into home ownership, although most have yet to fully commit.

Dow Jones Industrial Average ($DJI)

The market pounced on the news like my cat on my escaped hamster (may he rest in peace.) When the 11:00 ET correction period hit both the Dow and Nasdaq were testing last week's highs. The accelerated upside pace in the market blew the strategies I was watching for heading into the weekend out of the water and returned my bias to that which I'd favored throughout most of the prior two weeks: A return to the late-January to mid-February congestion zone.

The upside continued into the 12:00 ET correction period with a high level bull flag. By this point the market was starting to loose some of its earlier momentum, but it still managed a short burst of energy to propel the Dow and Nasdaq past last week's highs. That same price zone, however, served as resistance in the S&P 500 and all of the major indices began a larger 15 minute time frame correction off that resistance level.

S&P 500 ($SPX)

The early afternoon action in the markets was very sloppy. Although the short-term bias was bearish, the larger time frames started forming congestion zones or trading ranges along the intraday highs. Volume dropped off and clear-cut two-wave continuation patterns began to emerge in a number of individual securities. You can see this to some extent on the Nasdaq on its 5 and 15 minute charts, but the indices were quite choppy overall. Nevertheless, they failed to hold an afternoon base along the key 15 minute 20 period simple moving average.

The pivotal point came at 14:30 ET when the indices began to pull up off that support level for a second time on the smaller time frames. In order to maintain a corrective bias in the form of further downside, the market needed to break lower out of that second attempted bounce into the 5 minute 20 sma and hold that sma as resistance. By 14:45 ET the indices had passed that pivotal time span necessary to facilitate this reaction and confirmed a return to the bullish bias into the afternoon. Since the potential for a larger correction had failed, it also made it most likely that the uptrend would hold into the close.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) jumped 497.48 points, or 6.884%, and closed at 7,775.86 on Monday. Every single one of the Dow's 30 index components posted gains with the laggard amongst them, Pfizer (PFE), still up 2.86%. The financials were the clear winners for the day. Bank of America (BAC) was up 26.01%, followed by a 24.67% gain in J.P. Morgan & Chase (JPM), a 19.47% gain in Citigroup (C), and an 18.76% gain in American Express (AXP).

The S&P 500 ($SPX) climbed 54.38 points, or 70.08%, and closed at 822.92.Oil prices continued to climb. The crude oil futures closed at $53.80 a barrel in New York. This was a gain of $1.73 per barrel since Friday. Gold slipped $3.70 an ounce to $952.50.

The Nasdaq Composite ($COMPX) gained 98.50 points, or 6.76%, and closed at 1,555.77. All but three of the Nasdaq-100 posted gains.

The afternoon rally in the Nasdaq took it squarely into the target zone we had been following over the past several weeks. The S&P 500 and Dow both have a little further to go. Although maintaining the current pace is highly improbable into those levels, they can still test them this week on slower momentum. 7800-8500 is the Dow's daily and weekly resistance zone. Typically the middle of that zone will serve as the strongest price resistance. This narrows down the strongest resistance in that index to the 8000-8200 zone. 7779.92 was Monday's high. It was also the 50% retracement off the year's highs to date. 8090 is approximately the 62% Fibonacci retracement level. 1580-1600 is the next Nasdaq Composite resistance, although it can still be considered part of the same zone that hit on Monday afternoon.

Friday, March 20, 2009

Economic Reports and Earnings Events March 23-27

Economic Reports and Events This Week

Monday, March 23, 2009
10:00 a.m. Feb Existing Home Sales: Previous: +5.3%.

Tuesday, March 24, 2009
7:45 a.m. ICSC Chain Store Sales Index For Mar 21
8:55 a.m. Redbook Retail Sales Index For Mar 21
10:00 a.m. Mar Richmond Fed Mfg Survey: Previous: -51.
4:30 p.m. API Oil Industry Report For Mar 20
5:00 p.m. ABC/Wash Post Consumer Conf For Mar 21

Wednesday, March 25, 2009
7:00 a.m. Mortgage Applications Refinance Index: Previous: +29.6%.
8:30 a.m. Feb Durable Goods Orders: Previous: -5.2%.
10:00 a.m. Feb New Home Sales: Previous: -10.2%.
10:30 a.m. US Energy Dept Oil Inventories For Mar 20

Thursday, March 26, 2009
8:30 a.m. 4Q Final GDP: Previous: -6.2%.
10:00 a.m. DJ-BTMU Business Barometer For Mar 14
10:30 a.m. EIA Natl Gas Inventories For Mar 20

Friday, March 27, 2009
8:30 a.m. Feb Personal Income: Previous: +0.4%.
8:30 a.m. Feb Personal Spending: Previous: +0.6.
10:00 a.m. End-Mar Reuters/U Mich Sentiment Index: Previous: 56.3

Key Earnings Announcements This Week:

Monday, March 23, 2009
Before: PRSC, TIF, WAG (?)
During: -
After: FMCN, PVH, RUBO, SONC, TTGT

Tuesday, March 24, 2009
Before: CCL, CMC, HLCS (?), MKC, WSM
During: -
After: JBL, RBN

Wednesday, March 25, 2009
Before: ADES, DSW, SOLF, SNSS (?)
During: -
After: CTRN, CKR, PAYX, RHT, SAI

Thursday, March 26, 2009
Before: ALDN (?), BBY, CAG, CONN, DPS, FRED, FREE (?), FUQI (?), GME, LEN (?), MOV (?), SCHL, TXI, UTIW, VIP (?), WTSLA
During: -
After: ACN, CHINA (?), ERJ, EXM (?), HLYS (?), LULU, PEIX (?), FACE, SMOD, SNX, TK (?), TIBX, XRTX (?)

Friday, March 27, 2009
Before: FINL, KBH (?)
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.

Market Tracks Lower into the Weekend

Eventually, even the Nasdaq succumbed to the larger selling pressure. The index pivoted around 10:00 am ET and fell sharply into its 5 minute 20 period simple moving average. At this point it hugged the support into the 11:00 ET correction period before breaking lower out of an Avalanche™ short setup. This breakdown took it squarely into its 5 minute 200 sma and 15 min 20 sma. Both of these also held extremely well for support and the index congested along those levels.

The Nasdaq was the cleanest index in morning trade. It held support and resistance levels well with less overlap and slop than the S&Ps and Dow, but they also managed to shape up into the afternoon. All three of the indices congested from 11:30 ET into 12:30 ET. This congestion had two waves of upside within it which favored a breakdown into the afternoon. It was aided by the fact that this congestion experienced a decline in volume as it formed. This showed that the buying did not have a lot of solid backing within the congestion itself even when prices were moving higher.

The 2-wave short setup triggered out of the 12:30 ET correction period and provided the strongest move of the session up to that point. The selling was fast and steady into the 13:00 ET correction period. This correction period hit with equal move support on the 5 minute charts as compared to the earlier selloff as well as price support from the 15 minute time frames several days earlier. By this point, however, the market had triggered a larger 30 minute breakdown, and the support only stalled the selloff. The indices showed a better reaction to the 14:00 ET correction period, but the 15 minute 20 sma held as strong resistance and the indices fell back once again into the close.

S&P 500 ($SPX)

The breakdown on the 30 minute time frame showed the more widespread concern that the markets may be starting another leg down on the daily time frame. Given the action on Friday, this is a valid concern. In order to sustain a larger move into new highs for the month, the market has needed a longer correction on an intraday time frame such as the 60-minute one. As we saw on the way down, it is common to see a longer correction and then continuation. There was one 4-day congestion at the end of February for example. What we didn't want to see, however, was selling momentum building upon itself, as it did on Friday afternoon. Unfortunately, this leaves the bias more on the bearish side into next week.

In order for the market to be able to hit the larger resistance levels at the 100 day sma in the Dow and S&Ps this month we will need to see a fairly strong move higher off 60 minute support to create a "V" type of bottom that can lead to a trading range on the 60 minute time frame. The support for the lows of such a range should be no lower than the 60 minute 200 sma in the S&Ps. It would then have to very quickly return to the zone of Wednesday and Thursday's highs. This is going to be quite difficult to accomplish. Due to Friday's price action, the market is more likely to base or congest and then break lower once again on the 30 minute charts and play out a lower level range on the weekly time frame. If it does so, then we can very easily see new lows in the market by summer.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) posted a loss of 122.42 points, or 1.6%, and closed at 7,278.38 on Friday. Despite the strength earlier in the week, the index closed higher by only 0.7% by week's end, although it was still the first consecutive weekly gain since the first week of May last year. Only 6 of the Dow's 30 index components posted gains on Friday. General Motors (GM) was the leader with a gain of 10.80%, followed distantly by Johnson & Johnson (JNJ) with a gain of 3.22%. The financials led the decliners. Bank of America (BAC) posted a loss of 10.68%, followed by a 7.21% loss in J.P. Morgan & Chase (JPM)

The S&P 500 ($SPX) fell 15.5 points, or 2%, and closed at 768.54. Utilities, consumer staples, and health care led the gainers on Friday, while the financials, energy, and industrials led the decliners. The S&P 500 closed higher on the week by 1.5%.

The Nasdaq Composite ($COMPX) fell 26.21 points, or 1.8%, and closed at 1,457.27. While it closed lower by 1.8% on the day, it posted a 1.8% gain for the week.

Thursday, March 19, 2009

Market Pulls Back After Strong Gains

The market turned around very quickly into Thursday's open. The selling pace was a lot more substantial than the climb into the highs. The trap, as well as the change in pace, set the mood for the morning with a strong bearish bias and the indices returned quickly to support at congestion from the wee hours of the morning.

A second wave of selling took place after the market pulled up into the 10:45 ET correction period. This move higher was slower than the drop and formed with two-wave of buying on lighter volume than the decline. This was the perfect setup for a continuation move. The breakdown was not as rapid as the morning's decline, but it was steady. The selling continued into almost noon. At this point the indices found support once again on a 15 minute time frame from the previous session. Pivot highs and lows on the 15 minute time frame held well. This zone of support was also the equal move support zone, whereby the early morning descent was mirrored in this late morning continuation.

S&P 500 ($SPX)

The market turned higher once again on gradual volume into the early afternoon. At this point the indices were now exhausted on the 15 minute time frame and fell into a congestion move on this larger time frame. At first the congestion was quite orderly and remained bearish. When the 13:00 ET correction period hit, however, the upside pace increased. This began to limit the odds for a strong late-day breakdown. It created the potential for further upside as well, but it hinged upon the reaction to the 14:00 ET correction period that hit at price resistance from the mid-morning congestion.

When the 14:00 ET correction period hit the market took a sharp turn lower. It was unable to sustain that move, however, and ran into support after the pace slowed into 15:00 ET. This reversal made the markets very high risk into the final hours of trade. The 15:00 ET correction period held well, but the indices reacted very little in terms of price. Instead, the level just served as a support zone and the indices fell into an even more narrow range in the final hour of trade.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) fell back 85.78 points, or 1.1%, to close at 7,400.80 on Thursday. This gave the index only its second losing day out of 8. The selloff affected all but 8 of the Dow's index components. Alcoa (AA) rallied 16.79% on an upgrade by J.P. Morgan & Chase from neutral to overweight. JPM also raised its price target from $8 to $12. General Motors (GM) followed with a gain of 8.71%. Citigroup (C) did a reverse-face and fell 15.58%. It was followed by Bank of America (BAC), which fell 9.65%. J.P. Morgan & Chase (JPM) fell 7.97%.

The S&P 500 ($SPX) fell 10.31 points, or 1.3%, and closed at 784.94. The financials led the decline. Prudential Financial (PRU) was the hardest hit in the S&P 500. It fell 25.2% after Moody's severely cut its debt rating. Commodity stocks, however, did quite well on Thursday. The dollar has fallen sharply over the past two days on the heels of the Fed data Wednesday and crude oil futures jumped 7.2% to $51.61 a barrel.

The Nasdaq Composite ($COMPX) fell 7.74 points, or 0.5%, and closed at 1,483.48. Oracle (ORCL) was the largest gainer in the Nasdaq-100. It rose 9.73%. It was followed by Steel Dynamics (STLD), which rose 8.06%. Focus Media (FMCN) was the largest loser on the Nasdaq-100. It fell 6.43%.

The corrective bias remains in place heading into Friday. This means that the odds are high that the indices will continue to correct off Thursday's highs. At present that correction favors a pull lower into Friday morning, but the daily charts are not favoring a strong pullback at this point, so I am not strongly bearish. The zone from late-January to early-February remains the stronger resistance point and this current move off highs is likely just one of the 30-60 minute corrections I wrote of yesterday. The larger term bias is still in favor of a range on the weekly time frames.

Wednesday, March 18, 2009

Market Reacts Positively to Fed's Unexpected Announcement

Good day! The market faired extremely well on Wednesday... Much better than I had anticipated! The morning and early afternoon action was exactly in line with the larger bias. The indices opened lower, continued to pull back into about 10:30 ET and then resumed the previous day's uptrend coming out of a 15 minute bull flag. This kept it in line with the possibility for a 2T setup on the 60-minute time frame. A Phoenix™ followed as the indices hugged 5 minute 20 sma resistance into noon before breaking higher once again. The 5 minute 20 sma then served as support throughout the early afternoon and into the Fed announcement.

Dow Jones Industrial Average ($DJI)

The Federal Reserve announced that it did not plan on changing its key interest rates and would maintain a range of 0-0.25%. This was what had been expected. Given the gradual momentum ahead of the announcement, the market was still setting up a larger reversal for the afternoon and was just waiting on the news before it decided to act. What caught it off guard, however, was the move the Fed decided to make to purchase as additional $750 billion of agency-backed securities and another $100 billion of agency debt, as well as up to $300 billion of longer-term Treasury securities in an effort to "promote economic recovery and to preserve price stability."

This news blew the market's technical bias out of the water. The indices held the 5 minute 20 sma once again heading into the 14:15 ET news and when it hit the indices took off flying. They immediately busted through the highs of the day, which created a strong bias for daytraders to buy the first pullbacks.

S&P 500 ($SPX)

The indices followed through with the typical Fed-day strategy I've discussed many times in the past whereby an initial reaction is followed by a counter-reaction and then continuation in the original direction. This tends to form first on a 1 minute time frame and then on the 5 minute time frame. The one minute time frame action only shows up on the 5 minute charts as the tail of the immediate reactionary bars, but the second set formed clearly with the second move pushing higher into the 15:00 ET correction period. This made the continuation pattern easy to catch even if the initial setup was too fast.

This second high was made at a slower pace than the first and created a 2T reversal on that 5 minute time frame, leading to a pullback out of the 15:00 ET correction period into the final one of the day at 15:30. The market held support into the last correction period and pulled up into the close and immediately afterhours, although it held the intraday highs throughout the remainder of the evening.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) rallied another 90.88 points, or 1.2%, and closed at 7,486.58. All but 7 of the Dow's 30 index components closed in positive territory. The gainers were led by a 21.71% rally in Citigroup (C) and a 22.33% rally in Bank of America (BAC). American Express (AXP) gained 9.06%, while J.P. Morgan & Chase (JPM) rose 7.84%. The top losers were Kraft (KFT) (-4.38%) and Hewlett-Packard (HPQ) (-2.55%). Wednesday's session was the Dow's 6th day of gains in the past seven. Such a move is extremely rare. The Dow is still down 14.7% on the year though.

The S&P 500 (SPX) gained 16.23 points, or 2.1%, and closed at 794.35. This leaves the S&Ps down 12.1% for the year-to-date.Crude oil closed lower by just over $1/barrel at $48.14.

The Nasdaq Composite ($COMPX) rose 29.11 points, or 2.0%, and closed at 1,491.22. The Nasdaq is down 5.4% year-to-date.

Even though we should expect corrections intraday on a 30-60 minute time frame, the increased pace of this rally leave the larger targets at the late-January to early-February zone that I've been speaking of the past two weeks. This is about the 8k level for the Dow.

Tuesday, March 17, 2009

Market Manages Yet Another Strong Showing

Even though Tuesday was a strong trend day in the markets, it was a rather sloppy one. The morning was particularly choppy, but the indices had begun the day at strong support and since the pace on Monday had created an inverted "V" top it meant higher potential for a longer range into today as opposed to immediate continuation action on the downside. Nevertheless, the indices have been plugging away on the upside for over a week now and it was obvious in Tuesday's session that many were feeling a bit jumpy. A lot of the morning trade was choppy, but the markets did finally manage to break higher into the early afternoon with a little more certainty.

Dow Jones Industrial Average ($DJI)

The debate throughout the afternoon was whether or not the market would attempt to form a reversal pattern off the intraday highs. The pace shifted mid-day for a short trigger around 13:45 ET, but instead of hitting and holding support at 14:00 ET to allow for the creation of an Avalanche™ on the 5 minute time frame, the market bounced into the 5 minute 20 sma and then put in a slightly lower low into the 15 minute 20 sma support at 14:30 ET. An Avalanche became less likely at this points since ideally a more rapid pullback should have been followed by congestion. Instead, the 15 minute 20 sma proved too strong for support and the slightly lower low created a 2B buy setup into the afternoon. Momentum increased steadily into 15:00 ET and then continued into the closing bell for a close at the day's highs.

The economic data on Tuesday was decent. The Commerce Department posted a 22% increase in housing starts in February, which is the largest month-to-month gain in 19 years. A large portion of these gains were for apartment complexes. Construction for single-family homes rose 1.1%. Housing starts are still down over nearly 50% compared to the same month last year.

In other news, the Labor Department released the latest Producer Price Index, which rose 0.1% in February. It had been expected to rise 0.3-0.4%. The core PPI, which excludes food and energy prices, rose 0.2%, while economist had been expecting an increase of 0.4%.

S&P 500 ($SPX)

The Dow Jones Industrial Average ($DJI) rallied 178.73 points, or 2.5%, and closed at 7,395.70. All but three of the Dow's 30 index components posted gains. The losers were Alcoa (AA) with a loss of 8.66%, General Motors (GM) fell 1.98%, while Johnson & Johnson (JNJ) fell 0.02%. The top gainers were J.P. Morgan & Chase (JPM) with a gain of 8.88%, followed by Citigroup (C) with a gain of 7.73%, and Home Depot (HD) with a gain of 6.65%. The Dow is up almost 13% since lows earlier this month.

The S&P 500 (SPX) gained 24.23 points, or 3.2%, and closed at 778.12. All 10 of the S&P's industry sectors closed in positive territory on Tuesday. Financials and consumer discretionary shares led the rally. The S&P 500 is up 15% off the lows made just over a week ago. Energy shares were strong thanks to gains in oil. Crude oil came close to testing $50/barrel, falling just short of that mile marker in the afternoon before pulling back to close at $49.16/barrel, up 3.8% in New York.

The Nasdaq Composite ($COMPX) rose 58.09 points, or 4.1%, and closed at 1,462.11. The Nasdaq is up 15.3% off the month's lows. After suffering from relatively weakness the past several days, the index was boosted by a 4% gain in Microsoft (MSFT), a 4.4% gain Apple (AAPL), and a 4.9% gain in Dell (DELL).

Nasdaq Composite ($COMPX)

The guiding force on Wednesday will be the anticipated rates information from the Federal Open Market Committee, which wraps up a 2-day meeting and will be posting their outcome on Wednesday afternoon. It is expected that the central bank will keep its interest rates close to zero. The markets have the potential for a 2T on a 60 minute time frame in the S&P 500 and Dow whereby a slightly higher high on those time frames serves as a trap and is followed by a downward correction. Given the larger time frames, however, I suspect this to most likely be similar to the 15 minute of the Nasdaq the morning of the 16th where it just pulled back into support from the zone of the earlier low before pulling up again. 60 minutes corrections within this type of daily move are typical, but I'm still aiming for the congestion earlier this year, which is about 8,000 in the Dow, for the strongest resistance.

Given that Wednesday is a Fed day, use greater caution. Volume should be on the light side until the announcement since the market has been trending upwards over the past two weeks. Mid-day will be particularly light. When the news hits it can create a great deal of added volatility and it can be difficult to get fills at desired prices. You may also experience delays in your data. The waves of reaction still tend to offer really nice setups and risk diminishes about 15 minutes past the announcement.

Monday, March 16, 2009

Dow Narrowly Misses Posting Gains for the 5th Session in a Row

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

The market had one of those "close, but no cigar" moments on Monday when it flirted with the build throughout most of the session and then dumped them ahead of the close. The session began in positive territory on Monday after the index futures broke sharply higher around 3:00 am ET thanks to strength overseas. Even this upside open was not perfect, however, since the opening prices themselves were well off the premarket highs. After the initial surge, the indices had rounded off at highs between 4:00-8:30 am ET and had triggered a short ahead of the open. This led to continued downside out of the bell and resulted in a very rapid closure of the morning gap in the Nasdaq Composite and near-closure in the Dow Jones Industrial Average and S&P 500.

The markets experienced a very high level of divergence on Monday with the S&Ps and Dow showing considerable strength throughout the morning and early afternoon while the Nasdaq faltered. Both the S&Ps and Dow pulled back gently into 5 minute 20 sma support out of the open and held it very well at the 10:15 ET correction period. They returned strongly to the morning highs, based again into the 5 minute 20 sma, and then broke to new highs on the day. The Nasdaq, on the other hand, had closed its gaps with a few minutes of the open and broke its 15 minute lows and 5 minute 20 sma very early in the session.

The break of these support levels left the index free to fall back to Friday's lows with the next major moving average support at the 5 minute 200 sma. These levels also hit with the 10:15 ET correction period, but instead of the 5 minute 20 sma acting as support, it was resistance for the Nasdaq and resulted in a return to the morning lows into the 11:00 ET correction period at the same time as the other indices were pulling back to the 5 minute 20 sma support once again.

Dow Jones Industrial Average ($DJI)

When the S&Ps and Dow moved to new highs, the Nasdaq returned to Friday's closing prices. This served as resistance in the overall market and another correction off highs took place into noon. Support hit with the 12:00 ET correction period and held, but the market based out into 12:30 ET on light volume before once again pushing to the upside.

The light volume was a positive trait for the early afternoon breakout, but the inability of the indices to confirm the breakout on strong volume spoke of larger trend exhaustion on the daily time frame. The Nasdaq hit intraday highs and its 5 minute equal move target level into the 13:00 ET correction period. By this point it was also beginning to shift pace into those highs with an initially strong rally slowing into a stronger test of the targeted resistance. This triggered a reversal into the final three hours of trade. The stronger S&Ps and Dow followed with a comparable pattern that triggered in those indices shortly before 14:00 ET and confirmed when the larger uptrend channel on the 15 minute time frame gave way on the downside.

S&P 500 ($SPX)

The market had been on the lookout for a reversal since Monday morning with wordplay everywhere labeling this a "bear market rally." Once the selling hit, it did not take much for it to gain momentum. This is what I warned about on Thursday and had originally been looking for as a possibility Friday morning. The additional push Friday afternoon and into Monday, however, provided even greater exhaustion and had taken the Nasdaq into a strong test of its 50 day sma resistance.

At this point the markets are favoring a longer correction at this resistance zone for ate least a couple of days. It is still too early, however, to say that this is the end of this current daily trend. The 10 and 20 day simple moving averages are now support and slower overall corrections into those levels can still allow the markets to push higher into the late-January to early February price levels that we've been keeping an eye out on. Pushing through those levels, should they hit on this daily rally, will be extremely unlikely without a weekly correction off those highs. This will mean that a push into that zone should offer some strong short setups on a daily time frame for swingtrades, whereas the risk for such an attempt here is greater that this could just be a pause in what ends up being a two-wave push to the upside on the daily time frame and serve as more of a pause than a pullback to the lows.

Nasdaq Composite ($COMPX)

The Dow Jones Industrial Average ($DJI) ended the session lower on Monday by a mere 7.01 points to close at 7,216.97. 16 of the Dow's 30 index components closed in positive territory. A sharp upside gain of 30.90% in Citigroup (C) led the Dow, followed by a 7.29% gain in Bank of America (BAC). C had been up as much as 44% intraday. On the loosing end were General Motors (GM) with a loss of 7.35%, American Express (AXP) with a loss of 3.28%, and Merck (MRK) with a loss of 3.18%. AXP fell behind when it announced that delinquencies among its cardholders was greater than 8% this past month.

The S&P 500 (SPX) fell 2.66 points to 753.89 on Monday. 210 of the S&P 500 stocks closed positive. Crude oil futures rose from $46.25 a barrel in NY on Friday to close at $47.35 on Monday. After meeting over the weekend, the Organization of Petroleum Exporting Countries left its production output unchanged. They had cut production three times since September.

The Nasdaq Composite ($COMPX) fell 27.48 points, or 1.9%, on Monday and closed at 1,404.02. This index was weighed down heavily by the tech sector. Only 13 stocks in the Nasdaq-100, which tracks the Nasdaq's largest stocks, were positive.

Yesterday's Column:
http://www.tradingfrommainstreet.com/newsletters/FocusLetter/archives/20090316.html

Saturday, March 14, 2009

Market Catches Its Breath, Ending Week With Strong Gains

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

The market posted its fourth consecutive day of gains on Friday. The last time this occurred was December 2007. It was also the best week of gains since last November.

The Dow Jones Industrial Average ($DJI) gained another 53.92 points, or 0.8%, and closed at 7,223.98 on Friday. Speculation over health insurer Humana (HUM) as a takeover candidate helped the health care sector lead the market. Merck (MRK) was the Dow's second-best performer for the day with a gain of 12.7%, while Pfizer (PFE) followed in fourth place with a 3.7% gain. The Dow's weekly gains amounted to 9%, although the Dow is still down 17.7% on the year to date.

The S&P 500 ($SPX) closed higher by 5.81 points, or 0.8%, at 756.55 on Friday. Although the index is still down 16.2% year to date, it ended the week higher by 10.7%. Among the strongest sectors this past week were the financials. The Select Sector SPDR-Financial (XLF), which is the exchange traded fund that tracks the sector, rose 35% on the week. Energy shares were weak on Friday ahead of the weekend's Organization of Petroleum Exporting Countries (OPEC). Crude oil futures fell to $46.25 a barrel after ending the session higher by over 11% on Thursday at $47.03. It is up 1.6% from last week's close and is up 3.7% YTD.

The Nasdaq Composite ($COMPX) rose 5.40 points, or 0.4%, and closed at 1,431.50 on Friday. Technology shares had a lot of the difficulty intraday. Adobe (ADBE) fell 3.9%, while Research In Motion (RIMM) lost 3.1%. Microsoft (MSFT) dropped 2.1%, while Apple (AAPL) closed lower by 0.4%. Despite these components, the Nasdaq Composite still gained 10.6% for the week. For the year to date it remains down 9.2%.

Dow Jones Industrial Average ($DJI)

The economic data was fairly light on Friday morning and didn't have much of an impact on the morning's price action. Ahead of the open the Commerce Department reported that the U.S. trade deficit narrowed by 9.7% in January to $36 billion. This was lower than expected and is the narrowest gap since October 2002. At 10:00 ET the University of Michigan's report on consumer sentiment rose in March to 56.6 from 56.3 in February. It was expected to come in at 55.

After creeping higher throughout most of the session on Thursday, the market was quite extended into Friday's open. Nevertheless, the indices still held up well to begin with. Both the S&P 500 and Dow gapped slightly higher. Even though all three of the major indices pulled back out of the open, the 9:45 ET correction period held and the market managed to push to slightly higher intraday highs. These highs hit squarely at the middle of the congestion resistance I posted in yesterday's column in the S&Ps and Dow and they held perfectly.

S&P 500 ($SPX)

The initial reaction off the early morning highs was a very rapid one. The indices fell sharply into the zone of the first 15 minute lows, which then served as support. The market then bounced back to the prior breakdown zone with the 10:45 ET correction period before resuming the selling throughout the remainder of the morning. The pace of that selling could not come close to the initial drop from highs, however, and the indices began to creep lower with a lot of overlap on the 5 minute time frames before first attempting to pull higher into noon. A 2B formed on the 5 minute charts into 12:45 ET that helped shift the pace of the selling somewhat and allowed the market to roll over off lows into the afternoon. This turnaround was aided by strong support on the 15 minute time frames in the form of the 38.2% Fibonacci retracement level of the previous 15 minute rally in every one of the three major indices.

Nasdaq Composite ($COMPX)

Buying picked up well once the 5 minute 2B triggered intraday. Heading into the session I had originally expected the market to have a difficult time posting gains four a fourth day. Since this had not happened in well over a year, that expectation was well-warranted. The reason is that creeping upside action throughout an entire previous day will tend to break that trend sharply the next day. Such days, however, do tend to be marked by a lot more 5 minute setups which can make timing trades the next day a lot easier. This is what progressed on Friday. The morning swings were strong intraday off the support and resistance levels, accompanied by the correction periods.

The first main afternoon resistance to hit was at 13:30 ET when the indices came into the middle of the morning triangle and trading range action on a 5 minute time frame. This held, but a stronger correction tried to form out of 14:00 ET when the indices had created a slightly higher high for a 2T reversal. The 5 minute 20 sma was support for the correction off highs and it held very well. Instead of hugging the support level in order to favor continued downside, the markets pulled to another slightly higher out around 14:45 ET. This high came directly into the upper channel resistance on the uptrend in the afternoon in the indices on Thursday. Another pivot began, but once again the 5 minute 20 sma held. This action continued into the close with a final pullback in the last 30 minutes of trade.

The 60 minute charts at this time suggest that the markets may still try to push higher again into Monday, however, the resistance from the zone of the 17th remains strong and we will likely see a larger correction then form that lasts at least several days off the highs. As a result, any additional upside should be slower than the last and risk a stronger afternoon reversal. The market has had quite a run in it this past week and although it tried to catch its breath on Friday, it still needs more of a resting period in order to sustain another strong upside move should it even decide to attempt such a feat. The odds are still decent for another pullback into the previous lows since we have a "V" type of bottom, which is suggestive of the formation of a longer trading range. The scale of the range will depend upon whether it holds the highs heading into the week, or just bases and continues into the 100 day simple moving average resistance levels I pointed out last week and the zone of the gap closure from the 17th in the Nasdaq.

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Thursday, March 12, 2009

Market Up 10% in 3 Days Bolstered by News

Market Up 10% in 3 Days Bolstered by 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 indices closed higher once again for the third day in the row on Thursday in one of the largest market rallies we've seen in recent months. The indices overall are up about 10% off Monday's close with the Nasdaq Composite ($COMPX) now trading above its 20 day simple moving average and the S&P 500 ($SPX) and Dow Jones Industrial Average ($DJI) testing their own 20 day smas. A lot of Thursday's rally can be attributed to numerous news releases that were generally welcomed by the markets.

The Dow Jones Industrial Average ($DJI) closed higher by 239.66 points, or 3.5%, for the day at 7,170.06, once again making it over the 7k mark. Microsoft (MSFT) was the only one of the Dow's 30 index components to not post a gain. It fell 0.58% to close at $17.01. Bank of America (BAC) was the Dow's largest gainer with a close higher by 18.66%. CEO Ken Lewis stated that the company is unlikely to need further government assistance. J.P. Morgan & Chase (JPM) came in third place, up 13.73%. American Express (AXP) rose 10.23%. Many of the gains in banking stocks were attributed to hope that mark-to-marketing accounting practices will be revised, which was on everyone's tongue today. General Motors (GM) came in second with a gain of 17.2% after it announced that it would be able to get buy without the $2 billion loan it had previous stated it needed by the end of the month. It still needs funding, but just not as quickly as expected. General Electric (GE) rose 12.72% despite a ratings cut from Standard & Poor. Pfizer (PFE) was bolstered by the successful test of its cancer drug Sutent. It posted a gain of 9.62%, with Merck (MRK) just behind it with a gain of 9.53%.

The S&P 500 ($SPX) closed higher by 29.38 points, or 4.1%, at 750.74. All 10 industry sectors in the index posted gains with 476 of the S&P's 500 stocks in positive territory by the closing bell. Crude oil futures also soared, up 11.1% to close at $47.03 in New York for a YTD gain of 5.45%, while gold rose $13.30 to $924 an ounce and is up 4.49% YTD. In other commodities, copper is currently up 15.21% YTD, followed by silver with a YTD gain of 13.32%.

The Nasdaq Composite ($COMPX) closed higher on Thursday by 54.46 points, or 4.0%, and closed at 1,426.10. Only 4 stocks in the Nasdaq-100 posted losses. The most substantial was Steel Dynamic (STLD), which fell 15.20% after it changed its profit forecast of 5-10 cents a share for the first quarter to an expected loss of 40-45 cents a share.

Dow Jones Industrial Average ($DJI)

On the economic front on Thursday, initial claims for unemployment benefits for this past week rose by 9,000 to 654,000. The moving average of new claims now stands at 650,000, which is the highest level since October 1982. In other news, retail sales in February were slightly better than expected. They fell 0.1% for the month and rose 0.5% when excluding auto sales. The Commerce Department was expected to post a decline of 0.5% and 0.1% ex-auto. January retail sales were also revised higher to a 1.8% increase. Year-over-year sales are down 8.6%.

S&P 500 ($SPX)

The market formed a trend day to the upside intraday on Thursday, but it began weakly. After a rather flat open, the indices continue lower on the reversal that had begun off Wednesday's afternoon highs. This led to a test of the previous day's lows, which served as support, just as they had in premarket trade. This support zone hit going into the 9:45 ET correction period. Once the market turned higher, it was able to quickly retrace the losses and return to Wednesday's highs.

The zone from Wednesday's highs served as resistance, but the market reacted very little. The indices fell into congestion along the day's highs with the 5 minute 20 sma as support. A two-wave pullback on the 2-5 minute time frames led to continued upside into noon on an earlier-than-ideal breakout. Since the market had only rested approximately as long as it had rallied off the morning lows, this made it difficult to gain the same momentum as that initial ascent. This set the tone for the remainder of the session for a creeping trend day that moved higher with slightly higher highs throughout the session with the 20 sma on the 5 minute charts acting as support for the trend.

A couple of two-wave continuation patterns offered some slightly lower risk entries at about 14:00 and 15:30 for those that missed the initial triggers, but trends like this can be difficult since they offer very little opportunity for strong momentum moves and those looking for larger gains have to hang on during strong percentage corrections that can take back a huge chunk of gains before they continue. They also risk rapid flushes on the downside if the indices hug the 5 minute 20 sma too long. This type of trend day, however, does have a higher likelihood to close at or near the day's highs (or lows in the case of a downtrend, which was the case the last time I discussed this price action), and this held true on Thursday as well.

Nasdaq Composite ($COMPX)

Over the past four days the market has recovered losses that it took twice that long to make. This is a good sign for those hoping to see the lows hold for a larger continuation of this correction off lows on a daily time frame. It is not, however, strong enough to confirm a lasting low on a weekly time frame. The market didn't pull lower on Thursday to help slow the larger selling pace, so now we have more of a "V" type of low. This tends to signal a trading range in the making, which we can easily see form on the weekly time frames now that will mmake it extremely difficult to break the last weekly high.

For the market to have a decent shot at continuing to hold the lows over the next month we will need to see this rally continue with only mild 30-60 minute corrections until it hits the congestion zone I spoke of yesterday in the late January to early February price zone. This is approximately the 100 day simple moving average in the S&P 500 and Dow. This would then create the potential for a Phoenix™ along that resistance zone, which would also be about the 20 week sma. The pace would ideally have to continue to accelerate off this week's lows into that level, otherwise we can still fall back rather easily into this month's lows. Unfortunately for the bulls, I think that this later possibility is quite high. A rally in late-March with a slightly lower low in the Nasdaq beforehand would have been more ideal for a larger hold of support on the weekly charts.

Mastering Momentum Gaps Course now on DVD

Now available on DVD for those of you that could not make it to November's webinar! :) The new site needs spiffied up since this is the first mock-up, but I've been getting a lot of emails about people wanting the link for the product as soon as it was ready. For those that want to learn more, please check back as the site will be updated over the next two weeks.

Website - http://www.tradertoni.com

Upcoming Earnings and Economic Events - March 13-20th, 2009

Economic Reports and Events:

Friday, March 13, 2009
8:30 a.m. Jan Trade Balance: Expected: -37.0B. Previous: -39.93B.
8:30 a.m. Feb Import Prices: Expected: -0.8%. Previous: -1.1%.
10:00 a.m. Mid-Mar Reuters/U Mich Sentiment Index: Expected: 56. Previous: 56.2.

Monday, March 16, 2009
8:30 a.m. Mar Empire State Fed Manufacturing Survey: Previous: -34.65.
9:00 a.m. Jan Tsy International Capital: Previous: +$24.4B.
9:15 a.m. Feb Industrial Production: Previous: -1.8%.
9:15 a.m. Feb Capacity Utiliztion: Previous: 72%.
1:00 p.m. Mar NAHB Housing Index: Previous: 9.

Tuesday, March 17, 2009
7:45 a.m. ICSC Chain Store Sales Index For Mar 14
8:30 a.m. Feb Housing Starts: Previous: -16.9%.
8:30 a.m. Feb Producer Price Index: Previous: +0.8%.
8:30 a.m. Feb Producer Price Index,ex-food & energy: Previous: +0.4%.
8:55 a.m. Redbook Retail Sales Index For Mar 14
5:00 p.m. ABC/Wash Post Consumer Conf For Mar 14

Wednesday, March 18, 2009
8:30 a.m. Feb Consumer Price Index: Previous: +0.3%.
8:30 a.m. Feb Consumer Price Index, ex-food energy: Previous: +0.2%.
8:30 a.m. 4Q Current Account: Previous: -$174.1B.
2:15 p.m. Mar FOMC Interest Rate Decision

Thursday, March 19, 2009
8:30 a.m. Initial Jobless Claims For Mar 14 Week
10:00 a.m. Feb Conference Board Leading Indicators: Previous: +0.4%.
10:00 a.m. Mar Philadelphia Fed Business Index: Previous: -41.3.
10:00 a.m. DJ-BTMU Business Barometer For Feb 7

Friday, March 20, 2009
No major economic indicators scheduled.

Key Earnings Announcements:

Friday, March 13, 2009
Before: CODI, GMET, NVAX (?), NPSP, SKIL (?), SUI
During: -
After: -

Monday, March 16, 2009
Before: ABG, CYPB, EPL (?), ENG, FTK, HWCC, ORBC, OFG (?), PCAP, PLUG, PRSC, RDNT, SGK (?), SAH, STRL
During: -
After: APP (?), CNTY (?), EDR, FACE, SINA, SKIL, STAA

Tuesday, March 17, 2009
Before: CSIQ, CRYP, FDS, GVHR (?), GS (?), HNR (?), RTLX, SIRI (?)
During: -
After: AIR, ADBE, DRI, GES, TXCO (?)

Wednesday, March 18, 2009
Before: ATU, CHRS, GIS (?), HLCS (?), LNN (?), SMTS, SNSS (?)
During: -
After: CTAS, CLC, EXM (?), FMCN (?), HWAY, MLHR, IHS, LTON, NKE, ORCL, TBSI (?)

Thursday, March 19, 2009
Before: BKS, CCL (?), CTR, PLCE, CSUN, CRAI, DFS (?), FDX, MCS (?), MS (?), NEOG, NWY, PERY, PRGS, ROST, SCVL, SMRT, TNP, VIP (?), WGO
During: -
After: COMS (?), BBI, ICXT, PALM, SMOD (?), SNX (?), TK (?), ULTA (?)

Friday, March 20, 2009
Before: KIRK
During: -
After: GOL

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.

http://www.tradingfrommainstreet.com
http://www.swingtrader.net
http://www.tradertoni.com

Wednesday, March 11, 2009

Market Inches Into Daily Resistance

(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! For the first time in over a month, the Dow Jones Industrial Average ($DJI) managed to post gains for two days in a row. That victory, however, was very narrow. The Dow's gain amounted to a mere 3.91 points and the index still closed under 7k at 6,930.40. Slightly over half of the Dow's 30 index components posted gains. They were led by a 6.21% gain in Citigroup (C), followed by a 5.81% gain in the recently upgraded Hewlett Packard (HPQ), and a 4.62% gain in J.P. Morgan & Chase (JPM). On the losing side were Alcoa (AA) with a 5.88% decline, General Electric (GE) with a loss of 4.28%, and McDonald's (MCD) with a 2.98% drop. Crude oil futures were hit quite hard and fell 7.4% to $42.33. Exxon Mobil's (XOM) losses took away nearly 15 points from the Dow, while losses in Chevron (CVX) amounted to nearly a 5 point subtraction from the Dow.

The S&P 500 ($SPX) also barely managed to squeak by in positive territory on Wednesday. It closed higher by 1.76 points at 721.36. Among top gainers were information technology and consumer discretionary shares, while energy and health-care fronted the losses. The Nasdaq Composite ($COMPX) had the strongest daily gains of 13.36 points, or 1%, and closed at 1,371.64. Volume was decent, particularly out of the open, with 1.7 billion shares exchanging hands on the New York Stock Exchange and 2.2 billion on the Nasdaq.

Dow Jones Industrial Average ($DJI)

Early Wednesday morning the Mortgage Bankers Association reported that mortgage applications were up 11.3% this past week as the average interest rate for a 30-year fixed rate mortgage fell to 4.96%. Home buying applications stand at a seasonally adjusted 7.1%, while refinancing applications are up 13.3%. The news didn't have much impact on the market, however, which opened higher as the index futures continued to round off at highs on the all-sessions time frames.

After exhausting itself on Tuesday morning, the market had continued to creep higher, but as we expected it was unable to sustain moves comparable to those that took place heading into Tuesday. The result was a series of slightly higher highs on a 15 minute time frame. The market had opened higher on Wednesday as a result of one of these pushes and soon resumed that bias following a rapid closure of the gap immediately out of the opening bell.

S&P 500 ($SPX)

The market continued to push to new highs into about 10:00 ET. The S&Ps and Dow both held this price level, but the stronger Nasdaq pushed to another slightly higher high around 10:30 ET before starting to show greater exhaustion intraday.

An Avalanche™ pattern within a 5 minute head and shoulders formation triggered in the Nasdaq with the 11:15 ET correction period and congestion along the 5 minute 20 sma in the S&Ps and Dow also formed short setups in those indices. Steady selling on lighter volume followed, as did another bear flag into noon on the 5 minute charts. The pace was slower this time around in the Nasdaq though, and the 13:00 ET correction period held for another bounce into the second half of the afternoon.

The 14:00 ET correction period also held well for the highs of this bounce and led to a flush lower for a slightly lower low back into Tuesday's congestion zone before the markets crept back to the upper end of the range. One last flush wiped out a good chunk of this gain into the closing bell though and the selling continued afterhours with the index futures returning to the zone of the intraday lows by midnight.

Nasdaq Composite ($COMPX)

A lot of speculation exists right now that the current rally is merely another example of a bear market rally as opposed to a lasting-low. There certainly needs to be more confirmation of this pace change on a 120 minute time frame, however, this does look like a larger daily bounce in the making. One to two slightly lower lows on a 120-minute chart would help with the change of pace even more by creating traps at the lows. This would facilitate a more rapid correction off the current daily and weekly support zone. We are now into March, which is a typical corrective month for the markets, so I am looking for such opportunities for shorter term rallies to form. It may still take until the end of the month, however, for a larger weekly low to hold.

The market is currently at strong short-term daily resistance in the Nasdaq Composite. Not only did it test the 20 day simple moving average zone at highs on Wednesday, but it also hit the 38% fibonacci retracement zone on the daily time frame. If the market is going to pull back again to test the lows, I would expect it to do so coming off this resistance. When a larger correction off lows confirms, the 100 day simple moving averages in the major indices and the congestion levels from late January to mid-February will serve as the strongest immediate resistance overhead.

Market Scores Largest Gain Since Mid-November

Market Scores Largest Gain Since Mid-November

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

Good day! The market experienced the strongest session of the year on Tuesday. In yesterday's column I talked about comparable market conditions in Friday and Monday's intraday action. The same pattern that had led to an afternoon rally on Friday had been forming into the closing bell on Monday, particularly in the Nasdaq Composite. This triggered a buy setup before the evening was over.

The pace within the pattern itself, however, made it more likely that we would "see momentum build" coming off the lows as opposed to the strong immediate rally on Friday. This had begun somewhat when I sent out yesterday's column, but that building of momentum was not very apparent until after the first correction and continuation in the new 5 minute uptrend. This confirmed into 5:00 am ET and the momentum continued to build with shallow corrections prior to Tuesday's opening bell. When that bell rang the indices were already gapping strongly higher and the market triggered a sharp upside breakout within only a few minutes of the start of the intraday session. This led to the sharpest momentum move since first reversing off Monday's lows.

Dow Jones Industrial Average ($DJI)

When the 10:15 ET correction period hit the market was testing strong intraday resistance from previous highs on the Nasdaq Composite on the 15 minute time frame and the equal move targets on this same time frame in the S&P 500 and Dow Jones Industrial Average. This was also the 200 simple moving average on the all sessions 60 minute chart of the ES (S&P futures). The pace of the upside move itself negated the likelihood of a sharp correction off these highs, but it did make it very likely that new highs on the day would not be able to break previous highs by the same momentum as the original intraday rally. As I posted intraday heading into the 10:45 correction period: If the market attempted to push higher that a series of slightly higher highs would form instead.

The 5 minute 20 period simple moving average held as support throughout the morning trade in the indices. The market jumped out of the 11:15 ET correction period and again into the one at noon, but as expected, these moves were relatively small compared to the initial upside. They still offered strong technical setups for scalpers, however, and took the market to new intraday highs.

The rest of the day was not as clean as the morning trade. The 15 minute 20 sma served as support, but since the market had rally so far already before basing into it the indices didn't react strongly. The indices had congested throughout most of the afternoon and the slightly higher highs made within that congested created traps that concerned would-be buyers. Even though the market closed near the highs of the day, this level was only barely higher than the ones taking place into noon.

S&P 500 ($SPX)

The Dow Jones Industrial Average ($DJI) ended the session higher by 379 points, or 5.8%, at 6,926 on Tuesday. Every Dow component posted gains. Citigroup (C) was the best-performer in the Dow, up 38.1% to $1.45 a share after announcing a profitable year so far. Compared to years gone by, however, this relief rally is still rather minor. The other Dow financial companies also posted double digit gains. Bank of America (BAC) gained 27.73%, while J.P. Morgan & Chase (JPM) rose 22.64%. Retailers and pharmaceuticals were among the weakest of the gainers.

The S&P 500 ($SPX) rallied 43 points, or 6.4%, and closed at 720 on Tuesday, while the Nasdaq Composite ($COMPX) was the strongest of the three indices on Tuesday, rallying 90 points , or 7.1%, to close at 1,358.

Nasdaq Composite ($COMPX)

The market is now trading at strong resistance afterhours from the zone of the highs from March 4th. This has a good chance of holding buyers in line on Wednesday. The pace shift along the highs in the afternoon is opening the door for an intraday correction off highs, but the larger 60 minutes charts are still attempting to hold a low and it will be difficult for the market to break those lows over the next couple of days due to the extreme pace and range of Tuesday's rally. This will mean greater potential for swings on 5 minute time frames, but will continue to keep risk higher for multi-day holds, particularly on the downside at this time.

Monday, March 9, 2009

Market Forms Another 3-Wave Intraday Selloff

The S&P 500 ($SPX) fell 7 points and closed at 677 on Monday. The three weakest industry sectors in the S&P 500 were technology, telecoms, and health-care. Crude oil futures rose 3.4% to $47.07 a barrel. At highs they tested the 50 day simple moving average zone, which served as resistance early in the morning. The Organization of Petroleum Exporting Countries is expected to cut production yet again at their March 15th meeting. Energy shares rose in conjunction with the oil rally.

The Nasdaq Composite ($COMPX) lost 25 points on Monday. It closed at 1,269. Although about half of the Dow posted gains, only 15 of the Nasdaq-100s index components ended the session higher on Monday. Foster Wheeler (FWLT) posted a second day of gains, rising 4.8% to lead the Nasdaq-100. Meanwhile, technology stocks posted some of the day's largest losses. Google (GOOG) fell 5.7% to close at $290.89, while Apple (AAPL) shares lost 2.6% and the stock closed at $83.11. The Nasdaq closed at levels not seen since October 2002 and is quickly approaching the 2002 lows of 1108.49.

S&P 500 ($SPX)

The market on Monday bore a lot of similarities to Friday's price action, but lacked the strong momentum reversal action that took place heading into the weekend. On Friday the indices formed three waves of selling on the 5-15 minute time frames with the largest decline taking place on the first wave of selling. Monday repeated this formation, but the strength of the first selloff was not as strong as Friday's. Only the Nasdaq Composite showed the most noticeable difference between the first and second waves of downside on Monday.

As on Friday, each off the first two selloffs came in two legs, while the corrections in between each move lower also came in two waves. Instead of gapping higher on Monday as in Friday's session, however, the indices opened lower following the reversal off highs in index futures trading on Sunday. They then pulled quickly higher out of the open to close the morning gap. This rally continued into the previous highs for a retest and subsequent reversal. The rally was comparable to the run that had taken pace in the premarket on Friday.

Nasdaq Composite ($COMPX)

So what does this action tell us about the market at this point? Well, for one thing, it created favor for another move higher in afterhours trade Monday evening and continues to favor upside into Tuesday. Since the momentum did not shift as great as on Friday, however, it makes it difficult to get an extreme reversal to start with and instead we are seeing that upside momentum build after more rounded lows. The problem will be trying to sustain that move. Since the intraday momentum shift at lows was not as strong as Friday's, it can be more difficult for it to hold up until we see a better momentum shift on the larger time frames, such as on a 60 minute to 120 minute chart. At present, even though the 15 minute move have been rather predictable, these larger time frames can still go either way early this week as the Nasdaq teases the 2002 lows, so be more cautious on multi-day setups over the next couple of days.

Yesterday's Column:
http://www.tradingfrommainstreet.com/newsletters/FocusLetter/archives/20090306.html

Sunday, March 8, 2009

Economic Reports and Earnings Events This Week

Economic Reports and Events This Week

Monday, March 9, 2009
No major economic indicators scheduled.

Tuesday, March 10, 2009
7:45 a.m. ICSC Chain Store Sales Index For Mar 7: Previous: -0.6%.
8:55 a.m. Redbook Retail Sales Index For Mar 7: Previous: +0.8%.
10:00 a.m. Jan Wholesale Trade: Expected: -1.0%. Previous: -1.4%.
4:30 p.m. API Oil Industry Report For Mar 6
5:00 p.m. ABC/Wash Post Consumer Conf For Mar 7: Previous: -49.

Wednesday, March 11, 2009
7:00 a.m. Mortgage Applications Refinance Index For Mar 6: Previous: -15.3%.
10:30 a.m. US Energy Dept Oil Inventories For Mar 6
2:00 p.m. Feb Federal Budget Balance: Expected: -$200.0B. Previous: -$83.8B.

Thursday, March 12, 2009
8:30 a.m. Initial Jobless Claims For Mar 7 Week: Expected: +6K. Previous: -31K.
8:30 a.m. Feb Retail Sales: Expected: -0.3%. Previous: +1.0%.
8:30 a.m. Feb Retail Sales, ex-autos: Expected: +0.2%. Previous: +0.9%.
10:00 a.m. Jan Business Inventories: Expected: -0.9%. Previous: -1.3%.
10:00 a.m. DJ-BTMU Business Barometer For Feb 28: Previous: -0.6%.
10:30 a.m. EIA Natural Gas Inventories For Mar 4

Friday, March 13, 2009
8:30 a.m. Jan Trade Balance: Expected: -37.0B. Previous: -39.93B.
8:30 a.m. Feb Import Prices: Expected: -0.8%. Previous: -1.1%.
10:00 a.m. Mid-Mar Reuters/U Mich Sentiment Index: Expected: 56. Previous: 56.2.

Key Earnings Announcements This Week:

Monday, March 9, 2009
Before: AOB, CMN, ENG, PGNX (?)
During: FRPT (?)
After: AVAV, CASY, JRJC, CMTL, DIVX, HIL, MRT, FACE, RSCR, VVUS

Tuesday, March 10, 2009
Before: CAS, BF.B, CWEI, DKS, GSI, GVHR (?), GIGM (?), HWK, JASO, KR, PCAP (?), SSI, TRS
During: SAM (?), THO (?)
After: AIRM, APEI, CAP, CPE, STV, PSS, COMV, DXPE, FCEL, HOV, HYC, JCG, LHCG, NCS, SLXP, TTWO, TXCO (?), WES

Wednesday, March 11, 2009
Before: AAON, ALTI, AEO, BONT, BRNC, ESLT, EXLS, GPOR (?), HLCS (?), HITK, KFY, LDK, NSM, NCT (?), VITA, PLUG (?), TRK, SPLS, SNSS (?), BKE, MTN
During: -
After: AFCE, BLTI (?), BEXP, DAC, DMND, HOTT, ICFI, IPAR, JAS, LMIA, MW, MBLX, NABI, OPTR, PLL, PRSC (?), ZQK, SINA (?), STAN, TBSI, WCAA, XOMA

Thursday, March 12, 2009
Before: FEED (?), ALDN (?), AHR (?), CALP, CFSG, CNSL, EJ, EVEP (?), FLOW (?), FSIN, GSOL, GBE (?), IMAX, LNY (?), LCUT (?), MDZ, MED, TMR, MEA, MEI, MGM (?), MITI, NAFC, NGPC, PNY, SOL, SMHR (?), SCR, SFD, STEI, SURW, TICC (?), VIP (?)
During: -
After: ARO, ARNA, CCIX, DRYS (?), ERJ (?), ETEL (?), GKK (?), HLYS (?), HRLY, HIBB, HQS, INAP, LAD (?), MNTG, NGAS (?), PSUN, POWR, SALM, SEAC, SHFL, SWHC, STEC, TTGT (?), SWIM (?), ZIPR, ZUMZ

Friday, March 13, 2009
Before: CODI, GMET, NVAX (?), NPSP, SKIL (?), SUI
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.

Selling Continues as Panic Pushes Prices Even Lower

(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! Economic data and news this past week kept the market weighed down into the weekend. A number of companies continued to slash dividends and on Friday Wells Fargo (WFC) became one of the latest to do so. This was just another drop in an overall dismal bucket. On Thursday the Mortgage Bankers Association announced that nearly 12% of U.S. residents who carry a mortgage (approximately 5.4 million) fell behind on it by at least one month or are already in foreclosure. The U.S. House passed a bill that same day to help provide some relief, but it is up for strong debate in the Senate. This was followed on Friday by the latest unemployment data. While in line with expectations, it still showed a loss of 650,000 jobs this past month. Revisions for the prior two months were also raised and December's losses amounted to the largest since 1949. This brought the overall unemployment rate to the highest level in 25 years.

The Dow Jones Industrial Average ($DJI) ended the session up 33 points at 6,627 on Friday. Despite the gain, the Dow had to make a large comeback from intraday lows and it still fell 6% for the week overall for its fourth straight week of losses. Citigroup (C) traded below $1 as the news of the government's interests in the company continued to raise concerns by investors and drive down the stock's value. General Motors (GM) hit 75 year lows in yet another Dow component melt-down. On Friday it fell 22% and ended the session on Friday at $1.45. General Electric (GE), which led the Dow's gainers on Friday, still lost 17% last week.

The S&P 500 ($SPX) rose 1 point and closed at 683 on Friday. The losses in the S&P 500 for the week came to 7%. This was also the fourth straight week of selling for this index. The Nasdaq Composite ($COMPX) lost 6 points on Friday. It closed at 1,294 at its lowest level since 2003.

Dow Jones Industrial Average ($DJI)

Friday's session began with some initial strength out of the open. The indices had trended lower throughout Thursday's session, with the pace the strongest on the downside in the S&Ps and Dow, while the Nasdaq formed more of a range in afternoon trade. After opening slightly higher on Friday morning the markets tried to continued to push to the upside. That momentum, however, was very short-lived. The 5 minute 200 period simple moving average served as resistance in the S&Ps and Dow, as did the opening congestion zone from Thursday morning. The weaker Nasdaq held resistance at the upper end of the 15 minute trading channel. Highs made within about the first 15 minutes of the session held and the indices quickly began to reverse course once again.

The indices fell steadily throughout most of the morning. At the 11:00 ET correction period, however, the Nasdaq Composite found price support after striking an equal move on the morning's decline as compared to the one from the previous morning. There was also 5 minute equal move support in all three of the indices at that point intraday and the market was able to hold that level into the afternoon. Even though this was a substantial 15 minute support level, the pace of the morning's descent helped hold off a strong reversal. The market actually tried to break lower too early in the afternoon given the previous corrective activity on Thursday afternoon and this slowed the pace of the second drop to take place intraday on Friday from about 12:15 ET to 13:45 ET.

S&P 500 ($SPX)

This afternoon selloff also came in two waves and it attempted to break higher out of the trend channel with the 14:00 ET correction period. It failed to break the 5 minute 20 sma in the S&Ps and Dow and the 15 minute 20 sma in the Nasdaq, but pace shifts like this often take three waves of selling before they break the downtrend channel. Since the larger 15 minute correction off lows was still shorter than the prior afternoon (as seen best on the Nasdaq), it also left room for another attempt to push lower. The market did so soon after 14:00 ET coming off the moving average resistance levels. This time, however, the pace was even more gradual into a third low intraday and this created a larger momentum reversal pattern on the 15 minute time frames. This translated as a strong favor for an afternoon reversal.

The 15:00 ET correction period held and the reversal pattern pick up momentum when the upper channel broke coming out of the final intraday correction period of the session at 15:30 ET. The rally continued into afterhours trade and returned the index futures to their 15 minute 20 sma resistance on the all-sessions time frames, which include pre- and post-market data. This was also the zone of the early morning highs. Even though the futures continued to push higher into Sunday evening, the pace slowed into these larger resistance levels and began to pull back off them once again into 20:00 ET on Sunday.

Nasdaq Composite ($COMPX)

Volume was strong on Friday, particularly into the close as the market rallied. The momentum reversal hit its main target when it came back into the zone of the Friday morning highs, so I'm going into Monday without a strong intraday bias. I can see several scenarios potentially playing out intraday. The most likely as I write this column at midnight heading into Monday morning is that it holds the overall range from Friday throughout most of the session Monday.

I am not convinced we hold here yet as the lows on the daily time frames, but do feel we are close to a daily low, which means that new shorts, particularly as swingtrades or longer, will be higher risk. When shorting right now I will be sticking to the smaller intraday time frames of about 5 minutes or less and just use the larger 15 minute levels as guidance. If the markets can creep a little lower with a choppier downtrend channel on a 60 minute chart, then the odds for a sharp bounce out of the downtrend channel increase. Even a sharp correction, however, will have difficultly breaking the daily resistance overhead without first slowing at them. This will be particularly true of the 100 day sma that stalled the move in mid-February in the Nasdaq.

Previous Column:
http://www.tradingfrommainstreet.com/newsletters/FocusLetter/archives/20090303.html

Monday, March 2, 2009

Selling Pace Escalates as Funds Pour into the Nation's Top Institutions

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

The Dow Jones Industrial Average ($DJI) ended lower by 299.64 points, or 4.2%, at 6,763.29 on Monday to close at a level not seen since April 1997. Not a single one of the Dow's 30 index components closed positive. Citigroup (C), which is still reeling from news late last week of the government's conversion of its preferred shares into common stock and an increase in its interest in the company to 36%, fell another 20% to $1.20 a share. Alcoa Inc. (AA) came in second place on the loser list with a decline of 11.88%, followed by a 10.69% loss on General Electric (GE) and a 10.67% drop in General Motors (GM).

The S&P 500 ($SPX) fell 34.27 points, or 4.7%, and closed at 700.82. The losses on the S&P 500 covered all 10 of the index's industry groups, but was fronted by declines in energy, materials, and industrials. Out of these 10, all of them have also fallen so far on the year, but the losses in telecommunications, which came to -2.84%, are less than the rest of the pack. Monday's close in the S&P 500 hit levels not touched since October, 2007. Only 8 of the S&P 500 stocks posted gains.

Despite seeing a bit of a reprieve from the selling after turning off lows mid-February, crude oil futures also turned off the daily resistance that first hit this past Thursday. After stalling as 20 day simple moving averages and price resistance from late January to early February, prices turned lower on Monday with a decline of 10.3% to end the session on the New York Mercantile Exchange at $40.15 a barrel.

Dow Jones Industrial Average ($DJI)

The Nasdaq Composite ($COMPX) lost 54.99 points, or 4.0%. It closed at 1,322.85. This is the Nasdaq Composite's lowest close since March, 2003. The 2002 low on the Nasdaq Composite is 1108.49. Only one Nasdaq-100 stock closed in positive territory on Monday: Warner Chilcotte (WCRX). This was little solace, however, since the company it still trading at the level of multi-year lows.

One of the top news stories for the weekend for the markets came in American International Group (AIG). The Treasury Department and Federal Reserve agreed to another injection of $30 billion, on top of the $150 billion it has already received, to prevent the insurance giant's collapse. The company lost $61.7 billion in the fourth quarter, or $22.95 a share, in what is expected to turn out to be the largest quarterly loss in corporate history. AIG was expected to post a loss of approximately $60 billion.

S&P 500 ($SPX)

So what did all of this translate into from a technical standpoint intraday on Monday? Well, the action was rather bleak. The gap lower into the open confirmed the pace rollover that had begun mid-day on Friday and made a point of showing market participants that the breakdown Friday afternoon was just the beginning of a larger 30-60 minute channel break and continuation pattern. This placed equal move support, which is a typical target on a range or channel break, at a point that would amount to that 300 point loss on the Dow and similar losses in the S&Ps and Nasdaq whereby the selling on Monday could easily mimic the move off Thursday's highs into Friday's opening lows. I will show you an even larger example of this on a yearly time frame below.

The main problem with Monday's action for intraday players was the volatility. The intraday range was large, but as prices moved lower there was a great deal of overlap in price from one bar to the next. This added chop makes market timing more difficult for shorter term players and can often lead to them getting chopped up themselves intraday. It also increases questions of confidence on entry and exit timing, which can lead to more mistakes and it tends to be those that have taken a position early on in the session and just ride it lower throughout the day that tend to fair the best.

We are now into March, which, as I stated over the past week, is a much more common time zone for a larger weekly correction or move off support or resistance levels to occur than in February and had added risk to attempting to play support in February for larger time frame corrections. Since the Nasdaq is now coming into better support on a monthly time frame, I do feel that we will start to see better corrections start to hold before the end of the month off lows. Current price action in afterhours trade already is showing an attempt to bounce back from Monday's downward flush.

Nasdaq Composite ($COMPX)

I do want to step back and look at the much larger picture here for a couple of minutes and give you a little bit of food for thought. The index that I'm going to focus upon in the Dow Jones Industrial Average. The following chart is a monthly chart going back to 1900. Heading into 2000 I posted a piece in this column about how the Dow was approaching a typical target zone that I use for price projections. This helped time the original slow-down and turning point going into 2000. Well, using exact equal or measured move price points, what we can see in this chart is that in 2007 the Dow hit that target price even more exactly than just the zone I pointed out about 9 years ago. Amazingly, the price target using this strategy, which is based upon both price moves and pace or momentum, came within just a few points of an exact target despite the fact that this spans about 80 years.

At the 2007 International Traders Expo I gave an interview discussing the beginning of a larger market correction, but at the time I left room for the potential of a third highs to form on this yearly chart to created a momentum reversal pattern and had not initially anticipated as deep of a correction as we ended up with. This third high is still possible, using a triangle formation instead of a parallelogram at these highs, but the odds are less likely given the penetration of the 2002 low zone in the Dow and S&Ps.

Right now the more likely scenario is for longer time frame corrections through a trading range and long period of congestion. I would expect this to last at least as long as the 1960s-1980s trading range. Since the prices began to correct near the turn of the century, this would amount to about another 10 years before a third push higher similar to the one off the lows of the 1930s or beginning in the second half of the 1980s could take place. This is what I view as the "best case scenario" for the next half a century, since a push higher over the next 8-10 years would create that third high on the yearly time frames that would then favor an even larger multi-decade correction.

I had quite a debate with a friend of mine this evening who is in another area of finance and places a great deal of value in the fundamentals of a company and the valuation of a company itself, as well as the entire financial system regarding what would be more of a worst-case scenario before the Dow could recover. I proposed an extreme view whereby the potential exists of a larger multi-decade topping pattern forming with a two-wave rally (beginning in the 1930s), followed by a longer correction, and then a two-wave breakout. We see this a lot intraday in the markets and intraday. If this were to actually play out, it could lead to a correction in the Dow that could last up to 160 years. I know, 160 years... It seems quite extreme! If you were looking at this chart on an intraday time frame, however, that rally from the lows in the 1930s into this decade's highs could amount to 90 minutes, in which case a 3 hour congestion would certainly not seem at all unreasonable. The same strategies that play out intraday and the same techniques translate on all time frames, however, so just keep that in mind! Looking at a similar strategy in the S&P 500 it would mean a correction into about 2040-2050!

As my friend argued, there are a great deal of factors involved such as stocks being added and removed from the indices, as well as government actions, regulation, etc. that can potentially help the markets recover. I pointed out that many nations have arisen and fallen in lesser time, so there is certainly no surety that the Dow will survive, but this didn't go over with him very well. Let's assume, therefore, that it does. My stance in this particular hypothetical scenario is that we are actually charting human behavior and their response to differing stimuli and it doesn't matter what the underlying securities actually are. I explained that what we are seeing is a massive shift in confidence that will impact not only how individuals invest in their future, but also how other institutions invest that will be played out in the charts. In such a case, it would not be unreasonable to assume that it is going to change how the current generation of wage earners approach the markets. Do I think we will see a 160 year correction in the Dow and a 40-50 year correction in the S&P 500? Well, perhaps not, but it was fun to debate the possibilities. Even if this did end up the case, multi-year trends like we have seen since 2000 would still be fairly common within the much larger yearly range, so this alone would not really spell long-term disaster for those active in the markets.

Toni Hansen's Online Trading Blog

Monday, March 30, 2009

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Sunday, March 29, 2009

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Thursday, March 26, 2009

Dow Closes in on 8k

Wednesday, March 25, 2009

Market Whips Around at Daily Resistance

Tuesday, March 24, 2009

Slow-down Kicks In

Market Rebounds on Optimism from Treasury Dept. and Housing Data

Friday, March 20, 2009

Economic Reports and Earnings Events March 23-27

Market Tracks Lower into the Weekend

Thursday, March 19, 2009

Market Pulls Back After Strong Gains

Wednesday, March 18, 2009

Market Reacts Positively to Fed's Unexpected Announcement

Tuesday, March 17, 2009

Market Manages Yet Another Strong Showing

Monday, March 16, 2009

Dow Narrowly Misses Posting Gains for the 5th Session in a Row

Saturday, March 14, 2009

Market Catches Its Breath, Ending Week With Strong Gains

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Thursday, March 12, 2009

Market Up 10% in 3 Days Bolstered by News

Mastering Momentum Gaps Course now on DVD

Upcoming Earnings and Economic Events - March 13-20th, 2009

Wednesday, March 11, 2009

Market Inches Into Daily Resistance

Market Scores Largest Gain Since Mid-November

Monday, March 9, 2009

Market Forms Another 3-Wave Intraday Selloff

Sunday, March 8, 2009

Economic Reports and Earnings Events This Week

Selling Continues as Panic Pushes Prices Even Lower

Monday, March 2, 2009

Selling Pace Escalates as Funds Pour into the Nation's Top Institutions

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