Tradesight Market Preview for 3/17/11
Wednesday, the SP lost 21 on the day, settling just above a very key area. The 2010 close and also the 4/8 Gann level is right in the 1250 area. Other features from Wednesday’s price action is the penetration of the zero line in MACD and a near climatic reading in the CCI of -240(nearly short term oversold). The bias is negative and picking up momentum.
The Naz lost 36 settling below the 2010 close and below the 4/8 Gann level. Note that like the SP, the MACD has broken the zero line. Note that if the trend continues lower, the December breakaway gap will be a key target, supported by the 0/8 Gann level.
Multi sector daily chart:
The contra indicating put/call ratio finally recorded its first climatic reading. Keep in mind that this is not necessarily a by signal, but rather early evidence that a bearish posture is being established.
The 10-day Trin is still below the 1.35 oversold threshold, indicating that there is still more downside energy in the market.
All major sectors were lower on the day. The BTK was the best of the red majors. The gap remains open from December.
The BKX touched but did not lose the 50% fib.
The SOX settled right at the active static trend line and is now 8 days down. An inside candle Thursday could be a powerful setup going into Friday.
The XAU is also 8 days down and used the 200dma for support. This is a critical level to hold.
The OSX has tested the 50dma three times and so far held. Set an alarm for a break under this support to initiate momentum shorts.
Oil was notably weak. Key support is down at 93 which was the Q1 breakout.
Gold was a source of funds hitting the 50dma intraday.
Market Index Preview for 3/16/11
The SP gapped down big and spent the rest of the session recovering. The 1270 level was recovered which is a small win for the bulls. There are some key levels to consider as we progress through the quarterly expiration week. 1257.75 was the YTD low and after Tuesday’s session the new YTD low is now 1255.25(set alarm). There is a Seeker Trend factor level nearby that the market used today at 1267.50. Research has shown that the SP tends to move in chunks that span 5.556%. So measured off the high close of the move, 1267.50 is statistically significant. Other notable developments on the day are the penetration of the zero line in the MACD. Also, note the near climatic -198 reading in the CCI.
Like the SP, the Naz was weak on the day with the MACD penetrating the zero line. Price broke to new YTD lows but recovered above before the close.
Multi sector daily chart:
The put/call ratio matched the YTD high close but did not convincingly exceed it.
The 10-day Trin retreated and has yet to record an oversold reading of 1.35+.
The oil futures are back to trading at a discount to the OSX (oil service stocks). Look for a long setup in the oil futures or USO etf.
The SOX continues to bearishly underperform the NDX.
The XAU/gold futures comparison chart has the same bearish pattern as the SOX/NDX. This is bearish for gold futures. The SOX showing relative weakness vs. the NDX is never bullish.
The BKX tested the critical 50% fib and found bidders. This was the top performing major sector on the day.
The OSX slightly outperformed the broad market finding support at the 50dma. Look to this sector for long opportunities if a positive bias develops in the market Wednesday. Note that price has yet to record a Seeker 13 exhaustion signal.
The SOX was weaker than the general market but found support at the midpoint of the handle breakout ~410. The April 2010 high at 404.80 is next major support.
Oil was sharply lower on the day:
Gold was a source of funds but held above the 50dma. Note that the attempted breakout above the triple top was rejected and that the Seeker exhaustion signal is still active since the risk level (magenta) was never violated.
Stock Picks Recap for 3/15/11
With each stock's recap, we will include a (with market support) or (without market support) tag, designating whether the trade triggered with or without market directional support at the time. Anything in the first five minutes will be considered WITHOUT market support because market direction cannot be determined that early.
From the report, QLGC and CEPH gapped under their triggers, no plays.
GS triggered long (with market support); INSERT INTO `wp_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_category`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES didn't work the first time, worked later:
Rich's NYX triggered long (with market support) and worked:
Rich's AAPL triggered long (with market support) and didn't work:
RIMM triggered long (with market support) and didn't work:
AMGN triggered long (with market support) and worked:
FSLR triggered short (without market support) and worked enough for a partial:
In total, that's 5 trades triggering with market support, 2 of them worked, 3 did not.
Forex Calls Recap for 3/15/11
Here's the US Dollar Index for the session, with the Fed announcement late in the day that did very little:
Winner on the GBPUSD, see below.
Back to normal, new calls and Chat.
GBPUSD:
Triggered short at A, hit first target at B, lowered stop and stopped at C:
Stock Picks Recap for 3/14/11
With each stock's recap, we will include a (with market support) or (without market support) tag, designating whether the trade triggered with or without market directional support at the time. Anything in the first five minutes will be considered WITHOUT market support because market direction cannot be determined that early.
From the report, SINA triggered long (without market support due to opening five minutes) and worked huge:
SLXP triggered long (without market support) and didn't work:
RMBS triggered short (with market support) and didn't do enough either way to count:
MRVL triggered short (with market support) and didn't work:
In the Messenger, Rich's AGU triggered (with market support) and didn't work:
FSLR triggered (with market support) and worked:
Rich's POT triggered (with market support) and worked:
ERTS waited until the close to trigger, not enough time.
In total, that's 4 trades triggering with market support, 2 of them worked, 2 did not.
Tradesight Market Preview for 3/15/11
The SP expanded the range to the downside Monday, losing 10 on the day. Price has closed below the 10ema and 50dma’s. The last confirmation for the bears will be a loss of the zero line of the MACD. Note that while the action was negative, price settled above the open which qualifies as a camouflage buy signal. These short term signals were seen in the SP, NQ and YM futures. This implies that price will exceed the prior days high before the low is taken out. This is something help guide through the volatility and expiration week.
Naz remains boxed up within the recent three day range, so nothing new technically until this range is resolved on a closing basis.
Multi sector daily chart:
The 10-day Trin remains below the 1.35 oversold threshold which means that there is more downside potential until this level is crossed.
The OSX was top gun on the day, posted an inside day. The rising 50dma remains critical support.
The SOX was little changed after an attempt to fill the overhead gap. The bias remains down until the 10ema is reclaimed. Note the key support at the 420 level.
The XAU was down less than the broad market. There will likely be some volatile price action as the pattern pinches between the 50 and 200dmas.
The BTK remains boxed up and often is a place for long money to hide late in market move.
The BKX was lower by 1% and has a downward bias.
Oil spent a good deal of time below the $100 level early in the day, but ultimately settled above it leaving two very long tails (read buying) below the century mark.
Gold settled just below the 1431 breakout level.
Forex Calls Recap for 3/14/11
Not too exciting of a session despite all that is happening in the world. Here's the US Dollar Index intraday:
New calls tonight and Chat, but the Fed meeting tomorrow should keep things slow.
GBPUSD:
Triggered short at A and stopped. Triggered long at B, barely missed the stop, hit first target at C and beyond, still holding with a stop under R2:
COT 3-12-11
Hi Traders,
What an awesome weekend here in Tampa Bay... and that's all I'll say just in case it's cold and nasty where you are. Okay, that and... Hold on, summer is coming!
Okay, the COT charts are here; feel free to grab a copy of the sheet music and sing along.
The commodity currencies AUD and CAD are starting to push the "extremes" limits, especially the latter. Remember, though, even when this occurs, it can take some time for the spot FX market to change gears; these readings are best used as a heads up. NZD, though a member of the commodity currency team, keeps getting sold by the specs and bought buy the commercials. And, it's nowhere near extremes, so this could go on for a while. You might take a look at all three charts and note the difference.
The Swiss Franc and euro charts show the commercials 180-degrees apart; the commercials have been selling and the specs buying, though this may be changing soon, especially considering what's going with the EU's PIIGS. I mentioned this last week, so I won't kick that dying horse--that said, I never understood why anyone would consider kicking a dying horse, anyway.
The pound is beyond extremes, having turned around a couple of weeks ago. The commercials are buying, though not with conviction, and the specs are selling, though not with any sort of conviction, either. GBPUSD bounced off a monthly pivot last Friday and made a nice move higher. Will it head to 1.6400? Absolutely... unless, of course, it doesn't. GBPJPY and GBPCHF, like GBPUSD, found support (see daily price charts) and, by the looks of things, the market is considering where to take these pairs next. If the most recent daily highs are taken out, I anticipate this happen with less momentum, which is a signal for a turn (think "divergence)). Keep an eye on the daily highs.
The market is in a state of confusion about the yen. And, with the tsunami, it might take a little longer for conviction to enter the picture. Standby to standby.
The USD Dollar Index shows the commercials and specs180-degrees apart, which, when considering the swissy and euro charts, makes sense. Correlate these with the price charts and the extremely negative USD sentiment, and we're seeing the makings of an about-face.
Gold and silver are an interesting couple. The small traders and specs are buying gold again, but with silver making these most recent highs, it appears they're concerned and not sure what to do. That said, unless one's an aggressive trader, shorting silver now would, in my opinion, take a lot of guts and the willingness to be wrong if the market continues higher. Remember the old adage, "The market is never too high to go higher, or too lower to go lower." That, and, "Trade what you see."
That's it for this week.
Cheers,
Clay
Trend Changes, Trading, and Choosing Sides
One of the key learning experiences if you want to become a professional trader is how the market changes character at "trend change" points. I wanted to spend a little time this weekend talking about that.
Here is a look at the S&P 500 daily chart with the key uptrend line that we have been tracking:
When you have an obvious uptrend in place, there are a few things that I try to teach people to focus on. First of all, it isn't our job to guess when the trendline will break. Stay with the trend until it does. Second, a lot of the easy money will occur late in the trend IN THE DIRECTION of the trend. In other words, if you start trying to "get short" as the market pushes up like that, you miss a lot of big moves by leadership stocks that are continuing to base and breakout or rallying late in the day often.
The difference between being in an uptrend and in a downtrend is pretty simple. In an uptrend, you want to be buying the strongest stocks coming out of key patterns. The market will more often gap down and rally. The late day action will more often be pushes to the upside as mutual funds continue to buy. In a downtrend, the opposite will be true. You want to be shorting weak stocks. You'll see more gaps up with sell offs. You'll see more rallies fail and late day selling.
Remember that it really won't be until you have firmly established the downtrend that you can expect to see consistent and nice short patterns to use to make the easy money shorting the market. Just like it takes a while after an uptrend begins for the new leadership to become clear, it also takes a while in the downtrend before the patterns are there where you can say "Here's a stock that has been basing near relative lows for 4-6 weeks, let's short it on a breakdown." But that's where the easy money comes in.
However, it's usually right around the time that the market is truly going to break the uptrend (and vice versa) line that trading becomes a little less consistent overall compared to what we see during the trend. For example, if you look at the dip that occurred at the end of January on the chart above, the reality is that after two days of pullback, the market was already ready heading back up, and the leadership stocks gave you great opportunities. That's why you don't want to get wrapped up in the short side prematurely.
Meanwhile, the last two weeks, we saw a lot less consistency on the long side and more trades than usual not work even with intraday market directional support. If you go back through the logs, in January and most of February (and even before that); INSERT INTO `wp_posts` (`ID`, `post_author`, `post_date`, `post_date_gmt`, `post_content`, `post_title`, `post_category`, `post_excerpt`, `post_status`, `comment_status`, `ping_status`, `post_password`, `post_name`, `to_ping`, `pinged`, `post_modified`, `post_modified_gmt`, `post_content_filtered`, `post_parent`, `guid`, `menu_order`, `post_type`, `post_mime_type`, `comment_count`) VALUES we barely had any days where less than 50% of our trades that triggered with market support worked. And more than 70% of the trades that triggered were on the long side. In the last two weeks, we've seen a couple of days where less than 50% of the trades that triggered with market support (granted, in BOTH directions) have not worked. I think I counted 3 out of the last 10 days under 50% winners. That's not what we're used to, but it is a sign that the trend was weakening and that the market battle from both sides was leaning into neutral territory more, instead of a situation where the bulls were dominating.
Quite simply, trend changes are battles, and the easiest money in the market isn't made when the two camps (if you will) are battling and the previous loser is starting to gain strength. The easy money is when one side is in charge as long as you stick to the rules and trade in their direction. Remember, when it comes to being a successful trader, "We're Switzerland," as they say. We'll join either side that's winning. Not my job to be either camps biggest fan or treat them like the home team. I am my own home team, as you need to be as well.
Forex Calls Recap for 3/11/11
Pretty dull session after a pretty exciting one. Locked in over a 100 pip winner on the last half of the trade from the prior day, and then the new trade barely stopped us out by a couple of pips before working fine. See GBPUSD below.
As usual on the Sunday report, we'll look at the action from Thursday night/Friday, then look at the daily charts heading into the new week. US Dollar got weaker Friday. Here's the intraday action on the Index with our market directional tool:
EURUSD:
GBPUSD:
Last piece of prior day's trade closed at A for about 115 pips. Triggered short overnight at B and stopped by a couple of pips at C before triggering again (if you were awake, I wasn't) at D and hitting first target at E:
Take a trial or join our services for the rest of the report and the outlook for the new week.