The Dow zigzagged all day, moving up and down within a 97 point range, ultimately ending the day just about where it started. A sell off at the open was quickly followed by nearly a 100 point rally after the monthly new home sales figures were released. As investors absorbed the monthly new home sales data the markets shifted direction again and pulled back about 70 points from the high of the day. The Dow spent the rest of the day trading within a narrow range. When reviewing the 30 minute interval of the major stock indices you will notice a wedge formation building. The longer and tighter the band gets, the bigger the move that usually follows! Are we consolidating before the next move higher or are investors starting to peal off profits in anticipation of a pull back? Only time will tell! The Dow Jones Industrial Average ended the day up 4.23 points, to close at 9543.52. The S&P 500 gained 0.12 points, to close at 1028.12. The NASDAQ finished the day up 0.20 points to close at 2024.43.
What just happened? When I left for lunch we were up about 65 points and now we are up 6 points….We talked about 9500 being some type of psychological resistance level last week and that the market may reverse off of that level. Well this morning we broke through 9500 and it looked like the market wasn’t going to stop with the $DJI hitting 9587.65 before retreating for the morning. We actually went negative for a moment and hit 9500.97 and then bounced up slightly off of the lows.
I guess time will tell if 9500 holds as a nice support level but I doubt it. When we look at the short term chart you can see we are now 5 days into the trend. Plus when look at the previous cycles on this short term (day) chart you can see the trend last from 2 to 4 days and then pulls back.
So with that in mind we could easily pull back a day or two and test 9400 which is our next support level on the short term chart. Remember previous resistance becomes support.
9500 today… We made new highs on the DOW, S and P and the NASDAQ today. If you remember a couple of days ago the market was selling off pretty hard and the news was talking like it was the end of the world. It didn’t look good. Well, it’s Friday and the market is in rally mode up 141 points. Central Bank Chairman Ben Bernanke spoke to in front of attendees at the fed conference in Jackson Hole, Wyoming and said, "In this episode, by contrast, policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation."
So it looks like the water is safe to go back into. We caught the shark. My point here is don’t always believe what you read in the news. The market will do what the market does. We just follow it. This is why we practice good money management and we have a trade plan for any event that the market hands us.
So print your news, give me the charts and a stop and ill be just fine.
Happy Friday traders and have a great weekend.
OK, here's my 2 cents about the current market condition. The U.S. equities markets are volatile again. The alligator on the long term trends of the major indices tell us this. An alligator cross in the current interval implies added volatility. We also have red mid term trends. This tells us that we are in the beginning of a mid term correction or consolidation. With mixed signals between the long and mid term trends, there is a high probability that you will be whipped around a bit. I don't know how long this will last, but I can tell you that your Wizetrade software has been warning you since last week!!
There is still a lot of cash on the sidelines. Those investors that missed the big move up are now trying to buy on the dips. I think that is part of the reason why we bounced up so quickly this morning. So far every push down has been followed by a swift move back up. If you are trying to short into this market you may want to consider taking smaller positions until we have a firm committment to the down side (red long term trend with angle and separation). And if you are going long, don't be affraid to lock in those profits along the way!
Happy trading,
Kipp
I read an article that made me Google... I mean giggle today. It was from Mark Hulbert a writer at Marketwatch.com. He was writing about how he called it all wrong on Google. He goes into great detail about how poor the odds were that Google could grow fast enough to justify its then sky high P/E ratio. He then goes a little further in depth about why he came to his conclusion, citing and academic study he had read the previous year in the prestigious Journal of Finance. Entitled “The Level and Persistence of Growth Rates,” written by three finance professors two of whom are from the University of Illinois at Urbana –Champaign and the other was from the University of Florida.
Now you may be asking yourself, “Ok Karl, where are we going with all this.” Well trust me when I say this, I didn’t do all the homework that Mark had done or read the books that Mark had read to bring me to my conclusion. His article brought me back to the day Google started trading and the stock took off like a rocket ship with no destination. I then started thinking about the tech boom and how the tech stocks had fallen from grace in early 2000. I just couldn’t imagine Google would be all that and a bag of chips. I mean it’s a search engine, how can this search engine be better than AOL, YAHOO or MSN. What will it find that these other search engines can’t? What could Google bring to the table that is going to change the world of search engines? Well lets just say 600 points later...hahahaha. Who would have thought that Google is all that and a bag of chips with a large Coke. So when I stumbled across this article and read it today, it brought back memories and feelings of a day not so long ago.
It brought back memories and made me think of the simplicity of our software. No matter how much or how little homework you do on a particular stock. No matter how many times you add the numbers up or how other stocks in their sector perform, it all comes down to one thing. Are people buying this stock? Are there more buyers than sellers? It doesn’t matter if it’s an IPO or if the stock is GM and has been trading or was trading for the last 30 years. If people are buying it, the charts will tell you. If not the company goes out of business and the charts will tell you too, just like they did with GM, Enron and WorldCom. But it’s that simple. Now I’m not saying don’t do your homework or don’t educate yourself. You have to educate yourself to become a better trader. But what I am saying is don’t over think what’s going on in the market. If you think about it and you over analyze it, you just missed the move. Someone once taught me the KISS principle and it has helped me in my trading over the last 8 years. Keep It Simple Stupid. You can learn a lot from something so simple.
So I’ve been away for the past couple of weeks on vacation and finishing up with some Wizefest stuff. But I am back and ready to give you more info than you need or want. So before I went on vacation we were talking about the way the overextended mid term trends on the indices were looking. The green line was moving in on the red line indicating a slow down in the upward momentum, the market “was” moving higher but it was struggling to move higher. The trend had started to chop around; meaning volatility was entering the market place. You can compare this to a tug of war between the buyers and sellers. We had a lot of this last week when the market would open lower and then move back up later in the day to close positive or it would open higher just to sell off late in the afternoon and close negative. That could have been our sign to tighten things up or maybe lock in some profits.
You must also remember we had a 1350 point rally to the upside in the last 5 weeks and right now we are only 321 points off of the high of 9437.71. I think we could test 9000 within the next couple of days and I also think that 9000 will be some kind of psychological support level we could see some buying off of. If we break 9000 then the next level of support (if you can call it that) is 8800 on your short term chart set back on July 21st. What I am trying to do here is not to scare people with the bad news of the day but to educate people about the charts and market movement.
The market is going to do what the market does, bottom line. It doesn’t have answer to anyone or anything. I hear people all day long talk about why is the market moving higher when there is so much bad news, what’s the reason behind this madness????? All I can say is cycles and patterns or a more simple reason…over bought/over sold. When the market sold off over the last year, there became a ton of opportunity to buy stocks that were at all time lows (over sold). So the market bounced and stocks moved higher. When the market moves higher for an extended period of time and the money has been made, then the market sells off and people look to lock in profits (over bought). Since the market has started to pull back on us this is the sign that people are locking in profits and looking else where for value.
It amazes me that the stock market keeps moving higher, even with a slew of poor economic news! Today we had not so great retail sales, a rise in first-time jobless claims and rising foreclosures. And again today, like we have seen almost every day over the past few months, investors brushed off the bad news and continued to buy stocks! As a technical trader it is important to put your blinders on and focus on the charts, not paying attention to any “outside noise”! If you are not focused on your charts you may begin to second guess yourself and miss many great opportunities.
If you want a clearer picture of what is going on in the markets you can review the charts of the 3 major indices. Although sometimes that picture isn’t so clear, it will at least give you an idea of what direction the markets are going and how you should be trading; trading to put the odds in your favor! And when it comes right down to it, isn't that what we are all trying to do, stack the odds in our favor as much as possible?
Obviously the current bias in the equities markets is to the long side. Take a look at $DJI, $SPX and $COMPQ. These are the symbols for the 3 major indices. The all have a very similar look. The long term trends are green alligators. This tells us that there is stronger buying pressure than selling pressure, but it comes with added volatility. All of the mid terms are trending with angle and separation, except for the NASDAQ, which is converged. Again, this tells us that the bias is to the long side. All of the short term charts are trending as well. This is a resilient market that just doesn’t want to stop, at least not right now. Enjoy they ride; don’t let the noise stop you, and most importantly, trust your trading tool, Wizetrade!!
Today the Dow Jones Industrial Average ended the day up 36.58 points, to close at 9398.19. The S&P 500 gained 6.92 points, to close at 1012.73. The NASDAQ finished the day up 10.63 points to close at 2009.35.
Kipp
In anticipation of the release of the minutes from the FOMC meeting, the markets rallied out of the gate today, moving up about 120 points on the Dow in the first hour of trading. The markets went flat the rest of the morning awaiting the 2:15 EST results from the Fed. Following the “status quo” announcement from the Fed, we saw the Dow drop about 40 points. This drop was quickly followed by a sharp rally back up of nearly 100 points. The last 30 minutes of trading brought another pull back of about 60 points, getting us right back to where we were before the Fed announcement. I guess you could call it a little “volatility”! The Dow Jones Industrial Average ended the day up 120.16 points, to close at 9361.61. The S&P 500 gained 11.46 points, to close at 1005.81. The NASDAQ finished the day up 20.84 points to close at 1998.72.
Today we saw traders in the alerts chat room capture profits on JASO, ADCT, and HIG. I traded TOL live in the alerts chat room today, capturing almost a 1% return on my trade.
The Wizetrade Alerts are free for Founders Club members as well as subscribers to any of our scanning tools (Wizefinder, 4X Tracker & Option Hunter). If you would like to get more information, please vist www.wizetradealerts.com for more information. If you haven’t been to the Wizetrade Alerts equities chat room, I encourage you to go to check it out. You can access it through your Wizetrade Alerts control panel at: www.wizetradealerts.com
Kipp
Add another notch on the belt for the bulls today with all three of the major indices pressing higher and building strength to the new support levels for the S&P and the NASDAQ, although this move today did not come easy. We saw a mid morning rally quickly fade into a lunch sell off. An end of day rally brought the equities markets back near the highs of the day. With mixed economic news this morning, the markets still moved higher, proving that this market doesn’t want to stop. With a slew of economic news the rest of this week, expect continued volatility. The Dow Jones Industrial Average ended the day up 33.63 points, to close at 9320.19. The S&P 500 gained 3.02 points, to close at 1005.65. The NASDAQ finished the day up 2.70 points to close at 2011.31.
Kipp
On the heels of the best July for the Dow since 1989, August is off to a big start with another triple digit gain for the Dow Jones Industrial Average. So far nothing is holding this rally back. The U.S. equities markets want to keep pressing higher. I say go with the flow and don’t fight it. Psychologically some big barriers were broken today. For the first time in nearly one year the S&P 500 closed above 1000 and the NASDAQ closed above 2000. The Dow Jones Industrial Average ended the day up 114.95 points, to close at 9286.56. The S&P 500 gained 15.15 points, to close at 1002.63. The NASDAQ finished the day up 30.11 points to close at 2008.61.
