The Dow Jones Industrial Average has seen a nice move up for the past 6 days in a row with a breakout above the 52 week high the past 2 days! Although the trends have remained fairly strong through this "V bottom" recovery, we have seen the Dow and the S&P 500 stuck within a tight range for the past month. Investors have been looking for a big breakout or break down from this channel! Typically when you get a breakout, it occurs on heavy volume. At this point I am not seeing much conviction to this move. Plus, you have many big Wall Street traders on vacation this week. I know it’s easy to get excited when you see the markets moving, but I would remain cautious until we are through the first week of the New Year. At this point, even though we have technically “broken out” of the channel, I am not calling this a “breakout” just yet.
I was writing this blog a little earlier but my computer crashed and I lost all my documents that I was working on. That was about an hour or so before the fed spoke. I was asking the question was the Fed news going to push the market above 10500 on the Dow or was the Dow going to push lower and test support around 10200. We neither one of those things happened,it was a non event. With 10 minutes left in the market we are down 5.50 points on the Dow and up 5.83 points on the NASDAQ. We are going to end up flat today...After all that all i got was this stupid t-shirt. Even though the market is flat GS is having a good day, GS trading up $2.50 on the day. This is a short blog but i will be back tomorrow to check in and see if we are selling off and testing those lows of the channel we are in.
Until then,
Happy Trading.....
I happened across AMZN the other day and noticed that there is a Head and Shoulders pattern on the short term chart. If you are not familiar with this reversal pattern, here is some information to consider. In my classes I teach traders about the four basic tenets of reading charts. The definition of a bullish trend is one of them. This definition says that a bullish trend is a series of higher highs and higher lows. If a chart shows higher highs and higher lows, in order to continue the trend it must establish higher high after higher high. If at any point the stock cannot create a higher high and instead establishes a lower low, then the bullish trend is over. These concepts are the reason a head and shoulders is a reversal. The top of the head represents the highes high. The right hand shoulder represents the fact that the stock could not establish a higher high and instead establishes a lower high. The big "GO" moment signal in all of this is when the right hand shoulder breaks below the previous support (collar or neckline). When that takes place the trend has, by definition, ended and the possibility for reversal exists. A head and shoulders pattern not only gives you a "Go" for entry, it will also provide a potential target. Here is how you can determine the target on a head and shoulders. Take the price at the top of the head, and subtract the price at the bottom of the right collar. Now take that number and subtract it from bottom of the right hand collar. That is your target. As an example, today AMZN has a head and shoulders pattern on the daily chart. the top of the head is at $145.91. The bottom of the right hand collar is $129.82. The difference between the two is $16.09. Now if we subtract $16.09 from $129.82, your downside target would be $113.73. Most traders who work with these calculations would certainly not be greedy and try to capture the entire $16.09 move. I hope this helps your understanding of the head and shoulders reversal. If you would like to see this pattern and others like it traded, sign up for my Trade With Me Webinar series.
I read this morning that GM is going to repay their TARP money sometime this summer. Sounds like good news for the auto manufacturer and Howe Long! They are following in the long line of financial institutions that are paying back their loans. This sounds like a pretty good thing all in all but I was wondering about something. The banks want to pay back to loans for one main reason - to get control of their own destiny again. With the money came restrictions and expectations. No bonuses, no jets, no fun stuff. The expectations were that the banks, no longer in danger of going under, would start loaning to businesses again to get the economy going. When the money is paid back, no restrictions, and no expectations. I am not a big government guy, and I believe that businesses are in business for the purpose on making money and the government should not impose restrictions on how much any one person can make. With that said it is obvious why TARPies would want to pay the money back. As this happens it seems that President Obama has become more aggressive in his language. He invited the so called "Fat Cats" to a meetings to "encourage" them to start lending again. Unfortunately - he now has no leverage.
The Dow Jones Industrial Average ($DJI) is still holding onto support around the 10200 level. Looking at the Wizetrade charts, I keep seeing the green and red lights flip flopping back and forth on my minute time frames. That’s because the market has been trading in a really tight range today. The lows so for today on $DJI are 10235.78 and 10263.14 with the daily high being 10328.29. It looks like non eventful day in the market, but if you look a little deeper there are some stocks making moves today. POT (up $2.43), AGU (up $1.64) and CGA (up $1.17) are leading the run on the Ag side with MON (up.63) and MOS (up.10) not really doing a whole lot today. But all 5 stocks are green across the board today with some looking stronger than some of the others. So check your charts before you enter and trade your plan.
The Diamonds (DIA) has been trading in a tight range for the last 18 days. Back on 11/12/2009 the Diamonds (DIA) hit a low of 101.90, yesterday we hit an intra day low of 101.75 and then bouncing to close at 102.94. So we held support and this morning the Futures are pointing higher with the Diamonds trading at 103.22 on the ask.
Market is holding its own with the Dow up 44.89, Q's up 2.53 points. I have GLD (Spiders Gold Trust) on my screen which has rallied off its morning lows and is now trading in the positive up .20 cents. The low on GLD this morning was $111.44 and it is now trading at $114.00 on 33.8 million shares trading hands so far today. We are still bumping up against some major resistance on the Dow and the S and P right now. It looked like the Non Farm data that came out Friday might push us above the 10500 level but the market sold off shortly after the open as the Dollar rallied. Looking at the mid term trend on the Diamonds (DIA) the trend is flat and moving sideways. That is because we are trading in a tight range on the short term trend. Once the market breaks a support or resistance level, that mid term chart is staying flat and sideways. With the overall bullish trend on the Diamonds we might look for a break out above the 10500 level. I would wait for the break out before timing my next entry long on the Diamonds.
Lets get back to Gold for a minute, If you watched us this morning on the Opening Bell you might have heard me talking about Gold selling off and GLD gapping down at the open. GLD gaps because it is a stock traded on an exchange, Gold does not gap becuase it is a Commodity and trades 24 hours a day. I saw that the short term chart on GLD was bouncing off a support level set back on 11/20/09 of $111.54, today's low was $111.44. Since the open GLD has filled that gap and has traded positive to a day high of $114.22. Not to bad for an active trade.
Happy Trading....
Right now the futures are bouncing off their morning lows. I am seeing some buying coming in but we are still down 23 points on the Dow Futures, down 2.5 on the S&P Futures and 4.25 on the Q's this morning. December Contract on Gold is down another 16 points this morning with the mid term chart starting to roll over on some pretty serious profit taking. Jan 2010 contract on Oil is down just .40 cents today trading around $75.00. Basically the market is flat before the bell except for Gold taking it to the chin once again this morning.
It looks like the labor market improved markedly in November. The jobless rate feel back to 10% and the job losses look to be shrinking to the lowest levels in two years, the Labor Department reported Friday. That all sounds good but you have to think of what's going on in the big picture. It's the holiday season and companies have been hiring and or asking more out of their employees by working more hours. So i guess the big question is.... Is this temporary or the real deal? I guess we will find out in January. I've got to go and do my show, ill check back with you in a bit....
Happy Trading
The market opened up a little weak and then we rallied. We broke above 10,500 for a brief moment and then sold off pretty quick. I have been talking about AMZN and PCLN over the past couple of days and they are both rocking once again today. PCLN up over $3.00 and AMZN was up over $4.00 at one point this morning. Look for pull backs on both of these stocks if you are thinking about jumping onto one of these movers.
