I noticed today on the pressure charts that GS is trading into a wedge on the daily chart. I decided to look at is closer on the price charts and noticed that since January 21st GS has been at or near the $159.40 level five times. I just can't seem to make close above it. I applied some fib. retracement lines to it and found that from the last major swing high on January 21 ($171.00) to the swing low on January 27th ($147.27). The 50% retracement is $159.35. Maybe that has something to do with it. Traders may want to keep an eye on this level and make trading decisions accordingly.
So I have been in the financial field just over 10 years now. For my first year I worked in a branch office opening new accounts for customers, taking deposits and answering any questions that they may have had about their balances, trading or transfers. For my second year I worked in the 401k department for a large mutual fund company. I pretty much did the same thing but I was on a computer and phones, not in front of clients. I worked behind the scenes.
I really wasn’t into trading as much back then, I was learning. I was learning about the market and I was studying for series 7. Which if you don’t know is the craziest test you probably will ever take. More than half the information you study you will never use in this line of business. But it is cool to pull something out of the back of you head and say, “did you know?”
After that adventure I stumbled across a software company that made a trading program for the stock market. I wanted to know more and I wanted to trade. So I applied for the job and over the next couple of years I learned to actually trade the market and use a very simple program to accomplish my goals. For the next 8 years this was the only tool I ever used to trade. No Fibonacci, candlesticks or Bollinger bands. No SMA’s or EMA’s. I didn’t need them.
Fast-forward to present day.
So now I’m now learning how to use Fibonacci, candlesticks, SMA’s and EMA’s. Joy!!!!! There is nothing more satisfying than having to use all these tools to figure out what I already knew. But at least I know now “why” my previous software charts did what they did. I know the mystery behind the lights and charts. It kind of reminds me of the Wizard of Oz. I must say that it has been very educational and I am learning a lot. I have been kind of hesitant in wanting to learn new tricks because the old ones worked so well and have never failed me. But I have always told my clients that an educated trader is the trader who is going to be the most successful in his/her trading.
So on one hand I am a hard headed and don’t understand why you would want to reinvent the wheel, but if it can be a safer more efficient wheel then I think it is well worth the effort. So I am taking my trading knowledge to the next level and I am sure I will come out the better trader.
Just remember, never stop learning. Improve yourself and improve your returns in trading by investing in yourself.
Today's trading did not show much conviction. The 1100 ceiling seemed to be too much for the S&P 500 today. Why would that be after such a bullish day yesterday? My Italian trading friends the Fibonacci's might have something to say about it. If we measure the January 19th closing high of 1150 vs. the February 8th closing low of 1056 you have a difference of 94 pts. The 50% retracement of this bearish move would take us back to 1103 and change. If we measure intraday highs and lows we end up using the Jan 19th high again of 1150, and the Feb. 5th low of 1044. The difference there is 106 pts. The 50% retracement of this level is found at 1097. The S&P 500 closed today at 1099 which is right in the middle of the two retracement levels. Ultimately, picking a direction from here would be a coin toss for me except for the fact that almost every chart I look at seems to either be over sold on the stochastic or nearing that level. I guess we will see what tomorrow brings.
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As most of you know the VIX has traded up ten points in the
past month. That may not seem like a lot
until you consider that it started at about seventeen. The rise in the VIX is a sign that fear is
entering back into the market. The ATR
on the DOW is 141. Are you kidding
me! That’s huge. Sometimes up, and sometimes down. Above
10,000, below 10,000, above, below and on it goes. No wander fear is back – there is no
consistency. So how can we take advantage of this
chaos? If you are a Dow watcher, make a
change to the S&P 500. Yogi Bara
once said “You can observe a lot by just watching.” When it comes to the S&P 500 it is
true. I was just having a conversation
today with my “Trade with Me” class in which we were discussing the market’s volatility. I suggested that with the futures pointing
higher today we would have a pop initially but the S&P 500 was showing an
awful lot of congestion (resistance) at the 1071 range. The market opened and of it went – right through
10,000. The S&P did run up and it actually
made it to 1072 but because we had spent some time with the S&P chart
before the market opened when were watching for the fade around 1071. If my eyes were on the Dow I might have become
infatuated with the Dow above 10,000 but instead we held steady and the S&P
500 guided us through the market swing. Before
I make a trade, even if the stock chart looks fantastic, I always confirm the
move with the S&P 500. I think of
support and resistance levels on the S&P 500 as my “Market GPS.”
Follow up – Just after I wrote the information above, the S&P launched over the 1071 to a high
of 1079.28. I really did not expect this
to happen, but once the index broke its resistance (1071) I had a pretty good
idea where support now was (1071ish because old resistance often becomes new support). As the day progressed, the S&P500 has
worked its way back down to either side of 1070. If it holds the 1070 mark today, I would
think chances are good for a continuation of the rally. If it closes below 1070, we may be looking at
another downside reversal for tomorrow.
I will be watching my “Market GPS.”
I am sitting hear in my mancave watching the S&P 500 move from 1099 to 1100. From 1100 to 1099. How exciting! Yesterday I was totally confident that we were heading down after the "dead cat bounce," but here we are up 85 pts on the DOW and 11 on the S&P 500. Mayby the cat is not dead yet. I went into my charts and happened to notice an interesting picture. Back on October 19 2010, to S&P 500 topped out at 1100. The following day the high was 1098 and the day after that the market made one last charge to 1101 and then reversed course to the downside eight days before bottoming on November 2, 2010.
More recently the 1100 number has come into play as well - Like today! January 27th, the S&P ran up to 1099 and then retraced back to close positive for the day but off the highs. On January 28th, the S&P ran up to 1100 and backed off to close negative for the day. The market dove pretty hard for a couple of days down to 1071. Currently, the market is, as I mentioned earlier, at 1100.
If we were to put the pieces together we would notice the once we decisivley broke above 1100 December 22nd, that level became new support. When we broke through that support on January 22nd (30 days later) it has become new resistance. Here is my thought on the cat. If the S&P 500 does not close above 1100 today, the kitty may not come when you call it.
We started February off with a kick with the market up over 118 points going into the close. BRK.A has been a big mover since the stock split a couple of weeks ago. Yesterday we got a pull back for a possible entry long today; we just have to let the charts set up for that potential entry. The market is flipping back and forth from positive to negative this morning at the open looking for some sort of direction. I have been keeping my eye on Sirius Satellite Radio (SIRI) as it has been making some moves over the last couple of days fueled by upgrades and other news. Sirius made a new 52 week high this morning. There is a look at some stocks that have been making moves over the last couple of days, remember to do you own homework before you buy any stock and make sure its right for your investment goals.
Monday’s market bounce was a nice relief to the recent onslaught of selling that began on January 20th. Friday’s low of 1071.59 managed to punch through the 61.8% retracement level of the November to January rally at 1075.62, but as of the close on 02/01/2010 the SPX moved back above this level and spent most of the day trading in the lower end of the consolidation range from November and early December.
As annotated in the chart below the SPX managed to break above its minor downtrend line beginning at the high on January 19th. Note that the momentum as noted by the two trend lines has slowed, and this is confirmed by the “breaking” of the two trend lines. However, the minor down trend has not reversed just yet. A needed higher high and higher low would need to be made. If the SPX were to trade out above the high from Friday’s session at 1096.45 it would signal the potential beginning of this process. Evidence on the daily chart and the weekly charts support this event allowing the bulls to step back in once more.
As mentioned in a prior blog the intermediate trend as illustrated by the weekly chart shows a “breaking” of the intermediate trend on both the weekly and daily charts. But just like the “minor” downtrend has not been reversed, nor has the intermediate uptrend. The “peak-trough” progression has not demonstrated a reversal of the intermediate trend, which lends credence to the bullish case; at least in the short term. In addition to the SPX bouncing of the 61.8% retracement level of the November 2009 to January 2010 rally, the SPX is looking relatively oversold on the Daily and Weekly charts according to the 14 and 5 period Slow Stochastic respectively. Another “participation” or “breadth” gauge I watch to identify “intermediate” troughs in the market is the “NYSE Percent of Stocks Above 50 Day Average.” On Friday this gauge closed near, but not below, a level that would be considered oversold, a level similar to those seen during the last two “intermediate” troughs in July and November of 2009. A key trait to this gauge is that it tends to trough every four months, at least for the last two years. So, if this low in late January and early February represents an “intermediate” low the SPX may move higher, and rally for another 2-3 months.
For now, the indicators are indicating that the SPX may be at a “low” in the over cyclical bull market that has been in place for nearly a year. Levels that should be watched in the short term would be Friday’s low of 1071, with the next target below that at 1055. From an intermediate perspective, if the market moved below 1030 a reversal of the intermediate trend may be beginning. On the upside, if the SPX manages to break above the 1096 level, then it would not be inconceivable that the market would retest the highs of 1150. Finally, if the SPX moves higher through 1150 then 1220 is the next target, and beyond that 1350-1375.
MARKET MATTERS, SPX UPDATE AS OF 01/28/2010 CLOSE
by SCOTT McCORMICK, CMT
On Monday I wrote that the long term picture of the SPX seems to have changed due to the breaking of the major trend lines that had been in place since March and July last year. As of today’s close the SPX continues to drift lower, however at a slightly slower pace than it declined Thursday and Friday of last week. The SPX managed to test the lows of November and early December ultimately triggering stops, and pushing the SPX to 1078 before bouncing back above the 1080 level only to close at the November/December support levels at 1084.
Due to the confluence of support levels (1075 a .618% retracement of November low to January high, the low from the gap day on November 9th at 1080, and of course the four swing lows between 1084 and 1086) between 1075 and 1086 the negative momentum may subside, allowing the market to move sideways, and potentially higher in the coming weeks. As SPX is still trading below the trend lines coming down from the high in January 19th, a movement above the trend lines, and the last intraday swing high at 1099.51 would be required before considering a long position in the SPX, or a SPX equivalent.
Should the hourly trend continue to the downside, the next targets beyond 1075 would be 1055, 1043, and 1029 which represent the 78.6%, 88.6% and 100% retracement of the November through January rally.
Those are the Breaks
by Scott McCormick, CMT
As of last Friday’s close the SPX definitively broke below the trend lines that have been in place since March of 2009, and July of 2009. Keep in mind that even though the trend lines have been broken, it doesn’t mean that the trend since March 2009 has been reversed. In order to call it reversed a close below 1029 would be necessary. However, a breaking of the trend lines does imply a slowing of the momentum of the bull market advance. It is my opinion that the odds of a reversal have increased now since the SPX has respected an important retracement level at SPX 1144.00 and there are signs of weakness.
Friday’s low, near 1089, represented a 50% retracement of the rally from the November 2009 low to the January 2010 high. Couple this with an oversold 14 day stochastic, and the market may move higher in the short term, but as I indicated in the last paragraph there is a key resistance level now that has held at 1144, and with a slowing of longer term momentum, any bounce may be short lived.
In the short term, over the next week, a move below 1089 would most likely place the SPX at 1075. A move above 1102 may indicate a reversal of last weeks decline, and may move as high as 1113 to 1150. Any movement above 1150 would indicate that the longer term momentum has resumed, and a target of 1220 SPX would be in my crosshairs.
I have been having some fun using our new LightWave application. Having the ability to use the Wizetrade charts together with price charts is very powerful. It allows us to see things we might have missed using one alone. You notice in this screen shot that CAL is moving up in an ascending channel on the daily chart. By drawing the upper and lower lines of the channel, you can see that CAL is currently trading near the top of the channel. You will also notice that the 2 prior reversals were both greater than $6.00 each. Although CAL has a fairly strong green up trend, I think the reward far outweighs the risk in this trade. Obviously you need to determine is a trade like this fits into your plan and your risk tolerance. It would definitely be worth keeping this one on your radar, waiting for the reversal!!
Kipp
