Morning Review - 04/30/08

Had a nice surge in the ES market following the 0830 ET reports. However, the market stayed in a small trading range following the 0930 ET market open.



Both the NYSE Advance - Decline Line and $TICK were giving positive indications; however, the $TRIN was showing large selling volume.




Even thought the ES futures tried to trade higher than yesterday's afternoon high, the sector indicator showed a lower high.

The net result is that the market does not want to trade lower ahead of the FOMC 1415 ET announcement, but there is too much selling pressure this morning to trade the market higher; thus, a small trading range.

Charles

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According to this article in WIRED, new software based on current research to help you become smarter will soon be available: "Forget Brain Age: Researchers Develop Software That Makes You Smarter".

After all, we have to keep up with nature's competition: "Orangutans are Amazing".

Charles

Early Market Review - 04/30/08

Yesterday afternoon gave a nice series of uptrends, which was unusually symetrical.

Of course, today we have the FOMC announcement at 1415 ET. In addition, we have GDP and Employment Cost Index at 0830 ET, NAPM at 0945 ET and Petroleum Status at 1030 ET.

Don't forget the Employment Situation Report this Friday at 0830 ET.

Charles

Stochastic Analysis

Above is the Stochastic Analysis of 15 Dow Industrial Stocks as described in the post titled "Reversals". It uses the top weighted stocks in the index that represent as many various sectors as possible.

The chart above is the top two weighted stocks in the eight SPDR's (Consumer Discretionary, Consumer Staples, Energy, Financial, Health Care, Industrial, Materials and Technology), except Health Care in which I used just one stock (JNJ). I believe that the SPDR Stochastic maybe the better indicator.

Charles

Morning Review - 04/29/08

The charts explain themselves - everything in the red.

Another thing to consider is that yesterday was a Narrow Range (NR) 4 and 7 day (NR4 and NR7). This typically means that the next or following day will have a wider range.

Charles

Monday's Close - 04/28/08

The Stochastic of 15 Dow stocks as described in a previous post titled "Reversals", indicated weakening during the entire afternoon session. The indicator turned negative at 1430 ET, which was followed by a test of the high by the ES Futures. The test turned out to be a good place to fade the market. Interestingly,this was the only indicator that I look at that indicated any possible weakening of the underlying market.





Actually, I stand corrected on that last statement. The $TICK Pivot was also showing weakness as the ES Pivot was making new highs.


Charles

Early ES Short Trade Opportunity - Market Structure

Here is a short trade opportunity based on nothing more than Market Structure, Fibonacci and momentum.

Charles

Improve Decision Making Ability

In this interesting speech by Dr. John Medina, aerobic exercise improves executive decision making ability, but not memory skills. Toning exercises have no effect on brain function. Twenty minute aerobic workouts 3 times a week is all you need to improve decision making ability. Aerobic exercise also decreases the probability of suffering from dementia.

Also, if you experience constant stress caused by a situation that you believe is beyond your control, brain cells in the hippocampus area of the brain will start to die, which impedes your ability to learn.

Charles

Review - 04/28/08

The S&P 500 Index is trading above the 2008 pivot and the April pivot. If the recent gains hold for another three days, we will have a higher monthly open for the first time this year.

The ESM08 futures pivot has closed higher than the pivot high of 4/18/08. The $TICK pivot is on a slow but steady uptrend.

Charles

Reversals

On April 25, 2008, Dr. Brett Steenbarger wrote a blog about Anticipating Reversals. Dr. Steenbarger describe a method of tracking the number of Dow issues making fresh two-hour price highs minus those making two-hour lows on a five minute chart.

Below is a similar method using a Stochastic of 15 of the 30 Dow stocks. This Stochastic analysis simply measures where the current close of the 15 stocks are relative to the two-hour range. In other words, if the close is at the two-hour low, the stochastic is zero, and if the close is at the two-hour high, the stochastic is 100. The Stochastic described below is an average value of the 15 stocks, which are:

IBM, CVX, CAT, BA, MMM, DD, JNJ, MCD, WMT, JPM, HD, AA, AIG, UTX AND MSFT.

I tried to use a sample from various segments of the economy to get a broad sentiment indication of the large cap stock market using as few stocks as possible. In the indicator below, the blue dotted line is the 24 period SMA of the stochastic and the purple line is the 38 period SMA of the Stochastic.




In the chart above for 4/24/08, you can see that this indicator can be ahead of the futures market. After the Stochastic MA's crossed to the downside, the futures first tested the last high before started a downtrend.



Again in the example above for 4/25/08, the indicator was ahead of the futures, which tested the recent low before starting an uptrend.

Charles

Another Divergence

This afternoon we had another divergence between the NYSE Advance - Decline Line and the ES Futures. As the ES futures was making a lower low, the NYSE Advance - Decline Line was making a higher low. The NYSE Advance - Decline Line was also making higher highs before the ES Futures. The NYSE cash market won the battle to the upside.

Another reason to compare two different, but similar markets to find both divergences and complete agreements to potential market movements.

Charles

We're Back!

Well, the S&P 500 Index is back to 1400. Does the market have enough strength to trade past 1400? I DON'T KNOW! However, it is looking good so far.







In a slightly bigger picture, we can see the market is in a higher high/low market structure scenario.


Charles

Divergence

As the ES Futures was making a lower low at 1372, both the NYSE Advance - Decline Line and $TICK was making higher lows with a $TRIN reading of 0.85. This setup a nice bounce to the upside.

Charles

Pre-Market Musings - 04/24/08

According to the Stock Trader's Almanac, statistically, today is suppose to be a negative day for all stock indexes, followed by 6 days of bullishness. Of course, almost everyone in the trading world knows this, so it will be interesting to see if it becomes a self-fulfilling prophesy.

Here are some windows that I like to look at during the trading day:

The blue dotted line is the pivot, calculated by (High+Low+Close)/3. The green-red line is the 13 period EMA, and the white dotted line is the 38 period EMA of the pivot. The market thus far has remained above the pivot high of 4/16/08. It is interesting to see that the $TICK pivot has been in a downtrend since that time, but maybe showing some tendency to start an uptrend again.

I have put the NYSE Advance - Decline Line, $TICK and $TRIN on one 5 minute chart. Helps to see several market breath indicators all at once.


Charles

ES Pre-Market Review - 04/23/08

The market may switch to a higher low - higher high market structure; however, this will not be confirmed until a higher low and then a higher high is actually formed.

I have tweaked the paint bars on the 380 tick chart a little. I now look for long trades (green) when the 8 bar pivot (yellow) is higher than the 20 period EMA (white) and the 20 period EMA is higher than the 38 EMA (blue). Vice Versa for short trades (red). Long trades are a higher probability when the market, using a 380 tick chart, is making higher highs and lows, and vice versa for short trades.

The Earnings Calendar for today.

Only the Crude Report at 1030 ET today.

Charles

ES Mid-Day Review - 04/22/08

Just like yesterday morning, the market showed some weakness while making lower highs and lows.



However, as the market made a lower low after 1000 ET, the NYSE Advance - Decline Line and $TICK made a higher low. Also, the $TRIN had a bullish indication all morning, indicating that there was buying at these market lows. One reason why, thus far, the market has not had a rapid decline.





Looking at a slightly bigger picture, a Three Wave formation was just completed. We will have to wait to see if the selling continues, or if the market now becomes more bullish.


Charles

ES Mid-Day Review - 04/21/08

Market Structure was indicating a downtrending morning (lower highs and lower lows). The first half hour gave us a normal 50% correction, followed by increasing momentum in the down direction.

The NYSE Advance - Decline Line, $TICK and $TRIN confirmed the downtrend following the normal correction.

Charles

ES PreMarket Review - 04/21/08

According to the Earnings Calendar, BAC reports sometime today.

S&P 500 Index is testing a stubborn resistance level near 1400. We will have to wait and see how the market reacts to this resistance - again!

No significant economic reports today.

Charles

Divergences

The NYSE Advance - Decline Line reached its peak of the day around 1230 ET, while the ES Futures peaked just after 1330 ET. Turned out to be a good place to fade the uptrend.

The 5 period MA of the $TICK pivot reached its peak at 1200 ET indicating exhaustion of the uptrend.

Charles

Terry Laundry's T Theory

Terry Laundry's T Theory blog discusses in more detail his theory on time cycles. The following discussion is a grossly oversimplification of his theory. Terry uses a volume oscillator, which I have not been able to reproduce as yet. However, the simplified view of the theory still produces some interesting predictions of top and bottom cycles. Basically, the next up cycle should be equal in length as the last bottom cycle, and vice versa. You can look at big T's or a large cycle, or you can look at the smaller cycles within the large one, which are the little T's.

The following discussion uses a 60 Minute Chart of the S&P 500 Index.





The above example shows a down cycle from the end of February to the middle of March, thus predicting the end of the next up cycle to be around April 4. The actual cycle ended the next trading day on 04/07/08.

In the above example, you can see that the up-down cycle Green T and the down-up cycle Red T predicted the end of the cycles within one day's accuracy.

It will be interesting to see if we get an up cycle conclusion around 04/23/08.

It is a nice tool to use to get an idea of when a current short term cycle may conclude.

Charles

Post Citigroup Report Market Move

Market soars after Citigroup posts a larger than expected loss. Who would have thunk it?

The Dow Transports have been making higher pivot highs. The Industrials have yet to match that performance. Maybe today!

Charles

ES PreMarket Review - 04/18/08

The overnight activity still has the market above yesterday's high pivots.

Today's Earnings Calendar has CAT, C and HON reporting before the market opens.

No economic reports.

Expecting an average range market.

Charles

ES PreMarket Review - 04/17/08

Typically following a large range day like yesterday, the following days are smaller range days, as the market creates another equillibrium zone. The formation of these equilibrium zones usually takes 2 to 5 days.

Charles

1360?

Can the bulls trade the market above 1360? Time will tell.

Charles

Yesterday's Low - Further Analysis

I showed the chart above in the previous post. As the ES market was making a lower low at around 1140 ET, the $TICK pivot was making a higher low, indicating buying interest at the lower ES low.

In addition, the $TRIN was trending down, which is a bullish indication and further confirmed buying interest entering the market at the lower ES low.




On top of all of that, the NYSE Advance - Decline Line was making higher lows also and trending up over the last day or two.


Charles

ES PreMarket Review - 04/16/08

Hindsight is always 20/20. Looking back, we can see that as the ES market made a lower pivot low, the $TICK was making higher pivot lows, indicating buyers entering the market at the new ES l0ws. By the end of the day, both the ES and $TICK were making higher pivot highs. Short-term change in market direction? I would be a little cautious about fading up moves today! This is the type of thing that creates the sharp, quick and violent moves when traders begin to believe that a strategy that has worked for several days will continue to work. When the market moves against them, they have to liquidate positions in a hurry.

The ES market is currently between two equilibrium zones. Resistance is near 1345, and support is near 1336.

The one fly in the ointment is raising crude prices, and the weakening dollar against the Euro.

Today's Earnings Calendar.

Consumer Price Index and Housing Starts at 0830 ET.

Industrial Production at 0915 ET.

Peto Status at 1030 ET.

Beige Book at 1400 ET.

Charles

ES MidDay Review - 04/15/08

The $TICK Pivot Highs of this morning were the $TICK Pivot lows yesterday morning. The ES market as a result trended down from the 0930 ET open.

However, the S&P 500 Index is still higher than the pivot low of 03/31/08.

Charles

ES PreMarket Review - 04/15/08

A very quiet market lately. We will just have to wait to see which way the market wants to go.

Upside Resistance area is 1343.50 - 1352. ESM08 futures has a low pivot at 1309.50.




Light Crude is still climbing.

Producer Price Index and Empire State Mfg Survey at 0830 ET.
Housing Market Index at 1300 ET.

Beige Book tomorrow at 1400 ET.

Today's Earnings Calendar.


Charles


PS: While waiting; here is an interesting article that suggests that the ups and downs of markets may be hormonal related. And our Brains may decide to make a decision before our conscious mind realizes that we even want to make a decision.

ES MidDay Review - 04/14/08

The ES market has remained within the overnight range of 1336.25 - 1325.75. The market is attempting to make a higher low, but is failing to make higher highs.

The tone of the market is slightly bearish. The $TRIN started out bullish, but since has had a bearish uptrend.

$TICK is more bullish than Friday, but this as yet to translate into higher equity or future prices. Time will tell if this is a short term bottoming process. We will have to see a close above 1336.25 to confirm a change in market direction.

Charles