PreMarket Review - 07/31/08

The market at this point would typically take a two day rest from the recent bullishness. However, the economic reports of the next two days could make the market do unexpected things. The best that we can do is wait and see how the market reacts to these reports.

Twice the market has closed above the March lows. This is typically bullish. We will have to wait and see if the bulls or bears win this battle.

Charles

Morning Review - 07/30/08

The upward momentum was a little stronger than I anticipated. 1291.17 has to be taken out before we can call 1234.38 a pivot low.

The upward thrust may be losing steam as evidenced by the series of lower $TICK highs.

Charles

Premarket Review - 07/30/08

If the mindset of the market is still bearish, we should see resistance at this 50% correction of the lastest downward swing wave.

May see some consolidation and a more narrow range relative to the last two days.

Focus will be on employment data on Thursday and Friday.

Charles

1121 For The SP500 Index?

Will the market find support at 1121?

Charles

High Priced Financial Managers

An Editorial Note:

The high priced managers of our country's financial institutions are not exceptionally intelligent in managing our nations financial institutions, but they are extremely intelligent in being able to convince the world to pay them hundreds of millions of dollars to do a lousy job.

Hats off to those of you who are able to do this.

Charles

Wave Analysis

Especially following a narrow range day, if the market makes a large swing wave, you can usually expect an impulse wave of the same magnitude to follow. Yesterday we got exactly that following a lunchtime consolidation period.






The lunchtime correction or consolidation period was rather shallow, which indicated that there was very little interest in creating long positions. Typically when the market wants to move in a big way during the afternoon session, it will start to move during the 1220 - 1250 ET time frame. Notice how the $TICK was making long tails to the downside between +400 and +200 during this period.



Interestingly, the VIX still shows little panic.

Merrill Lunch not doing well!

Charles

Morning Review - 07/28/08

The action of the first 30 minutes looked promising for the short-term bulls, but the market decided to test the overnight low of 1250, which is now resistance.




What is interesting is that as the futures is making lower lows, the $TICK is not - yet.




The $TRIN is also lower than Friday and the NYSE Advance - Decline Line is higher. We will have to wait and see how long this divergence lasts. We are still bearish below 1250.

Charles

Competition for Energy

"Pemex Cuts Crude Supply to Shell, Valero Refineries".

Pemex sends crude to a Deer Park, Texas refinery, and 50% of the gasoline produced at that refinery goes back to Mexico. However, now pemex is cutting back crude shipments to the refinery due to falling output at Mexico's oil fields.

Charles

Perceiving Your World

After viewing this video on Synesthesia, I just have to wonder if there is some little quirk in my perceptions that may be totally different than everyone else's perceptions of the world.

Charles

Daily Bias and Pivots

The S&P 500 Index is currently sitting on a support ledge. There is a good chance that this support may hold.



The 30 Minute $TICK chart shows that the $TICK is trying to turn positive. The two moving averages are a 13 and 38 period SMA.





Expect range expansion on Monday and/or Tuesday. We should start to see buying interest increase on Monday and/or Tuesday. Pay attention to the market's reaction to tests of low pivots.

Friday was still a short-trade bias day. On short-trade bias days, look to short near previous pivot highs. If the market proves you wrong, your loss is minimal. The opposite is true for long-trade bias days.

Remember: the short-term market cycle is around two days and momentum precedes price.

Charles

Friday - 07/25/08

There will probably be some additional downward pressure today; however, today's range should be smaller than yesterday's, and the market may try to form a support base.

Charles

Brain Magic

Enjoy this video on Brain Magic!

Don't let the markets manipulate your mind.

Charles

Resistance Levels

The SP 500 Index closed above the July open, which is positive; however, it is stalling at July's high.



We have had two days of uptrend on the 2-day Rate of Change indicator for the ES Futures, so look for resistance to the upside, especially on tests of yesterday's pivot highs.




The 30 minute $TICK momentum is turning negative.

Charles

Oil , Dollar and the Short-Term ES Wave

Oil weakened further today along with a considerable strengthening of the dollar.




In combination with the weakened oil price and the stronger dollar, the ES Futures had completed a two-day downtrend of the 2-day ROC. This helped to bring buyers back into the market early in the morning, and made the closing of the gap a higher probability.




The ES Futures has only experienced a 33% correction of the last up-swing wave. I think that this is rather bullish relative to the overall weak market of the past 6 months. The $TICK moving averages on the 30 minute chart has also turned to a short-term bullish uptrend.

Charles

Bad Bank Earnings

The aftermarket futures are diving on aftermarket bank earnings reports. There will probably be more bad bank earning reports tomorrow morning.



The 2-day ROC indicator for the ES Futures turned negative on Friday. There is usually 1 to 2 days of follow through for this 2 to 3 day cycle. Today was follow through with an increase in range from Friday. Interestingly, the two day downtrend in the ROC was modest at best. However, aftermarket activity so far is breaking short-term support.




On the 30 minute chart, notice how the 13 period SMA of the $TICK pivot crossed the 38 period SMA late Friday. Probably one of the better indicators along with the 2-day ROC to illustrate the short-term wave action of the market.




Most of the morning traded in a narrow range. It was not until the close of the European markets at 1130 ET that selling picked-up momentum as illustrated by the $TRIN.

Cramer is recommending buying banks on dips. Perhaps based on the thesis that buying typically enters the market at the end of July in most years.

Charles

Testing Pivots

The most profitable short-term trading opportunities are trading the market's reaction to tests of high and low pivots. However, I prefer to define a pivot as an actual price point where the market has defined support or resistance. In other words, an actual turning point in the price chart. The calculated pivots, such as the floor trader pivots, are theoretical and based on absolutely nothing.

At the beginning of the day on Friday, the ES 2-day Rate of Change had uptrended for two days, which is where short-term traders start taking short term profits. Therefore, Friday was a day to look for short trade opportunities.

On Thursday, a high pivot of 1263 was created. On a day that you susspect selling pressure based on the 2-Day ROC Analysis, look for a short trade opportunity whenever the market tests the high pivots, which in Friday's situation was whenever the market tested the 1263 area.

Charles

PreMarket Review - 07/17/08

Light Crude is still above the 132 support. For a new downtrend, we still need a lower high and a close below 132.



You may notice that on the Economic Calendar that the Crude Oil report is now released at 1035 ET rather than 1030 ET. Yesterday, all eyes were on the oil report just before 1035 ET. A nice trade would have been to place a buy stop at 1220, which was just above the upper part of the small consolidation range created just prior to 1035 ET.




It is nice to see the $TICK pivot 6-period EMA in the green again.

The three-wave correction to the upside is complete. We should see a short-term move to the downside in the next day or two. Whenever the market is making a new high, look for evidence that upside volume and price momentum is decreasing. Remember that momentum precedes price.

Charles

PreMarket Review - 07/15/08

Light Crude has not traded up overnight, which is a plus for the equity market. However, Light Crude still has not traded below the previous low pivot, so we are not in a new downtrend yet.

$TICK is showing some signs of bullishness, and we have had two days of downtrend on the ES 2-day Rate of Change indicator. We may see some buying pressure today in the equity market. However, the VIX closed at 28.54, and we still have not had a good spike above 30 yet, which is a negative.

Charles

VIX, Indicators and An Excellent Thread on Scalping

The VIX is slowly reaching the 30 level. The 30 level is the level of pessimism that many side-lined bulls are waiting to see before entering the market to the long side.

As the ES and $TICK pivots went lower, the $TRIN and NYSE Advance - Decline Line were showing some signs of buying on Monday.

I never thought that I would recommend a thread on EliteTrader, but the posts by jjrvat on market waves, trend direction and momentum is an excellent read.

Charles

ES Morning Review - 07/14/08

The morning turned out a little more negative than I anticipated. However, the third week of July is typically weak especially in a down year. The market is currently trying to stabilize just above the -6 standard deviation level, which is also near the low of Friday. As is expected, the financials are leading the market weakness.

Charles

PreMarket Review - 07/14/08

We may see a daily range that is smaller than Friday's range, and may see a small technical bounce to the upside. The early action will probably see the market trade to the downside to test Friday afternoon's low pivots, but the market probably will not make a new low today.

There are no economic reports today, but Bernanke talks in front of various congressional committees on Tuesday and Wednesday with the FOMC meeting minutes being released on Wednesday afternoon.

The foreign markets did not get very excited about IndyMac - sell on the rumor and buy on the news.

The Federal Reserve and US Treasury on Sunday promises to financially support Fannie and Freddie if necessary.

Charles

IndyMac Bank Under FDIC Control

IndyMac Bank fails under pressure of the mortgage and foreclosure crisis and falling housing prices, and is put under FDIC Control, Los Angeles Times and The New York Times.

It will be interesting how the market reacts to this weekend news.

Link to Dr. Brett Steenbarger's view of the news.

Link to Ray Barros views.

Charles

Monthly Open

Once again, the S&P 500 Index bounces off of the monthly open, which is currently a point of resistance.

I probably will not trade today. I am slowly modernizing my house. I now have an R40 attic, R15 floors, all toilets are 1.6 gallons per flush, and today Energy Star windows will be installed.

Charles

Not a Good Place to Short

The 1400 ET time period is the beginning of the unwinding of the Energy Market Trades, whose market closes at 1430 ET. It is not uncommon for the ES Futures market to change direction during the 1400 - 1430 ET period as ES - Energy hedging trades come to an end.

In the above chart, the 3,10,16 MACD or 3/10 Oscillator shows a possible change in momentum at 1400 ET as the ES Futures test the previous low pivot.




In addition, this change in momtentum point was also a 62% correction of the latest upward moving swing wave. A point where long position equity traders maybe interested in increasing their long positions.




This 1400 ET point was also located at the 0930 ET Open, which is also another point that may interest long position traders. Notice as the ES Futures was testing the previous pivot low, the $TICK was making a higer low, again indicating a change in short term momentum.




The NYSE Advance - Decline Line as also indicating a possible change in short term momentum by making a higher low at 1400 ET.




Even the Staples / Discretionaries Ratio Indicator was showing a possible change in short term momentum.

In summary, the 1400 ET period yesterday was not a good place to be short.

Charles

Staples / Discretionaries Ratio

This may be better than the $TRIN.

Charles

ES Morning Review - 07/07/08

Oil took a short term bearish direction this morning, which you might think would be bullish for the equity market.




However, the Financials remained bearish all morning while the rest of the market was trying to be bullish.




At the beginning of the afternoon, the market could not overcome the bearishness of the Financials and traded down to the low of Thursday. We will have to wait and see how the market reacts to the test of Thursday low.




The NYSE Advance - Decline Line remained in a bearish trend all morning along with the $TRIN culminating in the rapid lunchtime sell off.

Charles

SP500 Index Review - 07/07/08

If there is any glimmer of hope for the bulls, it is that the S&P 500 Index closed above the yearly lows on Thursday following the test of those lows. However, the market is still below the monthly open, which is a negative.

Statistically, the first two weeks of July are bullish with the third week typically seeing selling pressure. If there is any bullish hope for the second half of the year, you should see buying starting to enter the market in the last week of July.




We may see an increase in range today with some bullish tendency for the day.



Hurricane season is here!

Charles