Friday, July 31, 2009

End of Day Review 07/31/09

When the market has a range day that is larger than the following day such as Thursday, the next day's range is typically about 60% of the wider range day. That is what occurred today. The limit of today's range was set in the first 40 minutes of trading, and a good strategy was to fade test of the upper limit of the range.

Morning Review 07/31/09

I didn't trade the early swings because I just wasn't sure what the market was trying to do. I did trade a few scalp trades as the market wiggled around the VWAP line. I rather not say that the market is forming a topping formation, but that is how the market is acting today.

Something that I am experimenting with is the 6,20,16 MACD of the $TICK on a 1 minute chart. The MACD Line is not plotted. The light blue line is the 16-period EMA of the MACD Line, and the Histogram is the difference between the EMA and the MACD Line, also known as the MACD Difference. The yellow, dotted lines are the 1 Standard Deviation (780 Period) of the MACD Difference. When the MACD Difference reaches 150 or -150, many times this signals a temporary end to a market move.
This is just another way to spot a decrease in momentum, and in some cases a signal for a possible fade.

PreMarket Review 07/31/09

GDP and Employment Cost Index at 0830 ET.
Chicago PMI at 0945 ET.
I was expecting the overnight market to stay below the 984 level, but we got a Fibonacci 50% correction instead. At the moment, the market is treating the 983 - 984 area as support.

Thursday, July 30, 2009

Morning Review 07/29/09

Similar morning to 7/23/09. Those trading the gap closing strategy got burned. Just like 7/23, the strategy this morning was to trade long.

PreMarket Review 07/30/09

Natural Gas at 1030 ET and a 7-Yr Note Auction at 1300 ET.
Jobless Claims did not change much, but is still in a downward channel. This lifted the futures past 984, and about 10 points above yesterday's close.

Wednesday, July 29, 2009

End of Day Review 07/29/09

The bulls didn't go away after all. After the release of the Beige Book, the market tested yesterday's low twice and bounced to the upside each time with the market closing above the VWAP line and above the 30 minute upper channel line. Let's see if the market test the recent highs by the end of Friday.

Interesting Divergence 07/29/09

Another lousy note auction, but the market reacts the opposite of yesterday. Short sellers got out of the way early today, and there is a lack of buyers in both the equity market and bond market. However, the market stays in its narrow range as it waits for the Beige Book.

Narrow Range Morning 07/29/09

In afterthought, it is not surprising that the market is staying in a narrow range this morning. The market is starting to realize that the economy may not be improving as well as first suspected, and the market is anticipating another poor 5-Yr Note Auction this afternoon. Plus traders are waiting for the Beige Book. So the market is trying to deal with conflicting data.

PreMarket Review 07/29/09

Crude Report at 1030 ET. 5-Yr Note Auction at 1300 ET and Beige Book at 1400 ET.
We have an overnight high of 976, and overnight low of 964. The market is staying above the 962.50 support, but in a slow down channel. The market is currently about 7 points below yesterday's close.

Tuesday, July 28, 2009

MidAfternoon Review 07/28/09

The 1-Minute Chart view.

Bonds Weaken 07/28/09

The afternoon bond auction was weaker than expected, which has raised yields and has lifted the NASDAQ to new daily highs.

The S&P 500 has not made new highs, but weakness in the bond market has lifted the futures past the VWAP line.

Morning Review 07/28/09

Early on the market was able to close the opening gap. The Consumer Confidence Report sent the market tumbling. Since that time the market has been unable to trade past the VWAP Line. Two 3-Wave moves this morning. 1-2-3 where the first wave was almost identical in length as the last wave. And the A-B-C correction to the VWAP Line.
The 10-Year Yield for the first time in 4 days made a lower low than the first 30 minutes of trading, and is trading lower than yesterday's low, which is bearish for the equity market.

PreMarket Review 07/28/09

Consumer Confidence 1000 ET. $42 Billion 2-Yr Note Auction at 1300 ET.
No new high or low overnight. 981.5 to 984 is resistance and 972 to 969 is support. The market may be running out of short term buyers, but we still need to see a lower low before throwing in the bullish towel.

Monday, July 27, 2009

End of Day Review 07/27/09

The market continues to make higher lows. The drop in this mornings market found support near the 62% Fibonacci level. The market found resistance near 977 for most of the afternoon, but then traded above that level a short distance.

Once the market traded above the VWAP line in the afternoon, it became support, and the market is ending the day above its 0930 ET open price.

Morning Review 07/27/09

After release of the New Home Sales, I thought that 976.50 would hold as support, but it didn't. So I took a small loss there. The Overnight Low failed to hold support after 1000 ET, and thus became resistance. The market is still below that level. $TICK divergences here are not working since the market is not near any major support levels. Market is bouncing to the upside a little as Europeans wrap up their trading day.
My trades are more successful when I wait to enter near Yesterday's High or low, Overnight High or Low and the 0930 ET Open Price.

PreMarket Review 07/27/09

New Home Sales reports at 1000 ET.
Once the overnight market traded above the 976.50 price, it has been acting as support with 984 as resistance. A lot of earnings reports this week, which so far as been lifting the market to new levels as investors are encouraged by cost cutting measures of most companies.

Sunday, July 26, 2009

S&P 500 Vs. Commercial Loans 07/26/09

I like looking at Commercial Loan activity by Commercial Banks as an indicator of economic health. This information is obtained from the Federal Reserve Bank of St. Louis's web site.
The chart above shows the Percent Change from 1 Year Ago for both the S&P 500 Index and Commercial Loans, which was down loaded onto a spreadsheet from this web page.
It is interesting to note that during the 2000-2003 bear market, the S&P 500 did not trade above the previous year's level until Commercial Loan's rate of change had stabilized for over a year. If the current Commercial Loan's rate of change is stabilizing, that process has just begun. If the past is any key, it may be a while before the market trades above the previous year's prices.

Saturday, July 25, 2009

Following a Strong July Update 07/25/09

Above are the same two charts discussed in the previous posts titled "Following a Strong July 07/25/09", except expressed in Percent Change from the July Close. This will better represent the change from the July close, since each year has a different market value ranging from 300 to almost 1600 S&P 500 points.

Following a Strong July 07/25/09

So far, 2009's July has gained 58 S&P 500 points from its open.

In the past 20 years, excluding 2009, only 9 out of 20 July's have ended the month higher than its open price. Of those 9 gainers, 2 gained more than 20 S&P 500 points, and 5 gained between 10 and 20 points.

The chart above shows the difference between the close of each month and the July close for the 2 years in which its July had more than a 20 point gain. In both 1997 and 2005, August through October closed below the July close. By the end of the year, the S&P 500 gained only between 14 and 16 points from the July close.

Above is the chart for July's that gained between 10 and 20 points. Of these 5 years, only 1995 and 2003 stand out as being different. 2003 is the year that followed the 2000 to 2002 market bubble burst. In both 1995 and 2003, the August through October performance was positive.

The performance of August through October may help determine if 2009 will be like most years and gain only between zero and 16 points by the end of the year, or be more like 1995 or even 2003.


Friday, July 24, 2009

Morning Session 07/24/09

Financials, Energy and Discretionary Sectors took the biggest hit this morning. Technology stayed relatively strong.

The NYSE Advance - Decline Line stayed below zero all morning.

However, the 10-Year Interest Rate or Yield remained above the first hour low, which may have helped keep stocks above the overnight low.

The 1-minute chart contains most of my thoughts throughout the morning.


PreMarket Review 07/24/09

Consumer Sentiment at 955 ET is the only economic report today.
We are still in a bull cycle as long as the market keeps making higher lows. Strong support is at 957 with weaker support at the overnight low of 963. 976.5 is the current resistance. Next week is typcially a bullish week.
The market longer term may see resistance in the 1044 to 1000 area. I would not be surprised if we see the market test this area next week.

Thursday, July 23, 2009

Morning Review 07/23/09

There was really nothing special about the first 10 or 25 minutes of the market to indicate a strong trend day. Volume was slightly below the 10-day average and the first 25 minute range was about average. It wasn't until 0955 ET that somebody pressed the buy button. Once the market traded convincingly above the previous highs, these highs acted as support, and away the market went.
I have noticed that the first 10-minute range is key, at least lately it has been. A break of this range lately indicates where the market may want to go for 30 minutes or so.
There is not much more to say about a strong trend day other than hopefully your positions were always in the direction of the trend.

PreMarket Review 07/23/09

Above is yesterday's 5-Minute Chart. The yellow line on the $TICK chart is the pivot of each 5-Minute Bar with the pivot defined as " (High + Low + Close)/3 ." It is a good visual aid in seeing changes in buying and selling momentum. In narrow range days, these changes in momentum will bring the market back to the VWAP Line.

The market lately isn't making new highs, but is making higher lows. The market will have to decide soon if it wants to break up or down. The upper limit is near the 2009 high, which the market is showing reluctance to trade past.

Wednesday, July 22, 2009

Morning Session 07/22/09

The best action was in the first hour of trading. Bernanke is still talking, and the market is treading water.

Closing the Gap 07/22/09

The market was able to close the opening gap. VIX confirmation of the upward move helps with confidence in a successful trade.

PreMarket Review 07/22/09

No new highs or lows overnight. Poor results by Morgan Stanley took some air out of the bullish bubble, but we are still above yesterday's low. 956 is resistance and 940 is support.

Repeating Mistakes 07/22/09

Life Coach Stuart Schneiderman wrote an excellent blog about repeating mistakes titled " When You Keep Making the Same Mistake."

In a reference article, " A Creature of Bad Habit: Why Mistakes Are Repeated ", it is mentioned that thinking about the mistake may actually increase the probability that the mistake will be repeated. If you tell someone to not think about a white bear, that person will start thinking about a white bear. Not only will the person think about a white bear, but the image of a white bear will dwell in that person's mind for a long time.

I have noticed this about myself, not only in trading, but in other aspects of everyday life. Sometimes when I see a pothole approaching while driving, I know that I should avoid that hole, but I drive into it anyway. Instead of avoiding the hole, I focus on it, and hit it. When trading, I focus on a bad trade, and end up making the same bad trade again.

Rather than focusing on "If A and B occur, I should NOT do D", we should focus on, "If A and B occur, I SHOULD do C".

This has made me rethink other life situations. For example, minority groups trying to eliminate discrimination against their group. Too often, they use the tactic of convincing society that discrimination against their group is bad. From a psychological viewpoint, they may actually be promoting discrimination rather than eliminating it. What they really should be doing is telling society that their group is beneficial to society because ....


Tuesday, July 21, 2009

Afternoon Session 07/21/09

Buyers came back in the afternoon session. I color coded the 50-period EMA on the $TICK chart to help see at a glance the overall trend of the $TICK. Green above zero, and red below zero. In a trending market like this afternoon, a trader would have done well going long each time the $TICK dipped to the lower band.

Morning Session 07/21/09

Traders started to take profits as the market tested the 2009 high. The overnight low of 944.75 at first acted as support, but has since failed as support after the close of the European Markets.

PreMarket Review 07/21/09

Not sure how much longer this uptrend will last. PreMarket Earning Reports have propelled the market to higher highs. We will have more reports after the bell, which will include Apple.
Bernanke starts talking at 1000 ET. The 10-Year Yield took a little dip yesterday. Sooner or later traders will be taking short term profits, and wait for the market to dip to more bargain levels before going long again.

Monday, July 20, 2009

Afternoon Session Review 07/20/09

Market is still in an uptrend mode.

Morning Session 07/20/09

Interestingly as the ES Futures was testing the overnight high, the VIX was climbing into more bearish territory relative to Friday's action. The ES market then quickly turned down below the 0930 ET open following the Leading Indicators report at 1000 ET. The open price then became resistance. We some support at 937 going into the European Market close.