Friday, October 10, 2003
Issue Contents:
| 08:27 | Taking Out Insurance The Bank of Japan voted to lower interest rates. |
| 08:28 | Strategy for Today This is what we will be watching for today in terms of price action. |
| 08:35 | [YHOO, Weekly] Yahoo! Let's step back and take a look at the big picture. |
| 08:45 | Chart Roundup: INTC, SONS, AMZN, EBAY, ERTS Here is a look at a number of charts of the stocks that are on our watch list. |
| 09:00 | Chart Roundup: SNDK, RIMM Here is a look at a number of charts of the stocks that are on our watch list. |
| 09:04 | [Intermarket, Weekly] Dollar, Gold, Rates It's been a while since we've visited the big picture. |
| 09:14 | Thankyou! Feedback... |
| 09:20 | Bond Market Roundup: USZ3, TYZ3, FVZ3 Here's a look at the weekly charts of Treasury bonds and notes. |
| 09:25 | [@SM, Daily] Soybean Meal Futures Yes, and then there are pork bellies too... |
| 09:27 | [@LC, Multiple TF] Live Cattle Futures Mad Canadian cows have been a great boon for their U.S. cousins. |
| 10:03 | [@PL, Weekly] Platinum Futures What about this shiny metal? |
| 10:04 | [@CD, Weekly] Canadian Dollar While the Dollar tests it's low, the Canuck Buck tests it's high. |
| 10:14 | [$VIX, Daily] Market Internals Let's take a look at the market internals for the S&P 500. |
| 10:22 | [$VXN, Daily] Market Internals Let's take a look at the NASDAQ internals. |
| 11:52 | +0.3% Wholesale Prices Rise It's always ex-food and energy. Always. |
| 16:16 | 2003-10-10 Transcript for Real Time Trading Group Real time forum discussion transcript: 2003-10-10 Transcript for Real Time Trading Group |
In what must be the ultimate "psychological" move, WSJ reports:
The Bank of Japan voted to slightly ease monetary policy in a move aimed at maintaining the economy's recovery. The move surprised investors and pushed Tokyo stocks sharply higher.
Maybe it's a move to help the yen go down a little, but with rates effectively at zero, it's not going to change much.
We've already gone over the fact that for most indices and a number of volume leaders, Thursday action amounted to indecision on a test of top on the daily charts.
We can see a number of long legged dojis, shooting starts and gap up reversals. What got our attention is the euphoria going into the day and the price action that we saw by the end of the day.
IF this was indeed a real "key reversal" day, THEN we will want to see follow through to the downside, in the form of a thrust, preferable back down under the September swing highs for most of the symbols that are on our watch list.
YHOO WEEKLY: You'll see this theme over and over. It's the fact that weekly charts are now registering extreme ADX readings for their respective symbols and timeframes, while reaching some form of significant long-term resistance. In English, it's jammed up a long, long way since the bottom. With glowing good news (it was actually the sixth consecutive quarter of growth at YHOO) we may be getting close to a top on WEEKLY charts.
YHOO WEEKLY: Squeeze the bars together, and we can confirm that the ADX reading is indeed at an extreme zone for this symbol and timeframe. It's "do or die" now, at resistance. For all we know, this will be a neckline, and there's a big "cup" here, but needs a significant pullback to form the handle. 200-day moving average is in the $27 area, so theoretically, it can go back a long way and it will still be a "handle".
Chart Roundup: INTC, SONS, AMZN, EBAY, ERTS
INTC Daily: Long-legged doji on a blast of volume. We know that there is supreme indecision here, and will need to see price come back under the September high to confirm that there has been a reversal.
SONS Daily: Big blast of volume on a gap up ended on a reversal. This is the bearish belthold pattern, what we call the "one finger salute". Watch the $8.80ish area to see if it will hold. This one is cheapie, so it might have more resiliance, as traders move from the expensive to the not-so-expensive. It's a case of "the rising tide lifts all boats".
AMZN Daily: Exhaustion gap?
AMZN Weekly: Another case of ADX reading an extreme zone for this symbol and timeframe.
EBAY Daily: Spike. Exhaustion gap?
EBAY Weekly: Upside target projected by pennant has been achieved.
ERTS Daily: Doji at the top of a price channel, one of the hit and run shorts that can still be done on a swing trade basis, but the ADX is not extreme for this symbol and timeframe. Possibilities intraday. Note that a nice big round number of $100 was hit. September 24 high is the first downside target.
ERTS Weekly: ADX is extreme for this symbol and timeframe. Beware of "sudden death" reversal, particularly at a big psychological number such as $100.
SNDK Daily: Just like ERTS. A quick hit and run swing trade on the short side. May wish to play it intraday, if Thursday's low is broken.
SNDK Weekly: Extreme ADX reading for this symbol and timeframe. Like AMZN, you can see that it's bounced the 50% mark.
RIMM Daily: We got the reversal day, coming close to the first downside target set up on the swing trade. What we need to see is confirmation that the reversal is indeed real, with a follow-through day to the downside. Given that it's a long weekend with light trading expected on Monday, if there is a thrust down we may exit the trade.
RIMM Weekly: Another case of extreme ADX reading for this symbol and timeframe.
[Intermarket, Weekly] Dollar, Gold, Rates
DOLLAR Weekly: Remember the screaming a couple of weeks ago? Well, it's hit the downside target and is now in the test of bottom formation. The mechanics is the exact reverse of the test of top. In fact, this is the Trader Vic 2B setup, and you'd think that if the Dollar is going to open up a new leg down, it probably won't be when there is universal negative sentiment.
GOLD Weekly: On of the more interesting factoids is that the yellow metal failed to go higher on Dollar weakness. It got the upside target set up by the big pennant, but nothing more. We'll now be watching this $365 area carefully to see if it offer support.
30-YEAR YIELD Weekly: Where you can see something percolating is the fact that rates are creeping up again. This looks almost like a stealth bull flag? Maybe the Dollar will be saved by ... higher interest rates?
Received in the email bag this morning:
I recently subscribed at a Bottom Line Analysis level. I very much appreciate the analysis you present each day. Your posts are very practical and helpful. They have helped me to avoid some of the mistakes I've too often made.
Well, thank you too, because it is good get feedback and to know that what we are doing is useful. If there is anything you would like to see, remember that we are always here at support@trendvue.com. And yes, I read every email message.
Bond Market Roundup: USZ3, TYZ3, FVZ3
USZ3 Weekly: The little bounce has lost it's putter, and we return to take a look at the evolving head and shoulders pattern on the weekly chart. Remember that our theory is that this is a top of *secular* significance, and therefore, to see a huge reversal pattern set up here would not be a surprise. What would be a surprise to the market would be that it goes down through the neckline from here after making only a tiny "thalidomide" right shoulder. We often see this after a big spike top.
TYZ3 Weekly: Same setup as Treasury bonds.
FVZ3 Weekly: Same setup as Treasury Bonds.
[@SM, Daily] Soybean Meal Futures
SOYBEAN MEAL Daily: An important test of top, 20-day high setup. ADX at an extreme for this symbol and timeframe. TONS of volume over the past few sessions.
[@LC, Multiple TF] Live Cattle Futures
LIVE CATTLE Weekly: The measured move off the triangle produces an upside target of 92.25. This is as close as we can get. Who knew that there's so much "beef" in LC?
LIVE CATTLE Daily: Big one finger salute candlestick at the upside target. It makes you wonder why economists always use "ex-food and energy" values for inflation, eh?
[@PL, Weekly] Platinum Futures
PLATINUM Weekly: Must watch it carefully here, in case this is a fake breakout at the top of a rising wedge. Need to see thrust up from here.
CANADIAN DOLLAR Weekly: We have here what we call an "ADX divergence" on a test of top. The first time it reached 75 cents this year, the ADX went over 50, and this was an extreme reading for this symbol and timeframe. Now on the test, we have a lower ADX readings. We've seen many reversals take place off this setup.
[$VIX, Daily] Market Internals
NYSE INTERNALS Daily: OK, on the price, we have a test of top. On the $VIX, we see that it's pushed to a new low as the 5-day RSI goes under the 30 line. A sell signal would be set up if the price of $VIX reverses on the daily, while the 5-period RSI hooks up above the 30 line. Tentatively then, we have a "warning sign". IF this is a real breakout, THEN it needs to blast here, and push that RSI down more to avoid the uphook.
[$VXN, Daily] Market Internals
NASDAQ INTERNALS Daily: Pretty much the same as the $VIX, but there was no new low on the $VXN. I think we should consider a warning sign too, or a short-term top. The bottom line is that the onus is now on the buyers to show us that there is support at the September highs. When we look at the charts of a lot of the NASDAQ 100 stocks, red flags are raised because many are already broken from a few weeks ago, plus there are a number of them that look like they've reached some sort of spike top.
No sooner said than done. After we poked fun at economists and toyed with the Live Cattle chart, we read that:
Wholesale prices rose 0.3% in September, but were unchanged excluding the volatile food and energy categories, suggesting that pricing power remains weak. The trade gap narrowed to $39.21 billion in August.
You know, gas prices have been going higher and higher for years, and now that we can use the model developed in the late 1970's by Professor Granger "to analyze the relationship between two statistics that had both a long-term trend and an element of randomness". If Myron Scholes did it for options, we really ought to get on with it and stop using "ex-food and energy" numbers.
But then again, the government and pension funds would have to pay out more. Ah, there's always a good reason for fudging numbers.
2003-10-10 Transcript for Real Time Trading Group
Real time forum discussion transcript: 2003-10-10 Transcript for Real Time Trading Group
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