Thursday, October 7, 2004
Issue Contents:
| 09:08 | The Day Ahead Economic releases and news. |
| 09:27 | Swing Trade Setups Featured charts and carry forwards for Thursday October 7 |
| 13:25 | Intraday Update Comments on broad indexes, Gold, and you guessed it, Oil. |
| 13:37 | Relative Strengh A comparison of three industry leaders. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 17:32 | Swing Scanner Results Thursday October 7 closing data. |
| 17:34 | Market Statistics TrendVue Swing Ratio for Thursday October 7th. |
Good morning on this the 281st day of 2004.
A busy economic calendar, reminds me somewhat of the quote “Full of sound and fury, signifying nothing”. It does seem like Federal Reserve governors are out in force today—there must be a quarterly quota system for performing speaking engagements. Comments by Chairman Greenspan later in the day might perhaps move markets, but by and large US markets are waiting for Friday’s big employment report which comes out at 8:30 am before the market opens—a good day to be up early perhaps.
Oil pushed to new highs in Access trading overnight, currently up almost one percent at 52.49.
Clearly, the CL contract is the chart of the day! A simple price extension suggests a potential near term target of $55/bbl.
Consider that most oil industry analysts are using average prices per barrel of anywhere between 25 and 35 dollars a barrel and it becomes easy to see why that sector continues to do well.
Thanks to a 28% increase in Natural Gas, heating our homes, water and running our barbeques and gas ranges is getting more expensive too.
US Market Calendar
- 6:00 am: Monster Employment Index
- 7:00 am: Bank of England Rate Announcement
- 7:45 am: ECB Announcement
- 8:00 am (ET): Cleveland Federal Reserve Bank President Sandra Pianalto speaks to the Cincinnati USA Partnership, in Cincinnati, Ohio.
- 8:30 am: Jobless Claims
- 9:30 am (ET): Federal Reserve Vice Chairman Roger Ferguson speaks at the Cato Institute, in Washington.
- 11:00 am: 3, 6-Month Bill Announcement
- 11:00 am: Chain Store Sales
- 1:00 pm: 10-Year TIPS Auction
- 1:00 pm (ET): Federal Reserve Governor Ben Bernanke speaks on central banks and monetary policy to the Japan Society, in New York.
- 2:30 pm (ET): Federal Reserve Chairman Alan Greenspan speaks at the St. Louis Fed’s “Reflections on Monetary Policy” conference in St. Louis, Missouri.
- 3:00 pm: Consumer Credit
- 4:30 pm: Money Supply
- 4:30 pm (ET): Dallas Federal Reserve Bank President Robert McTeer speaks about the U.S. economy at a Market News International event, in New York .
Canadian Market Calendar
- None scheduled
Earnings and the Federal Reserve
For earnings highlights, please see today's WSJ Earnings Calendar.
For a list of upcoming speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website. Recently released Federal Reserve Board material, including market moving FOMC decisions and speeches by members, will be found on their What's New page.
Featured setups from “Wednesday October 6 closing data symbol scan”:
http://www.trendvue.com/doc/8555
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Today’s list is going to be much shorter than yesterdays! We’ll use as a working base yesterdays list – any stock from the list of long retracements which made minor down bars Wednesday is still perfectly valid as a long trade for today – buy stop or alert to be set just above yesterday’s high.
Note that many of these may simply draw another bar in the bull flag today and move down a little more. This is one of the big benefits of our “wait until price proves itself” approach – we don’t buy blindly.
Long candidates remaining from yesterday’s list (all the rest triggered and most did well):
ACLS
AMAT
CNET
NT
NT:C (TSX)
SSTI
NVDA
Short candidates remaining from yesterday’s list:
ERES
Additional charts for our consideration today follow. Please also tune into TrendVue Trader Talk as I’ll be reviewing additional charts from the “X2” scan results over the first hour.
Long Setups
General common strategy: Unless noted otherwise, buy stop just above the “high” value, with an initial protective stop at the low value of the bar, not below the bar.
Retracement or Pause in Up Swing / Up Trend
MOT has been trending nicely, has rising ADX, and offers a small bull flag. My only caution here is that MOT has been trending so nicely – after a number of pushes upward – often 3 – its not unusual for even a healthy stock to make a more extended pause / retracement. Protective stops and our approach help us manage that risk.
Test of Top – Continuation
KLAC another semiconductor sector stock. The volume pattern is not quite classic here – normally a buyable retracement will have declining volume, but I’ve found that it pays not to be too dogmatic about these things.
Short Setups
General common strategy: Unless noted otherwise, place a sell alert at or just below the low of the setup bar, and look for the first failed intraday bounce after the low has been broken. What we are looking for is price to push down, bounce a little, and fail again – this is where we want to get short.
Retracement or Pause in Down Swing / Down Trend
HCA offers a classic stealth bear flag just above a test of bottom. Sell short alert at 37.80.
Special Situations
BBD.B:C (TSX) Bombardier is trading within a triangle—most often I will pass on trade setups that are stuck within such consolidation zones, but a small bull flag just inside the triangle gives us a spot to lurk just above and catch a potential move up and out of the triangle. What many traders do is put buy stops just above the triangle trendline, and get trapped long in doing so, only to be shocked that price settles back. Since we can use the flag to jump the gun more safely, its worth the attempt. The fact that BBD.B is usually one of the top 5 traders in Canada doesn’t hurt either.
Sometimes a picture tells the story better than any words:
There simply is not much to say about the broad markets while price is stuck in such a tight multi-day range, other than to point out the obvious. One cautionary note is self-evident – the “breakout” players of the other day are feeling some pain and worry. In the meantime we’ll keep an eye on the unfolding consolidation.
Crude continues to hold its recent gains, and interestingly Gold is also just a step below overhead resistance – a small pushing higher could spark this group. Over the past few days we’ve had a number of long-side trades trigger in Gold stocks.
Reminder: a very important economic release is due out at 8:30 am ET Friday – the employment conditions report including any, and often significant, revisions to prior numbers.
Yesterday the relative strength in Lucent (LU) struck me – looking back over the recent past its clear that LU has been trading in parallel to Nortel (NT) and Cisco (CSCO), until now.
LU and NT are a closer comparison and there the outperformance is more dramatic. Sometimes an observation as simple as this can guide our stock selection for the future – I’ll be looking for pauses or retracements in LU going forward for a possible longer term position—LU at least does not have the overhang of multi-year restatement of earnings that NT still faces.
Nortel will one day offer a longer term entry point but given the uncertainty which still dogs it, I will tend to trade NT very opportunistically and for short periods of time—mere days or hours.
Today's transcript.
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Thursday October 7 closing data.
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Statistics for Thursday October 7
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 456 |
|---|---|
| Symbols in Down Swings | 323 |
| Up/Down Swing Ratio | 1.41 : 1 |
| Advancers | 17% |
| Decliners | 82% |
| Unchanged | 1% |
| Close > 20EMA | 17% |
| Close > 50SMA | 73% |
| Close > 200SMA | 51% |
| 20EMA > 50SMA > 200SMA (trend up) | 35% |
| 20EMA < 50SMA < 200SMA (trend down) | 16% |
We’ve seen the market retrace over the past few days since noting earlier this week the extremes reached in the TrendVue Swing Ratio - showing reaching an extreme in advancers – we were prepared for that.
Here’s the current picture – most stocks are trading above their 50 day moving average, and are flip-flopping on either side of the 20 day moving average. This tells us we have the biggest chunk of the market moving in unison, and, the bias still is to the upside.
Its now crunch time. Tomorrow’s jobs report, good or bad, is really unimportant, but its highly likely to be used as a catalyst to get price going again. What is important is how emotion reaches out by the end of the day.
Given the medium term bias remains up, it makes sense to locate long-side setups and be ready. If markets react negatively tomorrow, rather than getting short in a big way my preference will be to move stops tighter on existing long positions, take some profits where it makes sense, and perhaps deploy a short off of index futures or QQQ / SPY / DIA ETFs.