Friday, November 12, 2004
Issue Contents:
| 08:55 | The Day Ahead Economic releases and news. |
| 09:26 | Swing Trade Setups Featured charts for Friday November 12th. |
| 09:47 | Market Direction Up, down or sideways... |
| 12:53 | Currency Update Hey buddy, spare a buck? |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 17:48 | Swing Scanner Results Friday November 12th closing data. |
| 17:53 | Market Statistics For Friday November 12th. |
Good morning, on this the 317th day of 2004. This morning’s October retail sales report either came in somewhat as expected1 or was a surprise2, depending on who wrote the headline. What the number, aside from the automobile sector, says is that hopes and expectations for the Christmas season are now rising. The ol’ dependable consumer is back, or so the market hopes.
We’ll get another peek at the psyche of the consumer at 9:45 with the Consumer Sentiment index – as this is the first read post-election, this may or may not confirm the building confidence in the retail sector.
Despite this apparent bad news, and in spite of all the jaw boning from foreign policy makers trying to weaken their currencies, the US Dollar just can’t seem to maintain a lift. Gold names have been focussed in the newletter repeatedly as of late; today we’ll be watching retail, but also whether the dollar resumes the down trend and supports our gold positions.
US Market Calendar
- 8:30 am: Business Inventories
- 8:30 am: Retail Sales
- 9:45 am: Consumer Sentiment
- 2:00 pm: FOMC Minutes
Canadian Market Calendar
- No releases.
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.
1 Retail Sales Up Slightly as Expected
Featured setups from Thursday November 11 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Entry and Exit Strategies
Note: This section repeated for the benefit of new subscribers. I’ll also be putting up some new documents in the Knowledge Base over the next week dealing with stop handling.
Entries: Each chart posted includes the TrendVue High/Low indicator in the chart legend, showing the high and low of the prior day. We refer to these values frequently for setting stops, alerts and initial protective stops.
Our trade entry methodology stresses that price should prove to us where it wants to go, consequently all of our setups involve placing entry stop/stop limit orders where a trade will be initiated for us automatically, if price is able to move in the expected direction.
When price does not comply, we evaluate the setup to determine if it is either a) an expanding pattern or b) an invalidated setup. For example, a 3 bar bull flag setup that does not trigger can be followed up the next day with a buy stop above the new 4th bar, provided that price doesn’t invalidate the bull flag pattern.
Exits: Once in a trade, we must place an initial protective stop as soon as possible. Consider this stop your crash stop – an emergency measure which you hope will never get used, but is there for your protection in case you lose all connectivity to your broker or some other unforseen event takes place. The initial protective stop, unless noted otherwise, is always at the opposite end of the bar used to trigger a trade.
For example, if our trade setup for a long trade is based upon a break of yesterday’s high, we will use yesterday’s low as our initial protective stop.
The next task for us, once in a trade, is to find the earliest reasonable opportunity to move stops up. Trade and risk management is a highly personal topic; we can only relate to what works for us. In general, once a trade is substantially profitable, or has started to trend on a 10 or 20 minute chart intraday, I move to a break-even stop immediately.
Once the trade has surivied its first day, we are already on watch to look for our profit exit. Here your personal objectives come into play. A longer-term investor using swing trading techniques to improve entry and exit will tend to give a trade some room. Our recommendation is to use the break even stop until the stock starts to trend (higher highs, higher lows or the reverse in a down trend).
Short term swing traders will tend to use price extension estimates and pre-place exit orders at these estimates. This discussion goes beyond the scope of our daily swing trade service, however we are happy to entertain questions in TrendVue Trader Talk on any subject.
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
Retail – many names have already been moving up, so excercise some caution with the few laggards here:
TGT
TJX
WMT – use the two day high as the buy alert / stop.
DLTR has showed up in our stock list lately – yesterday’s big down bar and intraday reversal may provide a good opportunity here for a long just above Thursday’s high at 29.40 stop. Use tighter stops than usual and demand that it push up and clear of the two day high and hold only if it remains up.
Gold – we’ll look at all the golds in Trader Talk today.
K:C see also KGC next
KGC NYSE brother to K:C
Test of Top – Continuation
GNW may continue directly here – buy stop 26.41 initial stop if filled 25.78 but I’d bail unless it acts strong from the get go. Keep on a watch list for 2 more days as it pulls back if it does not trigger today.
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.
Test of Bottom – Continuation
INTU is not acting very strongly at all. This may be a 3 inside up (bullish setup) however given the spot its in, its worth stalking on the short side as well.
Special Situations
SMH – semiconductor ETF – this is a tricky potential “3 inside up” scenario here – put a buy alert at 32.59 and buy after it breaks the two day high and then after the first retracement as price moves back up. An argument can be made to speculate on a short here as well but we’ll talk about that in Trader Talk if the market acts weak today. See the next chart for an example.
ADI – bounce to underside of wedge. Sell short alert 38.76
Which way do you think the market is heading, based on this chart?
Of course the market direction is “up” – in the big picture its rather obvious:
That doesn’t mean that long-side investors are safe from risk here. As we can see in the nightly TrendVue Market Statistics, roughly 1 of 3 stocks are still in down swings, even after all this up movement in the indexes as of late. Its a “stock pickers” market they say – well this may be true, but frankly the fundamental economic backdrop hasn’t really improved all that much, and we aren’t hearing of widespread company over-achievement and rising forward guidance, so its probably good to have a dose of caution. And perhaps put some money in index-following ETF’s whenever the next pull back comes around, to help remove some of the pressure on you to pick those 2 of 3 which are moving up.
Nasdaq yesterday pushed to its summer high – there will be some gnashing of teeth in technology if Nasdaq can’t also “break out” of this area to new highs like the broader S&P and Russell indexes have of late.
In the early morning going, price is pulling back a bit – this isn’t unusual given the very healthy move up of late. The first level of support where the decision between minor pull back vs larger pull back is made is near the 1170 level.
But still, the overall direction is up – until proven otherwise by a dramatic sell off or a retest of a key area that fails.
Pressure on the US dollar continues apace today, despite all verbal attempts to slow its decline. In particular some foreign currencies are appreciating against the
US Dollar Index – hovering just above the lows of 2004.
Detail: Lets look beyond the usual few and check out Asia more broadly today.
USDCAD – ditto – these are also 12 year lows.
EURUSD – trading above what had been its historic high from earlier this year with a strong move up against the USD.
GBPUSD – pushes above the trendline. As mentioned earlier this week, this type of chart pattern – an initial poke through an obvious trendline – lends itself well to lurking above the down bars as price pulls back into the range just below the trendline. GBPUSD traders are long and profitable that pair as of this morning.
In particular the Asian currencies continue to appreciate strongly against the USD.
Failed at obvious resistance—jawboning doesn’t appear to be saving the USDJPY pair even as Japanese policy makers worry out loud and threaten action over concerns about the impact to exports due to the weak dollar against their currency. The recent big moves are indicative of the stakes and emotion built up here.
Singapore – USDSGD
Korea
USDTHB – Thailand
USDTHB seen with more perspective here on the weekly chart. If the USD completely breaks down across world currencies in the coming days here’s a pair that offers some potential for a quick move to retest the 2004 lows.
Summary: intervention by one or more national bank is going to have to happen soon or emotion and technical trade will do its thing and deliver self-fulfilling prophecies – a much cheaper dollar in the weeks to come.
Is this a problem? Depends the medium term future outlook. Foreign investors in the US might get spooked, or may feel that the weak dollar is a buying opportunity to pick up new positions in debt and equity markets.
Today's transcript.
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Friday November 12th closing data.
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Statistics for Friday November 12
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 591 |
|---|---|
| Symbols in Down Swings | 183 |
| Up/Down Swing Ratio | 3.22 : 1 |
| Advancers | 75% |
| Decliners | 23% |
| Unchanged | 2% |
| Close > 20EMA | 75% |
| Close > 50SMA | 84% |
| Close > 200SMA | 65% |
| 20EMA > 50SMA > 200SMA (trend up) | 43% |
| 20EMA < 50SMA < 200SMA (trend down) | 12% |
Today saw an expansion in the TrendVue Swing Ratio capping off a good week over all, with major indexes moving up, technology moving up, small and big caps moving up, small cap indexes reaching new all time highs (we shall soon talk about index re-jigging that makes this magic possible), and even the dreaded yellow metal pushing higher and gold stocks along with it.
Nothing to complain about… or is there? That we shall discuss in more detail before Monday’s open, but, for now, I bid everyone a happy and safe weekend!