Tuesday, November 16, 2004
Issue Contents:
| 08:59 | The Day Ahead Economic releases and news. |
| 09:23 | Treasury International Capital Inflows report |
| 09:27 | Swing Trade Setups Featured charts for Tuesday November 16th. |
| 14:14 | Quick Take: Currencies and Gold Follow up to the Gold Focus note. |
| 14:43 | Sector Focus: Contract Manufacturing Electronic equipment manufacturing. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 20:17 | Swing Scanner Results Tuesday November 16th closing data. |
| 20:20 | Daily Market Statistics For Tuesday November 16th. |
| 20:31 | After the Bell Wrap up comments on indexes. |
Good morning, on this the 321st day of 2004.
This morning we learn that wholesale prices posted their biggest gain in nearly 15 years, confirming what most have long assumed – energy prices are having a significant impact. Even stripping out the “volatile” (how can a doubling of price that has held up over a year be considered “volatile” – I call that a new “baseline”) energy prices, as the Federal Reserve is known to do, producer prices came in with a 0.3% gain in October, triple what was expected.
Also this morning, the US dollar is weakening against a number of currencies (off 0.63% against CAD, 0.25% against EUR, 0.43% against GBP) in advance of the Treasury International Capital Flows (TIC) report at 9:00 am | 14:00 GMT. Recent TIC reports have shown a potentially troubling down trend which is exactly counter to what is needed to fund near record current account deficits.
US Market Calendar
- 7:45 am: ICSC-UBS Weekly Chain Store Sales Snapshot for the week ended Nov. 13
- 8:30 am: Producer Price Index
- 8:55 am: Johnson Redbook Retail Sales Index for the week ended Nov. 13
- 9:00 am: Treasury International Capital Flows
Canadian Market Calendar
- No scheduled 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.
Treasury International Capital
“TIC” data shows an increase in foreign capital after a particularly low last number – saved, for now at least:
US net capital inflows 63.4 billion in September, after an upwardly revised $59.9 billion in August, the Treasury’s International Capital report said. More >
The USD is holding a little firmer here near 83.97, rising even a little against JPY this morning; Despite the report, Gold climbed a little on the news.
tFeatured setups from Monday November 15 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
A pull back seems likely—please note that this is a time to exit or take partial profits on longs; a pause / pull back in a long up swing isn’t always an invitation to short with abandon.
Entry and Exit Strategies
Repeated for new clients.
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
EMC pauses – could be a running triangle, a particularly bullish pattern. Follow up on this for 2 more days if it doesn’t trigger.
N
ECA:C – single down bar at a test of top. Buy alert
ABX – Gold may just break out here which would make this rising wedge / dark cloud cover just the last spot to enter. Put an alert at Monday’s high.
Test of Top – Continuation
IBB – Nasdaq Biotech ETF – bull flag starting to form here near a recent important high. Keep this on your list for 2 more days if it doesn’t trigger today.
Short Setups
- None for today – lets see where price moves this morning first – please check in Trader Talk during the first hour.
Special Situations
UNM – long – this is a “piercing line” candle formation, which is found more often at important swing lows. Since its a big range candle you need tighter, intraday-placed, stops based on % risk or intraday formations. Buy stop / alert 14.08. Intraday traders only.
Quick Take: Currencies and Gold
GBPUSD – ever tightening triangle.
USDCAD continues to hover in the ledge just above the recent lows.
EURUSD has confirmed recent support until proven otherwise.
USDJPY dangerously close to extending losses here. Due to the more likely potential for intervention in this currency, its the first I eyeball each day.
US Dollar Index – still stalled after breaking through the bear flag last week.
Gold, The Conundrum
Gold is moving up ahead of the US Dollar now. Whether this is confirmation of a new launch upwards, or the begining of the end, we won’t know until a few more bars appear on this daily chart, but I take this as a caution, but regardless, I have been using pauses to add to a gold position started last month, as Gold has so far confirmed support at the old resistance line dating back from earlier this year.
Sector Focus: Contract Manufacturing
Lets first start off with a percent change comparison chart, dating from the August lows.
Earlier this year I noted the group as Forbes and a number of brokers were really pounding the table for Celestica, when to my eye, it was set up for underperformance. Price charts win this time.
FLEX – break out above support – swing traders should look to exploit any weakness here with buy stops above single down bars or minor “bull flags” (2 – 4 bars that retrace to or near the support marked out). Clearly the leader – one sector strategy I employ is to overweight with a leader but also pick an underperformer from the group that offers an attractive percentage change short term target. If the entire group moves, usually one, sometimes both, will deliver outsized results.
This strategy is better than putting all eggs in one basket, particularly since many traders / investors are drawn to stocks that have not performed as well, it avoids being stuck with only the dog should it not move.
JBL offers a so-far minor pull back just under support. Perhaps it can pull off a move such as FLEX. If stopped into a long trade demand that price push up and hold above resistance.
SLR, not dissimilar to JBL although offering greater percentage-change potential if a retest of the summer highs can be engineered.
As noted on the percentage comparison chart, CLS is a laggard in the group. Short term support is available at the recent swing low – first target marked out above. CLS may have currency exposure here factoring into its price.
Today's transcript.
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Tuesday November 16th closing data.
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Statistics for Tuesday November 16
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 487 |
|---|---|
| Symbols in Down Swings | 285 |
| Up/Down Swing Ratio | 1.70 : 1 |
| Advancers | 25% |
| Decliners | 73% |
| Unchanged | 2% |
| Close > 20EMA | 25% |
| Close > 50SMA | 82% |
| Close > 200SMA | 64% |
| 20EMA > 50SMA > 200SMA (trend up) | 43% |
| 20EMA < 50SMA < 200SMA (trend down) | 10% |
Across the board the major market indexes left “evening star” candlestick patterns in their wake. This three-day pattern suggests market has reached at least an intermediate term top.
Of course, in a strong market, an intermediate “top” might result in a pull back lasting only a day (check, that was today) or so. As we can see, each of the markets has support resting within a day or two’s average range away.
As for long-side trade opportunities, these are starting to become more numerous. I’ll first be perusing the list of stocks with down bars while still in up-swings (the green highlighted stocks in today’s symbol scan output | a text list of these “outliers” can be found at http://www.trendvue.com/latestscan).