Thursday, December 9, 2004
Issue Contents:
| 09:10 | The Day Ahead Economic releases and news. |
| 09:24 | Swing Trade Setups Featured charts for Thursday December 9th. |
| 12:52 | EIA Annual Energy Outlook EIA releases first cut for its 2005 outlook. |
| 13:29 | Intraday Update 19.75 points of profit later... Short, long, and then? |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 16:50 | Swing Scanner Results Thursday December 9th closing data. |
| 16:52 | Market Statistics For Thursday December 9th |
Good morning, on this the 344th day of 2004.
Pre-open stock index futures are substantially lower than yesterday’s close, setting up the potential for a gap down open that will likely setup a retest of yesterday’s low. This does not imply the retest will fail, but given the market internals as of late, that is at least a higher than 50% probability.
Among the concerns on trader’s minds are rising import costs1, rising jobless claims2, warnings from two chip makers, and nervousness ahead of tomorrow’s OPEC meeting3. Also on the energy front, the US Energy Information Administration is to release a long term outlook statement this morning in Washington at 9:30.
US Market Calendar
- 7:00 am: Bank of England Announcement
- 8:30 am: Import and Export Prices
- 8:30 am: Jobless Claims
- 9:30 am: Energy Information Administration releases long-term energy outlook
- 10:00 am: Wholesale Trade
Canadian Market Calendar
- 8:30 am: New Housing Price Index – October
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 Import Prices Up, Non-Petrol Prices Surge
2 Jobless Claims Rise Unexpectedly
3 OPEC Warns Oil Supply Cuts Needed for ‘05
Featured setups from Wednesday December 8 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Given a retest of the major index lows is likely this morning, near the open, be very careful on the long side until or unless the test passes. At the same time we need to be just as careful of new shorts. Pass / fail, a nice binary outcome hopefully this morning.
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 – so far a simple pull back in a strong trend, although ADX is getting stretched so caution / consider taking quick profits.
Test of Top – Continuation
CSCO -narrow pull back near range top – given markets are testing the week’s low here, a number of these test of top or test of top of range patterns could fail easily here as well or pass if the market as a whole passes, therefore these are both long and short candidates. Long just above yesterday’s high; short the two day low.
SUNW – deeper more complex pull back but given there was a nice bullish reversal the other day, perhaps an easier long.
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
AIRT – this is a 3 inside up long setup, but it has such a weak chart, I think stalking it as a short for today and the next few days makes more sense.
Special Situations
ETFs
DIA – either way.
SPY – either way, rising wedge.
IWM – technically a 3 inside up scenario, but if the two day low fails, we can expect a deeper retracement. Note how stretched ADX is.
Others
C – banking – long or short, however if the short trade triggers at the base of the two-day low, the first major target is the base of the rising wedge.
The EIA (Energy Information Administration) today released its first-cut of its annual energy outlook for 2005. Link to site >
The Energy Information Administration (EIA), in preparing model forecasts for its Annual Energy Outlook 2005 (AEO2005), evaluated a wide range of current trends and issues that could have major implications for U.S. energy markets over the 20-year forecast period, from 2005 to 2025. Trends in energy supply and demand are linked with such unpredictable factors as the performance of the U.S. economy overall, advances in technologies related to energy production and consumption, annual changes in weather patterns, and future public policy decisions [see endnote 1 on page 8]. Among the most important issues identified as having the potential to affect the complex behavior of the domestic energy economy, oil prices and natural gas supply were considered to be of particular significance in increasing the uncertainty associated with the AEO2005 reference case projections.
World crude oil prices—defined by the U.S. average refiner’s acquisition cost of imported crude oil (IRAC)—reached a recent low of 20 and just over 46 per barrel in October 2004.
Strong growth in the demand for oil worldwide, particularly in China and other developing countries, is generally cited as the driving force behind the sharp price increases seen over the past 3 years. Other factors contributing to the upward trend include a tight supply situation that has shown only limited response to higher prices; changing views on the economics of oil production; concerns about economic and political situations in the Middle East, Venezuela, Nigeria, and the former Soviet Union; and recent supply disruptions caused by weather events (Hurricane Ivan). The future path of prices is a key uncertainty facing world oil markets.
I always find the time to read through these reports in their entirety. Its on my to-do list.
This morning I covered my ES short from Friday, December contract, for 19.75 points total profit; also covered recent NQ and YM shorts. We’ve been stalking long opportunities since the 2B test of bottom earlier in the day and have nabbed a goodly profit out of the push higher.
The big question here is whether the market will push back into the overhead range. This is a critical juncture. If it does, and holds, then the long game will be on again, and there will be a ton of stocks with buy setups tomorrow; even still, until we see price start to trend with higher swing highs and higher swing lows, we will not rest easily in new long positions.
It goes without saying that you can’t have a higher swing low until a retracement of some sort comes in, and giiven the location of price here, that is likely nearby. Swing traders and market timers wishing to establish new positions that missed the DIA entry on the test of bottom posted in TrendVue Trader Talk earlier:
11:05:22 Mike: DIA swing traders could look to start a new long if INDU can push up here
11:05:50 Mike: And move to a break even stop ASAP off the smallest time frame that allows one to do so under 1 set of higher highs and higher lows.
… now need to look for an intraday retracement off a time frame such as the 10 or 20 minute chart, and buy as price pushes up above that retracement. Tight stops please in the early going.
Today's transcript.
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Thursday December 9th closing data.
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Statistics for Thursday December 9
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 229 |
|---|---|
| Symbols in Down Swings | 540 |
| Up/Down Swing Ratio | 0.42 : 1 |
| Advancers | 59% |
| Decliners | 40% |
| Unchanged | 2% |
| Close > 20EMA | 58% |
| Close > 50SMA | 76% |
| Close > 200SMA | 67% |
| 20EMA > 50SMA > 200SMA (trend up) | 45% |
| 20EMA < 50SMA < 200SMA (trend down) | 12% |
As expected, there are a lot of “hammers” in our scan results list for today (for Strategies for Success subscribers only, this link always points to the most recent text format results list). More analysis to come later, but at this point it seems as if we have played the last few days exactly right.
On to the next trade(s)...