Wednesday, February 11, 2004
Issue Contents:
| 09:00 | Daiily Swing Trade Today's stock picks. |
| 09:46 | Good Morning The day ahead. |
| 09:56 | Market Internals New high/low panel. |
| 13:14 | Subscriber Mailbag Tools of the trade. |
| 15:59 | Economic Data Summary of key releases. |
| 16:00 | A Better Browser Mozilla Firefox. |
| 16:05 | Subscriber Bonus Real-time transcript. |
| 16:16 | Active Trader Transcript Real time forum log. |
| 16:48 | The Greenie Effect Patience, my dear. |
| 16:58 | Broad Market Indices $INDU, $SPX and $NDX. |
Let's update Tuesday's picks.
BIIB/Biogen - Stopped out. As discussed, we wanted to see this thrust up on volume as it approched the "breakout" point. Instead, we saw selling come in. For risk and money management purposes, traders should be out, in case it starts to head back down toward the 42 area. No matter how we slice it, it is a big pattern and even if it's not dead, there is no need to hold on forever. Traders who want to take another "stab" at it, in case yesterday was simply a small back and fill day, can enter a buy alarm on break of Tuesday's high, and in order to hold the trade overnight, BIIB has got to close above Monday's high. Initial stop loss should be just above Tuesday's low.
CPWR/Compuware - Note after Monday's inside day where it hesitated at a prior swing high/resistance point, CPWR did what we call the "pipecleaner". It took out both sides of the inside day's range, and then it ran up to Target 2, which was a test of the January 26 swing high. Mission is accomplished. We are done with this one for now.
ETR/Entergy - Bar 5 of the bull flag is formed. It's getting late now, but traders looking to buy this retracement setup should move the buy alarm down to Tuesday's high. If the buy stop is elected, the initial stop loss should be placed just above Tuesday's low.
HAL/Haliburton - Holy Grail setup reached the upside target of a test of the January 30 swing high. Swing traders either take their money on target, or they move their stop loss up to just above Tuesday's low in case it continues upward. We usually take profits on target, mainly because what we know about the January 30 swing high is that this was a point where sellers showed up before.
GM/General Motors - Formed Bar 5 of a bear flag. Traders should move their sell alarm to Tuesday's low. If the sell stop is elected, in initial stop loss should be place just under Tuesday's high.
JDSU/JDS Uniphase - Again, much like BIIB in that this is a big ugly pattern that other traders want to buy. Volume continues to contract so at least there's still hope for a "breakout". Might be best to play this intraday in case the breakout is a fakeout.
JNJ/Johnson & Johnson - Buy stop was elected. Suggest moving the stop loss to Tuesday's low. Upside target of the February 5 swing high should be reached today IF there is any speed or power behind this move.
LTD/Limited Brands - Don't like this push down after a number of inside days, but volume did not spike up, so traders who want to continue on the buy side should move their buy alarm down to Tuesday's high. If the buy stop is elected today, the initial stop loss should be placed just above Tuesday's low. I would pass on this one, personally.
NXTL/Nextel - As anticipated, there was not breakout, but like BIIB and JDSU, this is a big ugly pattern. If you like the buy side, my suggestion is to look on the 10-minute intraday chart for buy setups if Tuesday's high is taken out on the upside.
That's it for now. We should have lots of time to come up with new picks for tomorrow during the day today.
This morning, we await FOMC Chairman Greenspan to appear at 11AM Eastern to give his semiannual monetary policy testimony before the House Financial Services Committee, in Washington.
Meanwhile, the U.S. Economic calendar is going to be very full tomorrow so we have yet another day of this holding pattern in the markets. On top of that, it's a holiday Monday on February 16, so if the market is unable to push up in a convincing manner, buyers might be hesitant to make commitments ahead of a long weekend.
by Teresa Lo
We're going to upload this one everyday, since it's something that is not available at too many websites. Read more about the "Mamis Spread"**.
**Requires Adobe Acrobat Reader Version 5 and up.
[Free Download]
by Teresa Lo
We received this email from a subscriber last week:
I am a new member and would like to ask for some direction....
I have been on the Real Time forum for 2 days and ... I think I do not have the supporting tools that you have or the screens you and looking at during discussion.
Can you share with me the list of tools that a trader MUST have to be in this business, including the type of account and who do you use. List of tools you use and who supply them....
Sure, let's go over the list:
Computer
Custom built desktop (mirrored hard drives) computer with a Matrox G-series video card for multiple monitor support. I use two high-end NEC 17" LCD monitors.
Charting Programs
Mike and I both use TradeStation 7. We also use TradeStation 2000i with datafeed from eSignal. I also buy some end of day data from Dial Data and download the rest from Yahoo (and intraday from Quote.com) using HQuotePro.
Trading Platform
Mike and I both use Interactive Brokers to execute all of our trades in the U.S. markets. We have backup accounts at a full service firm, since in our opinion, we should not expect or depend on prompt telephone support from online brokerage firms.
Technical Trading Tools
We use a minimum number of technical tools, but each one has been chosen carefully for a specific function. Mike and I will also be releasing a suite of our own advanced technical trading tools in the near future.
- TrendVue Classic Swing Plotter
- TrendVue Color Bars
- Exponential Moving Average
- Simple Moving Average
- Keltner Channels
- Volume
- Average True Range
- Average Bar Length
- Average Directional Index
- ShowMe Yesterday's High and Low for Intraday
- ShowMe the Narrowest Range out of X days.
- Ratio Charts for big picture work.
- Justin Mamis spread for the new highs and lows.
- RSI for watching Connors VIX Reversal signals.
There is a small difference between the tools we use on the daily/weekly/monthly timeframes compared to intraday. To find out more, please review the transcripts from the December 2003 Technical Trading Workshop in the Knowledge Base.
Stock Watch List
We have our own list of stocks that we watch, in addition to the usual volume and price leaders that change from day to day.
MBA Purchase Applications Index 402.2
(Econoday.com) - The Mortgage Bankers purchase index fell in the Feb. 6 week to 402.2, its lowest reading since early January and down 20 percent from its highs at mid-January. But volatility in a week-to-week series is the norm. The housing market, helped by low mortgage rates, remains strong. The MBA's refinancing index, at 3099.1, also fell in the week, perhaps due to a slight rise in mortgage rates (Freddie Mac 30-year average mortgages rose 4 basis points to 5.72 percent last week).
5-Year Note Yield Awarded 3.030%
(Econoday.com) - The 5-year note auction was well received Wednesday, posting a strong bid/cover ratio of 2.84 and an awarded yield of 3.030 percent, 2 basis points below the when-issued rate at bidding time. Central bank demand, likely from Japan, was solid, as 42.4 percent of the accepted bids went to indirect bidders. The results point to strong demand for U.S. Treasuries, a good indication for Thursday's final leg of the Treasury's quarterly refunding, a $16 billion auction of 10-year notes.
Mike tells me that this is the Holy Grail of browsers, and it's absolutly free. At their website, Mozilla Firefox is touted as:
"...empowers you to accomplish your online activities faster, more safely and efficiently than any other browser, period. Built with Tab browsing, popup blocking and a number of other seamless innovations, Firefox stands out ahead."
Ok, I'm downloading it now...
Today's real-time transcript is available to all subscribers.
Real time forum log.
Click on the title above to expand this document.
Well, he did it again. FOMC Chairman Greenspan appeared before Congress with the Monetary Policy Report today, and three little words saved the day for the financial markets: "can be patient".
The full text of the testimony of Chairman Alan Greenspan is available online, as is the full report. The relevant portion was:
"Of particular importance to monetary policy makers is the possibility that our stance could become improperly calibrated to evolving economic developments. To be sure, the Federal Open Market Committee's current judgment is that its accommodative posture is appropriate to foster sustainable expansion of economic activity. But the evidence indicates clearly that such a policy stance will not be compatible indefinitely with price stability and sustainable growth; the real federal funds rate will eventually need to rise toward a more neutral level. However, with inflation very low and substantial slack in the economy, the Federal Reserve can be patient in removing its current policy accommodation."
After last week's FOMC meeting, market participants have been wondering how soon rates can be expected to go up, and today, they got the answer.
Here is our panel with the Dow Industrials, the S&P 500 and the NASDAQ 100 indices. The last time we looked, we put a neckline below in case we needed it, and now, we've seen the bounce off the 20-day EMA for the $INDU and $SPX and off the 50-day MA for the $NDX.
While it certainly is very exciting to see this big tall bar today, we have to remember that these are also 20-day highs and tests of tops, at least for the $INDU and the $SPX. In fact, after a big up day like this, we would expect to see some backing and filling tomorrow, and should the $INDU and $SPX trade back under the January 26 swing high, there may be selling based on the StreetSmarts Turtle Plus One short sale setup. We'll be on the lookout for that in the morning.