Friday, April 2, 2004
Issue Contents:
| 09:59 | Good Morning Mission Accomplished |
| 10:28 | Silence is Golden Focus on Profits |
| 15:03 | Focus on $NDX Technical Update |
| 15:11 | Alert on Open QQQ Longs Consider Taking Profits. |
| 15:20 | Update on QCOM Tighten stops on swing trade. |
| 16:16 | Active Trader Transcript Real time forum log. |
| 21:00 | Economic Data Summary of Today's Releases |
Its going to be a very busy day as the jobs number has torpedoed the bond market and equities are sharply higher:
(WSJ.com) - U.S. Payrolls grew by 308,000 jobs in March. It was the fastest clip in four years, and blew past economists' expectations of 120,000 new jobs. The unemployment rate inched up a tenth of a percentage point to 5.7%.
Long trades entered from the past week in QQQ, SPY, DIA and ideas presented in QCOM that have triggered are all sharply higher. More to follow.
Note: We'll be opening the doors for our live interactive Java-based TrendVue Trader Talk on Monday. TrendVue Strategies for Success subscribers - check the web site for instructions over the weekend. - Mike & Teresa
Ever wonder why other advisory services get all excited as the market approaches tops (buy, buy, buy!) and bottoms (sell, sell, sell!) while TrendVue seems relatively quiet, even silent?
At the moment, we are simply enjoying trades put on when it was the right (but scary) time to buy. At the moment, instead of getting carried away by the emotions of the crowd as price action intensifies, we are looking to take profits as our trades reach well beyond targets amidst excitement, because we did the right thing at the right time.
This week has been a great example of tending to a good entry on the buy side. Back on March 21, we noted that conditions were ripe for a short-term bounce off the daily charts after the big push down that began in early March, a downswing that came on the heels of the big congestion pattern breakout to the downside.
Going into the March 24 trading day, we set up the scenario for the upside as a test of bottom swing trade:
(Teresa) - In case it actually tries to go up, this is the set up. It's a test of the 20-day low, the so-called StreetSmarts Turtle Soup buy setup on the daily $INDU and $SPX charts. The way they do it is to buy if price heads back up through the March 15 swing low on the DIA, while the SPY has to go back up through the March 16 swing low. Their initial stop loss will be placed just under Monday's low. This is a swing trade.
The following is an exerpt from the March 24 transcript from the Active Traders, our real-time coaching service where we demonstrated how to enter the same trade on an intraday basis:
| 10:42:29 | Teresa: Yesterday's low is broken on the 5M ES and it now triggers some selling on the swing trade...watching for trap. | |
| 10:53:33 | Teresa: And in case this is a big trap, since it's a test of the day's low, yesterday's low plus the swing entry, we will bracket this with a buy stop at ES 109100 | |
| 11:06:01 | Teresa: We have a very unusual candlestick on the 45M ES chart...a reverse hammer  |
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| 11:06:16 | Teresa: ES 10900 IS THE REVERSAL POINT IF ANYONE IS PLAYING FOR THE REVERSAL... | |
| 11:10:20 | Mike: TICK and TRIN at their extremes of the day - if a reversal is going to come it will be really soon otherwise the crowd will just keep on pressing sell. | |
| 11:10:27 | Mike: Just like in that moving Trading Places LOL | |
| 11:10:32 | Mike: Sell OJ SELL! | |
| 11:22:09 | Mike: Hey if they want to bounce this baby for a while.. like multiple days, today would be a good day to do it. With all of December and Jan gains in tech retraced no doubt there are people out there that believe enough is enough. | |
| 11:37:35 | Mike: Well I bought some SP500 ETFs in my retirement account 10 minutes ago. Any other Canadians in the room today? | |
| 11:44:49 | Teresa: Now...the position/swing traders who are looking for this downside move will have their stop loss placed either just above the morning high, or just above yesterday's high. | |
| 11:52:43 | Mike: Looking at ES45 minute you can imagine how much they could ramp this if they start triggering some short covering.. | |
| 11:54:15 | Mike: Here's a thought. If they can push it up, tomorrow might be a gap up day which will set an Island Reversal on ES. Now that would be fun... | |
| 12:30:17 | Mike: Well maybe my gap up scenario / island reversal for tomorrow might play out after all ;) | |
| 12:30:55 | Mike: Sure enough, a few people outside the room here that I know personally are all freaked out by the decline and are doing nothing. | |
| 12:31:15 | Mike: So my confidence level rises when I hear universal fear or bearishness LOL | |
| 12:31:35 | Mike: I think we all have our "canaries in the coal mine" that we use for such purposes... | |
| 15:35:15 | Teresa: This is going to be a VERY big test... | |
| 15:35:50 | Teresa: The thing that struck me was the fact that in headlines and reaction thing... | |
| 15:35:50 | Mike: Teehee. | |
| 15:35:58 | Teresa: that they are all PRAYING that buyers will show up | |
| 15:39:22 | Teresa: The thing about the market is that I interpreted the headlines as prayers...for buyers to show up, and you know, the market never answers those for some reason. Never when I needed it. Haha. | |
| 15:41:54 | Mike: Maybe that last poke down will be the fuel needed to jam it up... | |
| 15:42:00 | Teresa: Yep... | |
| 15:42:09 | Teresa: since you never prayed, it will go up for you Mike. :o) | |
| 15:42:23 | Mike: Its pretty rare when I go to 50% invested all in one day. | |
| 15:42:42 | Mike: Thank goodness for ETFs. |
When we last looked at the NASDAQ 100 index, it had hit the upside targets. With the big gap up this morning, let's take a closer look at it now.
Here is the daily chart of [$NDX], a nice and clean bar chart.
Add a few useful tools to it, including the Average Directional Index (ADX), the 20-day EMA (thick red one) and the 50-day MA (dotted grey line). For volume, we use the volume from the [QQQ], since it's much more indicative of action.
We then step back and think about what this picture tell us. Mike set up the island reversal scenario on March 24 on an intraday basis. This morning, off the big non-farm payroll number, the market opened gap up above the 50-day MA, which was our last upside target. It also jumped up and above what most investors would consider to be a "downtrend line", and they are probably screaming "It's a breakout!"
If we consider what the headlines were on March 22 and 23 and look at what they are saying now, the market has gone from depressed to euphoric over a very small amount of time. With yesterday's equity put/call ratio at 0.47, a multi-month low, we have to be careful that this may turn out to be a short-term buying climax.
At this point, we ask ourselves two simple questions. Doesn't this look so rosy? Didn't we get it at the bottom? With the answers to both questions being yes, it's not a big deal to pull up the protective stop loss orders quite a bit, or just take profits on a glorious Friday afternoon, because all the targets we projected have been hit. It's OK to leave some money on the table for people who actually need it.
This is the weekly [$NDX] chart, with the ADX, 20-week EMA and the 40-week MA on it. You can see that the big bounce came at the 200-day moving average, about as cliche as it can ever get.
This is not 100% scientific, but I've drawn a potential neckline here on the weekly chart, and cloned the line so that we can project an area of where a right shoulder might show up should a head and shoulders top be forming on this weekly timeframe. We'll just keep an eye on this [$NDX] 1500 area.
All good things must come to an end. As swing traders, we have the difficult but rewarding job of determining when to exit after profits accumulate.
I have closed my personal long entries in QQQ and SP500 - after an M test of top: 
I am generally very cautious about protecting longs, especially after a strong move up such as we have had on this trade since last Wednesday. QQQ close net of costs was 7.14%. I am probably more cautious than many of our readers.
If you are comfortable holding through a retracement that may develop over the next few days, we will publish some guidelines that you can use for trade management. Another alternative is to take partial profits here, and leave some capital in play in case the market does move directly higher.
Perhaps the best strategy is to bias your decision based on the activity near the trading day close. I would feel more comfortable holding full or partial QQQ longs here if NQ can push up and hold above the morning high ~ 1488.
This is a personal decision for all traders - the market may very well power immediately up on Monday; or, it may retrace for 1 - 3 days and offer another opportunity to set up a swing trade off of lower prices than todays.
More analysis and charts to follow. Congratulations on a profitable swing trade - have a terrific weekend. /mw
QCOM Swing Traders have been rewarded with a 3+% gain; its now time to move stops up. Lets update the daily chart and stop strategy from our last update:
All classes of trader - swing trader or longer term break out player - should have stops now at break even or better.
Longer term players may wish to place their stops under the low of today's (still forming) bar ~ 66.28- 66.30. If QCOM and the market push higher on Monday, this should ensure this trade participates.
Aggressive traders wishing to lock in gains should QCOM reverse intraday will want to move their stops below the second-last consolidation zone at ~ 67.40.
Super aggressive traders wishing to lock in maximum gains on an intraday basis will want to move stops to ~ 67.66 in case QCOM fails to hold current levels - which may invite a failed test of the opening high.
Real time forum log.
Click on the title above to expand this document.
Non-farm Payrolls +308,000
Unemployment Rate 5.7%
Average Hourly Earnings +0.1%
Average Workweek 33.7 Hours
(Econoday.com) - The economic outlook brightened significantly Friday as employers, after four months of surprising caution, may have suddenly begun to take on new workers. A stunning 308,000 gain in non-farm payrolls, the biggest rise in nearly four years, will push interest rates sharply higher, sparking talk of when the Federal Reserve will step back from its policy of low interest rates. The March report may mark a milestone for the economy and perhaps the end, if not a pause, for the Treasury market's long rally.