Thursday, August 12, 2004
Issue Contents:
| 08:55 | The Day Ahead Economic releases and news du jour. |
| 09:17 | Strategy In a nutshell. |
| 09:35 | Swing Trade Setups Featured charts from Wednesday's stock scan. |
| 10:22 | Quick Take: Oil Picture tells all. |
| 10:41 | Quick Take: ES, NQ Futures Nasdaq touches down... market direction TBD. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 16:15 | TrendVue Morning Trader Today's transcript. |
| 17:26 | Stock Scanner Results Thursday August 12 data. |
At 2:00 p.m. the meeting minutes of the FOMC will be released. Wal-Mart indicates oil prices have an impact1.
China reports a 5.3% Consumer Price Index, the second month in a row where it reported a number of that magnitude, continuing to support fears that Chinese government measures to manfacture a slow down and soft landing for its red-hot economy are falling short.
US Market Calendar
- 8:30 a.m. Import and Export Prices2
- 8:30 a.m. Jobless Claims3
- 8:30 a.m. Retail Sales
- 10:00 a.m. Business Inventories
- 11:00 a.m. 2,6-Month Bill Announcement; 10 Year Note Auction
- 1:00 p.m. 10-Year Note Auction
- 1:15 p.m. Federal Reserve Governor Edward Gramlich to speak about Social Security reform, at the National Press Club in Washington. Q&A expected.
- 2:00 p.m. FOMC Minutes
- 4:30 p.m. Money Supply
- Weekly Bill Settlement
Canadian Market Calendar
- None scheduled
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 CHICAGO (Reuters) [Wal-Mart] The world’s biggest retailer also said it remains optimistic about the year, despite soaring oil prices that have curbed consumer spending and contributed to disappointing sales growth in June. [...] “I started this year with an optimistic view. I still feel the same way,” Chief Executive Officer Lee Scott said on a pre-recorded message. “Although I am concerned about high gasoline prices, I continue to believe that growth in employment and real income will lessen the impact.”
2 WASHINGTON (Reuters) – Rising petroleum costs helped push prices for goods imported into the United States higher during July, reversing a one-month dip in prices during June, the Labor Department said on Thursday. Import prices rose 0.2 percent in July – their ninth increase in the past 10 months – after a revised 0.1 percent decrease in June that previously was reported as a larger 0.2 percent fall. The department said petroleum prices rose 0.9 percent last month, erasing a 0.9 percent decline in June.
Today we will first look for a break of the prior day low or high and then attempt to go long or short the market on the first retracement after that test.
Consider the following chart:
HP news overnight have worked to push Nasdaq futures sharply lower, the impact on S&P 500 futures is there but well within range of an easy test of the prior day’s high.
All indexes but Nasdaq remain in a bounce up, and, having reached their first targets, the question is whether buyers will step in and push prices higher or whether the minor energy that fueled this bounce is now spent.
Featured setups from Wednesday August 11 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Entry and Exit Strategies
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 unforeseen 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.
Test of Bottom – Reversal
IBM Buy stop 83.99
SPY S&P 500 Tracking ETF, put in – barely – a down bar on Wednesday. Intraday traders only for this one, since yesterday was a big range bar, traders will need to be extra vigillant and able to change stops intraday. Buy stop 108.34, suggest waiting first for any new high on SPX, and buy after the first pull back.
QQQ buy stop 33.06 – if price manages to rally off the HP news, it may well be time to get long tech again. Its a big IF but we need to look for these types of “surprise” type opportunities.
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
XLF – Financial sector ETF, stealth bear flag at a test of an important swing low. Sell short alert at 27.49 (chart was snapped after this morning’s open).
Special Situations
AAPL – we have redrawn the bottom edge of the triangle as the pattern is simply getting larger. Trading within a narrowing triangle is tricky stuff, often best to stand aside, however here is a place to lurk if a suprise up day happens around the corner today. Buy stop 31.14.
The picture:
After making a big down bar yesterday, crude futures popped above yesterday’s high. You can imagine a few recent shorts feeling a little roasted this morning. Whether these gyrations are evidence of price instability developing – a top building process – or the (gasp) process of building a new and much higher level of support, we won’t know until much later down the line.
Its hard to believe that other markets will remain immune to this although every seasoned trader in the world is currently looking for equity markets to go up on bad news. Clearly there is plenty of bad news out there, its the “going up” part which we are still waiting for. It may be awhile… in the meantime, we’ll keep looking for the surprise angle and vow to be ready when it appears.
The market is at an important juncture here :
Nasdaq futures made a marginal new low for the week, and in the process, for the year.
S&P and Dow futures have not as yet re-tested their lows – but you can virtually feel the tension here. Market emotions are at a sharp point here, so perhaps it makes sense to put our necks out a little and state that we expect either:
- a test of bottom that passes – resulting in a significant reversal of some sort; or,
- failure to hold these price levels and continuation of the down trend across all major indexes.
With a stealth bear flag currently building intraday here, its likely we will know the answer soon.
Today's transcript.
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Today's transcript.
Click on the title above to expand this document.
Thursday August 12 data.
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