Monday, August 16, 2004
Issue Contents:
| 09:20 | The Day Ahead Economic releases and news. |
| 09:35 | Quick Take: Last Week, This Week Strategy for today. |
| 11:44 | Intraday Update: EX/RC/EX Bing, stage one complete. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 18:26 | Stock Scanner Results Monday August 16th data. |
In a referendum on whether to recall him, Venezuelan President Hugo Chavez won with support from 58 percent of voters.1
Oil has remained high regardless, although international indexes and stock index futures recovered from steeper losses overnight as the news from Venezuela broke while most of North America slept.
Crude, Daily
Crude, Weekly
On the weekly Crude contract chart, price is rising in parabolic fashion – we always start looking for sharp reversals in a market when this occurs. None are yet on the horizon, but it doesn’t take a rocket scientist to know that this is what all of Wall Street wants, so we are forced to wonder what conditions might prevent the Street from getting its wishes. Hmnnn…
US Market Calendar
- 3, 5 and 10 Year Note Settlement
- 8:30 NY Empire State Index
- 9:00 Treasury International Capital
- 11:00 4-Week Bill Announcement
- 1:00 3-Month Bill Auction, 6-Month Bill Auction
Canadian Market Calendar
- 8:30 New Motor Vehicle Sales – Jun.
- 8:30 Existing Home Sales – Jul.
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 LONDON (Reuters) – Oil prices simmered near fresh highs Monday even though early reports of victory for Venezuelan President Hugo Chavez in a referendum on his rule eased fears that unrest could upset the country’s oil exports.[...] Oil prices simmered near fresh highs Monday even though early reports of victory for Venezuelan President Hugo Chavez in a referendum on his rule eased fears that unrest could upset the country’s oil exports. Link
Quick Take: Last Week, This Week
Lets roll out the tall charts and check on where last week left off:
Harami days in three of four indexes sets up a “3 Inside Up” buy setup on COMPX/NDX (and therefore QQQ), INX(S&P 500) (and therefore SPY).
As we noted last week, the 5 period RSI of VIX, a useful aid to timing market swings, hit extreme values and since has failed to reconfirm the second attempt to move lower. Keeping in mind the caution we signed last week off on, that its entirely likely markets could condolidate for another few days before making a final departure from these levels, price and market conditions may be at a point where an attempt to reverse the decline is upon us.
Using the weekly chart for a birds-eye view, we see that COMPX has more or less reached T3, the down channel drawn many weeks ago, while all other major indexes are testing the prior swing lows of 2004.
This may be as good as it gets. The strategy for today is to look for a break of Friday’s high and go long after the first retracement after that break has occured – typically the first intraday pull back on the 10 or 20 minute chart will do. As long as price only pulls back 2–4 10 or 20 minute bars – a classic bull flag retracement is more or less what we will look for, we should then position buy stops above the market.
If the market plows through Friday’s highs without a pause, we may simply have to do the caboose: close our eyes and buy, and move to a break even stop at the earliest opportunity.
The issues plauging the market have not left us, but timing and lack of other bad news may have left market participants with a first decent opportinity to try to capitalize on the test of 2004 lows. We have no choice but to play that game. Use of stops makes it straightforward. Removing the emotion from the trade allows us to pull the trigger for both entry, and exit... should the attempt to move up fail.
Following up on the strategy note from this morning, price has delivered an EX/RC/EX (description) pattern intraday:
At this point, price has travelled at least as much as the average daily range – to expect more means going against a stiffening wind.
It is certainly possible that price can ramp up further here, today, given how sold-off this market has been of late. If so, it will be one of the larger range days seen in some time – an outlier, not of the norm.
Intraday traders will have an increasingly hard time to scalp in that type of environment, as the typical pattern is lunge… grind sideways, and suddenly lunge again with little or no warning.
Daily / swing traders have it easy here by comparison, and can now move their protective stops to break even and head to the golf course, go for a bike ride, clean up the tomatoes in the garden, or head to the beach.
Having waited a long time for a decent opportunity to go long, it makes some sense to put on a bigger picture hat and give the trade a bit of room to work, but not so much room that a decent winning trade turns into a loss. The break-even stop seems like a suitable compromise here at this point.
In the event that the market delivers continuation either today or tomorrow, the next likely targets are marked out on the 135M intraday futures chart.
As you can see, both markets have significant overhead resistance – ES is pushing up to resistance set at the July lows. Certainly we can expect sellers to make an attempt here. That battle might be over in a flash if buying rushes in. Again, our break even stop protects us if sellers win the next skirmish too!
Today's transcript.
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Monday August 16th data.
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