Thursday, August 5, 2004
Issue Contents:
| 08:53 | The Day Ahead Economic releases and news. |
| 09:27 | Swing Trade Setups From Wednesday scan results. |
| 10:09 | Market Overview and Strategy Despite moribund trading, market action is getting quite exciting here - investors ought to be paying very close attention. |
| 11:00 | Quick Take: US$, Gold One up, one down. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 16:15 | TrendVue Morning Trader Today's transcript. |
Good morning. In addition to domestic economic news, and the ever present oil watch1, bond traders are also digesting:
- 7:00 Bank of England interest rate announcement (quarter point increase2)
- 7:45 European Central Bank interest rate announcement (no change)
US Market Calendar
- 8:30 Jobless Claims
- 11:00 Chain Store Sales
- 1:00 3, 6 Month Bill Announcement
- 3:00 Treasury STRIPS
- 4:40 Money Supply
Canadian Market Calendar
- 8:15 Foreign Reserves – July
- 10:00 Ivey Purchasing Managers’ Index for July
- 10-year Bond Auction Announcement
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 OPEC moves to ease fears of oil crunch – CALGARY (Globe & Mail) – Oil prices were pushed into full-fledged retreat yesterday as OPEC rushed to reassure global markets that it still has spare output and fears ebbed that the Russian government might create a worldwide shortage of crude by forcing OAO Yukos to halt its production.
2 BoE Raises Interest Rates to 4.75 Percent – LONDON (Reuters) – The Bank of England raised interest rates by 25 basis points to 4.75 percent on Thursday, the fifth such hike since November, in an expected move aimed at cooling a roaring British economy.
Featured setups from Wednesday July 4 symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Long Setups
Test of Range High
BRL offers a down bar just below a test of a range top and potential for a short term burst through stops overhead. Move to break even protective stop ASAP if filled.
Retracement or Pause in Up Swing / Up Trend
BLS is actually trending up, a rarity in this market. Measured move out of the triangle marked is the blue shaded area, do not be shy to take profits. Buy stop 27.76,
Test of Bottom
NXTL is in the process of making a tweezer-bottom, and is also a test of bottom with a marginal new low this week. Long setup: while its already triggered as of Wednesday, intraday action may permit getting long near the open. Former trigger point was 22.71. May be traded both directions long/short – see short setups as well.
Short Setups
Retracement or Pause in Down Swing / Down Trend
AMAT bounce to overhead resistance – up bar in a down swing gives us a place to lurk on the off chance AMAT breaks down here. Short on break of 16.58.
Triangle Failure
AAPL, short on break of 31.17. Protective stop if filled: 32.15
Test of Bottom
NXTL short on break of 22.10, trade premise would then be a failed test of bottom.
Special Situations
For the aggressive intraday-capable folks:
QCOM is in a big triangle, aggressive traders can attempt to get long on a break of yesterday’s high. Tight stops please!
GCI has such a picture perfect rising wedge – lets put this on the watch list and monitor for failure. Aggressive intraday traders can try to short this on a break of 83.55.
AW may be ready to retest its recent lows soon – one for the intraday folks to watch. An inside day yesterday may also provide a launch point for an attempt to fill some of the overhead gap – this stock is so badly broken that long term holders feel like they’ve been TASR’ed!
Despite moribund trading, market action really is getting quite exciting here and we all ought to be paying very close attention.
Lets update our big market index overview chart:
In all indexes except the NYSE composite (NYA), we have _three_ trading ranges, with price having risen to the bottom edge of the middle trading range. Remembering that former support (the bottom edge of the trading range) turns into new resistance when price starts trading below this level, its not too difficult to lay out a road map of where price will likely push to and stall.
But this is more than an academic exercise, as price has been painted into the proverbial corner here.
We’ve seen the Nasdaq Composite (COMPX), S&P 500 (INX) and Dow Jones 30 (INDU) all make attempts to push directly up, hit their first targets, and now we have a 2 day pull back just below resistance. This this is the formation of a nasty but still viable looking bull flag, at a critical juncture.
Hemmed in here by overhead resistance and the 2004 lows which are within easy striking distance (two average daily trading ranges away), investors are going to be forced to make a decision – support the naescent rally and push prices higher, soon, or risk price retesting the year lows once again where we may well see that level of support fail to hold.
The good news for those of us doomed to watch the market during the normally slow late summer season is that fireworks are close at hand.
For today, the most important number to watch right now is yesterday’s index highs – that’s the current line in the sand. This is day three of the potential bull flag and the clock is ticking.
Ahead of the FOMC meeting next week when a quarter-point rise in the overnight rate is widely expected to be announced, the US Dollar is pushing up this morning from 4 day pause.
We haven’t talked about Gold much lately, and perhaps our readers are wondering why.
Once a darling, Gold is now all over the map but not in a position to generate reliable returns. I had to turn off the gap-markers on this chart as all the dots were far too distracting. This is one market where the only ones left are the true believers, and precious metals mutual funds that have no choice but to ride the tide, even if it kills them.
Unfortunately for Gold bugs, the commodity itself appears to be stalled by new overhead resistance. At this point its more likely than not that the Gold contract will retest the 2004 lows.
A quick check of the HUI Amex Gold Bugs Index confirms that stocks and metal are trading in tandem at this time.
Earlier this year we published a key piece near the top of the Gold market, reminding readers that Gold rallies are typically 3 to 4 years in duration. This is year 4, and, so far, nothing has changed to suggest that this rally will be any different.
A dispassionate look at the weekly chart of HUI tells us all that we need to know. In the absence of an honest to goodness major test of bottom, there is no reason to be long this group at this time, while price continues to trade sideways below its important major change of trend zone. What was once an up trend has officially been a down trend now for months. That observation tells us how to treat HUI: except for tests and speculative short term trading, this is one market to walk away from, or look for short opportunities. When this situation changes, we will again shift our stance.
Today's transcript.
Click on the title above to expand this document.
Today's transcript.
Click on the title above to expand this document.