Thursday, September 2, 2004
Issue Contents:
| 09:00 | The Day Ahead Economic releases and news. |
| 09:29 | Swing Trade Setups Featured charts from Wednesday's scan. |
| 09:58 | Quick Take: NDX and SPX Intraday Checking in on NQ and ES futures. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 16:45 | The First Shoe INTC lowers guidance. |
| 17:52 | Stock Scanner Results Thursday September 2 |
Good morning.
Unbelievably, Nortel warns that it will again delay releasing restatement of its FY2003 results.1 As was widely expected, the European Central Bank kept its benchmark lending rate at a six year low on concerns about EU region economic growth, citing concerns about oil prices and job growth.2 Overnight, oil held onto yesterday’s strong gains, supported in part by news from Russian oil giant Yukos that the company may be forced to stop production.3
And finally, from the “you talkin’ to me?!” department, girlieman economists appears to be the number 1 most quoted quip coming out of the Republican National Convention.
US Market Calendar
- Weekly Bill Settlement
- 7:45 am: ECB Announcement
- 8:30 am: Jobless Claims
- 8:30 am: Productivity and Costs
- 10:00 am: Factory Orders
- 11:00 am: 3, 5, 6, 10-Year Bill and Note Announcements
- 11:00 am: Chain Store Sales
- 4:30 pm: Money Supply
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 Nortel Results Delayed Until End October
2 ECB Keeps Benchmark Rate at 2% as Oil, Unemployment Curb Growth
3 Yukos Says Output May Stop; Russia Seeks $2.6 Billion
Featured setups from Wednesday September 1 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Yesterday was an “up day” across the board in major indexes and traders will be keen to see which key level is broken first today – yesterday’s high or low – in order to get an early sense of direction.
Today we shall continue to look for both long and short ideas, with a bias to the long side but note this caution: price may easily be setting up to chop sideways here.
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
ANF – bullish harami / 3 inside up / 2B test of bottom setup all present here on the daily chart.
Pre-open news may cause this to gap up over the trigger level; if so, look for the first significant retracement on the 10 or 20 minute chart and place buy stops above the decline. Be aware that the first day after news may quickly run through available buying pressure – keep protective stops tighter just in case the “sell the news” effect reasserts the downtrend.
Retracement or Pause in Up Swing / Up Trend
DIS – bull flag, currently on bar 4 of its first retracement after the recent upswing (a similar buy setup to the successful DNA trade entry from earlier this week). Buy stop 22.54, initial protective stop if filled: 22.29
Test of Top – Continuation
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
MSFT – stalk Mr. Softee in case a stealth bear flag sets up. Sell alert at 27.13. If it does not trigger today, MSFT should be on a short watch list for tomorrow as well.
JNY – stealth bear flag just above a test of bottom. Sell alert at 35.64.
Special Situations
SWIR / SW:TSX – Sierra Wireless sure receives a lot of discussion in TrendVue Trader Talk, and perhaps today there may even be a reason to attempt a long, although it is not one I will be attempting myself today. However, there is great value in pointing out all alternatives, as well as highlighting what we should consider marginal trade setups.
Price has declined somewhat deeper than we’d like to see for a straight-forward test of bottom, which is why I’ve slotted SWIR into the Special Situations bucket – aggressive traders only. We might expect to see SWIR bounce to overhead resistance, only to resume selling again.
Premise: Having formed a “hammer” Wednesday, a long buy stop at 18.21 but you must, I repeat, must carefully monitor the position intraday and move to a break even stop at the earliest possible opportunity.
Less aggressive would-be holders of SWIR should wait for a bounce, and if one develops on the daily chart (i.e. more than a single up bar) then look to see if the first retracement off the bounce offers an opportunity to position a long buy stop above the retracement. In short, the less aggressive can wait, and in fact, I will be too.
Quick Take: NDX and SPX Intraday
After a two-week rally, we were not surprised to see markets generally pause. Since we can not know ahead of time if price action will merely grind sideways and marginally down, or reverse outright, shorter term / more aggressive swing traders exited positions or tightened up stops dramatically on Monday. Taking profit is after all the name of the game and we are never sorry about doing do.
The bias to the market remains up at this time, and so, we are on the daily hunt to detect long-side opportunities in stocks and the index ETFs.
Just the same, while price is grinding sideways, we want to continue to tread lightly or not at all. There will always be an opportunity to get long when it is clearly obvious that we should do so – trading within chop is a sure way to give up hard-won profits.
Nasdaq 100 NDX futures pushed through the intraday triangle yesterday, this morning the first step in the price discovery process will see if buyers are willing to step up and launch a potential attach on the overhead highs.
We drew a similar chart yesterday for SPX futures, and also added the Head & Shoulders top pattern present here on ES. We do not use the H&S pattern to time or initiate trades, but it is useful in identifying potential risk, and gives us a measurement of a potential move should the neckline be broken.
Tale of Two Markets?
The single best-performing broad index of late has been the NYSE Composite. NYA we can see has pushed directly through overhead resistance on the daily chart.
The question of the day is which market will join the other? Nasdaq move up with NYSE? Or NYSE move down with the generally weaker Nasdaq?
Today's transcript.
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Intel surprised analysts with a sharp reduction in its third quarter revenue estimates.
The Santa Clara, California based company said it now expects third-quarter revenue of 8.6 billion, down from a prior outlook of 9.2 billion. Gross profit margin is now expected to be about 58 percent, compared with an earlier target of around 60 percent. Intel Cuts Revenue Outlook, Shares Fall
This has put INTC under pressure:
—which as a result has pushed Nasdaq index futures down within the trading range of the past three days. This retracement is deep enough that we have to at least give serious consideration to a failed test of top scenario playing out:
Meanwhile, we are waiting for the other shoe to drop, although there is no way to know if the jobs report Friday morning (8:30 am ET) will complete the picture. A positive surprise would give the market cause to dismiss Intel’s issues as being company specific (which market participants may well do anyway), essentially by refocussing attention elsewhere.
FYI “wait for the other shoe to drop”
This phrase means “to await an event causally linked to one that one has already observed”. In the form “drop the other shoe”, meaning “say the next obvious thing” or “end the suspense”, it dates from the early 20th century. It derives from the following joke:A guest who checked into an inn one night was warned to be quiet because the guest in the room next to his was a light sleeper. As he undressed for bed, he dropped one shoe, which, sure enough, awakened the other guest. He managed to get the other shoe off in silence, and got into bed. An hour later, he heard a pounding on the wall and a shout: “When are you going to drop the other shoe?”
For our part we’ll get ready a number of long and short ideas, including some ETF setups where possible, and be ready to handle either eventuality.
Thursday September 2
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