Tuesday, January 11, 2005
Issue Contents:
| 08:44 | Swing Scanner Results Monday January 11th closing data. |
| 08:45 | Market Statistics For Monday January 10th. |
| 09:02 | The Day Ahead Economic releases and news. |
| 09:07 | Swing Trade Setups Featured charts for Tuesday January 11th. |
| 14:59 | Market Update In case of failure, break glass. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Monday January 11th closing data.
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Statistics for Monday January 10, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 291 |
|---|---|
| Symbols in Down Swings | 475 |
| Up/Down Swing Ratio | 0.61 : 1 |
| Advancers | 57% |
| Decliners | 40% |
| Unchanged | 3% |
| Up Bars | 34% |
| Down Bars | 36% |
| Inside Bars | 16% |
| Outside Bars | 10% |
| Close > 20EMA | 57% |
| Close > 50SMA | 46% |
| Close > 200SMA | 65% |
| 20EMA > 50SMA > 200SMA (trend up) | 32% |
| 20EMA < 50SMA < 200SMA (trend down) | 19% |
Good morning – its Tuesday January 11th. Retail sales figures show weather related softening for the first full week of 20051, and Canadian housing starts hit a 17 year high in 20042.
With no other economic news on deck for today, traders are looking for direction from earnings reports starting to trickle in for the the last quarter completed. Increasing selling pressure on Nasdaq and the Dow, after the bell on Monday, AMD issued a sales warning3 and Alcoa reported lower quarterly profits than analyst expectations.
US Market Calendar
- 7:45 am: ICSC-UBS Store Sales1
- 8:55 am: Redbook – Jan. 8th week
Canadian Market Calendar
- 8:15 am: Housing Starts – Dec.2
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 Report says chain store sales fell last week as unseasonable weather tempered post-holiday shopping
2 2004 housing starts post 17-year high—New construction finished 2004 on a strong note, however, sales of existing homes through MLS® have been trending lower since March 2004. This trend supports our view that the level of activity in the housing market will begin to slow in 2005. Housing starts will decrease 9.8 per cent to reach a robust 210,200 units in 2005. Sales of existing homes will also fall, nevertheless, 2005 will be the second most active year on record for MLS® sales.
3 AMD sees fourth-quarter sales below expectations: operating income will be ‘down significantly’
Featured setups from Monday January 10, 2005 closing data symbol scan
Notes for the Day
Futures pre-market indicate we could see yesterday’s low broken near the open – this does raise the probability of yesterday being a “one day wonder” – a single anti-trend day, in other words, a single up day in a strong down trend.
The early going will likely be where any attempt to turn the tide of selling pressure will take place, and we shall need to be careful that minor wiggles down have follow through behind them.
Such a day provides swing traders with an opportunity to initiate a short position, perhaps using ETF’s to gain broad exposure just in case the markets are heading directly lower. Longer term investors, generally long-only investors, can also use short positions to hedge against declines in other long positions.
Lets see how the open is handled before considering any long opportunities. If the market finds support and manages to hold these levels, I shall publish a set of long trade ideas in TrendVue Trader Talk.
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.
Retracement or Pause in Down Swing / Down Trend
ETFS
DIA (Dow 30)
SPY (S&P 500)
IWM (Russell 2000)
QQQQ (Nasdaq 100)
All the ETF’s are showing a similar picture, although Nasdaq QQQQ is trading well below the uppermost trading range as we’ve noted over the past few weeks. The first bounce or pause after the open can be used to stalk a short, waiting for price to continue lower before starting a position.
Last week’s low sets out the line in the sand for the market and today we’ve seen, so far, a successful test of this as S&P 500, Dow 30 and Nasdaq 100 futures all made marginal new lows and are currently bouncing to resistance:
We can’t know if this bounce ends up holding or not until hindsight is available – so for now all we can say is that one hurdle has been crossed. Traders will be keen to see whether this session closes weak as have so many as of late.
Aggressive swing traders will in fact be using this first retracement after the “2B Test of Bottom” (a knowledge base article coming up soon on this) as a trigger for new long positions, provided price does not decline too deeply from here, thus invaliding the bull flags.
In case of failure
Using a technique known as price extension, we can extrapolate where price may go, if the recent range lows do not hold:
The pattern we see here is one of range expansion, range contraction (Knowledge Base article), which is frequently followed by a second leg of range expansion of roughly equal dimension to the first. This price extension implies a rough major target of 10,400 on the Dow and 1160 – 1165 on the S&P 500.
Today's transcript.
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