Thursday, January 6, 2005
Issue Contents:
| 08:26 | The Day Ahead Economic releases and news. |
| 08:54 | Swing Trade Setups Featured charts for Thursday January 6th. |
| 09:11 | Market Commentary Which song sheet to pick... |
| 09:31 | US Dollar Index |
| 11:13 | Crude Awakening |
| 12:06 | Crude: Big Picture Back to key resistance, again. |
| 12:10 | Subscriber Note Administrative, email issues. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 21:07 | Swing Scanner Results Thursday January 6th closing data. |
| 21:08 | Market Statistics For Thursday January 6th |
Good morning – its Thursday January 6th and we have some employment news in advance of tomorrows important labour report.
The Monster Employment Index showed a minor decline in December1, while the weekly Initial Jobless Claims registered a substantial surprise increase this morning, rising to 364,000 up 43,000, and continuing claims moving from 2.78 to 2.84 million.
Even with the jump between Christmas and New Year’s, weekly claims averaged 343,000 in 2004, the lowest since 299,000 in 2000. The numbers are in line with expectations that employers created 175,000 jobs last month, making 2004 the best year for payrolls since 1999, according to a Bloomberg News survey in advance of the December report on employment tomorrow.2
US Market Calendar
- 6:00 am: Monster Employment Index1
- 8:30 am: Initial Claims – Jan. 1st week2
- 11:00 am: Chain-Store Sales – Dec.
- 1:00 pm (ET) : Kansas City Federal Reserve Bank President Thomas Hoenig speaks in Kansas City on the U.S. economic outlook
Canadian Market Calendar
- 8:15 am: Foreign Reserves – Dec.
- 30-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 Monster Employment Index Dips Slightly in December—Stepwise Growth in 2004
2 U.S. Initial Jobless Claims Rose by 43,000 Last Week to 364,000
Featured setups from Wednesday January 5, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups
Notes for the Day
Two picks only, but I will be reviewing US and Canadian stocks in the first hour – not seeing very much out there that doesn’t say “this one will likely bounce for a few days at most and then fail”. A failing bounce is perhaps the most likely scenario but we shall see…
ETFs such as DIA, QQQQ etc do not have simple buyable long setups on the daily charts – if an intraday opportunity shows up we’ll raise that possibility in “TrendVue Trader Talk”./transcript
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 Top – Continuation
CHS – not a test of top but pulling back to its breakout, and delivered a “piercing line” candle – this two day pattern is a less commonly known pattern – if the market can lift today this one perhaps will outperform a little on the long side as it started to yesterday.
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
ABS – rising wedge, breaks the lower trendline. Short alert just below yesterday’s low, hold only if solidly profitable at days end. IF this makes a minor bounce back up to the trendline, this will remain a reasonable short candidate, primary target is the wedge bottom below…
The situation in a nutshell:
- All three indexes are trading below their most recent range
- Nasdaq 100 and Dow 30 lag the broader market indexes, in the sense that neither formed an additional higher trading range in December, unlike the S&P 500.
- Over the course of three days, the Nasdaq Composite index erased 100% of the gains made in December.
What we can say is this: unless price can regain the ranges immediately overhead and hold there, what we are seeing is the early stages of a change in trend. We can’t “predict” whether price will regain the ranges or not, all we can say with certainty is what is in front of us.
CBH – used here only as an example – is representative of many stocks which have recently pushed to new 52 week highs and since pulled back. CBH has failed a test of its most recent range high, but has not as yet tested its range low, consequently this stock is officially in a “pause” and has not yet changed trend although its certainly in danger of doing so. Three Black Crows formation (three relatively tall black down candles) also present on this chart for added suspense!
All in all the current situation paints a rather gloomy picture, although that is not my intent. Our goal here is to educate and open eyes to all sorts of possibilities, hopefully before the rest of the street is singing from the same song sheet.
For all we know, the recent decline is a gift. What we don’t know and won’t know until hindsight is available to us is whether this is a terrific buying opportunity, or a warning of more to come.
What to do then? Clearly when price is trading down the “right hand side of the mountain” we have to me much more careful on the long side than we are when prices are trending higher on the left hand side.
If we take a long side trade under these general market conditions, we are in effect saying that we feel that the market, or the specific stock or instrument, is done going down. In order to have a basis for that opinion and risk capital, we therefore we have to have a very good reason for going long.
Good reasons for going long include:
- finding buyable retracements in stocks or markets that are still climbing the left side of the mountain
- finding stocks or markets that are making a well defined test of bottom or test of a uppermost trading range bottom – and these tests must of course pass.
Over the next few days our mission is simple: we shall first be looking for any signs of failing bounces - both to exit any new long positions but also to stalk strategic shorts in case this move down has more to go. Lets see what today holds…
US$ Index continuing its bounce to the resistance at the range overhead—there is an honest to goodness 2B test of bottom on the chart – a marginal new low followed by a push higher, so who knows, perhaps its done its decline for a while.
After such a decline, and this bounce, sellers are bound to come out again as price rises to resistance, so in the next week or two we ought to get an idea of whither the dollar shall head…
Here’s a classic example of how not to play a triangle:
Yesterday we started drawing out the developing triangle in crude.
12:46:31 Mike: Triangles everywhere today. CL
12:47:58 Mike: I put two lower trendlines there on purpose. Wihtin a triangle you never know if the triangle is simply getting bigger. Those that sold the first t/l break in Crude are now facing a bounce to the trendline which may or may not fail. That’s why I don’t sell trendline breaks but look for a safe place to lurk above or below to capture surprise.
12:48:49 Mike: A triangle by definition is sideways price movement with ever decreasing amplitude of the price swings.
Fast forward to today:
10:23:33 Mike: Crude poked down out of the triangle we marked out yesterday and regained it… and now moving above the triangle. ;)
And the result:
Done, like dinner!
These examples are meaningful to all of us – because the same principles in trading apply whether trading Gold, or Oil or Stocks on daily charts, or Index Futures on 1 minute charts.
This is the second time in the last month that CL price has made it back to resistance here ~ 45 – 45.50 level.
As we’ve said in reference to stock indexes, IF price can regain the range above—breaking up and out of the lower (yellow) range—and hold, then Crude will have effected a change in trend, from Down to Up.
Note: This chart is a large timescale intraday chart – we use these to get a heads up on potential changes in trend that do not become obvious on the daily charts until later.
We are still having a major problem with floods of spam, much of it virus laden. I shall be implementing some changes on the web site that allow us to provide a direct contact method for clients that bypasses email altogether.
In the meantime, if you need to contact us please use the following temporary email address:
This address bypasses our normal anti-spam handling and will be delivered directly to me. I expect that by the end of the weekend we’ll have this problem solved once and for all.
FYI I’ve sent this out to a few clients who needed a contact email, only to have their email bounce back to me as undeliverable – a self-help “change your own email address” facility is high on my to-do list!
Today's transcript.
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Thursday January 6th closing data.
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Statistics for Thursday January 6, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 116 |
|---|---|
| Symbols in Down Swings | 650 |
| Up/Down Swing Ratio | 0.17 : 1 |
| Advancers | 56% |
| Decliners | 42% |
| Unchanged | 2% |
| Up Bars | 25% |
| Down Bars | 44% |
| Inside Bars | 16% |
| Outside Bars | 10% |
| Close > 20EMA | 56% |
| Close > 50SMA | 48% |
| Close > 200SMA | 64% |
| 20EMA > 50SMA > 200SMA (trend up) | 32% |
| 20EMA < 50SMA < 200SMA (trend down) | 18% |