Friday, October 7, 2005
Issue Contents:
| 09:21 | Swing Trade Setups Featured charts for Friday October 7 |
| 09:36 | The Day Ahead Economic releases and news |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Featured setups from Thursday October 6, 2005 closing data symbol scan http://www.trendvue.com/latestscan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Was yesterday the flush needed to set up a rally? Possible; we should play it as such, but be careful, get our positions to break even stops at the earliest opportunity, and be ready to try again if noise gets in the way of a direct line up. One technique which can be useful is to take profits on 1/3 or 1/2 of a position once it moves enough, and use that to fund a stop, but ONLY if that looser stop will give your position a reasonable expectation of holding up. No point in giving up profits if price moving against you will break patterns or needed support.
ETFS – IWM and QQQQ I tend to focus on when there is significant potential for a turn around. Here you can see Nasdaq 100 ETF is trading in a tight range all summer long. For all we know, it will fail to hold support an initiate a trend reversal in the much bigger picture, but, this is an opportune time to give the long side a shot.
QQQQ
There is a short trade implied in any range test – if prices head lower, we’ll be selling QQQQ (perhaps via NQ) or other broad market indexes short today.
SMH – semiconductor HOLDRs ETF.
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
INTC – semiconductors
Retracement or Pause in Up Swing / Up Trend
ABX – some golds performed nicely yesterday (NEM) while others paused, on a day when the USD had its biggest drop in some time. This might be profit taking by resource-heavy investors, as the resource sectors have really taken a whacking this week.
ANDW – communications – its possible the gap up represents a big change of sentiment in this name, but we do generally expect gaps up to be swing reversal points so be cautious. Held up pretty well last couple of days.
MOT – hunt intraday entries above the lower trendline
UNH – healthcare
ENERGY
Yes, that was a painful sell off… for others! For us, it marks potential opportunity. Play with extreme caution but do not shrink away from looking for opportunity here… however reduce expectations. Prices are not going to be back at 52 week highs overnight, perhaps not at all again this year… but they may…
ECA
CHK
APC
TLM – gaps down in this sector may mark a swing low
Test of Top – Continuation
SWY – groceries
DF – foods – these defensive names have been on our list a number of times over the past month or two
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
WB, and financials in general, have been weaker even before the sell off this week.
UPS – transportation and trucking
BBY – possibly forming a stealth bear flag. We stalk these for surprise factor and are not dissapointed if they do not trigger.
Special Situations
COMS
Good morning, today is Friday October 7th, the 280th day of 2005.
Markets have been selling off this week. What a surprise. Back on August 8th (indeed earlier… we were laying the ground work for illustrating the topping process in the week prior) Trendvue issued a key market direction heads up, which concluded:
I prefer to err on the side of caution – markets have failed test of tops on the daily charts and have been acting weak despite relatively positive earnings reports. Without overthinking the situation we can appreciate that market participants are not convinced at the moment that their biggest risk is not being long enough. Read the full article
On September 15 we reminded folks of the downside targets and potential opportunity on the long side:
10:47:10 Mike: Certainly if price pulls all the way back to Katrina lows, will want to speculate on long side – that would be a fairly significant retest. Yet there remains a significant possibility that the market has hit its highs earlier in 2005 and will not revisit them for the balance of the year. I’m managing my long-only portfolios as if this is the case… an abundance of caution.
10:47:19 Mike: Eventually even energy will weaken in that scenario.
10:49:42 Mike: Too early to think such dark thoughts really but all tops start somewhere and in August we saw topping action and, so far, price has been unable to regain the uppermost trading range and hold.
Its rather anti-climatic when the top is later visible to everyone. No one talked about weak markets, inflation, or anything but goodness, back in August, and now pundits and portfolio managers are all over the story. And now, here we are, all targets hit and a little bonus too.
Did yesterday’s panic into the close mark the bottom, or is the down draft of this week merely the opening volley in a much larger pull back? Only time will tell, but there will be clues along the way to help us remain positioned correctly.
Market Statistics for Thursday October 6, 2005
| Symbols in Up Swings | 74 |
|---|---|
| Symbols in Down Swings | 604 |
| Up/Down Swing Ratio | 0.12 : 1 |
| Up Bars | 10% |
| Down Bars | 71% |
| Inside Bars | 6% |
| Outside Bars | 9% |
| Close > 20EMA | 27% |
| Close > 50SMA | 32% |
| Close > 200SMA | 51% |
| 20EMA > 50SMA > 200SMA (trend up) | 29% |
| 20EMA < 50SMA < 200SMA (trend down) | 27% |
Our custom market statistic, the Trendvue Swing Ratio, hit an extreme typically found at tradable bounces if not market bottoms. We’ll play the long side cautiously and take profits along the way, for as long as it makes sense. How long will that be? 1 hour? 1 day, 1 week, 1 month? No one can forecast this with certainty and we do not try to. Simply paying attention is enough.
In advance of the Columbus day weekend, the bond market will close early today at 2:00 pm; US equity markets remain open on Monday, while Canadian markets will be closed Monday in observance of Canadian Thanksgiving. Trendvue will publish pre-open notes in the newsletter and participate in Trendvue Trader Talk for the first 90 minutes on Monday.
US Market Calendar
- 8:30 am: Employment Report – September
- 10:00 am: Wholesale Trade – August
- 3:00 pm: Consumer Credit – August
Canadian Market Calendar
- 7:00 am: Employment Report – September.
- Bank of Canada Business Outlook Survey
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.
Today's transcript.
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