Friday, November 4, 2005
Issue Contents:
| 09:18 | The Day Ahead Economic releases and news |
| 09:34 | Market Direction Where's the surprise... |
| 09:52 | Swing Trade Setups Featured charts for Friday November 4 |
| 11:02 | Market Update Into every rally a little profit taking shall fall. |
| 14:15 | Afternoon Trade Patience pays? |
Good morning, today is Friday November 4th, the 308th day of 2005 and the end of a long couple of weeks for me.
Pre-open index futures have been trading mixed but are now pointing somewhat higher after this morning’s only meaningful economic news release, the all-important Employment Situation report
(U.S. October Payrolls Rise 56,000, Trailing Forecast).
On the other side of the 49th parallel, Canada’s jobless rate dipped to a 30 year low in October, coming in with a surprisingly strong report. (Canada Jobless Rate Dips to 30-Yr Low on 68,700 Jobs) An economy running at or near full capacity is an economy that can usually expect more interest rate hikes and the initial forex reaction supports this expectation.
Market Statistics for Thursday November 3, 2005
| Symbols in Up Swings | 550 |
|---|---|
| Symbols in Down Swings | 123 |
| Up/Down Swing Ratio | 4.47 : 1 |
| Up Bars | 73% |
| Down Bars | 10% |
| Inside Bars | 7% |
| Outside Bars | 6% |
| Close > 20EMA | 61% |
| Close > 50SMA | 56% |
| Close > 200SMA | 57% |
| 20EMA > 50SMA > 200SMA (trend up) | 34% |
| 20EMA < 50SMA < 200SMA (trend down) | 25% |
US Market Calendar
- 8:30 am: Employment Report – Oct.
Canadian Market Calendar
- 7:00 am: Employment Report – Oct.
- 10:00 am: Ivey Purchasing Managers’ Index – Oct.
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.
The pundits are starting to sound a little giddy again; perhaps its time for a pullback! Despite this, the surprise move for today is probably more up. The first retracement (happening right now) should be bought above, particularly if the pre-open gap is ,filled, although if the dip underway slows near 10530 I’ll be jumping in there with a first attempt at a long as well.
YM Futures, key levels:
First significant support is 10495, then 10450 and 10390 near the two day low after that. If this rising wedge fails to breakdown, then the formation turns into a bullish running triangle and we’ll look to classic Edwards and Magee price extension which suggests a move of up to 200 points from here – near 10700 – 10750.
Once I’ve calculated the potential price extension then I look at a bigger picture chart to see if it makes sense at all:
And indeed it does, with a major hurdle first at 10650 to deal with, before attempting to unwind the decline since September 12th.
Just remember – we don’t buy or sell based on price extensions. No analyst can predict the future. All we can do is identify likely price targets and then use our experience to guess at what will happen if price keeps following a certain path. If indeed support is found at one of the higher levels noted above, then we’ll want to be adding to positions on dips, probably for some days to come.
Today is all about continuation, particularly in the leaders. On Monday we looked for strength in the semi-conductor space and true to form, they have really powered up the Nasdaq. I don’t plan on shedding all of my positions but am trailing 1/2 size profit stops fairly tightly now – several 20M swings back – and, if stopped out on these, will be looking to top back up to full size on weakness.
In the meantime… protect profits, and embrace a down day, if one shows up, from the sidelines. If we see in the coming days a pull back show up for a session or two, that will be a good thing, as long as key support levels below are not broken.
Long
QLTI is building a ledge here off what was a move up from significant lows.
Short
HUM – Healthcare
PDLI – early stage biotech
IGT – gaming
CCU from earlier this week is still just hanging in there…
The question of the week (likely next week really) is whether the current upper-most range remains resistance or turns into re-confirmed support (today or Monday):
Now that the gap from yesterday has been fully filled, we’ll want to stalk the index futures or stocks on the long side, either aggressively directly off the gap fill (tight stops please!), or, after price regains support overhead – stalk the first retracement following that point (illustrated).
I see many energy names have sold off sharply, suggesting a bear flag trigger failure setup (long) trade for Monday. Aggressive traders should also be looking at key names in this group – ECA, TLM, APA, APC, VLO, MRO and the like for potential intraday reversals – for the bear flag trigger failure to easily work on Monday, price will have to rally 1/3 – 1/2 of the day’s range before the close today. If so, I will hold on to any new positions added.
If you squint at the chart you’ll see a rather loopy looking declining wedge – whatever we call the pattern, its clear there is a declining consolidation building, provided the 10500 area generally holds up as support today:
Its time to hunt down minor retracements that may appear right now (2:10 time frame) – look for a minor pull back after the trendline breakout as illustrated:
We might not see much of a pull back as sellers have been thwarted a number of times today. First targets: 10530 and 10560.
Provided price doesn’t break down very big today, I think we’ll find opportunity on the long side on Monday, and perhaps, finally, some more candidates will show up in the scans, using today’s move down as fuel for a move up next week.