Tuesday, November 8, 2005
Issue Contents:
| 09:09 | The Day Ahead Economic releases and news |
| 09:41 | Swing Trade Setups Featured charts for Tuesday November 8 |
| 09:54 | Futures A gap fill of another sort |
| 13:20 | When up is... sideways Or, how long is your...swing. |
Good morning, today is Tuesday November 8th, the 312th day of 2005.
Market Statistics for Monday November 7, 2005
| Symbols in Up Swings | 418 |
|---|---|
| Symbols in Down Swings | 255 |
| Up/Down Swing Ratio | 1.63 : 1 |
| Up Bars | 45% |
| Down Bars | 29% |
| Inside Bars | 14% |
| Outside Bars | 7% |
| Close > 20EMA | 56% |
| Close > 50SMA | 57% |
| Close > 200SMA | 60% |
| 20EMA > 50SMA > 200SMA (trend up) | 34% |
| 20EMA < 50SMA < 200SMA (trend down) | 23% |
Noted on-line – Bloomberg Podcasts
All remains generally quiet on the economic news front until Thursday this week.
US Market Calendar
- 7:45 am: ICSC-UBS Store Sales
- 8:55 am: Redbook – Nov. 5th week
- 2:00 pm: Daily MMS Gulf of Mexico Shut-in Report
- 3:00 pm: Daily DOE Office of Energy Reliability Situation Report
Canadian Market Calendar
- 8:15 am: Housing Starts – 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.
Price action on the major indexes looks a little tired – it wouldn’t surprise me to see a pull-back today; provided it remains relatively narrow, the mood on the street should remain favouring an upward bias.
What might go up today if the broader markets head lower? Perhaps energy – if the CL/NG pull-back flattens out, that sector could be ripe for a counter trend move up. Stalking the opening lows for a potential turn around and if not will watch over the day. The producers are not going to do much at all until the commodities show signs of holding ground, so no heroics in this sector, please.
Long
CLS / JBL – contract mftg – looking at some bottom fishing – will follow JBL down one more day, so it should be on our lists tomorrow as well unless it really tanks deep back inside the triangle.
ESV – energy services – since our last entry in this sector the services have done far better than the producers. ESV, RDC, DO and similar names need to be monitored daily for setups; included ESV here as it has a test of top playing out.
GW – smaller energy services name. Sure has a gappy chart… caution.
Short
COCO – education – has a small triangle here
COCO – weekly shows a descending wedge and reason for caution, but I’ll stalk the short regardless.
BJ – wholesale retail – if price remains under the mid point of the tall down bar this remains a short candidate
!
Its been a while since we’ve seen a gap down – is that it for this rally, or is this merely a pause? At this point, there’s not enough on the chart to fashion a guess either way – what really matters is where price goes from here.
First trade:
Stalking this scenario
Bigger picture:
Key levels:
- Overhead resistance lives under the lower end of the upper-most trading range at 10575; if markets can’t regain that level and turn it back into support, we may see a deeper dip form over a longer time period.
- 10530 is the likely do-or-die point – if it fails to hold as key support then 100% of the gains obtained from the rally off Nov 4 lows is more likely than not going to be lost, and sentiment will start to change if so; certainly if 10480 fails to hold as support we’ll see speed pick up to the downside.
In the meantime… the bias is still up but even in an uptrend a little pause must fall.
While we wait for the Dow/YM to break resistance near 10475, lets look at the really, really big picture and consider the monthly index charts of late:
Nasdaq Composite, S&P 500, Dow 30 – monthly
Here’s what we are looking at, in a nutshell:
- consolidation patterns drawn out over two years
- a longer term upward bias in the continuation pattern only in the S&P 500 although perhaps we can argue the same for the Nasdaq composite.
- price has moved above last month’s high only on the Nasdaq, but not quite enough to trigger a new up-swing… close, but not quite yet.
The last point is one of significance, as we know that a trending market, as opposed to a consolidating market, will generally have swings longer in the direction of the trend. Lets zoom out and review the swings of the past five years, using the Nasdaq composite for this exercise. The number of bars in an upswing are marked in blue, downswing lengths are marked in red.
This observation is useful in all time frames – on an intraday chart then the up-swings are generally longer than the down, we know we should stop shorting, and vice versa.
What’s most interesting about the consolidation zone is its age… and its narrowing to a point. Following range contraction we find range expansion – and this is where the real money is to be made. If up, then an Edwards and Magee price extension would have price run to the 3100 levels; if down… 1500 or lower would not be out of the question, but the base of the consolidation patterns is the first, major, target.
Our most important job this year is to be on the right side of trade when price leaves this consolidation for good – whatever direction that might be. That point, if up, is likely to be soon, as price is positioned for an attempt already.
Biggest risk? That would be the rising consolidation patterns (COMPX, SPX) break down and follow the typical rising wedge scenario – revisit the base of the pattern.