Friday, February 11, 2005
Issue Contents:
| 09:00 | The Day Ahead |
| 09:18 | Quick Take: Currencies and Gold |
| 09:28 | Swing Trade Setups Featured Charts for Friday Feb 11th |
| 11:10 | If at first you don't succeed |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning – its Friday February 11th, the 42nd day of 2005.
Today there are no significant scheduled economic data releases on either side of the border so market direction is purely in the hands of traders responding to yesterday’s news and price action.
Later in the day Fed Govenors Bernanke and Yellen speak in Palo Alto:
- 3:45 pm (ET): Federal Reserve Governor Ben Bernanke to speak on inflation control in Latin America, at the Stanford Institute for Economic Policy Research summit, in Palo Alto, California.
- 4:50 pm (ET): San Francisco Federal Reserve Bank President Janet Yellen participates in a panel discussion on U.S. economic outlook, at Stanford University, in Palo Alto, California.
On the with the day…
Quick Take: Currencies and Gold
Our decision to get into gold two days ago proved timely; yesterday many names gained 2 to 3% and a few energetic gold stocks moved as much as 5% on the day. What’s more important is that there is a potential bottom forming here, so an early entry is even more important for those who plan to ride out any noise for the next few days with a break even stop, hoping to have caught a lasting bottom for a multi-week trade.
Currencies Strengthen Against USD
But across the board, there is still room for a reversal of the last day’s price action and continued USD price appreciation:
GBPUSD – a test of bottom, so far successful, but also a stealth bear flag forming for the time being unless price holds abvoe the 20EMA just above. New GBP longs would not want to see the low of Thursday’s tall up bar broken.
USDJPY – spike top at the range high test. Traders will be watching this one carefully for confirmation of a reversal (not here as yet).
EURUSD – so far just a bounce in a down trend, however if it can push above the range bottom immediately overehead and hold, we are likely to see EUR run higher for a while, possible target around the 1.32 range before pausing or reversing again.
USDCAD – has dropped back into the range and unless it turns around shortly I’ll be converting some funds myself.
Gold
Ready for Good or Bad (depending on your outlook and trading stance) scenarios?
First the bad, a possible ultimate target should gold break down below the recent swing low:
And the “good”, at least for the short term – price has pushed back up into the range above with a solid push up, and its easy to imagine the declining trendline being bought by excited gold bugs if broken.
Incidentally, immediately after any such trendline break is when we should be on high alert to exit (if we are scalping quick profits) or to ready a buy stop above any decline which immediately follows a trendline break (if we are not already long).
We’ll follow up on this as the days unfold.
Sorry for this abbreviated report – having a few issues with technology here this morning.
Yesterday in Trader Talk I quickly ran through a number of names which had fairly simple pull backs – bull flags – which may trigger this morning if there is any strength. Among the names were tech stocks such as EMC
EMC
the SMH Semiconductor ETF
.. and a variety of “old economy” names as well. Please scan the discussion for more, and tune into this mornings Trader Talk for more setups in the next few minutes.
Before getting aggressively long here its critical that markets prove themselves by holding the last major swing low, ideally pushing directly up into the ranges above. Charts to follow.
Going into the end of the week we’ve been following this premise that trading on the long side made the most sense, even when it doesn’t look particularly sensible in the short term. Our rationale has been supported all along by the position of price against major resistance/support levels.
Support and resistance trade places all the time – when price breaks key overhead resistance, and holds above, we consider old resistance to now be new support. Frequently such moments are marked by significant rallies or attempts to rally.
We’ve certainly had the latter, some times in a matter of minutes (yesterday), and now markets are once again attempting to hold these support levels. An early long this morning is once again giving us the comfort to go to a break even stop and wait things out.
Swing traders operating only off the daily chart will be looking at QQQQ at the moment as its triggered against yesterday’s high. Ironically this entry will be more difficult and initially more dangerous than our intraday trade, but at least there is a premise backing up an attempt. Lets look at the big picture charts:
S&P 500 futures in fact have been the strongest of all markets from a support/resistance perspective, having turned old resistance into new support by a signficant margin in the past few days, then failed, and since recovered again as of yesterday and reconfirmed this support this morning. +1 for the long scenario and a big heads up.
Dow 30 has not acted quite as strong, but even as I write this the chart now shows price solidly back in the range. +1 for the long scenario.
Nasdaq 100, the poor cousin, has a completely different and much more complex picture. However yesterday and today I attempted and obtained successful long entries at the relative lows of the day, encouraged to make the attempt by a) the price action in the broader markets, b) Nasdaq itself traded much more solidly starting Thursday, and c) Nasdaq has been pushed down so far and hard that IF a rally of any lasting nature shows up, the percentage gain potential in that market will (likely) quickly overshadow a more conservative trade in the S&P.
In the end I selected Dow and Nasdaq for my futures swing trades, complimenting Gold longs and broader market ETF longs from earlier this week (Canadian).
Having a plan is important; but even more important is having two or more plans. Had markets not reconfirmed that old resistance is new (apparent) support, we very quickly would have shifted gears to short the market.
Today's transcript.
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