Wednesday, March 9, 2005
Issue Contents:
| 04:49 | Swing Scanner Results Tuesday March 8th closing data. |
| 04:51 | Market Statistics For Tuesday March 8, 2005 |
| 09:03 | The Day Ahead Economic releases and news |
| 09:27 | Swing Trade Setups Featured charts for Wednesday March 9th |
| 13:39 | Forex: US Dollar |
| 15:25 | Crude Realities Time to pay close attention... |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Tuesday March 8th closing data.
Click on the title above to expand this document.
Statistics for Tuesday March 8, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 445 |
|---|---|
| Symbols in Down Swings | 319 |
| Up/Down Swing Ratio | 1.39 : 1 |
| Advancers | 17% |
| Decliners | 45% |
| Unchanged | 38% |
| Up Bars | 24% |
| Down Bars | 45% |
| Inside Bars | 18% |
| Outside Bars | 7% |
| Close > 20EMA | 25% |
| Close > 50SMA | 59% |
| Close > 200SMA | 65% |
| 20EMA > 50SMA > 200SMA (trend up) | 50% |
| 20EMA < 50SMA < 200SMA (trend down) | 20% |
Good morning – its Wednesday March 9th, the 68th day of 2005. With little economic news on deck for today traders will be keeping one eye looking forward to the release of the Federal Reserve’s Beige Book at 2:00 pm; one eye on the US dollar, as it continues to trade somewhat lower following yesterday’s broad sell-off.
First up: the weekly heart-in-mouth release at 10:30 am when the latest EIA Petroleum Status Report is issued.
US Market Calendar
- 7:00 am: MBA Purchase Applications1
- 10:30 am: EIA Weekly Petroleum Status Report
- 11:00 am: Consumer Comfort Index for the week ended March 4
- 1:00 pm: 5-year note auction
- 1:30 pm: Chicago Federal Reserve Bank President Michael Moskow speaks to the Investment Analysts Society – topic: U.S. economic outlook.
- 2:00 pm: Beige Book
Canadian Market Calendar
- 8:30 am: New Housing Price Index – Jan.
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 U.S. mortgage applications decrease last week
Featured setups from Tuesday March 8, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Tests of tops must always be watched very carefully
- So far, this pull back remains above where we first expect support to come in
- Therefore, until or unless support breaks and a clearer short opportunity arises, we’ll lean to conservative long strategies…
Entry and Exit Strategies
Entries: Each chart posted includes the TrendVue High/Low indicator in the chart legend, showing the high and low of the prior day. We refer to these values frequently for setting stops, alerts and initial protective stops.
Our trade entry methodology stresses that price should prove to us where it wants to go, consequently all of our setups involve placing entry stop/stop limit orders where a trade will be initiated for us automatically, if price is able to move in the expected direction.
When price does not comply, we evaluate the setup to determine if it is either a) an expanding pattern or b) an invalidated setup. For example, a 3 bar bull flag setup that does not trigger can be followed up the next day with a buy stop above the new 4th bar, provided that price doesn’t invalidate the bull flag pattern.
Exits: Once in a trade, we must place an initial protective stop as soon as possible. Consider this stop your crash stop – an emergency measure which you hope will never get used, but is there for your protection in case you lose all connectivity to your broker or some other unforseen event takes place. The initial protective stop, unless noted otherwise, is always at the opposite end of the bar used to trigger a trade.
For example, if our trade setup for a long trade is based upon a break of yesterday’s high, we will use yesterday’s low as our initial protective stop.
The next task for us, once in a trade, is to find the earliest reasonable opportunity to move stops up. Trade and risk management is a highly personal topic; we can only relate to what works for us. In general, once a trade is substantially profitable, or has started to trend on a 10 or 20 minute chart intraday, I move to a break-even stop immediately.
Once the trade has surivied its first day, we are already on watch to look for our profit exit. Here your personal objectives come into play. A longer-term investor using swing trading techniques to improve entry and exit will tend to give a trade some room. Our recommendation is to use the break even stop until the stock starts to trend (higher highs, higher lows or the reverse in a down trend).
Short term swing traders will tend to use price extension estimates and pre-place exit orders at these estimates. This discussion goes beyond the scope of our daily swing trade service, however we are happy to entertain questions in TrendVue Trader Talk on any subject.
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
Retracement or Pause in Up Swing / Up Trend
NTRS – first pause after a big break above the downtrend line. Follow up for one more day if not triggered today.
XLF – Financials ETF – single down bar in still-intact upswing – today only. If it pulls down farther today we’ll want to see it deal with that rising trendline before considering again.
IP – paper showing some strength lately (DTC:C, A:C, NS:C as well) – first pull back. Follow up one more day provided the base of support marked holds.
Test of Top – Continuation
MMM – any test of top is also automatically a short candidate; but since this one has pulled back only a minor amount we’ll want to stalk it long first. The short-side opportunity is to stalk the first bounce and look for failure to sell.
DIA – Dow 30 ETF, same comments as MMM
SPY – S&P 500 ETF, same comments as DIA
Short Setups
We will discuss these in TrendVue Trader Talk today.
Special Situations
High Risk
QLTI – long – disclaimer, I bought this close to the LOD yesterday and have a smallish open profit. Looks like selling exhaustion – I am prepared to dump it at the open if it acts weak at all.
EYET – QLTI’s competitor – note the gap down – often this marks a swing end. Trading well below IPO, something sure is wrong with this stock and the pair of them really stink!
Another weak day for the US dollar follows yesterday’s large breakdown. Lets look at the news and charts and see what targets lay ahead:
USDJPY breaks down out of a tight congestion zone – unless price immediately pulls back inside the wedge, the next major target is the 2005 lows.
USDCAD – having broken through a similar congestion zone, price is starting to accelerate. Canada’s strong commodity resource base continues to be cited as the principal reason underlying the strong Canadian $ performance, even in the face of a slower rate of interest rate hikes in that country.
EURUSD looks capable of retesting 2004 highs, and the measured move of the invest head and should in fact takes it somewhat beyond that level as a potential target. JPMorgan appears to believe so as well:
JPMorgan, the second-biggest U.S. bank by assets, forecasts the dollar will fall to a record $1.38 per euro by June 30, Patterson said.
GBPUSD very similar picture to the Euro.
U.S. Investment Income Trend Ominous for Dollar
NEW YORK (Reuters) – The ongoing decline U.S. net investment income suggests further weakness for the dollar lies ahead, analysts said. “I expect that will become a drag on the current account,” and the dollar, said Binky Chadha, global head of currency research at Deutsche Bank in New York. In the fourth quarter of 2003, the current account gap was 147.2 billion, 164.7 billion in the subsequent three quarters, according to the U.S. Commerce Department.
Over the same three month periods, net investment income flows into the United States shrunk from 13.6 billion, 6.7 billion.
“Unless there are significant changes to the patterns of global external imbalances, it’s perfectly reasonable to assume the U.S. income balance is headed toward deficit from here,” said Jason Bonanca, vice president of foreign exchange research at CSFB in New York.
UBS, JPMorgan, State Street Say U.S. Stock Sales Hurting Dollar
March 9 (Bloomberg)—UBS AG, JPMorgan Chase & Co. and State Street Bank & Trust Co. said information from clients show a ``strong’’ exodus from U.S. stocks that’s eroding demand for the dollar.
``The net equity outflow we’ve seen for the U.S. is a problem for the dollar,’’ said Michael Metcalfe, a senior strategist in London at State Street, the world’s largest provider of investment services to institutions. ``Strong U.S. growth expectations aren’t being reflected in investor flows.’’
Dollar Sell-Off Resumes, Deficits Blamed
“We think that the moves are driven by a renewed focus on U.S. imbalances in anticipation of U.S. trade data,” said HSBC analysts in a research note on Wednesday, referring to the euro’s rally.
Reminder: Trade data comes out this Friday.
US Dollar Index
This morning I snapped the US$ index daily and weekly charts – following any big break down the first thing we look for is either a “pause” or direct continuation. This morning a pause or relief rally in currencies seemed possible, however…
USD Index – as the day has worn on its clear that the Dollar is not getting support. Lows of 2004 are the next target – which is also the measured move and traditional target for a rising wedge – we’ve been pointing out this pattern for some time now.
The big picture:
Following the target immediately ahead, the next measured move, originally drawn out early 2004, takes price between 79 and 77. Its likely the decline will accelerate unless support is found at the multi year lows near 80, dead ahead.
With stocks all over the oil and oil services sector trading up 20, 30, 40% or more in weeks…
VLO
ECA
… and leaving spikes in their wake today, with ADX at high or extreme levels, following a larger than expected rise in oil inventories – its time to get a ready finger on the exit button, or at least take some off the table.
Summary of Weekly Petroleum Data for the Week Ending March 4, 2005
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 3.2 million barrels from the previous week. At 302.6 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year.
… we should therefore at least be open to the idea that this current run may be ready for a more significant pause than we have seen in many weeks, if not a reversal.
First up we will look for support to move in near 52.50 on any decline, retesting prior resistance, now support until proven otherwise.
I’m taking 1/2 my open profits in the oil sector, resigned to perhaps having to rebuy in the days to come, and am prepared to exit the other half soon – tomorrow’s trade will likely tell the tail.
Today's transcript.
Click on the title above to expand this document.