Friday, April 1, 2005
Issue Contents:
| 06:48 | Swing Trade Setups For Friday April 1st, including market direction comments. |
| 08:09 | The Day Ahead Economic releases and news |
| 09:30 | Headlines and Reaction: Employment |
| 14:13 | Touchdown II |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 21:08 | Friday File |
Featured setups from Thursday March 31, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Focus today is protecting long and short positions already on-going
- Golds and oils from yesterday – get to break even stops, particularly in oils – there is no reason for these to come back. Gold – premarket is trading down marginally and the USD has gained a little. Watch the sector carefully. I did not buy into the sector yesterday, am hoping for a minor down bar today which will leave an ideal long entry for Monday.
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
QQQQ – disclaimer, I’m already long QQQQ off an intraday entry mentioned in Trader Talk two days ago, and am still holding with a break even stop. QQQQ ( and all the broad indexes) can be stalked both long and short above and below the narrow range or inside bars present. In the case of QQQQ in particular the test of bottom is still on-going.
Russell 2000 Index – included here to show how to deal with RUT and its ETF, IWM:
First, note the trendline break. Unskilled buyers frequently cry out “its a breakout!” when a trendline like this is broken, and buy, only to find price sink back below. We can exploit this tendency and wait—IF price pulls back the first trade I will look for is a minor down bar today over which to put a buy stop on Monday next week. We can also stalk the 2 day high today for a new long but must demand that price move up strongly in our favour today if triggered.
IWM – matching ETF for RUT
Retracement or Pause in Up Swing / Up Trend
AMAT (perhaps also KLAC) – big outside bar, but we should still stalk a long. One benefit of our approach is that it costs nothing to let price come to us…
KLAC – see AMAT comments. SMH etf might be used as a proxy as well.
Test of Top – Continuation
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
DIA – Dow 30 ETF – one day only, monitor the low of yesterday’s inside bar and prepare to short or use this as a trigger to consider exiting new longs. We want to avoid making decisions based on a minor wiggle through either the high or low of these inside bars. We also must keep in mind that since yesterday’s trade held within the upper 1/3 of the range of Wednesday’s tall up bar, we should give the benefit of doubt to further upside, at least for today.
That being said, in the early going of a bounce above a major retest which was not completed (2005 lows) we have every reason to be a little aggressive on the short side and be ready to capture and exploit failure.
Again DIA inside bar can also be used to lever a new long – hold only if price closes quite strongly in your favour.
SPY – similar comments to DIA and QQQQ. I’ve marked overhead resistance – even if price continues up today we should not have our expectations for a lasting bounce be set to high until price starts to trade above 119 and HOLDS there. My approach is to be long and not scalp minor profits – so I will not be moving profit stops up on new longs until resistance is hit—I am quite content to let any recent entries stop out at break even. At such a time my primary goal is to protect good entries, not scalp minor profits. Another approach that marries the best of both worlds is to take profit on 1/3 or 1/2 of your positions if they stall in the days to come, and let some run longer just in case this bounce turns out to be more than a failing rally in a new bear market.
Test of Bottom – Continuation
COF – financials – stealth bear flag forming
BEAS – stealth bear flag forming
FDO – retail – weak bounce just inside the range, perhaps may pull a WMT which delivered a nice short trade yesterday. Hold only if short closes below Wednesday’s low.
Special Situations
ISSI – long – after breaking through the trendline earlier this week has pulled back – taking one stab only at trying to capture a move back out of the triangle and up.
Good morning, its Friday April 1st, the 91st day of 2005.
Today traders are wondering what April Fools jokes the market may have for them – following the rather impressive reversal this week, yesterday’s inside bars or trade largely in the upper end of Wednesday’s range can be seen as a pause or indecision, while traders square off taking short term profits and size up the risk of getting long or remaining short. Such pauses are common following a big range day, what’s more important is what happens today. Consequently the high and low of yesterday will be closely watched.
We have two market moving economic reports today – Employment at 8:30 am ET and the ISM Manufacturing index at 10:00 em ET, along with the usual concern over the price of oil, to move markets today.
Prior to the open crude is trading up more than three quarters of a percent over yesterday’s close, although at 55.82 remains below yesterday’s $56+ high. Stock index futures are up over yesterday’s close but we can expect this to move strongly one way or the other in 20 minutes when the employment numbers come out, as this market is in search of a reason to do something. Too strong growth? Fears of inflation. Too weak growth in jobs? Fears of stalling economy. A middling report? Perhaps that might be the best, as traders will look to oil and ISM report later in the morning for direction and give us enough time to have our first coffee!
US Market Calendar
- 8:30 am: Employment Report – March
- 9:45 am: University of Michigan Consumer Sentiment Index – March
- 10:00 am: ISM Index – March
- 10:00 am: Construction Spending – February
- 4:00 pm: Auto Sales – March
Canadian Market Calendar
- No releases scheduled
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.
Headlines and Reaction: Employment
The economy pumped out far fewer jobs last month than most economists projections, coming in 1/2 of the median estimate of 213,000 at 110,000. As would be expected, stock index, currency and gold markets move rapidly on the news. As might not be expected, the direction price is likely to take today is far from certain.
YM – Dow 30 futures
`This will start to take the idea about 50 basis points (increases) out completely,’’ said Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, one of the two-largest bond brokers. ``Anyone thinking the Fed’s going to go 50 are now back to the `measured pace’ idea.’’1
Maybe. Probably.
Unsurprisingly the US Dollar did take a big hit initially, rebounded, and is now driving lower:
Perhaps surprsingly, Gold is also heading lower:
Moral of story: news events, especially big surprises, often end up pushing price in unexpected directions – the best plan is to sit back for a bit and let the smoke and noise clear….
1 U.S. Treasuries Gain as Economy Adds Fewer Jobs Than Forecast
Touchdown: For those that followed along with the short done on YM in the early going this morning, with all targets hit we should be taking at least some off the table as profit here.
INDU – Dow 30 Industrials cash index has now hit the final target for this week as it revisits the March lows; only the February 2005 low now remain as a final bastion of potential support:
INDU – Daily
Its important to put this test in context with the big picture – up to this point the dominant trend – UP – remains intact albeit price has been moving sideways in the shorter time frames (daily) in range now for several months. This price action is the very definition of trendless, although the swings have certainly been tradable in the short term.
INDU – Weekly
IF price breaks througth the 2005 lows now not far away and begins to trend lower – for my purposes any trend which emerges in a 45 minute chart or higher time frame (daily) will do – we have to conclude that the broad up trend which started in 2002 has ended, until proven otherwise. A trend we will all recall, is a series of higher swing highs and higher swing lows in an uptrend, and exactly the reverse in a down trend.
We should not expect immediate or dramatic confirmation of this, nor should we fear buying if suitable setups show up here at this test of bottom – the purpose of this note is to set the context for the next few days, perhaps 7 – 10 days, so that should it become necessary to flip from being generally in favour of stalking the long side to generally cautious or short. We are nearing that point.
At the same time knowing the importance of this area of support can assist us in deploying cash for new longs when all looks bleak. If it appears that support will hold, significant rallies can be expected – at least sufficient enough to get new positions quickly to break even stops.
Today's transcript.
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