Tuesday, April 12, 2005
Issue Contents:
| 09:22 | Swing Trade Setups Featured charts for Tuesday April 12th |
| 11:59 | The Day Ahead Economic releases and news |
| 12:36 | Market Direction Touchdown... |
| 15:00 | FOMC Meeting Minutes Spark Rally |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 19:15 | Swing Scanner Results Tuesday April 12th closing data |
| 20:29 | Swing Trade Setups Featured charts for Wednesday April 13th |
Featured setups from Monday April 11, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- My apologies for the late trade posting today – following oral surgery yesterday I was a little too spent to go through the usual several hundred charts. Today I will be in TrendVue Trader Talk on a part time basis – there fore the open and first two hours, and the last hour or two – and I shall be posting swing trader for Wednesday within a few hours of the close. Hopefully by Wednesday both myself and the schedule will be more or less back to normal.
- In reviewing charts and considering the indexes there appears to be some chance that a gap down open today may provide the catalyst for selling exhaustion – be wary in new shorts in the early going. We need to see a down trend below yesterday’s lows before any sense of comfort in a new short can be had.
- I will be posting additional swing trade setups in the first hour today.
- Note “Special Situations” for an up/down strategy for the SPY / S&P500 ETF
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.
Retracement or Pause in Up Swing / Up Trend
CL – consumer products
XLE – energy ETF. Caution because many individual charts have dark cloud covers or bearish formations.
TLM – energy
ECA – energy, note the dark cloud cover. Caution. Sometimes surprises happen at such times, I have to stalk the sector until a real trend down is clear.
Test of Top – Continuation
CNO – insurance, demand three day high is taken out and strong close in order to hold
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.
Test of Top – Reversal
FD – retail – one day only under the break out attempt above the ledge. High ADX.
Special Situations
SPY – immediately following a wedge or major trendline break there exists an opportunity to capitalize on “break out failure” – if price can’t continue down today and pushes up strongly we’d want to take the long, subject to our usual concerns over buying here while rising into overhead resistance. But, until proven otherwise, the direction is down – following a break of the two day low (almost guaranteed at the open) we should stalk a weak bounce to get short.
AGR.B – semiconductor – used as an example for many semi names – if today sets up as selling exhaustion in the broad markets, we’ll want to be ready for a long above yesterday’s high in some names including perhaps AGR.B or SMH the sector ETF. I’ve highlighted AGR.B here to show the piercing line – its a less common bar that can sometimes precede a turnaround.
Good morning, its Tuesday April 12th, the 102nd day of 2005.
This morning’s installment of The Day Ahead is a little late as I am recuperating from oral surgery. Lets catch up quickly here.
As pretty much everyone expected, the US Trade Deficit was large, perhaps a little larger than some expected as it hit yet another record at $61 billion dollars with a 4.3 percent rise in the gap following directly on the heels of a 5% rise in January.
``While we imported the necessities, we didn’t sell a lot to the rest of the world,’’ said Joel Naroff, president of Naroff Economic Advisers in Holland, Pennsylvania. ``As for the Fed, this report would likely mean more measured rate hikes.’’1
The US Dollar, once weakened by such news, moved up as this environment suggests the Fed may remain on its interest rate increase path. Currently the US Dollar Index is up 0.76%.
Also this morning, Canada’s equivalent to the FOMC, the Bank of Canada, held interest rates again2.
Of particular interest to interest rate watchers this afternoon, the FOMC meeting minutes from the March meeting will be released. You’ll recall this meeting is where the tone shifted towards more concern over inflation – now we’ll find out just how widespread the concern was. Bond and equity markets are certain to react to the revelation (or lack thereof). Stay tuned…
US Market Calendar
- 8:30 am: Goods & Services Trade Balance – Feb.1
- 8:55 am: Redbook – Apr. 9th week
- 2:00 pm: Treasury Budget – Mar.
- 2:00 pm: FOMC minutes from March meeting
Canadian Market Calendar
- 8:30 am: Merchandise Trade Balance – Feb.
- 8:30 am: New Housing Price Index – Feb.
- 9:00 am: Bank of Canada Interest Rate Policy Announcement2
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. Trade Deficit Widened to Record $61 Bln in Feb.
2 Canada’s Dollar Falls as Bank of Canada Leaves Rate Unchanged
Its time to take stock of what has transpired since our rather timely warning on Friday. You’ll recall while price was within pennies of the recent highs on Friday:
09:50:15 Mike: Speaking of consolidation patterns, the grand-daddy of them all is this rising wedge on Nasdaq
09:52:03 Mike: It has to potential to turn into a running triangle, which is a very “bullish” outcome, but all rising wedges also have a dark side, target is the base of the wedge. I was trading NQ yesterday on the long side on the expectation it may try to break higher and in fact it did but can it hold it or will the alternate, darker scenario, rule…
10:05:38 Mike: 1508 SELL STOP LIMIT NQ DANGER, high risk.
10:06:03 Mike: Only reason I am doing this is to try to capture the VERY top of a rising wedge.
.. and then re-iterated in Market Direction that same day:
A potential change of trend is in progress here:
YM – Dow 30 FuturesIn the early going we don’t panic, but we do get defensive. IF price starts to trend down below resistance here on the 5 and then 15M charts, we THEN call it a confirmed change in trend. Currently am short from 10550 with a break even stop in place.
NQ – Nasdaq 100 FuturesA similar picture exists on Nasdaq although it had taken over the leadership position over the past two days. Currently am short from 1508 with a break even stop in place, trade setup was a 2B test of top (shown) and the bigger picture is a rising wedge to resistance.
Last week the pundits were talking about rallies, this week they are talking about deficits and interest rates again. Lets just let price talk to us instead.
I’‘m still holding 1/2 of my YM (Dow) and NQ (Nasdaq 100) shorts, just in case sellers pile on to Nasdaq again and bring it back down to the 2005 lows, as YM / Dow 30 has achieved this morning.
The collapse in new 52 week highs today does suggest that there is at least a chance that the last three days of selling are signs of selling exhaustion, but we’ll want proof before getting aggressive on the long side. If an honest to goodness up trend develops here intraday I may take further profits, but am in no hurry.
If you are not already defensive or net short, and are a longer term investor, its probably too late at this point to switch gears unless price starts to trend below the 2005 range lows on any larger intraday time frame such as the 14 or 45M charts.
With YM retesting the 2005 lows today its likely we’ll know the outcome soon enough this week; if the range lows do not hold we can expect a revisit of the 10,000 level, with a first target at approximately 10150.
FOMC Meeting Minutes Spark Rally
As expected, the 2:00 pm release of the FOMC meeting minutes did indeed get the market moving. There’s no way to game this before hand – like on the day of an interest rate policy decision, trader reaction to anything that comes out of the fed can only be guaranteed to be one thing: *Volatile.
From the Minutes of the Federal Open Market Committee March 22, 2005:
In discussing the announcement to be released after the meeting, members agreed that it was appropriate to acknowledge the recent evolution in the inflation situation by indicating that “though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power is more evident.
Members also focused on the issue of whether to reiterate the judgment expressed in the Committee’s recent statements that ”. . . policy accommodation can be removed at a pace that is likely to be measured.” Some expressed the view that such language could constrain future policy inappropriately; while these concerns were not new, they were now felt to be more pressing, as the odds that the Committee might need to step up the pace of policy firming were thought to have increased.
To my eye there is little of surprise in the release, and it may be the absence of surprising language that is propping markets up. I’ve picked up some long exposure, closed out most, but not all of my short exposure, and will wait until tomorrow before dramatically alerting my swing trade and investment stance.
Today's transcript.
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Tuesday April 12th closing data
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Featured setups from Tuesday April 12, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- With the volatility seen lately, need I remind any one to be careful and get break even stops in place once price starts to trend away and in favour of your position?
- I’ll be hunting more short candidates in the morning. Few turned up in my scans this evening – this is more a reflection of the volatility I think than suggesting the turn about in markets is conclusive. We can always gain short exposure via SPY, QQQQ and DIA – in particular if QQQQ or DIA revisit the lows of Tuesday, we’ll want to stalk any weak bounce near there to get short.
Overriding notion: Caution. It may seem, and probably is, unlikely that markets will do a direct turnaround and head back down tomorrow, but that’s what folks thought this morning I bet, and on Friday last week… this market is nothing but total turnarounds and price is right back in chop. One positive which we’ve been noting frequently over the last few days are the number of stocks with 5 – 10 days of selling exhaustion printed on their charts – little areas of parabolic-shaped movement down. This sort of price action is exactly what we’d expect to see near a major turn around back up.
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 triggers, makes for a find short, hits target, and reverses back into the pattern above – all in one day. Phew!
MCD – consumer fast foods
QLTI – healthcare/pharma – warning, CFO resigned, news yesterday. Gaps are quite often turning points, if even for a few days sufficient to put a swing in.
Retracement or Pause in Up Swing / Up Trend
BLS – telecom, another location for an entry following March 30 setup.
VZ – telecom – piercing line and the sector is generally getting a boost. Some other candidates have acted stronger however. (BCE:C, BLS over last few weeks…)
BRCM – tech – support at low of last weeks tall up bar held, so far. Also QQQQ and SMH would be worthwhile proxies to stalk if this rally continues tomorrow, simply buy the first reasonable retracement and get to break even as soon as possible.
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
FRX
Special Situations
Gold – The US Dollar reacted positively to the trade data, but the reaction wasn’t strong enough to break prior swing highs and may end up reversing before long.
US Dollar
Stock markets rallied on the premise that the Fed won’t be raising rates aggressively, yet the dollar rising depends on this. Clearly one or the other will be wrong, so we’ll watch Gold until the end of the week (more $ moving reports to come out this week) here just in case.
PDG
NEM – triangle break out failure potential
ABX – Congestion break out failure potential
FCX – piercing line