Thursday, May 12, 2005
Issue Contents:
| 13:49 | Market Direction Update |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 16:24 | Swing Scanner Results Thursday May 12 closing data |
| 16:25 | Market Statistics Thursday May 12, 2005 |
| 16:31 | Swing Trade Setups Featured charts for Friday May 13 |
| 23:24 | Quick Take: Forex & Gold |
Following up on yesterday’s Market Direction note we are about to learn whether the key support levels mapped out then – 1460 NQ, 1170 ES, 10300 YM – hold, or turn into new resistance.
The day started out with a solid attempt to hold support but all attempts to move higher have so far been met by sellers, including myself.
10:31:20 Mike: 2B Test of top 5M chart: regardless in the early going provided price has not pulled back too much we expect it to try again…
10:38:55 Mike: 10313 SELL STOP LIMIT
10:39:29 Mike: can’t help but try but I will have to risk quite a bit of today’s profits initially I suspect
10:39:48 Mike: 1469 SELL STOP limit
10:44:45 Mike: otherwise, I may just get to stay short the balance of the day…. lets look at what brought us to this crazy decision to short what seemed like a strong market and decide if it made sense at all…
10:45:09 Mike: 1. Test of top in YM- check, always makes sense to consider the potential for a bend in the trend at such times
10:45:40 Mike: 2. Price weaker except in tech – not a full point to the short side – tech often does lead big rallies and I’m always cautious when it is stronger.
10:45:53 Mike: 3. Rising wedge in Nasdaq – check
10:47:25 Mike: 3. Nasdaq hits its last big target, the overhead resistance from late march / early april – check
10:48:06 Mike: (and that’s one giant rising wedge on the 135M chart – one I really don’t expect to revert to the norm and revisit 2005 lows but we never know….)
Is the rally over, kaput? Perhaps it is, perhaps not. Yesterday’s low has to break first before folks will get really excited, myself, I prefer not to wait that long and will happily take profits as my quite-tight profit stops (on long positions) are hit one by one between now and then.
Here’s where the short term oriented trader has it all over the buy and hold folks – when a major support level breaks down, we can shoot and ask questions later.
Today's transcript.
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Thursday May 12 closing data
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Statistics for Thursday May 12, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 334 |
|---|---|
| Symbols in Down Swings | 413 |
| Up/Down Swing Ratio | 0.80 : 1 |
| Advancers | 23% |
| Decliners | 75% |
| Unchanged | 2% |
| Up Bars | 37% |
| Down Bars | 30% |
| Inside Bars | 10% |
| Outside Bars | 17% |
| Close > 20EMA | 23% |
| Close > 50SMA | 36% |
| Close > 200SMA | 47% |
| 20EMA > 50SMA > 200SMA (trend up) | 25% |
| 20EMA < 50SMA < 200SMA (trend down) | 29% |
Featured setups from Thursday May 12, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Hey, its Friday the 13th!
What a day Thursday was – well, we knew that the market was poised to break down below support; can DELL bring all boats back up above? Seems unlikely, but we are in the exploit the surprise biz, aren’t we?
If overnight there are currency or crude moving developments we’ll look at those sectors in the morning. Weak intraday bounces in energy may also provide opportunities to a) lighten up if you have not already or b) short for aggressive traders.
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
RON:C – Canada’s version of HD – reported and with not-bad results really so personally I plan to avoid shorting and will stalk a long another day if it doesn’t play out on Friday.
KLIC – classic 2B test of bottom with a harami bar following the marginal new low – this truly can be played both ways.
MRK – similar to KLIC but this is the bottom end of a range; while the drugs are classically defensive, everyone things so and sometimes everyone is dead wrong. Extra-caution no matter what direction it goes…
Retracement or Pause in Up Swing / Up Trend
QQQQ we can go both ways on QQQQ, provided we can get any shares to borrow for a short; lets be cautious with shorting tech as clearly there has been some rotation going on as of late and tech has been the beneficiary.
MCD, reported, in the middle of its range, and the only oil it uses is for making fries. Like many names which have better-weathered the recent weakness we’ll only want to hold this long if it clears and holds above the two-day high.
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
VRTS – bear flag, classic
PMCS
UIS – single up bar in a downswing gives us a somewhat safer place to play the short here
SBC – stalk short here ahead of a retest of recent lows
FCS
SYMC has sold off so much the natural reaction is to remain cautious or avoid, but everything can get cheaper – bounce on light volume has the makings of a bear flag here
IPG – advertising, in news recently in conjunction with automakers
IQW.SV:C – Quebecor, printers/media – perhaps it needs to bounce a bit more here; time to stalk regardless.
PCA:C / PCZ:NYSE – I can’t often bring myself to short the oil group; there are plenty of other sectors to short that don’t sell products that run the economy – but clearly there is a lot of “hot” money in the sector and its entirely possible momentum will keep hammering prices down until a bad inventory report shows up.
Test of Bottom – Continuation
KLIC – classic 2B test of bottom with a harami bar following the marginal new low – this truly can be played both ways.
Special Situations
Low priced picks of the day… don’t forget to follow up on the past day or two.
ZL:C – rather hated by many in Canada
Thursday delivered rather big moves as patterns resolved to the norm all over the place, spurred on by a stronger than expected US retail sales report, and no small amount of expectation this was coming no doubt. More interesting than the big sell off in Gold and forex Thuesday will be what happens in the immediate few days…
Forex
GBPUSD – breaks down out of the later triangle, after failing to regain levels above the broken trendline earlier in the week. Note ADX is starting to curve upward from low levels, the makings of a trend are here.
USDJPY – rumours of Yuan revalutation had been lending additional support to the Yen, and this quickly undone today, keeping a pattern of higher major swing lows and highs for the USD-JPY pair intact for the time being.
EURUSD – hit its lowest level in 2005 today amid generally pessimistic news.
Gold
With such important patterns breaking down in major currencies it was inevitable that Gold should sell off, all day long, and so it did:
Gold, Continuous Contract – Daily: broke down out of the decending triangle. For the next day or so we’ll be watching for weak bounces under which we’d want to sell (or sell the gold stocks) but also for any surprise push back into the pattern above. Occasionally when a pattern completes or breaks down on news, the trade everyone expects to work fails.
Last year I wrote that Gold rallies historically last 2 – 3 years with long periods of drought; this current rally was then already far older than that, and has aged yet another year. While there area many arguments that suggest the USD should weaken and Gold therefore benefit, I prefer to keep the historical context in mind and trade in and out gold rather than believe in it as a magical store of value.
There will be another time to be long the group, but it certainly wasn’t the time to be long on Thursday.