Thursday, July 21, 2005
Issue Contents:
| 08:30 | China Moves Peg |
| 09:07 | Swing Trade Setups Featured charts for Thursday July 21 |
| 10:23 | Market Direction Heads Up |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 22:05 | Swing Scanner Results Thursday July 21 closing data |
| 22:07 | Market Statistics For Thursday July 21, 2005 |
Markets are likely to overreact and perhaps act in unexpected ways this morning as China announced an immediate revaluation of the yuan to the US Dollar, moving the exchange rate by 2.1%.
This was not an unexpected move – pressure has been mounting for some time – yet now that the reality is here it will still catch many off-side as a new risk dimension is now a reality. Market participants also have to weigh the impact…
- immediate impact to the USD and rise in Gold at least for the short term
- lowers import cost of US denominated commodities, helping China control inflation… but also buy more if their growth demands as it seems to be
- bond market will be hit immediately, potentially we’ll see yields head higher from here in the longer term
We must remember that a revaluation of the yuan, linking China’s currency to a basket of currencies, has been expected for some time yet even as the process starts to unfold, much is not known and most importantly the composition of the basket of currencies has not yet been announced. Markets don’t act rationally when information is sketchy – expect plenty of volatility today and as this story unfolds.
Featured setups from Wednesday July 20, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups
Notes for the Day
- CAUTION !! Ahead of the open currencies are very volatile; oil has made a big swing down then up; stock index futures have been all over the map…
- Premarket crude futures suggest energy sector may be hit although crude itself has been extremely volatile in both directions all night and particularly since the Chinese currency news has firmed after an initial sell off. Pick your favorites and be ready to be long, stay long, or get longer if a surprise rally shows up but at the same time it may be time to take profits for a few days.
- Breaking news from London regarding reports of bombs, smoke on a bus and/or the subway. Parts of the underground system have been closed while authorities get to the bottom of what is going on. So far the incident does not appear to be serious or on the same level of the attacks earier this month.
- Slim picking on the long side but that’s more a reflection that prior longs have been moving up without much pause. Keep cranking protective stops higher…
- be cautious about gap up open and reversals for long-side trades..
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
INTC – be cautious about gap up open and reversals; target – gap fill and beyond
CNET – in a big complicated but generally bullish consolidation zone, stalking a long here today only to capture potential breakout of CNET and continuation of tech market overall.
BHI – energy services – similar comment re CNET.
Test of Top – Continuation
CCE – can be stalked long or short, would favour the long side as long as market environment overall remains positive
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
CECO – for profit education – follow up for 1 – 2 days if it bounces to resistance first
STRA – for profit education
APOL – for profit education
GDT – healthcare products, reported; stalking short just one day
CAH – triangle breakout failure (potential) setup to stalk short
BAC – banking
CFC – banking/credit
Test of Bottom – Continuation
NXTP – telecom; unlikely to just breakdown from here but that’s indeed why I’ll stalk it – for the surprise value. Today only.
A quick heads up as things are developing fast here today. I’ll update the overall picture later in the day or after the close as required. S&P 500 (ES) and Dow 30 (YM) futures have failed tests of tops here on the big 135M chart. IF price starts to trend UNDER the areas marked in green:
… THEN we will have to conclude that a major trend change is underway, until proven otherwise.
Longer-term investors will want to take a little more time before exiting trades which follow the market; short term folks will be managing existing longs with trailing profit stops and be taken out automatically.
Very short term folks… were short at the open this morning:
09:30:17 Mike: I am selling here 10702
09:30:54 Mike: 678.60 ER selling
Even though we nimbly trade in and out of futures, I too hold longer-term positions in various sectors. At this time I am more heavily weighted in energy than any other sector; I have already taken profits in my trading positions in energy and in almost all technology that I held.
I am am quite prepared to get long in tech again if the market decides (as it may very well do) that China doing what the US has long asked for is nothing but good news.
On the energy front, we may also see renewed activity in commodities once the initial “surprise” of this long-awaited event wears off and more details are known. At the same time, as discussed in TrendVue Trader Talk this morning, energy is the sector potentially most at risk here:
10:12:27 Mike: Big picture oil view – this is a very dangerous spot for crude as it tests the range low. Quick trip below 55 if these levels do not hold. I’ve been expecting a dip below – the overnight move may be it.
10:12:40 Mike: overnight:
10:14:24 Mike: I’d have liked to have seen a much more bold move down and reversal first – then such price action would really feel like support building and reversal, but given the bearish sentiment starting to build and all the talking down of this market being done from all corners, unless a dramatic event occcurs somewhere in the world it will not be a surprise to see CL sell off 5 – 10% and then find a base to rally from into the fall.
Crude and natural gas are selling off here following this mornigns Natural Gas Storage Report. Our job will be to identify panic-style bottoming action in the sector and take advantage of it. May be here, may be 10 percent lower…
Today's transcript.
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Thursday July 21 closing data
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Statistics for Thursday July 21, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 437 |
|---|---|
| Symbols in Down Swings | 303 |
| Up/Down Swing Ratio | 1.44 : 1 |
| Advancers | 22% |
| Decliners | 75% |
| Unchanged | 2% |
| Up Bars | 34% |
| Down Bars | 33% |
| Inside Bars | 18% |
| Outside Bars | 9% |
| Close > 20EMA | 22% |
| Close > 50SMA | 77% |
| Close > 200SMA | 67% |
| 20EMA > 50SMA > 200SMA (trend up) | 49% |
| 20EMA < 50SMA < 200SMA (trend down) | 10% |