Tuesday, September 20, 2005
Issue Contents:
| 09:11 | The Day Ahead Economic releases and news |
| 09:21 | Swing Trade Setups Featured charts for Tuesday September 20 |
| 13:36 | Ahead of the Fed A look at bonds, dollars and gold. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning, today is Tuesday September 20th, the 263rd day of 2005.
Today’s most important moment: 2:15pm this afternoon when the Federal Open Market Committee releases their latest interest rate policy decision. Experience has taught us to hunker down ahead of FOMC meeting releases, so after about the first 90 to 120 minutes, I’ll be doing little to no trading.
Once the FOMC decision is out of the way the market will go back to fretting about Tropical Storm almost-hurricane Rita. Energy traders have come to their senses, a little – yesterday’s nonsensical run up is being met by a significant, but far from complete, pull back in prices across the board. One doubts the market will completely relax at this early stage (Crude Oil Falls; Tropical Storm Rita May Not Hit Refining Centers Directly) after the experience with Katrina. Once the size and direction of Rita becomes more clear, that market will quickly decide what to do with price again.
Ahead of the open stock index futures are up marginally. Gold is up marginally and the US dollar is up marginally, and guest what: short and long bond rates are also up marginally. A little ditty from the kids program Sesame Street comes to mind ”one of these things is not like the other, one of these things is not the same…”
US Market Calendar
- 7:45 am: ICSC-UBS Store Sales1
- 8:30 am: Housing Starts – August2
- 8:30 am: Building Permits – August
- 8:55 am: Redbook – Sep. 17th week
- 10:00 am: State Street Investor Confidence Index
- 2:15 pm: FOMC Interest Rate Policy Announcement
Canadian Market Calendar
- 8:30 am: Wholesale Trade – July
- 8:30 am: Leading Indicators – August
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 Store sales drop on economic worries NEW YORK (Reuters) – U.S. chain store retail sales dropped significantly in the latest week, as a result of high gasoline prices, ripple effects of Hurricane Katrina and increased consumer concern about the future of the economy, a retail report said on Tuesday.
2 Housing starts fall, small Katrina impact WASHINGTON (Reuters) – U.S. housing starts dropped by a larger-than-expected 1.3 percent in August as a 9.4 percent slide in multifamily housing construction offset a slight increase in groundbreaking on single-family homes, a Commerce Department report showed on Tuesday.
Featured setups from Monday September 19, 2005 closing data symbol scan at http://www.trendvue.com/latestscan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Energy sector likely to be hit today; I’m taking profits on a chunk of my portfolio, looking to reload later today or later this week as the market deals with Rita
- Experience has taught us that at least as often as not the ultimate direction of trade after the FOMC meeting announcement – later that day or in the following session – is infrequently in the same direction as the initial reaction. 50/50 odds at best of being in the same, lasting, direction… not good. I usually back off activity until the next day… but will make a call following the announcement.
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
JNPR – these communications stocks may be trying to form a bottom here; must close abouve resistance in fairly short order (within days) to validate that thesis.
EXTR – hold only on strong close > resistance line here
ABT – was a frequent visitor on our short list, its possible it may try to hold these levels. Caution.
Retracement or Pause in Up Swing / Up Trend
AMD likely to move higher if broad market can put it together today or tomorrow
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 Bottom – Continuation
CDWC – computer related sales
CYBX – medical products
CTX – financing, home related
Lets take a snap shot of bonds, dollars and gold before the FOMC announcement (2:15pm today). The market seems truly perplexed and anxious ahead of the announcement, for the first time in many months at such an event. Tomorrow, after the initial reaction to the FOMC announcement wears off and all the tea leaves have been consulted, we’ll look at these charts and the concensus that has developed and see if we need to adjust (or create) a long term view.
Bonds
Spread between 10 and 30 year
10 Year note – remains under resistance near 111.
US Dollar
Monthly chart – the 2005 bounce off what may hold up as selling exhaustion (late 2004) has been pausing now for over a month. On its own, this is a bullish pattern – a bull flag still early on it formation – however if the dollar likes what the FOMC has to say this week it has another challenge at the range high not far ahead so greenback-watching we shall be here for a while yet. Remember: a bounce does not a trend reversal make, however if price breaks out of the range marked and holds, then yes indeed we have a trend reversal in the very big picture.
Lets zoom into the USD on the weekly chart – we can see its already tried to break above the multi-week retracement, so dollar longs have to be put at red alert here – if price pulls back below the breakout the odds of a complete reversal of the 2005 rally go up.
Zooming to where the rubber hits the road, on the intraday chart the yellow zone highlights the range of uncertainty – if price gets deep into that range then I would expect the lower line of support to turn into new resistance and complete a change of trend, from up to down, in the bigger picture intraday charts—which will set up a potential failed trendline breakout setup on the daily and weekly charts.
The converse is true—if price pulls back above 88.25 and holds today and through the end of the week above these levels, or comes back there after a 1 – 2 day retracement, then the USD likely has much more room to run higher.
Gold
Gold as we know has been leading the dollar of late, but it can’t do that forever. A major test of top dating back to last year (and ultimately 17 years) is underway here. Gold sector longs need to be protected carefully, and those looking for new positions will be trying to get long above any minor retracement here—what we have seen the in the stocks themselves may be all there is to work with. Cautionary note: stocks often lead the commodity lower.
Today's transcript.
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