Thursday, December 8, 2005
Issue Contents:
| 10:23 | Market Direction Recent test of swing high... |
Whenever we see a test of top, its time to keep one-foot near the exit door.
Index round-up:
- failed tests of tops, so far, on Nasdaq and NYSE composite indexes and a spike top on the S&P 500 as well
- the Dow 30 index has been unable to move with the broader market, but has pulled back to the rising 50 period moving average – the first significant retracement since the fall rally got underway. Its still possible, perhaps even likely, that there is another leg up ahead for the market, of roughly the same proportions as the move from mid-October to mid-November.
- the upper-most trading range, on the daily charts, has not yet been broken to the downside, so as yet there is not a change from trend (from up to none to down), but price is not far from the levels where such a change would occur.
Given the potential for an EX/RC/EX (see the Library for a discussion of expansion / range contraction) scenario, we’ll have to keep looking for long opportunities to arise out of the current consolidation and retracements.
YM 45 minute chart
In smaller time frames, price is already trading at or below a change of trend zone. The trade opportunities here are simple:
- LONG – stalk the first pull back AFTER price regains the range
- SHORT – stalk bounces with sells underneath if price fails to regain the range, but do not continue to attempt to sell if price remains stuck in a narrow range. At a change of trend we expect to see price movement – speed – not consolidation (as has been the case for much of the morning so far. But, provided the NYSE and Nasdaq composite indexes generally hold above the December 1 lows, we should be a little quicker to take profits on the short side and keep looking out for long opportunities off the daily charts.