The markets are not all working their way higher as nicely as you might believe if you're focused on last week's impressive 5 up days in a row statistic. Consider this set of facts:
1. The bulls have the Q's on their side, as it has now closed over the 50 and 200 day MA, but
2. The SPY's have lagged somewhat based on their standing relative to Sept. 1 highs
3. The DIA and IWM can't even muster up enough strength to exceed Aug highs!
Last week was impressive, but given the fact that all 4 market watch charts have negatively sloped 50-day MA's that are under their 200-day MA's, it should be expected that we'll see a pull back into last week's range. The Q's are bumping up against the 57 level which would be a very logical place for at least a short term-top based on the July swing low and the 200-day MA.
Friday was up, but it was more or less a consolidation day. This will make it easy for the markets to find themselves trading under their pivots. The pivot stack and OR location relative to the pivots should be a strong consideration in deciding which type of trade to focus on. In a bear market rally like the one we're experiencing, make sure you are very aware of any short OR reversal below the pivot or in a negatively stacked condition.
Long Focus
GLD
SLV
WYNN
CMG
BIDU
SINA
HUM
CERN
CELG
GMCR
SINA
PANL
BIDU
CREE
PCLN
MA
V
Short Focus
ATI
CTRP
SMG
TZOO
JOYG
EWZ
CAT
SLB
CPX
FSLR
ACOM
SHW
CPT
I hope Tuesday will be more helpful in revealing the market's short term direction than Friday. While the main trend is down, the last few weeks have created a wide range consolidation pattern which will likely result in a large move in either direction.
Friday wasn't all that helpful because with a report of the worst job data we've seen since Sept. 2010 it's natural to expect a gap a lower, and essentially that's all we got. No volume. No real attempt to rally. No real follow through to the downside.
Friday was the last "summer" trading day and the day before a long weekend so it is not surprising that the markets lacked volume and follow through. We'll look out for it on Tuesday, especially on the downside.
However, there is a bullish case to be made here that should not be ignored. If you look at the SPY's you'll see its 10-day MA is now positively sloped, over the 20-day, and the market held there Friday. This plus the fact that it has not taken out the daily trend line from the recent lows should be watched for support.
In looking for stocks for the short Focus List it was hard to find stocks that still had a negative 10-day MA. And on the long side there are quite a few stocks that have decent daily trends and have retraced back to the support of strong 10-day MA's. If the market breaks down on Tuesday I would like to be short stocks with weak daily trends and trading below the 10-day MA. If the market holds and rallies, the opposite is true. There are stocks on the long Focus List with negative pivot stack, but they made the list because of the quality of their retracement.
In summary this Focus List is ready for a move in either direction on Tuesday, but don't lose sight of the prevailing negative trend. For the short side I'll focus primarily on market ETF's, and I'll favor OR breakdowns and short OR Reversals with a close eye on the prior day's range as key support and resistance.
Long Focus List
GLD
SLV
CDE
GDX
SLW
TLT
FNSR
AGU
CF
POT
ALXN
AMZN
BBBY
GMCR
COG
ED
FDO
SINA
MRX
JAZZ
PANL
ORLY
REGN
Short Focus List
CVD
ESI
FSLR
GS
KSS
OPEN
PRU
The last day of summer trading, a three day weekend and a big jobs report all on the same day. Tomorrow. I'm not going to try to call this one.
Purely by the numbers, all 4 market watch...
1. The Fibs: Have stalled at the 50% retracement from their July highs and the Q's have the distinction of making it back to kiss the 50-day moving average. So as I said yesterday, this would be a logical level to retreat from.
2. 3-Day Pivots: Closed below their 3-day pivot lows, so an OR Breakdown and trade below today's low would be a confirmed 3-day pivot bearish bias in the context of a daily trend that's down.
3. Floor Trader Pivot Stack: Have negative stack.
4. The Prior Day's Range: Closed below the prior day's low.
5. The Phase: Bearish
6 .The 10-20-50 day MA condition: 10-day positive slope just crossing negative sloped 20-day, and both below the negatively sloped 50-day.
Your quiz!!! -- >>>>
Considering EVERYTHING stated above, which is the most compelling piece of information?
Answer: To be discussed in the AM in the Live Trading room. If you can't make it to the trading room then email geoff@marketgauge.com your answer, and the your favorite feature of either the product your are subscribed to (MMM, CSTS, ORSF, DTHS). ? In return I'll give you the answer and the "WHY" which is the most important part of the answer (feel free to include the"why" in your answer if you wish).
All the above considered, here's how I see tomorrow...
1. A big gap beyond the range of the last TWO days could be considered to be traded in either direction.
2. A gap within the TWO day range should be either faded or not traded.
We'll have to see where any gap begins relative to major support or resistance levels. But unless the market really picks a direction, this I not a day I'd expect much follow through because it is a holiday week.
Long
BBBY
BIIB
GMCR
LO
MA
TLT
GDX
****
BIDU
CBOU
COG
CVI
ED
FDO
JAZZ
MCP
RIMM
SINA
SLW
WYNN
Shorts
ALTR
FOSL
CVD
LRCX
KSS
SNDK
HAL
VMC
AMP
PRU
GS
Today was a tough day for day traders because the market traded above its OR and then back below the OR low. This is price action that is typical of a market that needs a rest, and as I highlighted yesterday, the SPY is sitting at the 50% correction level from the recent lows which is a good level for us to expect it to stall or reverse.
Regardless of what I think of the possibilities for the market to correct, I have to stick by the basic rules that a positive stack in the pivots requires a break of S1 to move to a bearish bias. An additional reference point for the short bias is the low of 8/30 because it is the last low before the market broke out from its range defined by the 8/15 high. Until that low is broken I will not get too bearish.
With the market somewhat extended in the short term, I’d prefer OR Reversals vs. O.R. breakouts on the long side. For the most part I’ve tried to select focus stock that are not too extended, may have had a rest day, and have the pivots stacked in the direction of the trade.
Focus Longs
COG
LO
MA
MA
CBOU
BIDU
MCP
IBM (this stock could easily move big in either direction)
RIMM
BIIB
ED
CVI
WYNN
Focus Shorts
ALTR
FOSL
CVD
LRCX
MHS
KSS
SNDK
What will you do if the market gaps below today’s low?
I don’t have any reason to believe it will happen, but it could. And if it did, would you know what to do? You should.
The markets have moved up nicely in the last 5 of 6 trading days, and the 1-day pivots are stacked positively. This means that the bulls are in control until the markets trade below S1 which happens to line up relatively close to today’s low. Additionally, today’s low represents the first daily low below the breakout level of the 8/17 swing high. This makes it a very significant low for defining the bullish and bearish bias.
If you add that all up, and a move below S1 will not only mean that our rules say you should have a bearish bias, but it could lead to a significant move lower.
So why might the markets turn lower from here?
If you put your Fibonacci retracement lines on the move from the 7/21 high to the 8/9 low, you’ll see that on the SPY today’s high was right at the 50% retracement level. I’d never just assume the market will sell off from the 50% mark, but if it does begin to sell off you should pay attention.
On the bullish side, when markets gat back over 50% mark in a convincing way it should mean the down leg is done. We’re not there yet.
As I’ve said all week, the closer we get to the 3-day weekend the lighter the volume may become so be careful about illiquid stocks.
Longs
GLD
SLV
TLT
BIIB
CREE
ORCL
CF
CVI
JAZZ
ABV
AMZN
RIMM
WYNN
GMCR
GDX
MCP
SINA
BIDU
AAPL
HANS
ED
ISRG
CMG
NFLX
Shorts
PRU
GS
FSLR
C
Ok, so when I said the markets would have to get above R1 to be bullish, I was not anticipating they would all gap open above R1!
Despite all the excitement in price action the volume was incredibly light. This should not be a surprise given that the East coast of the U.S. is still recovering from a massive storm and it’s the pre-Labor Day week. However, as I said in yesterday’s Focus List, don’t expect that low volume will mean low volatility. A perfect example of this WYNN. If you put the Long Focus List in HotScans you’ll see WYNN had the lowest relative volume yet with Keith’s help today in the Live trading room is was a home run O.R. reversal trade.
I’m not trying to say volume doesn’t matter. Please don’t read that in what I’m saying. Volume is all relative. This week is a lightly traded week, big volume should be treated with extra respect and low volume should be viewed as the norm. Unfortunately, however, low volume does still leave stocks susceptible to sudden and exaggerated price moves so be careful.
With all the market watch charts closing above the Aug. 17th high and having strongly stacked pivots, the game plan for tomorrow is pretty straight forward. Long until S1 is broken confidently.
Long Focus
MA
SINA
GDX
GMCR
MCP
NFLX
CMG
POT
CF
CVI
IBM
AMZN
RIMM
WYNN
AAPL
YOKU
Short Focus
VRTX
CEF
C
MET
GS
Chairman Bernanke got the markets rocking on Friday, but and we had a great day in the room with some movers like AAPL, GLD , SINA, and PANL. The chairman’s speech was much anticipated and resulted in a very common and potentially profitable trading pattern. As a result I created the latest training video on how to trade the pattern. The video is dated 8/25 and titled “A News O.R.” I’d recommend checking it out while Friday’s action is still fresh in your memory.
The week before Labor Day typically has very light volume. However, this doesn’t always mean low volatility, so I expect there will be opportunities early in the week, but be careful of low liquidity.
The markets are wedged between resistance created by the 3 days of consolidation from 8/15-8/17 and the lows for 8/19 and 8/22. Friday’s action was an impressive recovery from a vulnerable break of two day lows and the Q’s even managed to close over the prior two days of highs, but in the end we’re left we volatile consolidation right under a very steep 20 day moving average. I don’t see a clear pattern other than a volatile short term bounce in a longer term down trend.
The Q’s are on the only one with a positive stack on the 1-day pivots and the FTP (52.52) will be just below the 52.70 area which I’d expect to be support based on prior daily highs and the last hour low on Friday. So from a bullish perspective the markets should be above their FTP, and I’d focus on the Q’s, especially if we see an OR reversal above its FTP and last hour low.
According to our rules, a negative pivot stack requires trading over R1 to be bullish. So all but the Q’s need to clear R1 to be bullish, and there is reason to trade an OR breakdown from the short side if it occurs below the FTP. If the markets do sell off look for potential support at the last hour lows, and the daily lows from 8/24 and 25.
Because Friday was a wide range day and the markets are in a wedge pattern, I would not be surprised to see the OR Reversal trades work the best, both long and short.
Long Focus
AAPL
ALXN
DLTR
HANS
GLD
SLV
CF
BIDU
ISRG
JAZZ
WYNN
RIMM
CVI
SINA
PANL
GMCR
MA
ABV
KO
ED
TJX
Short Focus
C
URBN
ADM
FXI
APA
MET
WFC
VECO
PNC
GS
We're about to begin the last week in August which is usually one of the thinnest trading periods of the year. Add to that the fact that tomorrow is a Friday and I'd plan on a very thin trading day. The much anticipated speech by Chairman Bernanke, could easily may create volatility, but it's not likely to create a great trading environment. So tomorrow is a day to be patient, only take very good set ups.
I might even be inclined to say any 5-min OR break that is on the short list and lines up with today's low would be my favorite trade anticipating that I'd take profits at 10:00. Look at URBN today for an example of what I mean.
I've attached a chart of the SPY's which is very representative of all 4 market watch charts - SPY, QQQ, IWM, and DIA. I've used the 60-min. chart only because it displays more granularity of data than the daily. Here are the key points of consideration.
Add it all up and I see 4 key levels to trade off. Today's low (115.87). The FTP (117.30). Yesterday's high (118.25) and today's high (119.40).
There is a good chance that many of the stocks you're looking at will have similar patterns and confluent reference points. Check them out.
As a general rule the FTP will be the line in the sand between bullish and bearish and I'd be more bearish below today's low and the 5-min OR low.
Long Focus
GLD
SLV
TLT
MA
ABV
CF
CVI
AAPL
SINA
BIDU
IBM
BIIB
ISRG
RIMM
HANS
Short Focus
OPEN
ADM
FXI
LVS
VRSN
HAL
OXY
RAX
SLG
All 4 market watch charts had a pattern that should not have surprised anyone. After the strong prior day they corrected in an orderly way into the prior day’s range then rallied back to the high of the day.
The pullback was shallow, but I won’t read too much into that, and the daily volume was light. The light volume is a bit of a concern, but the end of August is a light volume period historically.
The end result is a positive day, 3-day pivot bullish confirm, and a decent range day. So tomorrow look for long OR Reversals over S1 I the market watch and the strong stocks. And since the main trend is still down, expect R1 and R2 to be good resistance, especially since they are into resistance created by the 8/15-8/17 highs.
All in all I can’t argue with the short term momentum on the upside until S1 levels and prior day lows are taken out.
Long Focus:
GMCR
BIIB
BIDU
AMZN
COG
SINA
TPX
CMG
JAZZ
IBM
RIMM
YUM
CI
HANS
Shorts
FXI
SLG
RAX
OXY
HAL
URBN
Yesterday's focus list said that after 2 days of compression we should expect a good trend day. Well, we got it. And you need only to look at.
After a good range day you can really focus on trader pivots for highs and lows, and we've got some really interesting support and resistance levels to trade tomorrow.
For resistance all the market watch (SPY, QQQ, DIA, IWM) are at the top of their 4 day range which is the beginning of a significant gap from 8/18. They are also sitting right at the 10-day moving average and the 50-period moving average on the 60 min chart. This is a significant inflection point which if broken could lead to the gap being filled quickly (a quick rally). So today's highs will be very important levels tomorrow.
After a big trend day, the 1-day pivot (floor trader pivot) is a good area to expect any intraday correction to hold. Tomorrow that level will line up with the high of the day from yesterday - another very important price level that I talked about in a recent training video.
Sum it up and simplify it and you have today's highs and tomorrow's FTP as your two points to use for very important inflection points. With a positive pivot stack, long OR reversals and breakouts could be a good bets tomorrow for longs.
It's also worth noting that all 4 market watch charts closed above the 3-day pivot high for the first time in this recent decline. This means an OR breakout and move above today's high would put the market's in a 3-pivot bullish bias condition.
For shorts look out for any stock below S1 or today's low.
Here's our focus list.
Long Focus
QQQ
IBB
SMH
USO
SINA
SPG
JAZZ
BIIB
IBM
WYNN
BIDU
CLB
YOKU
AAPL
HANS
ORLY
Short Focus
SLG
BTU
HAL
URBN
LLL - this is very compressed and could go either way big.