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Rallies Run Out Of Steam - Correction(S) Clearer - Support Levels Raised
Rallies Run Out of Steam - Correction Updates - Patterns More Clear - Support Levels Raised
The markets returned from the long weekend picking up where the Asian and Euro markets left off - moving higher. The momentum quickly waned and the lack of anything to credit the rally to, the sellers moved in and began to take things lower. The DJIA still managed to ring in another new high though.
I still get a chuckle from reading how last weeks fears of the FED may begin to scale back on its bond buying program sent the markets lower, but how the release of the S&P/ Case-Shiller home price index for March showed the highest year over year growth rate since 2006 (in 2006 the numbers were pumped up on sub-prime loans) coupled with "strong" consumer confidence numbers brought back the buyers. Yeah right - how about the shorts running for cover was the more likely reason and once they realized the error of their ways the scramble began to re-short.
In any case, the pattern of the correction(s) is clearer with today's run for the highs. There is a strong possibility that the next leg down will find support in the area of the lows seen last week. This would substantially raise support levels given (restated below) and strongly suggest another round or two of new highs to be followed by what I would anticipate being a deeper correction. Index futures were trading lower after hours but that does not guarantee much in the way of tomorrow's trade.
For the most part two-way trade continued today and that remains a strong positive for day trading. I am including updated charts to keep some perspective on things for this week.
Restated and updated from Thursday's Blog - (Charts updated)
They say a picture is worth a thousand words -- Take a look at the charts below to see how a 350 point drop in the DJIA, a 53 point drop in the S&P 500, a 39 point drop in the Russell 2000 and an 87 point drop in the NASDAQ 100 fit into the mid to long-term picture. Barely a scratch! The arrows indicate the support area (that) likely (will not) be reached during this corrective round. All zones are (now - well) above common Fibonacci support at the .382 levels. (Click on the chart to enlarge)
DJIA
(click to enlarge)
S&P 500
(click to enlarge)
Russell 2000
(click to enlarge)
NASDAQ 100
(click to enlarge)
I continue to extol the benefits of day trading versus position trading during these finishing moves of the much longer-term bull market. It may well take another year or another 5 years before all is said and done. Missing opportunities in either direction should not be a part of your trading strategy.
Day trading has increasingly become my first choice as the markets become more stubborn and push to extremes.
I use the stochastic overbought/oversold indicator and RSI momentum oscillators to indicate where money is flowing, where an imbalance of buyers or sellers occurs and a "bull trap" or "bear trap" forms. Both oscillators are very useful whether on a tick chart or a monthly chart. Keep in mind that there are many indicators available and when used properly do produce solid tradable signals. Unfortunately, many fall prey to the inexperienced that don't take the time to learn how to use them and therefore get "tossed" into the garbage pile.
I continue to believe and implement several "core" longer-term positions in, but the near to mid-term market gyrations have produced far more profitable day trading opportunities without overnight risk.
Diversified Trading System
I continue to recommend as the best trading platform available to a broader range of traders from novice to expert. The Diversified Trading System offers a cost effective product that allows a trader to enter into the "chaos" and trade more effectively.
Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility. Automated stop-loss management and position sizing eliminates most of the problems most individual traders have. Day trading and position trading both require (actually demand) good risk management. Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades.
(Updated 5/28/2013)
Here are the updated levels for the:
DJIA - With it appearing that the correction will take a more "flat" pattern (all three legs being equal in size) support would come in at the area of last weeks lows - Stronger Elliott support begins at 14865 to 14424 - additional support zones are below at 14369, 14006 to 13644. I would not be looking for a drop into the second or third zone, but rather for the top end to the middle of the first support zone to contain the move and set the stage for the rally to pick up again and take the DJIA to additional new highs.
S&P 500 - Support should now begin at the 1635 to 1625 area. Stronger Elliott support begins at 1600 to 1535.55 - additional support zones are below at 1526 to 1508 and 1479 to 1427. Again, I am not looking for a more serious drop, which would take prices into the second or third zone, but the top to middle of the first zone to contain the move. Here as well expectations would be for the rally to pick up again and move the S&P to new all time highs.
Russell 2000 - Support should now begin at the 969 - 960 area. Stronger Elliott support begins at 953 to 896 - additional support zones are below at 868 and then 836. While a stronger drop can not be ruled out as the Russell has tended to be the weak link previously - but the Russell along with the QQQ's are more tech laden and that has added stronger upside momentum with the Russell 2000 breaking above the all important 1000 level on Monday.
The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA).
Here is an updated list of the markets where I have found that DTS (all three birds) are producing numerous signals:
Disclosure: I am long FAZ.
Additional disclosure: I am short IWM, QQQ, JPM
Strong Two Way Trade As Correction Unfolds – Numerous Day Trading Opportunities
Strong Two Way Trade as Correction Unfolds - Numerous Day Trading Opportunities
The broader market indexes are continuing to correct bringing a much needed return of strong two-way trade. As I discussed yesterday it is vital and important in maintaining a healthy and efficient market for the process to 'normalize', for the markets to move towards where volume will trade. The place where two-way trade takes place and this was evident during Thursday's session.
They say a picture is worth a thousand words -- Take a look at the charts below to see how a 350 point drop in the DJIA, a 53 point drop in the S&P 500, a 39 point drop in the Russell 2000 and an 87 point drop in the NASDAQ 100 fit into the mid to long-term picture. Barely a scratch! The arrows indicate the support area likely to be reached during this corrective round. All zones are above common Fibonacci support at the .382 levels. (Click on the chart to enlarge)
DJIA
(click to enlarge)
S&P 500
(click to enlarge)
Russell 2000
(click to enlarge)
NASDAQ 100
(click to enlarge)
Although position traders were likely very busy today making adjustments and taking possible profits the methodology that trumped it in my opinion was day trading. The opportunities were not limited to the broader indexes. When a larger correction takes place money shifts across equities, indexes, ETFs, futures, treasuries, and precious metals. The return of two-way trade brought with it far more opportunities than one trader could take advantage of.
This remains the reason I continue to extol the benefits of day trading versus position trading during these finishing moves of the much longer-term bull market. It may well take another year or another 5 years before all is said and done. Missing opportunities in either direction should not be a part of your trading strategy.
Day trading has increasingly become my first choice as the markets become more stubborn and push to extremes.
I use the stochastic overbought/oversold indicator and RSI momentum oscillators to indicate where money is flowing, where an imbalance of buyers or sellers occurs and a "bull trap" or "bear trap" forms. Both oscillators are very useful whether on a tick chart or a monthly chart. Keep in mind that there are many indicators available and when used properly do produce solid tradable signals. Unfortunately, many fall prey to the inexperienced that don't take the time to learn how to use them and therefore get "tossed" into the garbage pile.
I continue to believe and implement several "core" longer-term positions in, but the near to mid-term market gyrations have produced far more profitable day trading opportunities without overnight risk.
Diversified Trading System
I continue to recommend as the best trading platform available to a broader range of traders from novice to expert. The Diversified Trading System offers a cost effective product that allows a trader to enter into the "chaos" and trade more effectively.
Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility. Automated stop-loss management and position sizing eliminates most of the problems most individual traders have. Day trading and position trading both require (actually demand) good risk management. Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades.
Let's Review where we are:
While I remain firmly in the bullish camp over the mid to long-term I have been expecting and anticipating a correction to begin for the past couple of weeks. The patterns to the intraday highs on Tuesday again show completed 5 wave patterns which in turn complete larger 5 wave patterns which again in turn complete yet a larger 5 wave pattern.
The Big Picture:
Staying in touch with what your "big picture" is critical. I spent some time recently updating all my long-term charts. This was important as it gave me a very clear perspective on how large of a correction should be coming. While my expectations is for a decent "slap-down" to occur it is not the "mother" of all corrections as some have forecasted. For example:
All of the broader indexes (DJIA, S&P 500, Russell 2000, and NASDAQ) began their perspective rallies off of the March 2009 lows. I fully expect additional new highs (several) for the DJIA, S&P 500 and Russell 2000. The NASDAQ may have reached its peak(s) in 2000, however I don't think it would be wise to exclude them just yet. All the patterns are very similar in size and breadth with smaller differences likely within the internal counts. Therefore based on this it appears that an across the board correction is due - but again not the collapse that many are forecasting. That is at least a year or more away.
(Updated 5/22/2013)
Here are the updated levels for the:
DJIA - Support begins at 14865 to 14424 - additional support zones are below at 14369, 14006 to 13644. I would not be looking for a drop into the second or third zone, but rather for the top end to the middle of the first support zone to contain the move and set the stage for the rally to pick up again and take the DJIA to additional new highs.
S&P 500 - Support begins at 1600 to 1535.55 - additional support zones are below at 1526 to 1508 and 1479 to 1427. Again, I am not looking for a more serious drop, which would take prices into the second or third zone, but the top to middle of the first zone to contain the move. Here as well expectations would be for the rally to pick up again and move the S&P to new all time highs.
Russell 2000 - Support begins at 953 to 896 - additional support zones are below at 868 and then 836. While a stronger drop can not be ruled out as the Russell has tended to be the weak link previously - but the Russell along with the QQQ's are more tech laden and that has added stronger upside momentum with the Russell 2000 breaking above the all important 1000 level on Monday.
The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA).
Here is an updated list of the markets where I have found that DTS (all three birds) are producing numerous signals:
Disclosure: I am long FAZ, EWI.
Additional disclosure: I am short SPY, IWM,
Logical Market Update: Correction Begins - First Of Several Over The Next 2 Quarters
Correction Begins - Ultimately the First of Several Over The Next 2 Quarters
It was a sight to behold on Wednesday morning. The futures were poised to race higher; the markets were on edge waiting for the Housing Starts and then Bernanke's testimony before Congress. The Housing starts gave a jump-start to what I will call the initial round of capitulation. Shorts needed to stop the bloodletting and were now willing to do it at any cost. Then Bernanke began speaking. Again, the second and final round of capitulation began bringing the broader indexes (DJIA, S&P 500 and Russell 2000) to fresh all time highs. The NASDAQ 100 and Composite moved to new recovery highs. The 30-yr bond reversed course and moved lower along with the precious metals. Then it stopped as the buyers evaporated and the patient bulls began to take their profits. The broader indexes slide lower caught their breath resumed the rally (just to make sure nobody was left behind) and then came in for the "slam dunk".
I stopped counting after the tenth email, IM, or phone call this morning as trader friends were calling to ask what I was doing as the markets screamed higher. While I will always carry some "core" positions the bulk of my funds have been earmarked for day trading. So, unfortunately, the answer I gave was not what they wanted to hear, but when you must defend a position against the backdrop of what is seemingly nonstop bloodletting your focus is not on the multitude of opportunities being presented across the wide spectrum of trading vehicles offered. Everything participated today. The last signal that the rally, (at least this portion of it) was complete - total market capitulation was the missing piece to the correction puzzle and that was received today.
It is vital and important in maintaining a healthy and efficient market for the process to 'normalize'; for the markets to move back towards their mean centers or comfort zones- so to speak. The place where two-way trade takes place and not the one-way ride witnessed the past couple of months and please don't misunderstand this applies to a one-way up or down market.
This remains the reason I continue to extol the benefits of day trading versus position trading during these finishing moves of the much longer-term bull market. It may well take another year or another 5 years before all is said and done. Missing opportunities in either direction should not be a part of your trading strategy. There are numerous opportunities in a myriad of indexes, ETFs, and futures to choose from within the equities, treasury, commodity, and precious metals markets.
Day trading has increasingly become my first choice as the markets become more stubborn and push to extremes.
I use the stochastic overbought/oversold indicator and RSI momentum oscillators to indicate where money is flowing, where an imbalance of buyers or sellers occurs and a "bull trap" or "bear trap" forms. Both oscillators are very useful whether on a tick chart or a monthly chart. Keep in mind that there are many indicators available and when used properly do produce solid tradable signals. Unfortunately, many fall prey to the inexperienced that don't take the time to learn how to use them and therefore get "tossed" into the garbage pile.
I believe that it only gets more confusing going forward as the market ignores "the writing on the wall" and continues higher with a false sense of security built on negative input. Price volatility has increased with the broader averages easily moving 2 to 3 percent and as high as 10 percent intraday. Many stocks have seen daily trading ranges average between 10 and 15 points, with one day being 15 points higher and the next being 10 points lower.
This type of action is the primary motivation behind my suggesting switching strategies if necessary and focusing on day trading and less on position trading. I do believe there are discernable longer-term positions investors should consider and implement, but the near to mid-term market gyrations have produced far more profitable day trading opportunities without overnight risk.
Diversified Trading System
I continue to recommend as the best trading platform available to a broader range of traders from novice to expert. The Diversified Trading System offers a cost effective product that allows a trader to enter into the "chaos" and trade more effectively.
Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility. Automated stop-loss management and position sizing eliminates most of the problems most individual traders have. Day trading and position trading both require (actually demand) good risk management. Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades.
Let's Review where we are:
While I remain firmly in the bullish camp over the mid to long-term I have been expecting and anticipating a correction to begin for the past couple of weeks. The patterns to the intraday highs on Tuesday again show completed 5 wave patterns which in turn complete larger 5 wave patterns which again in turn complete yet a larger 5 wave pattern.
The Big Picture:
Staying in touch with what your "big picture" is critical. I spent some time recently updating all my long-term charts. This was important as it gave me a very clear perspective on how large of a correction should be coming. While my expectations is for a decent "slap-down" to occur it is not the "mother" of all corrections as some have forecasted. For example:
All of the broader indexes (DJIA, S&P 500, Russell 2000, and NASDAQ) began their perspective rallies off of the March 2009 lows. I fully expect additional new highs (several) for the DJIA, S&P 500 and Russell 2000. The NASDAQ may have reached its peak(s) in 2000, however I don't think it would be wise to exclude them just yet. All the patterns are very similar in size and breadth with smaller differences likely within the internal counts. Therefore based on this it appears that an across the board correction is due - but again not the collapse that many are forecasting. That is at least a year or more away.
(Updated 5/22/2013)
So, what can be expected? Smaller 4th wave corrections within the context of larger (Cycle degree) 3rd wave advances. Here then are the updated levels for the:
DJIA - Support begins at 14865 to 14424 - additional support zones are below at 14369, 14006 to 13644. I would not be looking for a drop into the second or third zone, but rather for the top end to the middle of the first support zone to contain the move and set the stage for the rally to pick up again and take the DJIA to additional new highs.
S&P 500 - Support begins at 1600 to 1535.55 - additional support zones are below at 1526 to 1508 and 1479 to 1427. Again, I am not looking for a more serious drop, which would take prices into the second or third zone, but the top to middle of the first zone to contain the move. Here as well expectations would be for the rally to pick up again and move the S&P to new all time highs.
Russell 2000 - Support begins at 953 to 896 - additional support zones are below at 868 and then 836. While a stronger drop can not be ruled out as the Russell has tended to be the weak link previously - but the Russell along with the QQQ's are more tech laden and that has added stronger upside momentum with the Russell 2000 breaking above the all important 1000 level on Monday.
The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA).
Here is an updated list of the markets where I have found that DTS (all three birds) are producing numerous signals:
Disclosure: I am long FAZ, AAPL, MSFT, EWI.
Additional disclosure: I am Short - FAS, IWM, SPY, DJX,