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Michael Noonan Edge Trader Plus Michael Noonan is the driving force behind Edge Trader Plus. He has been in the futures business for 30 years, functioning primarily in an individual capacity. He was the research analyst for the largest investment banker in the South, at one time, and he... More
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  • S & P - A Snap Shot For Near Term. [Subject To New Developing Activity]

    Wednesday  5 May 2010

     The daily chart was printed at 9:30 a.m., CST, to provide a quick look at
    what may be developing.  Since the sell recommendation on Friday, price
    has reached an oversold condition.  Bear in mind that oversold is a relative
    term, and it can become more oversold.  It is just an indication to watch
    market activity for a possible reaction.

     For full disclosure, we covered short positions at 1164, pre-opening when
    price was nearing the oversold area.  Price dropped another 1,000 tics, so
    it shows how the condition is relative.  As we write, price has rallied to 1169.

     What we expect from here is a rally to retest the breakdown level from
    yesterday.  The upside to an expected rally is the 1186 area, which also
    happens to be the day session opening.  If the rally is weak, it will be an
    opportunity to get short again, or add to short positions.

     The initial downside objective is the January 2010 high, around 1143. 
    Previous resistance usually acts as support, at a later time, when retested.

    S&P D 5 May 10

    Tags: S P, SPY, QQQQ
    May 05 11:00 AM | Link | Comment!
  • S & P - Know When To Hold'em. [For Good Reason]

    Tuesday  4 May 2010

     Yesterday, we stated we were short from the 1187 area and gave longer
    term chart perspectives as to why price may decline.  After Friday's steep
    drop, three possibilities could develop for Monday, yesterday's trade. 
    1. Sharp continuation follow-through down.  2. A trading range while sellers
    continued to absorb buyers.  3. A rally that negated Friday's drop.  What we
    got was a hybrid of 2. and 3. which turned out to be another failed retest rally.

     It is not always comfortable to sit through a correction against one's
    position, but if the analysis is on point, stops are in place, the position
    should work.  Given how pre-opening day session prices are 800-900 lower,
    as this is written, holding the position was the proper stance to take.

     The daily chart shows that a week ago Monday was a small range, low end
    close.  This says that buyers were spent in being unable to extend the range higher, and the close says sellers won the battle that day.  This kind of small
    range, low end close bar can be stopping action.  As it turns out, the whole
    week became an OKR, very negative.
    [See S & P - May You Live In Interesting Times, second paragraph after first

     Note how the three largest bars are days where price declined.  This tells us that selling is present and persistent.  We viewed this as distribution,
    [see S & P - Plan A Or Plan B?, second paragraph].  After Friday's decline,
    the activity said that Friday was a failed retest of the previous Monday high,
    and price is likely to go lower, and we gave the three possibilities above.

     While yesterday made things a bit tenuous, we were comfortable with the
    analysis and prepared to be wrong, if  stopped out, for the short position was entered for all of the right reasons.  For as long as any position is entered
    for good reason, the winners will take care of the losers, so one has to hold
    steady, and let the market run its course.

     S&P D 4 May 10

      The 60 Minute chart is included just to show the failed  retest high from
    Friday that should, if the analysis is correct, act as resistance.  The  market
    rallied 20 points, a strong showing after the Friday drop, BUT, the rally never exceeded the resistance area.  We can live with that.

     Today may offer another shorting opportunity if a weak rally develops. 
    Tomorrow, or soon, we will show a monthly chart that we will use to point out
    a downside target that may make jaws drop.


    [Our blog is till down.]

    S&P 60m 4 May 10

    Tags: SPY, S P, QQQQ
    May 04 9:04 AM | Link | Comment!
  • S & P - May You Live In Interesting Times. Interestingly, This May Not Be A Chinese Proverb!

    Monday 3 May 2010

     Not a Chinese proverb!?  Ah, but we digress.

     What do we now know, and why may this be an interesting time?  From
    "China" to England we go in pursuit of a Holmesian deduction. Sherlock
    Holmes would look at all the evidence, and from it, he would draw his
    conclusions. Our single source of information comes from the charts,
    those much maligned, so often misused lines that tell a true story. Charts
    are like braille. Everyone knows what braille is, but you have to know how
    to read it in order to understand it.

     So, here goes the blind leading the blind.

     The best first start in approaching a market is to define and know the
    trend. The trend is the path of least resistance. ["The Path Of Least
    Resistance" is also a book, written by Robert Fritz in 1984, about learning
    to become the creative force in one's own life, an apt description for what
    we endeavor to accomplish in reading charts and knowing the trend.] What
    is equally important about knowing the trend is identifying the time frame
    under consideration.

     As an aside, for those who want a fast answer to where price is going, you
    will have to seek out another analyst who serves up conclusions du jour.
    We are of the mind that if you do not know how you got to where you are,
    you will never understand how you will get to the next level, and we see this
    as an interesting time that can lead to a lower level.

     The larger time frames, weekly and monthly, [there are others], are more
    controlling for a trend because they take more time to change and turn.
    Most participants in futures markets do not look beyond a daily chart, and
    often focus on intra day activity. The trend of an intra day move can be at
    odds with a daily trend, and have no bearing on a weekly or monthly chart.
    This is why it is critical to know the trend of the time frame in which you are
    trading, and also to know the trend of the next higher time frame.   A
    potential breakout on a daily chart could be important resistance on a
    weekly chart.  Buying a breakout on a daily chart without knowing the weekly
    chart resistance can prove costly.

     Many of you, if not most, may already know this, but repetition is never
    wasted in understanding how and why markets work.

     We recently stated that the intra day trend was already down, and the daily
    trend was still up, but on the cusp of turning.
    [see S & P - Great Example Of Changing Information, second paragraph].
    We are  going to start with a monthly chart, two time frames higher from the
    daily, because it has reached that "interesting" stage, and if the analysis is
    on point, the S & P is headed much lower in the weeks ahead.

     For us, the monthly chart stands out like a Cape Hatteras lighthouse. The
    last bar on this chart provides many important clues. Given that the larger
    time frames are more controlling, the implications of potential change on a
    monthly chart are significant in the impact of the lower time frames.

     The first clue is the position of the close. It is under the mid-point of the
    range. What that tells us is that the sellers won the "battle of the bar."
    Where price closes on any bar shows which force between  the buyers and
    the sellers was in control. If price closes mid-range, it is a stand-off, neutral,
    and the importance would lie in the location of the bar. What we can now
    deduce is that after an entire month's effort, sellers were the winners, and
    they won the battle not only in an up trend, but at the highest level price
    has reached since the March 2009 low.

     The second important clue is the size of the range. It is the smallest range
    since the February low. Why is that important? After the previous two much
    wider up bars, the smaller April range says that buying was spent. Buyers
    did not have enough force to extend the range higher. That is also due, in
    part, to the fact that sellers were more in control, not only in meeting the
    efforts of the buyers, but overcoming them, as well, which is why the close
    was on the lower end of the bar.

     Most chartists love to draw lots of support trendlines, use relative strength,
    moving averages, etc, etc... which are all measures using past tense
    information, and trying to impose it on present and future tense activity. 
    It makes no sense...except for the ones who try using it. What keeps
    "technical analysts" using these indicators is that sometimes they work! We
    prefer using the logic of present tense activity as a gauge for what the
    market is likely to do next. Past tense activity is important, but when in 
    context of  what the present tense information is conveying as a result, in
    a continuum.

    S&P M 3 May 10

     If we are reading the logic of the last monthly bar correctly, the monthly
    trend may have difficulty in going higher. If that is to be the case, then the
    weekly chart should buttress that evidence.  Next chart.

     We are always of the belief that there are no accidents. Here, the last bar
    on the week just past, the culmination of the last week of the month, is an
    Outside Key Reversal bar, [OKR].  We have discussed OKRs in the past. 
    One occurs when price make a higher high than the previous bar, [in this
    instance, in an uptrend],  a lower low than the previous same bar, and often,
    but not always, a lower close than the previous bar.  Here, we have all three,
    including a lower close.  OKRs can often be the stopping and reversal of a
    trend.  That may be the case, developing here, but we now need to see
    confirmation in the weeks ahead.

     What makes this OKR more significant is that it is on a higher time frame
    chart, the weekly, which, as we all now know, is more controlling in influence
    on a trend.  We already applied some logic to analyzing the monthly chart,
    and the conclusion drawn finds support in this next lower weekly time frame. 
    Looking for harmony in the time frames under study helps to solidify the
    analysis.  We will stop here, lest this become more of a treatise and less of
    an analysis of the S & P market. 

     It was important to establish what the higher times frames are saying,
    beyond the daily charts, because it means that drawing a logical conclusion
    as to where price could go is in keeping with the past development, up to the present tense. 

     The conclusion deduced from the logic of the information provided from
    the charts is that price could go as low as this past February lows, the 1040
    level.  The validity of that potential will be determined by HOW price reacts
    to the next important support area, 1150, the January highs.

     This is our overview.  Now we all get to watch how the daily time frame
    unfolds in a supporting role. As we indicated from our last analysis, we are
    now short the S & P, at the 1187 area, near the lows, but we had to see
    confirmation that 1195 support would fail, and then look to sell a weak rally,
    which did not happen, hence the lower entry level.

      There is some work being done on the blog, and access may not be available for a short period.  Apologies for any inconvenience.

    S&P W 3 May 10

    Disclosure: Short S &P Futures
    Tags: SPY, S P, QQQQ
    May 03 8:50 AM | Link | Comment!
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