July 14, 2009
Author has no positions in the companies mentioned herein.
Trend Tracker: EVALUATE NOW
Strategic Plan - No Trigger on Monday.
The dull days of summer may be behind us. I am feeling an aggressive bias in the air. Direction may be up for one more day or so, but then the Market is likely to hit a wall. The mid term neutral channels that exist now were developed after Monday's break, and they should be respected. If the intra channel resistance lines of the mid term charts break higher, the aggressive push will almost surely take the Market to an official test of mid term neutral resistance levels as well. That is where the wall exists.
I love days like Monday, and I live for them. I hope you do too. Transitioning with the Market and producing results with every turn is what this business is all about. Doing so while controlling risk is what matters. We are only able to achieve the results that we do because we control risk. We are only able to secure 3.4% here and there because we are willing to protect ourselves if we are wrong. There is no other way to engage this business in my opinion. Either you control risk at all times, or you are prone to significant losses when you are wrong.
Instead of right or wrong though, I look at it as disciplined or undisciplined.
I am feeling aggressive, and I love the trends right now, but that does not affect my strategy or discipline at all. That just makes my mouth water. I look at this market as a sitting duck. It is there for the taking, all we need to do is stay on track, and avoid making stupid human mistakes. If you were able to do that on Monday, your week got started with a bang!
Review a short presentation about Trend Tracker, and decide if you want to use it:
We are long term Bears. We expect a GREATER DEPRESSION in the next 5 - 10 years. The Investment Rate explains why. Find the link in the Main Menu.
Our combined analysis for Tuesday tells us to expect the Market to begin the day flirting with initial resistance levels. The Market has developed mid term neutral channels, and steep - tight near term up-channels at the same time. Coincidentally, the resistance lines of the near and mid term charts coincide, so that makes them reasonable inflection levels for Tuesday. However, the near term charts must be discounted somewhat, because they are far too tight as they stand alone. For example, the spread between near term support and resistance for the Dow is about 30 points, and that is unheard of. Therefore, we have chosen an alternate support level representative of the near term patterns, and retained resistance accordingly. With resistance in mind, the Market is also threatening to break higher. The complete neutral mid term pattern tells us to expect a break of initial resistance in fact. This initial resistance level represents mid term intra channel resistance lines, and because support has been established already, follow through to mid term neutral resistance (secondary resistance in our summary data) would be most likely. If that happens, initial resistance would need to break higher, and that is one of the reasons initial resistance is an inflection level. If initial resistance holds, expect downside risk to be high, but more probably if resistance breaks higher an aggressive up-day may lie ahead instead. Treat 1794 as inflection. If it holds expect a pullback to 1781 first, and then a decline to 1763 if that breaks too. However, if 1794 breaks higher, expect 1823.
Here are the raw data parameters for the three markets we follow. The charts used to define these parameters can be found on our website.
|Initial intraday trading parameters for the NASDAQ exist between 1781 - 1794|
|If 1781 breaks lower expect 1763|
|If 1794 breaks higher expect 1823|
|Otherwise expect 1781 - 1794 to hold|
|Initial intraday trading parameters for the DOW exist between 8260 and 8330|
|If 8260 breaks lower expect 8102|
|If 8330 breaks higher expect 8575|
|Otherwise expect 8260 - 8330|
|Initial intraday trading parameters for the S&P 500 exist between 894 -900|
|If 894 breaks lower expect 871|
|If 900 breaks higher expect 931|
|Otherwise expect 894 - 900 to hold.|
The Stock of The Week
This call is for the week ending 7.17.09
Short under 33.80, target 30.23, Stop Loss @ 34.06 (Resistance Plan)
Rationale: If the pattern described in our combined analysis holds, an increase to resistance followed by steep declines, this call should work well. It is designed to cover if mid term support is tested too.
Monday: Adjust the call to short near resistance as follows:
|PRU||(Short) Resistance Plan:||Short near 39.63, target 34.02, Stop Loss @ 39.89||SUMMARY|