All three of these topics come down to supply and demand which is the basis of technical analysis. Everyone has their own way of viewing these things and that includes myself. In this post I’ll talk about how I view them, the reasoning behind it, what causes it, and just the overall understanding behind them along with other nuances. I have talked a lot about market structure in previous education pieces and this one will dive deeper into that part of technical analysis. Understand this is coming from the view point of myself and what I have learned by studying markets to derive these concepts, so some of it will likely vary a bit from what you may have already learned and other parts not so much. I’ll try to keep this one shorter than the others, but don't hold me to it because I want to be thorough here. If it ends up being too long for you for one sitting, I will separate it into three sections as per the title of the post if that helps.
12-29-13 Weekly Review & Watch-list
First off, hope everyone had a great Christmas or other celebrations. I have been taking it easy on the trading, mainly just managing trades I already entered and taking few new positions. Any stocks covered here is just for new entry purposes, I won't go over the positions I am already managing or any unreasonably late entries.
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Equity Swing & Position Trading Setup
I previously wrote a short piece on my intraday futures trading setup, and now that I have shifted my focus back to equities and options I figured it was only appropriate to write this short post on my setup for equities.
Bitcoin Looking At $1500 & $2000
Let's welcome it in with a big round of applause, my first bitcoin post! Wonderful.. Well I figured it was a good time to make one since it is pulling back and keeping relatively decent market structure. Aside from talking about fundamentals and whether or not bitcoins have any intrinsic value, the technical targets I am seeing right now are right around $1500 and $2000 (technically $1900 but hey, this is bitcoin.. if it gets there why not $2000?). With the way bitcoin moves that honestly wouldn't surprise me to see that happen especially with this Fibonacci retracement (50% & 61.8%) that caught the price action quite nicely (which is also what is giving me the targets). As long as it can hold above that fib zone the probabilities of hitting those targets are fairly high. I don't trade it and don't want to trade it, but I do follow it and that is what I'm seeing right now.
12-22-13 Weekly Review & Watch-list
First off, the transition from futures to options is really going great for me. Before the Fed announcement I was pretty reluctant to put on positions but after the reaction to the announcement I had a list of names ready to go and I did very well with them. If you were following me you saw that in real time. So here's how the new format is going to go.. To start I'm going to talk about the overall markets (SPY, QQQ, and IWM) with internals, then give a list of names with short descriptions about why I'm interested in them. After that I'll post the news calendar and that'll be it. So let's get into it...
Green Candles For Bernanke
Wow, quite the day today was.. The only reason I am writing this post is because I think this is such a great learning opportunity about being able to flip your views on a dime. This morning things were looking grim with the SPY working on a rounding top type pattern for a short term correction and the fed meeting just sent off a huge, massive squeeze and turned that rounding top looking pattern into a continuation looking pattern.
Take a look at the charts below:
Take a look at the charts below:
My Priorities Are Changing
You probably noticed that most of my focus today was on stocks and options rather than day trading futures. I have been wrestling with myself for weeks now about whether to shift my focus solely to stocks/options or not, and over the weekend I made the decision to go ahead and do it for several reasons.
The first reason is just simply because I don't want to be trading all day anymore. Putting on positions and letting them work without making split second decisions really sounds nice to me for some reason, so that is what I am going to do. I have been trading options all along and before my futures journey but I am shifting 100% back toward the equity markets now. On this same note, not having to make split second decisions regularly will allow me to more thoroughly think out a trade idea.
The first reason is just simply because I don't want to be trading all day anymore. Putting on positions and letting them work without making split second decisions really sounds nice to me for some reason, so that is what I am going to do. I have been trading options all along and before my futures journey but I am shifting 100% back toward the equity markets now. On this same note, not having to make split second decisions regularly will allow me to more thoroughly think out a trade idea.
12-15-13 Weekly Recap & Outlook
Next week is the big week, supposedly the Fed is going to taper although I
have never heard them say anything of the sort. Given that I don’t believe QE
has anything to do with economic growth or jobs, I have my doubts about if they
really will taper or not. Aside from my beliefs, the market believes it..
S&P down –2.1%, NASDAQ down –1.5%, Euros up 0.3%, and 10 year notes
unchanged. It was great trading needless to say.
If you haven’t already, go check out the post I made during the week. It lists all kind of indications telling us that the market needs a breather –> S&P 500 Party Coming To An End?
If you haven’t already, go check out the post I made during the week. It lists all kind of indications telling us that the market needs a breather –> S&P 500 Party Coming To An End?
S&P 500 Party Coming To An End?
At least in the short term, you gotta ask yourself this question. I mean it has been nonstop all year, and every internal you want to look at, as well as investor, is screaming it’s time for a compelling pullback more so than at any other time during the party.
A few charts we should look at that hold significance…
A few charts we should look at that hold significance…
12-08-13 Weekly Recap & Outlook
Amazing what can happen to our economy in a week right? We went from fearing the taper to embracing it with chests out in less than 5 days. Obviously that is a great example of Wall Street not understanding anything about our economy. The assumption is that our economy can stand on it’s own two legs now that the data is starting to perk up which has a high probability of being a fallacy. An economy that lives by QE dies by QE as Peter Schiff said.
Trade2day1
Dec. 6 at 4:09 PM
More Volatility To Come..
Today we experienced some awesome volatility that was much anticipated by me for a few weeks now, but I believe that this is just the beginning…
There are so many factors to look at to explain why the volatility is coming into the market this month; end of year selling after large gains, Fed December meeting/taper scare, VIX Bollinger squeeze being released, daily chart distribution, daily chart wedge broken to the downside, jobs numbers & on top of all of this market participants are actually embracing a correction possibility for the various reasons they want to see one which makes it more likely to happen and follow through.
There are so many factors to look at to explain why the volatility is coming into the market this month; end of year selling after large gains, Fed December meeting/taper scare, VIX Bollinger squeeze being released, daily chart distribution, daily chart wedge broken to the downside, jobs numbers & on top of all of this market participants are actually embracing a correction possibility for the various reasons they want to see one which makes it more likely to happen and follow through.
Francs & Euros Look Ready For Liftoff
I have talked a lot about how bullish I am on Euros for the long term weekly/monthly charts, but I have also come to like the Swiss Francs as well. In fact, I like how Francs look more than Euros but both are still looking very good as opposed to their counter-parts.
Every other major currency besides these two looks destined for weakness. Currency is a market that the fed cannot manipulate and with the ever increasing supply of dollars relative to demand the only logical direction the dollar can go is down. As a technical analyst, the dollar is the weakest currency of them all. There is going to have to be alternatives to the dollar in both currency and assets, and there are actions being taken by these countries to distance themselves from the dollar. Dr. Paul Craig Roberts does a much better job explaining that in this video than I ever could. I just see strong charts, and strong charts mean strong currency and more buyers. I think these two currencies will be the premium choice.
Every other major currency besides these two looks destined for weakness. Currency is a market that the fed cannot manipulate and with the ever increasing supply of dollars relative to demand the only logical direction the dollar can go is down. As a technical analyst, the dollar is the weakest currency of them all. There is going to have to be alternatives to the dollar in both currency and assets, and there are actions being taken by these countries to distance themselves from the dollar. Dr. Paul Craig Roberts does a much better job explaining that in this video than I ever could. I just see strong charts, and strong charts mean strong currency and more buyers. I think these two currencies will be the premium choice.
12-01-13 Weekly Recap & Outlook
So lets get this out of the way first.. Lately I have been finding myself stripping off all my indicators really unintentionally (especially when I am looking through stocks) and eyeballing everything I need to as well as using other methods like supply/demand zones and trend lines. Price structure and location is where my focus is at for daily/weekly charts and I can see a lot better with a stripped down version of the trend setup so that’s what I’m doing. I am using the 50 & 200 SMA for determining location and part of the directional analysis. I definitely still recommend the trend support though if you are still learning trends, no doubt about it. This is just what my instinct is telling me to do, so lets get into the recap..
Envision The QE
Many well respected people continuously criticize the people calling this market a bubble. I should only need to ask one question: Would this market be trading at this level if we had no QE? If the answer is no, then you agree that mal-investment is being made into equities therefore causing a mispricing of the stock market. The main argument is that there isn’t anything happening as huge as the housing market or the tech boom. Take a look at the Federal Reserve balance sheet, our deficit/trade deficit, unfunded liabilities plus the national debt, or the debt:GDP ratio.
Stocks To Watch
I run scans looking for stocks every so often and this time I figured I would share the list I made with all of you. Note that just because they are on this list doesn’t mean I am going to buy on the market as soon as Monday opens. Some of these still need to trigger entries, some are building bases, & others are ready to go but you will have to make that decision on your own for when you like to enter. Long only names with good fundamentals so they can be trusted for months at a time. Click the images for live charts or hover to see the ticker symbol:
Looking Inside…
After these two down days ensuing after a fairly strong three day rally, people may be looking for reasons to take profits. Here are two things to think about (click the images for live charts):
11-17-13 Weekly Recap & Outlook
Stock Index Futures:
I suppose it was inevitable after we got the range expansion in late October. I talked last week about breaking out of $1775 as a threshold to see new highs and sure enough we got it. I also said if that happened then something has changed in the markets because we didn’t get a real pullback before getting liftoff again. Now people are just buying the 20ema on the daily chart rather than the weekly, so we have kicked it up a notch. The range expansion may have kicked off a fairly large rally, so there really isn’t much else to say here except don’t dig in your heels. Embrace the rally, use stops, watch the 20ema on the daily as well as the RSI on the daily and weekly. As per you volatility lovers like myself, at least we aren’t covering miniscule ranges like we were in January/February, so who cares if we go up or down?
I would like to address (rant about) this bubble fiasco as well. I am in the camp that we are in a full blown bubble at this point. Why? Because ask yourself if the market would be at these levels if the fed weren’t in the market. If the answer is no (as mine is) then you agree that this asset class is in a bubble and that we are not in a real recovery but a recovery being propped up by the fed; a ‘recovery’ that can’t survive without the fed. If you want to lie to yourself and pretend like America is in some kind of ‘economic boom’ and live in the fantasy land with the rest of an Keynesians well then that is your decision to make. I don’t want to hear a list of 25 statistics proving that we are in some kind of economic boom because all I have to do is look at the middle class then look at Wall Street and the transfer of wealth is absolutely obvious. A transfer of wealth does not constitute economic boom, walling yourself into the corporate side of America and shouting “economic recovery!” does not constitute a recovery, telling me about how ‘strong’ our financial sector is because we have 0% interest rates, and how much debt Americans are going into so they can consume now does not create prosperity in the long term. My explanation for this market charging full speed ahead is the cheap money being provided to Wall Street for speculating, along with interest rates forcing people into equities, and the propaganda campaign by the media that our economy is in some kind of wonderful period in American history. Everything else you hear about is just people trying to justify why they are bidding this market up, it makes them feel a lot better about it.
Now that I said that, I should say this too. Don’t trade based on that. Trade based on what you see (on your charts) the majority of the market doing. If you see a bubble being built up and up and up then trade to the long side. Buy equities, join the party. There is no nobility in sitting out on a fortune, but don’t justify you doing it because of economic growth, because we all know that is a fallacy. Just be real and say you are doing it because there is a lot of momentum in this fed driven equity market. There is also no nobility in trading the wrong side of the trade, all you are doing is making yourself look like a fool while at the same time taking huge losses while everyone else is getting rich. If you truly believe that we are in a bubble as I do then just watch out for a long term top, meaning a top on the weekly charts. In the mean time, trade your plan and manage your risk.
Crude Oil:
Crude still really isn’t looking very good to me. Even if it gets above $95 there is a ton of trend support coming down on top of it. The weekly chart is showing some slight accumulation off of the trend support, but still the daily chart has a lot of work to do. $93 will be an important are for next week to break for more downside. Next key levels are the 3 at; $92, $90, & $88 so its possible we go mingle with those guys but at the same time the last trend support on the weekly is right below $92 so keep that in mind as well. We are at kind of a decision point in crude right now so I will just be waiting to see what road it takes.
Gold:
I still hold to my thresholds that below $1320 is bearish and below $1280 is very bearish. It can’t seem to hold below $1280 for any period of time though. Weekly chart trend support still coming down like a ton of bricks and RSI still bearish on both time frames. I suppose we should be watching the swing low put in at $1260 now twice to break for more downside as well as watching the 20ema on the daily to get some bearish reaction as a confirmation of more downside to come. The structure on the weekly chart is also really bearish, so downside is much more probable in my opinion.
Euro Currency:
Euro getting some slight bullish reactions off of the daily and weekly trend supports. Will be watching 1.3500 for a break and hold above, that would be refreshing for bulls to see. Just the fact that it is getting some decent reactions across time frames should put some puff back in the bulls chest. That was a pretty steep drop though, so I wouldn’t be surprised to see some consolidation before heading higher, if it is going to head higher. I am not really interest in any downside action if it comes to that. Looking at the dollar index it should be clear why 1.3800 failed on the Euro; because that 79.000 band on the dollar is quite the strong one and if it gets below that there could be a very quick move down to 76.000. No trend support is in the way of the dollar either, in fact trend is pointing lower across time frames, especially the monthly.
Market Internals:
Well stocks are holding things together on the internals. Percent above 200 is working its way back above the blue line, McClellan is turning back up and VIX is completely dead I mean no movement at all. Bollinger bands are squeezing on the VIX as well which historically has led to a pop in the VIX (as well as closing below the lower BB) but that was in a different market condition (before the range expansion kicked off a different kind of rally). Also every time we have approached this 12.25 level, some buy pressure comes into the VIX. Anyway, we will just have to see how this one plays out. I would consider the VIX most important to watch here being it has three signs that it should head higher, so lets see how it reacts to that.
Economic Releases:
Highlight of the week going to FOMC minutes on Wednesday. Other than that, CPI and PPI will be important numbers (for the Fed at least, I don’t believe in them). Retail sales, home sales, philli fed survey, business inventories, PMI, housing market index are all important stuff. We have a packed board this week so it should be a good one.
Trade well,
-Michael
We May Be in a Bubble, but Not Quite Parabolic Yet
I ran across something today which is quite compelling information on where our market is going and what it is currently doing. This of course in context with the current market psychology & QE programs. You can argue that we are in a bubble, but after seeing this you will see that we aren’t completely parabolic yet.
Trade2day1
Nov. 13 at 1:25 PM
11-10-13 Weekly Recap & Outlook
Stock Index Futures:
The thresholds that need to be given here should be quite easy to point out. On the Russell we are looking for $1110 to break higher and hold if price is looking to make new highs. For the S&P, the threshold is breaking and holding above that distribution ($1775) into new highs. If that does happen then something has changed, we never got the weekly test of the 20ema. It is definitely possible to smash into weekly overbought territory for a while. The flip side to upside thresholds is breaking and holding below $1740 on the S&P and $1075 on the Russell. You can’t deny those weekly candles are bullish though. I just want volatility back, so I am hoping that the distribution bars will hold and we can get a nice sell off. But if that doesn’t happen I am not going to dig in my heels just because I would prefer the market to go that way.
Crude Oil:
Crude oil is really not looking too hot right now. That $95 key level is acting as good resistance and if it cant get back through it, the next level is $92. If it can get through $95, I would be looking for a test of the daily 20ema and/or $97.5 key level. Weekly chart printed a bit of accumulation on the support level, but I am not sure that is enough. I will need to see more confirmation of buyers stepping in before I start looking for real bullishness on the daily chart. Keep in mind though, the weekly and monthly chart trends are still very much in tact for now. That means nothing without the daily chart confirmation bullish activity though, just something to keep in the back of your mind.
Gold:
Gold couldn’t get back above the $1320 key level and is now about $5 from breaking down below $1280 and that really could trigger some serious selling since this is the second time we have been in this scenario. The first time just turned out to be a stop run, and now that all the retail traders are scared to take this setup a second time, this is likely the one that works and works well. $1280 is still a level that should be given great importance though. I should probably add it as a key level, but I will have to check data going way back before I do that. Anyway, look at that weekly chart as well. The sellers are just overpowering any chance that bulls have at recovering. RSI is staying below 50 and the 20ema/channel support is really suppressing this market nicely. So watching $1280 for a breakdown would be a good idea I think.Euro Currency:
Well, another brutal week for the Euro due to a surprise rate cut or something. As of right now there is really no upside threshold that I think is reasonable to happen next week. What I will be watching is if the Euro can hold its long term trend support because if it can it still has a chance at resuming the uptrend. It could be a very long lasting one too if it could get the momentum going behind it. We haven’t been this oversold on the RSI since March; that is not a reason to buy, just something to pay attention to. The RSI usually doesn’t get this low on the Euro, at least since it has been a dead instrument. So, there is really no trade setup but I will just be monitoring how well it holds up against the long term trend support & watching for more accumulation at these levels.Market Internals:
The VIX almost woke out of her coma this week, but the bulls kicked her in the face. Percent of stocks above 200sma and McClellan Summation Index are both turning lower. There is a lower wick on the percent above 200 at the 50% level, but the bull trap scenario I laid out on that indicator a while back is coming to fruition. If it breaks lower, we could really have a bear party and bring some volatility back into this market and there is nothing I want for Christmas more than that. As far as this week goes, I will be watching for the percent above 200 to stay below that blue moving average (89 period) so the bull trap will stay alive and well. Economic Releases:
Not much going on with the news release side of things this week. I guess we get to see how negative our trade deficit is, how terrible our treasury budget is looking, and how terrible industrial production continues to be, but those are things we already know. Looks like EIA Petroleum Report was moved to Thursday. I wonder what the market will decide it wants to trade on this week, QE perhaps? In case you missed it, I did put out the education piece on building a trade plan called Probabilities, Risk/Reward, & Trade Management. If you don’t yet have a trade plan, I highly recommend you not only read this but study it. Having a trade plan is the most important thing you could ever do in this business. I stress it because when I first started trading I was one of those that told myself, “I don’t need a damn plan, I can wing it. I’m smart enough.” Well that didn’t work out too well for me, not only that but when I actually tried to put one together I had no idea how to do it or even what I was trying to put together. Just like everything else, I had to learn it for myself what was important and what wasn’t so I am trying to give you a shortcut here. I hope it helps you.
Trade well,
-Michael
Probabilities, Risk/Reward, & Trade Management
“When we play, we must realize, before anything else, that we are out to make money.”
These three things are the most important parts of your trading whether you acknowledge it or not. This piece will trump everything I have written before this in the level of importance, even though those things are very necessary and give you more of an edge, this is an absolute necessity to building wealth and maximizing profits consciously so you can be consistent in the long term. Again, like the previous piece this is more of the art of trading or rather very personalized especially when getting into trade management but I can tell you how I do things, the basic outline of what you should be researching, and really give you a foundation of how to build your trade plan by giving you the things you should seriously put focus on. If you are really serious about this, and willing to put in the 10,000 hours the least I can do is push you in the right direction so you don’t get caught up jumping from strategy to strategy paying “educators” to teach you something that you have to learn for yourself anyway. That is what this whole education section is based on. This post is going to be a rather long one because of its importance, but those who are serious about trading and don’t have a grasp around it yet, don’t know exactly how to formulate a trade plan, or just understand that good traders never stop learning will take the time to read it. If you just map out a trade plan using the layout I am about to explain, you are already so much farther ahead of the majority than you even realize.
These three things are the most important parts of your trading whether you acknowledge it or not. This piece will trump everything I have written before this in the level of importance, even though those things are very necessary and give you more of an edge, this is an absolute necessity to building wealth and maximizing profits consciously so you can be consistent in the long term. Again, like the previous piece this is more of the art of trading or rather very personalized especially when getting into trade management but I can tell you how I do things, the basic outline of what you should be researching, and really give you a foundation of how to build your trade plan by giving you the things you should seriously put focus on. If you are really serious about this, and willing to put in the 10,000 hours the least I can do is push you in the right direction so you don’t get caught up jumping from strategy to strategy paying “educators” to teach you something that you have to learn for yourself anyway. That is what this whole education section is based on. This post is going to be a rather long one because of its importance, but those who are serious about trading and don’t have a grasp around it yet, don’t know exactly how to formulate a trade plan, or just understand that good traders never stop learning will take the time to read it. If you just map out a trade plan using the layout I am about to explain, you are already so much farther ahead of the majority than you even realize.
11-03-13 Weekly Recap & Outlook
Something I wanted to say about these blogs before getting started.. I don’t consider them predictions or anything like that and I never have. I consider these laying out a scenario to see how the market reacts to that scenario. If I say there is a good chance for a rally this week and on Monday and Tuesday there is just distribution bars, well the market isn’t reacting to that scenario in a favorable way so that tells me that I either don’t want to touch it or I want to look for the opposite move. If I say I want crude to reclaim the $104 level for a nice move to the upside, but the entire week $104 (or even another key level below $104) is giving strong resistance; that tells me that sellers are not allowing that threshold to be met and they have the upper hand in the market. If I say I want to see accumulation off of the 20ema for a rally and we open up Monday and shoot straight up well that tells me bulls don’t have time for accumulating at a reasonable level they want it now and that tells me the mood or sentiment of the market is everyone is chasing and bidding this market up fast. New information comes in all the time in the market and these are just scenarios to see how the market is going to react to it.
----------------------------------------------------------------------------------------------------------------------Stock Index Futures:
The Russell very much underperformed everything else this week which should be concerning since it has been the leader this entire market rally this year. I said it should be for a reason, this market is so juiced up on QE it doesn’t know when a pullback is a good idea. As sellers come in so do buyers, and when buyers come in, more buyers come in. That has been the theme at least since May. On the Russell we have a weekly candle pattern that on the daily is coming right into support. So will need to watch the reaction off of that daily $1085 level. If we break below the next level I will be watching is the daily 50sma. S&P hasn’t even tested the 20ema on the daily chart yet so obviously that would be the first level to watch. S&P printed some distribution on the weekly and that usually has led to some kind of pullback even if it is a tiny one that just gets bought. So on a weekly basis we need to be watching the 2013 holy grail 20ema on both Russell and S&P to be tested. However, if the daily charts can hold support without weeklies going to the 20ema.. the pattern may be changing and we could see something new. Monthly bars closed and they closed very nicely, as well as Russell breaking the red-green-red-green pattern. A few tweets regarding stock indices this week #timestamped #techniques:
Crude Oil:
The first thing I see when looking at this chart is the daily slamming into a key level while being oversold on the RSI. Now, I am not in denial that crude completely fumbled any chance it had at heading higher in the short term (which is why I gave it the $104 threshold that it could never recover) and will have to build another base for that to happen. I am saying we could see a bounce back up to $97.5 if $95 holds. The weekly and monthly are also sitting right at support levels that have been holding up. I don’t know how many more support levels it is going to crash through, I do know there is no setup though unless taking the chance at buying that weekly/daily ($94/$95) support is in your playbook.
Gold:
Gold couldn’t play ball either, good thing that distribution was as clear as the sun during the day. Distribution into weekly resistance levels is not something you want to be long against. Anyway, we are back at giving gold this $1320 threshold. Below is bearish, above needs to prove itself again. I am considering that $1280 is trying to prove itself as a key level so again, $1280 will be the last level to beat before a free-fall. That weekly chart is just too powerful, every time that thing smacks down the price action. If it can recover itself I am still looking at that higher high to be taken out for a classic reversal, but it has to do it.
Euro Currency:
Yet another symbol that couldn’t play ball. I asked it kindly to hold 1.3700 and it smacked me in the face with a big huge monthly distribution bar and gave back about 400 pips. Right now it is sitting at 1.3500 support and I still give it the 1.3700 threshold to recover, if it wants to keep tanking it is heading toward 1.3400/1.3350. Long term, I am still bullish though (mainly because of dollar monthly chart) but that has no bearing on week to week price action.
Market Internals:
VIX is still completely dead, no signs of life. Percent of stocks got back above the 89sma and McClellan summation recovered that high I was watching for so long. So in order to keep the bullish theme going, VIX needs to hold right where it is, and the other two need to hold above those levels and head higher.
Economic Releases:
Highlight for the week is the Employment Situation Friday, other than that we have GDP on Thursday and nothing else is really important. Hopefully we wont chop around due to that.
A shout out to my followers –>
Trade well,
-Michael
10-27-13 Weekly Recap & Outlook
I am starting a new format today as far as the charts go. It is just going to be daily and weekly charts unless the month closed during the prior week or during the weekend of the recaps.
So picking up from last week, the range expansion led to a healthy consolidation pretty much over the entire week. The bullish structure was definitely kept in place, especially on the S&P and the Russell gave some very clear breakout levels at $1120. Like I said last week, I have no idea how long this one will last but all I do know is people were shorting the $1700 area and we have now left that range. Those shorts will get squeezed as long as the bulls have the juice to do so, and gauging on the price action right now they do so long as they can get liftoff straight out of this mini pattern. The only thing that concerns me is that this pattern looks exactly like the July top. It is still a bullish pattern as it stands now, but just be aware it could change into a failure like July did.
Well the breakdown target was achieved with ease last week and then gave some more. It also broke through the $97.5 key level but found daily accumulation on the weekly long term trend support at $96. So $95-$96 will be the area I will be watching for buy pressure and $97.5-$98.5 (200sma) will be two levels I’ll be watching for sell pressure or for bulls to reclaim. As far as RSI analysis goes, bulls have an oversold reading to work with on the daily while at the same time being at known support on the weekly. Keep in mind that the long term trend structure (weekly, monthly) is still place very much so, which means it is only natural for me to lean bullish but still be aware of the downside and trade it if need be. Although where we stand now, between the weekly and daily there is just support all over the place.. literally at every round number except $93.
Gold has really washed up as a day trading instrument. You never know if it’s going to have a nice trend day or just chop/algo spike all day like it does 9/10 days. Algos have completely destroyed it, either that or the manipulation the suppress the price. Anyway, even though it isn’t the ideal trading instrument right now there is still a very nice swing setup here to the $1380 area trend support on the daily. I really like that setup, and plenty of room on the RSI to move. Something else to be aware of is if gold can take out the higher high (HH) on the daily, that would officially be a classic reversal taking place. It may be more clear on this weekly chart. If I was deeply long in gold down here, that would really be giving me hope/optimism right now and may even drive new buyers to step in.
Euro has really been working beautifully for me. Sometime in the history of this blog (possibly around July-August) I made it official that I was long term bullish on the Euro, and at that point I started looking for reasons to confirm that. Back in September, the V shape bounce worked perfectly. Then early this month (October) I was talking about the buy signal at 1.3500 looking really good, you can check my stocktwits stream or twitter if you don’t believe me. Anyway, buyers are really doing their job right now and they have gotten a little overheated on the RSI so if price confirms the overbought situation and starts slowing down I want to see it hold 1.3700. If it can do that we can see 1.4000 then 1.4200 and eventually 1.4500. That is a nice clean break on the weekly and it’s exactly what I was looking for. Now just waiting for a large continuation of that.
Internals are definitely improving, but I just hope that VIX comes back up this week because it really killed off the good trading ranges last week. Percent above 200sma is showing broadening participation across the market so that confirms a bullish outlook for now. If that 60% level high made a while back cannot get taken out then it would just be the bull trap I was looking for before we broke out. For now though we will just go with the trend until it fails. I admit it is disappointing I was really hoping for a nice, big correction (10-20%) with expanding ranges (I mean real expansion) to trade for a new months.. I think most of the big money was too so they can have a real buying opportunity, but the date on that has been pushed back once again. No reason to fight it.
BREAKING NEWS: Fed announcement comes in and there is NO TAPERING; I repeat NO TAPERING due to the government shutdown they said, data still too weak to pull back and it likely has something to do with the holiday shopping season… That is what you are going to hear in the news media this Wednesday, so just prepare for that. Obviously the Fed announcement is the highlight for the week. It looks like we are getting some shutdown data this week, I‘m not sure but just assuming that because some of the releases already have “Report” tagged on them and that usually means it has already been released, but that is what they did during the shutdown. It is a pretty packed board this week, so should be a good one.
Still working on that education piece on execution, should definitely be a good one and very helpful in building a trade plan and deciphering a trade plan from a trade strategy.
Trade well,
-Michael
Stock Index Futures:
So picking up from last week, the range expansion led to a healthy consolidation pretty much over the entire week. The bullish structure was definitely kept in place, especially on the S&P and the Russell gave some very clear breakout levels at $1120. Like I said last week, I have no idea how long this one will last but all I do know is people were shorting the $1700 area and we have now left that range. Those shorts will get squeezed as long as the bulls have the juice to do so, and gauging on the price action right now they do so long as they can get liftoff straight out of this mini pattern. The only thing that concerns me is that this pattern looks exactly like the July top. It is still a bullish pattern as it stands now, but just be aware it could change into a failure like July did.Crude Oil:
Well the breakdown target was achieved with ease last week and then gave some more. It also broke through the $97.5 key level but found daily accumulation on the weekly long term trend support at $96. So $95-$96 will be the area I will be watching for buy pressure and $97.5-$98.5 (200sma) will be two levels I’ll be watching for sell pressure or for bulls to reclaim. As far as RSI analysis goes, bulls have an oversold reading to work with on the daily while at the same time being at known support on the weekly. Keep in mind that the long term trend structure (weekly, monthly) is still place very much so, which means it is only natural for me to lean bullish but still be aware of the downside and trade it if need be. Although where we stand now, between the weekly and daily there is just support all over the place.. literally at every round number except $93.
Gold:
Gold has really washed up as a day trading instrument. You never know if it’s going to have a nice trend day or just chop/algo spike all day like it does 9/10 days. Algos have completely destroyed it, either that or the manipulation the suppress the price. Anyway, even though it isn’t the ideal trading instrument right now there is still a very nice swing setup here to the $1380 area trend support on the daily. I really like that setup, and plenty of room on the RSI to move. Something else to be aware of is if gold can take out the higher high (HH) on the daily, that would officially be a classic reversal taking place. It may be more clear on this weekly chart. If I was deeply long in gold down here, that would really be giving me hope/optimism right now and may even drive new buyers to step in.
Euro Currency:
Euro has really been working beautifully for me. Sometime in the history of this blog (possibly around July-August) I made it official that I was long term bullish on the Euro, and at that point I started looking for reasons to confirm that. Back in September, the V shape bounce worked perfectly. Then early this month (October) I was talking about the buy signal at 1.3500 looking really good, you can check my stocktwits stream or twitter if you don’t believe me. Anyway, buyers are really doing their job right now and they have gotten a little overheated on the RSI so if price confirms the overbought situation and starts slowing down I want to see it hold 1.3700. If it can do that we can see 1.4000 then 1.4200 and eventually 1.4500. That is a nice clean break on the weekly and it’s exactly what I was looking for. Now just waiting for a large continuation of that.
Market Internals:
Internals are definitely improving, but I just hope that VIX comes back up this week because it really killed off the good trading ranges last week. Percent above 200sma is showing broadening participation across the market so that confirms a bullish outlook for now. If that 60% level high made a while back cannot get taken out then it would just be the bull trap I was looking for before we broke out. For now though we will just go with the trend until it fails. I admit it is disappointing I was really hoping for a nice, big correction (10-20%) with expanding ranges (I mean real expansion) to trade for a new months.. I think most of the big money was too so they can have a real buying opportunity, but the date on that has been pushed back once again. No reason to fight it.
Economic Releases:
BREAKING NEWS: Fed announcement comes in and there is NO TAPERING; I repeat NO TAPERING due to the government shutdown they said, data still too weak to pull back and it likely has something to do with the holiday shopping season… That is what you are going to hear in the news media this Wednesday, so just prepare for that. Obviously the Fed announcement is the highlight for the week. It looks like we are getting some shutdown data this week, I‘m not sure but just assuming that because some of the releases already have “Report” tagged on them and that usually means it has already been released, but that is what they did during the shutdown. It is a pretty packed board this week, so should be a good one.
Still working on that education piece on execution, should definitely be a good one and very helpful in building a trade plan and deciphering a trade plan from a trade strategy.
Trade well,
-Michael
Intraday Futures Trading Setup & Indicators
I have had a lot of questions regarding my indicators and the setup I use for the intraday trading, so I am going to write this brief post explaining them so I can direct people here.
10-20-13 Weekly Recap & Outlook
Stock Index Futures:
Last week I was talking about the range expansion taking place in the stock indices, I didn’t think that would lead to more upside initially but about mid-week I realized we probably would blast off to the upside. I posted about it on stock twits. Now, from here I have no idea how far we will go. Capitulation is the word you need to think of, bears are capitulating right now and bulls will wring their neck and squeeze them senseless for as long as they can. This chart is something I should have brought up last week, it is just a Russell 2000 weekly but using a line graph. From that perspective it is much clearer which direction we were headed, but it can still be used to see the context of this range expansion to the upside. Look at this NASDAQ monthly chart. The ranges are easier to compare on a weekly but I can’t fit it into one chart clearly. If this expansion to the upside continues, it is very possible we have something like the NASDAQ bubble of 2000 except this time it is going to be present in the Russell 2000 & S&P 500 as well. Think about it, everything is set up for a nice classic bubble. Yellen easy money forever and… well, I guess that’s all we need. Now granted, this could very well be the start of a blow off top (short-term or not I don’t know) but there is a lot of euphoria in the market right now and I think bulls will jump all over this for as long as they can.. this market has not been loosing them money, so why would they stop? So, I believe this is much different than the other rallies and if it keeps up we can see a lot higher as well as even more expansion. I’ll leave you with an expanded view of this monthly Russell chart, monstrous.
Crude Oil:
During the week I posted on stocktwits to watch the $100.5 level for a breakdown level, which worked but not like I was looking for. The new breakdown level is now $100 which may work better as that is a psychological level to be breaking down. If we do break down though I will still be watching that swing low from 9/30 at $101 for bulls to reclaim it which would be the first signs of bulls recovering. $104 is still the ultimate threshold. Breakdown target would likely be the 200sma and then I would be watching to see if price could reclaim the swing low, or at least attempt to. Other than that, daily 20sma and $103 key level is resistance if price tries to immediately rally into the week so watch that as well.
Gold:
Gold had a very solid setup for another leg lower but sellers couldn’t capitalize on that, so that should tell you something right there. Bulls aren’t in the clear until they reclaim $1350 like I have been saying for a while (can now accept $1340) and I also still say that below $1320 is bearish, but given the context of what happened last week if it can hold right at $1320 and consolidate that would be bullish and likely precede a break of those key levels. Something I have been looking at on gold though is this may be building a possible bottoming pattern which would explain the resilience to another leg lower. This two step bottom structure where price makes a higher low and would be confirmed when it takes out the $1400 high while continuing to make higher highs. It is a very real possibility. I’m not just throwing around theories here, I am aware of my parameters set by the daily structure, location and pressure along with the weekly trend resistance but the pattern remains the same. If $1400 is taken out I can seriously consider a bottom has been put in. Above $1340 key level, I would look for $1400 to be tested and below $1320 my hopes are not so good for bulls.
Market Internals:
I included some new ones this week so you can see the level of overbought the market is in and compare this to how price reacts this week. If price continues on with the action it is having now while these shorter term oscillators stay overbought, then we have a massive squeeze and big money buying everything in sight confirmed. What should happen is we get some kind of pullback or pause to calm the overbought reading before surging higher again. So use that as your baseline to compare the actual price action to.
Economic Releases:
This week we will see a lot of numbers that weren’t released during the shut down. Some maybe have not been announced yet so we don’t know the date. But we do have employment numbers on Tuesday for September so that will definitely be the highlight of the week. Since it is on a Tuesday that may really bring out the volatility because typically jobs number Friday is a dull way to end the week, but this time around it is an exciting way to start the week. Also crude numbers on Monday. Existing Home Sales on Monday, Durable Goods on Friday, New Home Sales on Thursday.
On a side note, I have started on the next education piece regarding execution and building the trade plan (“Probabilities, Risk/Reward, & Trade Management”). It is going to be a long one because of it’s importance and likely take me a bit to write it but I have started working on it and am mostly finished with the first section being “Probabilities”.
Trade well,
-Michael
10-13-13 Weekly Recap & Outlook
Stock Index Futures:
Well everything went according to plan after the Russell broke down from the level mentioned and the S&P failed to hold above $1700. So we got the sell off, and after that, to my surprise we got the biggest 2 day rally this year. Now, obviously that is a huge change of pace from the kind of rallies we have been having this year. That kind being dead, choppy, gap up days. I am thinking that this isn’t necessarily the start of a new move to the upside, but possible the start to some volatility. Of course I am biased to always crave the volatility, but I just explained the rationale. The Russell weekly 20ema was held, again, for the fourth time this year. I’m asking myself how many times is this thing going to hold. Even so, like I said last week there is sell pressure above $1080. So even if we do break above and make new highs there is a high probability sellers are waiting up there, unless we are just going to go parabolic for no reason. I won’t say it’s not possible. Bears capitulate, bulls step in hardcore, and off she goes. Anyway, $1700 will be the level I am watching as a line in the sand for bulls and bears. Above $1700, watch how bulls are composing themselves. Is there conviction or sell pressure? How is the price structure looking? That level for the Russell will be $1080. I won’t sit here and lie and act like the bulls didn’t set themselves up nicely with that weekly candle. Bears also still have a nice setup from the $1720 distribution weekly candle, so they are going to have to duke it out. Let’s all pray for a very volatile week while bulls and bears fight each other.
Crude Oil:
Crude bulls did not do well this week. As we sit right here, that is bearish price structure. The $103-$104 key levels turned into resistance as well as the 20ema and trend channel. RSI is below 50. I’m not blind to that, but I’m also not blind to that fact of marking up that $101 swing low from 9/30 and watching that as an important level for bulls to reclaim if it is broken. Weekly chart we just bounced off of the midpoint of the channel just the slightest bit, that is probably why we came so far off the lows on Friday which was something I wasn’t expecting because of the structure. I am willing to say $99-$98 is in the cards if $101 is broken and not reclaimed. Threshold to get aggressively bullish again is still $104 which was never reclaimed either. Under Friday’s lows I will be trading aggressively bearish if the right setups come along on intraday, and that’s about it.
Gold:
Like I said last week, gold was and is the easiest read out of all the instruments. Bearish is the name of the game here. Price held below $1320 which was a sign of weakness and then cracked $1280 which is a sign of watch out below. I am looking for new lows. You can say what you want about physical and fed printing or whatever and I agree with you. But I won’t put my money on that, I will bet my money on what price action tells me. What the market tells me. I mean look at that weekly chart, you cannot honestly tell me that is bullish in the slightest bit as it stands right now. The monthly too, that thing is broken. It is that simple, you have a weekly and monthly that is broken so you look for triggers on the daily, and $1280 was that trigger. Bulls would have to completely turn the tables on this to make a difference, meaning structure on monthly, weekly, and daily charts; getting past all the resistance through the time frames; turning the trend support around on the weekly and daily. Just things that don’t happen until the market is ready for them to happen. So watch for more downside, leave your emotions at the door, and trade smart. Long term (monthly chart) you can start looking for real buy pressure in the $1100-$1000 zone.
Treasuries:
I think bonds are toast. Bearish reactions on the weekly and daily charts. Weekly at 20ema and daily at trend support. I am still willing to give it to 125’0 for an official breakdown level because of my analysis on rates but still I just don’t see any conviction from the bulls on this one. Weekly chart is under all of the trend supports and getting bearish reactions from it as well as the daily. Things aren’t looking good for bonds, and that will impact the entire country and the federal government if this keeps up.
Market Internals:
Market internals are trying to make a bounce back but still aren’t even close to bullish territory. What they are trying to do is attempt to get into bullish territory. Percent above 200sma is in a big wedge pattern that I will be following, haven’t seen something like this in a while. Summation is trying to do some kind of head and shoulders thing, but I am still focusing on the fact that it is below 0. VIX fell hard this week and raising hard, hopefully that keeps up. Meaning both the rising and falling, indicating volatility and wide ranges.
Economic Releases:
I don’t know what is going to be released and what isn’t. It looks like they have already knocked out Industrial Production and the EIA reports as N/A. Assuming we get housing starts that is the highlight of the week. The real highlight though is this whole debt ceiling debacle. I love it. The ‘deadline’ is this Thursday and with the president threatening default (debt ceiling doesn’t equate to default) the volatility may be present this week.
Trade well,
-Michael
10-06-13 Weekly Recap & Outlook
Stock Index Futures:
S&P and Russell are giving huge divergences. Russell being the stronger of the two. The month closed last week though, S&P closed with distribution on the monthly, and Russell closed a big green bar. Look at that pattern that the Russell has been putting in though; one month green, one month red. It is crazy. What else am I to expect this month than a red monthly bar? Weekly chart on the Russell is showing some distribution though, a small amount but still some. Daily chart is what is making me ponder some short term upside though. It is just a nice clean, consolidation, actually textbook bull flag. On the flip side of things, there is more sell pressure than before one of these other runs the Russell has been making and I feel like if we did break out again (like on Tuesday) sellers would be waiting somewhere close to smack it down again. Levels I’ll be watching are; holding above Tuesday’s high or getting below Monday’s low. Any breakdown I would be looking toward the weekly 20ema as a target which coincides with the blue trend support on the daily. S&P is in a much different spot, two monthly distribution bars, weekly distribution and RSI divergence, bearish engulfing pattern (engulfed the distribution), and failure patterns everywhere. For any upside, it needs to get and hold above $1700. If It can’t do that I’ll be looking for the weekly 20ema to break and $1625 to be tested. **Note: The S&P & Dow Jones could very much cause the Russell and NASDAQ to break down**
Crude Oil:
Like I said last week crude may need to pull down to $101 trend support to find some better footing and that is exactly what it did. It got some great accumulation off of that trend support and that is exactly the kind of stuff I look for. It is currently back above the blue trend support, next objective is to get through the 20ema and channel on the daily. If it can get going short term target is still $107-$108 area. Weekly and monthly aren’t looking like they will pose any problems for another big run. First signs that it isn’t ready to break through the 20ema will be failure on an intraday basis at those levels, either $104 support or the 20ema itself. If it comes off significantly (breaking $103), it may need to come back for another round of accumulation around the $101 support. So obviously $103 will be the key level I am watching this week for either continuation or more accumulation.
Gold:
Gold is definitely the easiest read out of all of them right now. Below $1320 is the weakness and breaking $1280 is the trigger. Everyone in the world is watching that $1280 level and if it cracks stops are going to be triggered, people are going to be bailing, shorts will be shorting, etc. Because everyone knows breaking that level could lead to new lows. I mean look at that weekly and monthly, those babies are ready for some downside action. The only way gold is going to redeem itself to me is getting and holding above $1350 like I said last week. I am more excited about downside though.
Market Internals:
I posted this on Stocktwits. McClellan Summation Index looks the worst and could reassure the other internals to continue into bearish territory. If it gets that crossover to the downside while being below 0, I would not even touch any fresh breakout on the Russell or NASDAQ because there is such a high probability they will fail. Especially with the percent of stocks above 200sma about to fall below 50% WHILE Russell is gearing up for a break. Nope, that smells like a retail trap and it smells like a place where the smart money is going to be unloading as they have been.
Economic Releases:
Highlight of the week is FOMC minutes from the “no taper” meeting. I am sure that will be exciting. I don’t even know what other releases are going to make it out with the shutdown.
Trade well,
-Michael