Yesterday
As expected we did have a narrow range and held the important 900 range, while the low of the day was slightly below the 900 at 896.81 we can consider this still as part of the 900 support range. I mentioned we need confirmation of a break at 890 and that did not occur.
Regarding the comment of the need to go through distribution. I had mentioned that the 900 range is very important and can provide a short term bottom. Considering the strong down day on Wednesday and the importance of 900 a break here was less likly. The market is still trying to find its direction and the down day on wednesday required either a decision yesterday or another day of holding/distribution. Also take a look at how we arrived here off the 857 low, it took us a bit of time to get into the 945 range and to finally find the top there - the market is not going to give that up so easily. There are many new believers out there that feel the bottom is in.
As you can see the advise not to short again on wednesday turned out to be correct. Yes I know its always easy to state that after the fact, though it seems this time it was correct.
Today
I had mentioned that the retest of the 945 range on the intraday tuesday was quite a bullish sign. To top it off we did not break 900 even with horrible retail results accross the board - to take it even further we broke out of our narrow trade range at the end of the day and closed above the range - while it was only a few points it is still a bullish sign. It is very likly that from here we will reattempt the 945 range.
While it is Friday the market is bracing itself for the Jobs Data today. This will be the key driver in deciding our direction. We are currently still in hold mode, though with a slight bullish tendancy, so this key fundamental indicator will define our trade range. This direction should find its end on Tuesday between 10:30 and 11:30 and change trend there so watch for a top/bottom next week.
How to trade this?
I would try to stay out of the market today even with strong moves we will see. Remember we do not gamble so we want to ensure a tradable trend is established. If you are to dable in the market today stay small even if it appears tempting to be part of the move today and refer to my key support/resistance numbers at 885, 900, 912, 920. A break of 885 is very bearish and will bring is back to the 857 range. A break of the 920 very bullish leading back to the 945.
Its Friday and in this market enviornment I would not feel comfortable to hold over the weekend. We will have a much better chance to enter a position on Monday as the market will reattempt upper/lower ranges giving us a great 2 day position to run it out by Tuesday.
Great call yesterday, and your advice seems very sound! Thanks for your blog, it is very helpful!
ReplyDelete"While it is Friday the market is bracing itself for the Jobs Data today. This will be the key driver in deciding our direction. We are currently still in hold mode, though with a slight bullish tendency, so this key fundamental indicator will define our trade range. This direction should find its end on Tuesday between 10:30 and 11:30 and change trend there so watch for a top/bottom next week."
ReplyDeleteI appreciate the commitment to market forecasting; willingness and confidence to disclose a strategy or part of your trading strategy - in context with what the market is doing - in context with important support and resistance ranges being indentified. Many chartists and short term forecasters, will share their charts and important resistance and supports numbers, but stop short in extending forward a strategy for trading it. What I mean to say is, I like your follow through in this regard. Even though it may not represent 100 percent of a comprehensive trading strategy, it is a good idea of what you are doing; enough to interpret how you are approaching the market, given review of data and indicators you mention.
Nicely done.
I want to ask if you view earnings releases of banks which begin occurring next week, as potentially effecting the "bullish tendency" you are attaching to the current trend you are observing (short term trend between 885 and 946+). With these (bank) numbers due out next week, isn't it more likely a bearish tendency, we might lean toward in the next week?
Just curious how you might view the banks earnings coming out next week as relevant to market direction, pricing probability and trading range 'tendency.'
Sometimes banks reporting bad numbers are interpreted as good or "already priced in." I am wondering if that is getting to be a worn out view point, and if the market might need to revalue itself - when that might occur, in your view.
Thank you for a good blog. Caught your post on SPX forum at google and appreciate your taking initiative in that regard.
Also appreciate the cautionary notes you are seeming to make consistently and regularly.
First off thank you for the kind words. I always appreciate if my analysis can help others and actually makes sense =)
ReplyDeleteBefore addressing your points in detail I wanted to share 2 of my older posts that will give you a much better insight into what I think of this market longer term.
The first one was done in October (http://chaugner.blogspot.com/2008/10/where-are-we-headed-long-term_29.html). Another good one to read before hand was off our bottom with the analysis of where we will head (http://chaugner.blogspot.com/2008/11/is-this-bottom.html). I am glad that those calls still hold true and as you can see the current cycle should be ending this month. I still feel we have some more left in it before we break down again but we are coming to and end and the momentum the market needs is fading. We may have already created the top.
In regards to adding more then just support and resistance numbers. Initially many of my posts in the past included only those numbers. As you said you can find them on many other blogs and chartists articles. While they helped me in my trading they still did not provide me with reliable enough method. Its great if you can make a call for a low or high of the day but many times you are just presented with 5-6 numbers and of course the market will hit them as support and resistance eventually. The difficult part is creating a trade strategy around those numbers and knowing when and how to trade them. There are many trade styles that can be applied and I am still perfecting mine as well. I felt sharing my experiences and lessons learned will not only help me but possibly others as well.
In regards to earnings next week – we have had a huge amount of bad data since we had established our lows - yet we were able to rally despite this horrendous information. Take GM for example, they are on the brink of failure yet we rallied off the news that they received emergency funding for another month or so after congress had denied to help – this should have been a death blow but instead we continued rallying. I want to be honest, many times I am tired of hearing “this is already priced in” – its not. However the market cannot just drop from one day to the next and we have to account for that. Earlier this year I had made quite a few bad trades as I was convinced that the market should turn lower based on fundamentals but it rallied.
My bullish tendency in reality is not very bullish at all, rather an interpretation of what the market must do in order to continue down its path.
I hope this helps address the questions you had. Let me know if you want me to elaborate on anything else.
I meant earlier last year I had made quite a few bad trades. Forgot its 2009 already =)
ReplyDeleteChaugner, thanks for your reply. I notice you have made a good effort to sort through my post and I appreciate that.
ReplyDeleteAppreciate your thoroughness in reply. Went back and read your previous posts as preface to the one above. You addressed my questions well. Nice blog. I will be checking in here more regularly.