Friday was an extremely weak day in the market. We had a true selling day on Friday across the board. Today is shaping up to be a strong day. Today is Monday. Today is the last day of the month. Consider this passage from trader Gary Smith:
"One of my more reliable momentum patterns over the years has been the Friday-to-Monday pattern. Stronger-than-average strength on a Friday is expected to be followed by more strength on Monday (or Tuesday if Monday is a trading holiday). Conversely, extremely weak price action on a Friday is expected to lead to more weakness on Monday. A Friday-to-Monday momentum break pattern occurs when the expected strength or weakness on Friday doesn't carry over to Monday. These weekend momentum break patterns are highly significant and indicative of a short-term trend change."
Source: Gary Smith, How I Trade for a Living, page 112.
If the market closes up today, then the momentum pattern has changed on a Monday following a weak Friday. Thus, I would change and revise my top target from 1294 to 1320. The volatility should increase between now and the end of February.
Have a good day!
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Monday, January 31, 2011
Tuesday, January 25, 2011
Market Conditions
I normally don't like to blog during market hours because (1) the last hour of the trading day is the most important hour of the trading day and (2) the closing price is always in question until the close.
But I have some free time during lunch, so here goes....
The market's behavior is consistent with a developing top. The market dipped down to the 13-day moving average. Buyers came in to buy the dip. I was then looking for the market to rocket to new highs and to take out resistance @1291. Instead, the market stalled out @ 1291. Q: What does this retreat tell me? It tells me that resistance is beginning to matter more and more. In a raging Bull Market, resistance is cut through like butter. We are far from that condition now.
I think the market will power higher than 1291, however, it may or may not happen today. Even though I am bearish, I actually want the market to bounce higher above 1291 and 1296. Why? Because a higher high with a lower high in the Relative Strength Index (RSI) will set up a nice negative divergence that can be sold. As a rule of thumb, a negative divergence is a desirable set up and trading opportunity. It doesn't happen often but it is worth waiting for.
The time is now 12:37 in San Diego. The market will close in 23 minutes. The opening price was 1288.17. So, I want to see how the close correlates to the open. Will the close be higher, lower or the same level as the open? We have had a ten-point range day, so today will not be a narrow range seven (7) day.
Some days are days of opportunity. Today is just a day for watching the market and taking cues from the price action.
Later.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
But I have some free time during lunch, so here goes....
The market's behavior is consistent with a developing top. The market dipped down to the 13-day moving average. Buyers came in to buy the dip. I was then looking for the market to rocket to new highs and to take out resistance @1291. Instead, the market stalled out @ 1291. Q: What does this retreat tell me? It tells me that resistance is beginning to matter more and more. In a raging Bull Market, resistance is cut through like butter. We are far from that condition now.
I think the market will power higher than 1291, however, it may or may not happen today. Even though I am bearish, I actually want the market to bounce higher above 1291 and 1296. Why? Because a higher high with a lower high in the Relative Strength Index (RSI) will set up a nice negative divergence that can be sold. As a rule of thumb, a negative divergence is a desirable set up and trading opportunity. It doesn't happen often but it is worth waiting for.
The time is now 12:37 in San Diego. The market will close in 23 minutes. The opening price was 1288.17. So, I want to see how the close correlates to the open. Will the close be higher, lower or the same level as the open? We have had a ten-point range day, so today will not be a narrow range seven (7) day.
Some days are days of opportunity. Today is just a day for watching the market and taking cues from the price action.
Later.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Monday, January 24, 2011
Market Conditions
The S&P 500 Index opened today @ 1283.29. The low was made early in the day @ 1282.47. The market gradually drifted higher throughout the day before making a high @ 1291.93 and closing @ 1290.84. Today was a bullish day because the close was higher than the open. However, the volume was less than Friday's volume. I read less volume as a lesser commitment by institutions, funds, and wealthy individuals compared to Friday's price action.
What catches my eye about today's action is the Relative Strength Index indicator (RSI) on a daily basis. The RSI heading has dropped below the 70 overbought level and closed @ 67.81. The reading is heading higher towards 70. What I am looking for is a higher price action on the S&P 500 Index and a lower RSI reading then the last week's high. In other words, a reading higher than 1295 with a RSI reading below 70 would say to me that the market can be sold short. That's the setup.
We remain in a well-defined uptrend on a daily basis. The 13-day moving average is above the 50-day moving average. The 50-day moving average is above the 200-day moving average. Trend followers will "buy the dip" in anticipation of higher prices ahead. That strategy has worked since December 1. True believers in trend following will have bought Friday's dip in price down to the 13-day moving average.
In the next 1-3 days, I am looking for either (a) a new high @ 1300 or (b) a new dip to the 1274 level. The new high on a negative divergence with the RSI reading would be ideal. The new dip would just be a short-term buying opportunity until a new high is reached.
The scuttlebutt at clearstation.com is that there are alot of sell stop orders below the market @ at the 1250-1260 level. These people are looking to lock in profits. As a result, we have the conditions in place for a quick, sharp correction when the time comes. I view 1271 as key support on the S&P 500 Index.
Have a good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
What catches my eye about today's action is the Relative Strength Index indicator (RSI) on a daily basis. The RSI heading has dropped below the 70 overbought level and closed @ 67.81. The reading is heading higher towards 70. What I am looking for is a higher price action on the S&P 500 Index and a lower RSI reading then the last week's high. In other words, a reading higher than 1295 with a RSI reading below 70 would say to me that the market can be sold short. That's the setup.
We remain in a well-defined uptrend on a daily basis. The 13-day moving average is above the 50-day moving average. The 50-day moving average is above the 200-day moving average. Trend followers will "buy the dip" in anticipation of higher prices ahead. That strategy has worked since December 1. True believers in trend following will have bought Friday's dip in price down to the 13-day moving average.
In the next 1-3 days, I am looking for either (a) a new high @ 1300 or (b) a new dip to the 1274 level. The new high on a negative divergence with the RSI reading would be ideal. The new dip would just be a short-term buying opportunity until a new high is reached.
The scuttlebutt at clearstation.com is that there are alot of sell stop orders below the market @ at the 1250-1260 level. These people are looking to lock in profits. As a result, we have the conditions in place for a quick, sharp correction when the time comes. I view 1271 as key support on the S&P 500 Index.
Have a good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wednesday, January 19, 2011
1294 - The Top
Yesterday, the S&P 500 Index closed @ 1295, one point above 1294.
Today, the market behaved as if the trend has changed to the down side.
Q: Why do I say that? First, the bull flag pattern has worked very well during this rally since December 1. The market would correct and then rally higher. But the corrections were always higher than the previous correction. This morning, I was observing the cash futures for the S&P 500. Another bull flag formed at about midnight with a low of 1290. If the uptrend had still remained in play, then the market should have bounced off of 1290 today. Instead, the market dropped through support @1290. This little behavior told me that the character of the market had changed. Second, there was support from Friday @ 1287. The market dropped through this support as well. Third, yesterday was a narrow range 7 day. In other words, Tuesday was the narrowest range day out of the previous seven days. Normally, a price expansion follows a narrow range 7 day. So, the market's behavior of ranging widely was to be expected following a narrow range day. Fourth, the 2011 Stock Almanac warned that this week in January stood a high probability of producing losses in the market. Finally, the market stopped right @ support @ 1278 before closing @ 1281.
Taken together, all of these events told me that the trend had changed early this morning before the market opened
So, if 1295 was the absolute top of this move from the July 1, 2010 bottom of 1010, what should happen next? This week should be a down week. Levels of support are @ 1278, 1259, 1242, 1225, 1207, 1191, and 1173. These support levels are key because they mean that buying pressure will come to slow the market's drop before the down trend renews itself. Notice how we go back in time when the trend has changed to down. Unfortunately, many longs will try to convince themselves that the market is still advancing higher. They will continue to buy the dips in the market because that strategy has worked since December 1.
However, the character of the market has now changed. I am 100% in the G Fund and have been since 1240. We should see 1240 again real soon. Now is a good time to sell, although yesterday and last week were better times.
Looking ahead, the next stop is 1259. I would not be surprised if the market made a low @ 1259 tomorrow. Notice how the bullish sentiment will begin to change over the coming days.
Did we have a true selling day today? Yes, we did. Remember that true selling days occur when at least three indexes drop by 1% or more. This rough rule of thumb separates dips to be bought (buying opportunity)from times to sell and get out. The following indexes were down by more than 1% today at the close: Nasdaq, 1.46%; NYSE, 1.05%; S&P 500 Index, 1.01%; NDX, 1.09%; Russell 2000, 2.56%. Yes, today was a true selling day.
I don't know how long it will take for this correction to play itself out. We could either see three or five waves down. I am waiting for the 1173 zone as a good buying opportunity. By buying at this level, I can ensure that we buy low and are in a good position to outperform the S&P 500 Index this year.
I did not blog on the market yesterday because I was home sick with a bad cold.
In a month, it will be nice to look back and say that the 1294 zone was the top and that we nailed it. We just have to see what develops. I remain biased towards May as a good buy time for 2011.
Thought for the Day: "First acquire patience and perseverance, then make up your mind what else you want, and you will be almost sure to get it." --Napoleon Hill, The Law of Success in Sixteen Lessons (Volume 2), page 122
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Today, the market behaved as if the trend has changed to the down side.
Q: Why do I say that? First, the bull flag pattern has worked very well during this rally since December 1. The market would correct and then rally higher. But the corrections were always higher than the previous correction. This morning, I was observing the cash futures for the S&P 500. Another bull flag formed at about midnight with a low of 1290. If the uptrend had still remained in play, then the market should have bounced off of 1290 today. Instead, the market dropped through support @1290. This little behavior told me that the character of the market had changed. Second, there was support from Friday @ 1287. The market dropped through this support as well. Third, yesterday was a narrow range 7 day. In other words, Tuesday was the narrowest range day out of the previous seven days. Normally, a price expansion follows a narrow range 7 day. So, the market's behavior of ranging widely was to be expected following a narrow range day. Fourth, the 2011 Stock Almanac warned that this week in January stood a high probability of producing losses in the market. Finally, the market stopped right @ support @ 1278 before closing @ 1281.
Taken together, all of these events told me that the trend had changed early this morning before the market opened
So, if 1295 was the absolute top of this move from the July 1, 2010 bottom of 1010, what should happen next? This week should be a down week. Levels of support are @ 1278, 1259, 1242, 1225, 1207, 1191, and 1173. These support levels are key because they mean that buying pressure will come to slow the market's drop before the down trend renews itself. Notice how we go back in time when the trend has changed to down. Unfortunately, many longs will try to convince themselves that the market is still advancing higher. They will continue to buy the dips in the market because that strategy has worked since December 1.
However, the character of the market has now changed. I am 100% in the G Fund and have been since 1240. We should see 1240 again real soon. Now is a good time to sell, although yesterday and last week were better times.
Looking ahead, the next stop is 1259. I would not be surprised if the market made a low @ 1259 tomorrow. Notice how the bullish sentiment will begin to change over the coming days.
Did we have a true selling day today? Yes, we did. Remember that true selling days occur when at least three indexes drop by 1% or more. This rough rule of thumb separates dips to be bought (buying opportunity)from times to sell and get out. The following indexes were down by more than 1% today at the close: Nasdaq, 1.46%; NYSE, 1.05%; S&P 500 Index, 1.01%; NDX, 1.09%; Russell 2000, 2.56%. Yes, today was a true selling day.
I don't know how long it will take for this correction to play itself out. We could either see three or five waves down. I am waiting for the 1173 zone as a good buying opportunity. By buying at this level, I can ensure that we buy low and are in a good position to outperform the S&P 500 Index this year.
I did not blog on the market yesterday because I was home sick with a bad cold.
In a month, it will be nice to look back and say that the 1294 zone was the top and that we nailed it. We just have to see what develops. I remain biased towards May as a good buy time for 2011.
Thought for the Day: "First acquire patience and perseverance, then make up your mind what else you want, and you will be almost sure to get it." --Napoleon Hill, The Law of Success in Sixteen Lessons (Volume 2), page 122
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Sunday, January 16, 2011
1294 Then 1319?
On Friday, the market closed @ 1293. We've got about 2 more weeks in this final fifth wave up. When I look at a chart of the S&P 500 Index, I see five (5) clear waves up since July 1, 2010. Wave I up was from 1010 (July 1, 2010) to 1129 (August 9, 2010). Wave II down was from 1129 (August 9, 2010) to 1039 (August 27, 2010). Wave III up was from 1039 (August 27, 2010) to 1227 (November 5, 2010). Wave IV down was from 1227 to 1172 (November 16, 2010). Wave V started at 1172 (November 16, 2010) and is now entering its third month.
Levels of resistance are at 1294, 1299, 1310, and 1319.
The higher we go, the greater and more dramatic will be the drop.
That's my thinking. Certainly, Wave V is the final leg up, according to Elliott Wave theory. I'm waiting for the correction. The violation of 1286 as support will signal and confirm a change in trend.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Levels of resistance are at 1294, 1299, 1310, and 1319.
The higher we go, the greater and more dramatic will be the drop.
That's my thinking. Certainly, Wave V is the final leg up, according to Elliott Wave theory. I'm waiting for the correction. The violation of 1286 as support will signal and confirm a change in trend.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Friday, January 14, 2011
Sticking by 1294
The S&P 500 Index closed @ 1293. We are in a selling zone. Is it possible that the market could print a higher number on Tuesday? Yes. Maybe, 1297. What about 1300? My point is that we are in a selling zone right now. Now is an outstanding time to sell, not to buy. I would not be a buyer until the S&P 500 Index returns to the 1172 area. That is my position tonight. I also think that May and June will present a better buy opportunity for the year than January.
Next week should be a down week. When I say a down week, I mean that the week should open at a higher price than the closing price for the week next Friday. If I am wrong, then I am wrong. We will see. Keep an eye on the opening price on Tuesday and the closing price next Friday. The trend will have changed when the closing price falls below 1281, today's low.
Have a good weekend!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Next week should be a down week. When I say a down week, I mean that the week should open at a higher price than the closing price for the week next Friday. If I am wrong, then I am wrong. We will see. Keep an eye on the opening price on Tuesday and the closing price next Friday. The trend will have changed when the closing price falls below 1281, today's low.
Have a good weekend!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wednesday, January 12, 2011
1294
We are creeping towards a top. We may reach the top this Friday. 1294 appears to be the final resistance. Once a top is reached, a correction should follow. Ideally, a buy should be placed once the correction is complete. Normally, the 50-day moving average provides support in an uptrend. Then, a bounce should follow. Then, a lower low should complete the correction. The price action since July 1, 2010 suggests that the lower low should be around 1197 - 1200. I would be a buyer at those levels.
It goes without saying that the market is severely overbought. There are way too many bulls out there for new buy positions to be initiated. I'm watching and waiting right now, just watching and waiting.
It is a hard thing to do but the best time to buy is not at the end of a rally. It is at the end of a correction. But I'm probably repeating myself by now.
Have a good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
It goes without saying that the market is severely overbought. There are way too many bulls out there for new buy positions to be initiated. I'm watching and waiting right now, just watching and waiting.
It is a hard thing to do but the best time to buy is not at the end of a rally. It is at the end of a correction. But I'm probably repeating myself by now.
Have a good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
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