Archive for September, 2008

Last week, I felt that the DOW would run up to 11550 and have difficulty going further and that is exactly what happened.  (See chart comments on the INDU for week ending 9-5-2008)  After the Hammer Candlestick on Friday 9/5, the DOW briefly tested the 11550 plus level on Monday 9-8 and retraced to close at 11510 and did not regain that level all week.  The SPX followed my script and made a run to close at 1268 on Monday 9-8 which ended up being the highest close for the week on that index.  My upside target was 1265-1270 (see chart comments for SPX week ending 9-5-2008).  Finally, the NDX exhibited much indecision as I pointed out last week.  I felt that there was a sight upside bias to this index, however indecision won the day as the Nasdaq ended the week virtually unchanged.

            It looks like Hurricane Ike did a bunch of damage but left the oil infrastructure fairly unscathed.  There continues to be great uncertainty in the financials and as you know, the market does not like uncertainty.  My outlook remains sideways to bearish.  I feel that any move to the upside will be short lived.  Well, I wish you all a marvelous weekend and I look forward to chatting with you next week.  Robin

 

I trade for a living now. When I was in “the real world” working for a living, I recalled an axiom that changed my view on work and life. “Are you living to work or working to live.” Psychologists tell us that satisfying work is essential to emotional and mental well being. However, so many of us are attempting to climb the corporate ladder or just slugging it out day to day to make a living. What kind of a life is that? I spent 25 years in the corporate world and was a loyal corporate soldier until I got wise to what’s really important. I was the poster child for corporate commitment. I drank the Kool-Aid. The corporation wanted my blood, my first born and my soul. I was “living to work”. OK, so why I am I telling you all of this!? I came to my senses. I realized my personal satisfaction and well being was not the corporation’s first priority. You think you have security but you don’t, not really. The only real security is relying upon your ability to create your own freedom. Trading can do that for you. I now call my own shots, which includes defining how I want to handle my trading business. We’re talking today about “Time Commitment” to your trading business. There is obviously ramp up time and effort needed to learn the business but once you are comfortable with your knowledge base and the infrastructure of the market, you can then determine your trading style which directly correlates to your “Time Commitment”.

I do this full time but I don’t trade all day long. I experimented with Day Trading and made money doing it but it didn’t fit my personality and what I wanted out of trading. I thought, “Why am I exchanging one high pressure situation for another Bell to Bell job”!? I had to define my willingness to commit my time. I opted for a much more relaxed style of trading that allowed me to actually have a life and still reap the tremendous rewards of trading. There are those that crave the adrenaline rush of one minute charts with eyes glued to the computer all day long and I say, “If that’s for you “Go For It”! My typical trading day comprises reviewing the before market activity and my positions for about 20 minutes in the morning, a quick mid day glance (I really wouldn’t even need to do that) and an end of the day assessment of my positions after markets close. If I need to consider adjustments to any of my positions, I will make those plans and execute them at the next day’s open. My aftermarket review takes about 45 minutes. I do most of my due diligence over the weekend and that can take up to 4 hours. I am a voracious reader of market information, so as a matter of course, my reading is market related material which is fun for me. So in assessing the amount of time I spend in my trading business, it’s about two hours a day and 4 hours on the weekend. I can live with that. The rest of my day, I go to the gym, I meet friends for coffee, and help my fellow traders learn how to trade successfully. Then there is always the “HONEY DO LIST” at the house to deal with, but it’s not too bad.

Your trading plan needs to include the amount of time you are willing to commit to this business. Time is precious. Once it is gone, it is gone and it’s not coming back, so plan wisely. My most gratifying times now are the time spent with my wife, children and close friends. I also get tremendous satisfaction in helping others succeed at trading. My life is very different now. I am in control and I can pursue my daily activities without worrying that I am stealing time from the corporate monster. However, I must warn you that you can exchange one monster for another if you do not carefully assess the time commitment that you are willing to give to your trading business. This is a vital part of your business plan. You need to be very realistic, especially in the beginning because it will take an extra amount of time as you learn the business. In order to become proficient at trading, you must be willing to make a commitment of time and energy. You must align your trading plan to be consistent with your lifestyle and what you want to achieve from your trading business. If you make a commitment to be good at this marvelous business, you will never regret it. The whole idea as far as I am concerned is to create total financial freedom and security and having the time to enjoy it. Be careful not to get trapped into another job. Keep your trading fun. You must ask yourself, “Do I want to live to trade or trade to live?”

Well, we’re planning a big party in Sherwood tonight. So I gotta go! See you next week. Robin…. Oh, I almost forgot, we have a video that may be worth your time. Check it out at www.hedgetraining.com. OK, I’m gone for real this time.

After the three day weekend, the market charged out of the gate with gusto on better than expected news concerning Hurricane Gustav and the damage it didn’t do. The ISM report fell shy of expectation and Construction Spending was down. However, the market gave back early triple digit gains to finish lower. Tuesday, Factory Orders were up slightly, oil faltered along with continuing concern about financials leading to a small move up in the Dow. The S&P and Nasdaq finished lower. The story on Thursday was jobs. The ADP Employment Index indicated a much larger drop than anticipated and first time jobless claims had a large increase. There were several weak retail reports that all contributed to a 344 point drop in the Dow. On Friday, amidst a plethora of bad economic data, the market fought back to close higher after spending much of the day firmly in the red.

(Click on the chart to enlarge and get full view).  The INDU  formed a Hammer candlestick pattern at the bottom of the trading range on substantially higher volume.  The Hammer is a strong bullish candlestick pattern and when positioned at the bottom of a range it can many times signal a trend reversal.  It looks to me like the “smart money” just shook some weaker players out of the market and positioned themselves for a bit of an up move.  We’ll watch to see if there is follow through.  Moderate support 11140, strong resistance at 11550.

(Click on the chart to enlarge)  See INDU commentary.  We have moderate to strong support just under the close of Friday’s Hammer at about 1235.  The resistance at 1265 is moderate with stronger resistance at 1286.  Could run back up to test the first level of resistance at 1265-1270.

(Click on the chart to enlarge)  The NDX formed a gap down ”Spinning Top” candlestick pattern which indicates more indecision than the Hammer which was formed on the INDU and SPX.  We need confirmation.  The index is between areas of strong support and resistance.  I feel we will have a small bounce here and then look for follow through.  Short term oversold and a bias to the upside.

ECONOMIC REPORTS

MONDAY 9/8

Consumer Credit

TUESDAY 9/9

Pending Home Sales, Wholesale Inventories

WEDNESDAY 9/10

Crude Inventories

THURSDAY 9/11

Export Prices-Ex Ag, Import Prices Ex-Oil, Initial Claims, Trade Balance, Treasury Budget

FRIDAY 9/12

Core PPI, PPI, Retail Sales, Retail Sales Ex-auto, Business Inventories, Michigan Sentiment

EARNINGS OF NOTE

MONDAY 9/8

None

TUESDAY 9/9

PBY

WEDNESDAY 9/10

None

THURSDAY 9/11

CPB, KKD

FRIDAY 9/12

None

The week played out pretty much as we predicted ( see last week’s commentary and charts). The breakdown in the market came very close to testing the July lows today (Friday) two hours into the trading day. Then the 15 minute chart formed a doji and a bullish engulfing pattern and began a steady march higher to close with a 5 point gain in the SPX on much better than average volume. I am not a day trader, but a technique that can help you understand the dynamics of the market is to compare various time frames by investigating the price action on smaller or larger time frame charts in order to gain knowledge as to the market action. In this situation, it became obvious to me that the smart money drove the market down to “shake out” the weaker players and acquired their bullish positions at bargain prices. This action is depicted on the daily charts in the Dow and SPX as represented by a “Hammer” candlestick pattern which is a very bullish single day pattern. The move may have been partially influenced by rumors about the Treasury finalizing a backstop plan for FRE and FNM the two troubled GSES. The financials traded up smartly after hours on the news. Energy continues to be a huge issue, but as posted previously on this site, I feel that housing must stabilize before we have a meaningful and sustained Bull Market. From a technical perspective, the Dow and the S&P, as already mentioned, have formed a classic Hammer pattern. I expect these indexes to open higher on Monday and trade up. However, I must emphasize that I believe that at best, this will be a bear market rally. We will watch the price action closely and reevaluate our opinion if necessary. Next week there is a parade of economic reports that could well influence the direction of the market. Today’s action could have been the bottom of this recent downtrend, but I highly doubt it. We need a much more convincing sell off. You may be able to take advantage of a short term relief rally but my belief is we have more to go on the downside. On the political front, Sarah Palin was impressive in her acceptance speech and it was interesting for me to note that The Republicans still continue to maintain the “inexperience” theme with Obama , even in the face of Palin’s apparent lack of experience. I don’t know about you, but I want to hear the candidates talk about the issues and get past the petty B.S. This is a critical election with many more important things to decide and act upon besides candidates taking pot shots at one another. Think about it, the war, the economy, healthcare, global warming the energy crisis on and on and on. Let’s get busy. I encourage you to get involve and stay involved. OK, it’s time for me to get back to Sherwood. I hope you had a good week. Tell your friends about Robinhoodtrader.com. We’re trying our best to keep you on the right side of the market! See you next week. Robin