Archive for November, 2009

The DOW traded down 154 points on a low volume holiday shorten session on Friday.  The debt restructure issue with Dubai drove the move.  My feeling is that the move was an overreaction and trading this coming week should sort out the importance of the situation.  The index rebounded nicely off the lows of the day.  With that said, the bullish trend is running out of gas as indicated by the ADX and the low volume associated with the move.  We are essentially trading in a box.  The upside breakout level is the high from 11/23 at 10,496 and the key level to the downside is the swing low from 11/12 at 10,171.

The SPX analysis is similar to that of the DOW.  We are also in a sideways channel on decreasing volume with a target breakout level of 1114 from the high on 11/16.  The downside level to watch is the lows from 11/12 and 11/27 at 1084.  The upside trend is very tired at this point.  A turn to the downside is not far away.

The COMPQ staged a Counterattack type candle pattern after gapping down significantly at the open on Friday.  Again, the move was fundamentally driven by the Dubai situation on low volume.  It is interesting to note that the low of the day coincided with three prior gaps that acted as solid support.  The bullish trend is essentially done.  I see sideways to down from here.  If we do manage to go higher, it will be in very small increments.  There is too much overhead resistance at this point.

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What is a simple moving average and how is it computed?

The sum of all closing prices divided by the number of periods (days) being measured.  The resulting and most recent data point is plotted and the oldest data point is dropped.  So for example, the 5 day simple moving average comprises 5 data points and the moving average is dynamic.

• Example on the QQQQ from 11/17- 23 which included 5 trading days with a weekend between the 4^th and 5^th day. 
• Closing prices
• Day 1 – $44.60
• Day 2 – $44.35
• Day 3 – $43.66
• Day 4 – $43.44
• Day 5 – $44.14
• Total = 220.19/5 = $44.038
• This data point would then be plotted as the most recent day in the 5 day simple moving average and what was the oldest day is dropped.

The moving average allows us to filter out “noise” and to determine the general direction or trend of the stock.  Various moving averages can be employed.  Some common and popular SMAs are the 5, 20, 50 and 200.  Moving averages can act as levels of support and resistance and are sometimes used as buy and sell signal on crossovers.  For instance when the shorter term average crosses from below to above the longer term average it could signal a bullish entry.  Robin

ECONOMIC REPORTS

MONDAY 11/30

Chicago PMI

TUESDAY 12/1

Construction Spending, ISM Index, Pending Home Sales, Auto Sales, Truck Sales

WEDNESDAY 12/2

Challenger Job Cuts, ADP Employment Report, Crude Inventories, Fed Beige Book

THURSDAY 12/3

Initial Claims, Continuing Claims, Productivity-Rev., Employment Cost Index, ISM Services

 

FRIDAY 12/4

 Nonfarm Payrolls, Unemployment Rate, Average Workweek, Hourly Earnings, Factory Orders

 

 

EARNINGS OF NOTE

MONDAY 11/30

OVTI

TUESDAY 12/1

 SPLS

WEDNESDAY 12/2

 ARO, SNPS

THURSDAY 12/3

DLM, MRVL, NOVL, SWHC, TOL

FRIDAY 12/4

 BIG, RY

 

Many traders approach trading as a coin flip.  Their efforts are really nothing more than gambling.  However, there are those who strictly apply trading rules for entries and exits and learn to cut their losers short and let their winners run.  This is a lot easier said than done.  It takes a great deal of discipline.  Even those adept at this style of trading find it difficult and challenging as “Emotional Capital” as well as “Trading Capital” can be depleted.  Those embracing this style of trading will encounter times when they suffer through several losing trades consecutively.  This is when you must remain steadfast and believe in your system.  Sometimes in the midst of a winning trade, the trader ends up staying too long and watching an unrealized profit morph into a realized loss.  Fear can also take hold and force a winning trade to close prematurely booking a much smaller gain than should have been. 

Another way to trade is by hedging your positions and learning how to adjust to optimize a change in trend.  This approach to trading has several advantages. 1)  We stay with a stock that we know.  This can supply a tremendous edge in that we become very familiar with how the stock reacts to the market as opposed to abandoning the stock and moving on to another unknown position.  2)  When you have confidence that you can adjust a stock and move with the trend, you begin to trade without fear.  The absence of fearful trading means that decisions are well thought out and not panic driven.  3)  Hedging can provide the luxury of not monitoring your trades 24/7 for fear of having your positions move against you.

We at www.markettamer.com specialize in hedging and trend following.  Let us show you how to trade successfully without fear and stress.  Best Robin

The DOW was rejected by the upper trend line of the channel and ended the week with a Spinning Top.  This could be just a short term pullback  and then a move back up forming a J Hook pattern.  However,  we may have a little more to the downside before continuing higher.  The predominate trend continues up.  Watch for the breakout above 10,438.  If the Spinning Top (very close to a doji) does halt the move down, we could go sideway briefly before going up.  However, it is clear to me that the bullish move is still in tact.

The SPX has a similar story as the DOW.  We have been trading in a box for the last two weeks.  Look for a break out of the box.  I feel we will test the lower trend line before resuming the trek higher.

The COMPQ has been the leader all the way up from the March lows and I see less downside potential here.  I feel that we will form a J Hook chart pattern and then break above the recent high of 3525 and continue higher into the end of the year. 

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