The Week in Crayons
Despite ending the week somewhat off their new highs, the markets for the most part continued the slow and relentless rally that began about a month ago. As has been the case during that time, sellers have been few and far between and price action once again occurred on muted volume with relatively little volatility. Not much has changed since last week from a technical perspective and most of the analysis I mentioned in last Friday’s post still stands.
Looking at a chart of the e-mini futures contract for the S&P 500, we can see that we are still in the same narrow rising channel that has contained our rally after breaking out at the start of the year. Price is for the most part in the same range it was in last week except for a failed attempt above 1320 which occurred during the middle of the week off the back of strong eps reports(most notably AAPL). We are now very close to last year’s highs which should serve as a strong magnet for price action as the bulls will eventually try to push price to new highs mirroring the action that has already occurred in the nasdaq composite index.
However, we remain oversold and are beginning to see signs of waning momentum. Notice that we printed a yellow candle on our SG22 momo trend bars on Friday’s close, the first such bar in over a month. This is a hint that upward momentum is slowing down and traders should begin to exercise caution in regards to our current swing up. The first key level to watch if this weakness persists is the 1300 area. This was support last week, and a break below it would also likely take price out of our rising channel. After that, the rising 20 day moving average would likely become the next key area of support which would also coincide with the mid 1280′s which supported price nicely after breaking past our last major pivot high formed in late October. Trader’s should be wary that price dropping into these levels shouldn’t necessarily be seen as a sign to short this market as sellers have been virtually non-existant so far this year and a retracement at this point may end up taking the form of a benign sideways drift instead of a deep price pullback. If price were to remain in our channel and continue squeezing higher, look for the 1340 area to become a major test as we begin to probe last year’s highs.
While this type of slow rise can be frustrating to traders that feel they have not capitalized enough on it can be frustrating, continue to remain patient and wait for the proper setups to appear as we work off our oversold nature very close to some stiff resistance on the longer term charts.
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The Week in Crayons
The markets continued their slow march up this week with little to no real pull backs as the bulls relentlessly stepped in to support the markets any time there was a hint of a drop. We have now drifted in one direction(up) with relatively light volume and volatility for about a month on most of the major indices which is in stark contrast to the highly volatile back and forth movement we experienced for most of the latter portion of 2011. While we can’t truly know until we experience a substantial retracement on the current move, it appears that the market has had a change of character recently and is more likely to be bullish to neutral instead of the neutral to bearish undertone that characterized the back end of last year’s trading. In fact, the start to 2012 is somewhat reminiscent of the start we had in 2011 which also began with a slow and steady march up that seemed to defy gravity.
Looking at a near term chart of the e-mini futures contract for the S&P 500, we can see this low volatility uptrend clearly. Notice how the last several week’s worth of price action is confined to a single narrow range channel. As mentioned earlier, this is in stark contrast to the volatile oscillation that occurred prior to this move. We are now clearly above several key areas of resistance including all of the major moving averages and are poised to challenge last year’s highs. However, Stochastics has had an oversold reading for the entirety of the breakout and while we can continue this slow squeeze all the way to the highs, risk reward does not favor chasing momentum here unless your time frame is less than one to two days for a trade.
Of course, action has been completely bullish for several weeks now, and someone looking to short this should realize that the potential for us to squeeze to last year’s highs is very real. In fact, the nasdaq composite has already formed new highs this week and could be a harbinger of things to come from its relatively weaker peers. In addition to the possibility of a continued squeeze higher, another thorn in the short seller’s case right now is the potential change in character in the markets which could lead to a benign correction that drifts either sideways or slightly down and fails to offer proper rewards commensurate with the risk taken at this point.
As we can see on an older chart of the e-mini futures contract for the S&P 500, this exact scenario occurred during the end of 2010/beginning of 2011. Notice the long narrow channel which contained price action neatly for practically three months. Also note that we were oversold for basically the entire time as well.
While this scenario doesn’t have to play out exactly the same(and likely won’t), it should offer traders a hint of what can possibly occur over the next couple of months and serve as a good warning for those that are looking to short this type of action prematurely. On the other side of the coin, looking at the steep drops that occurred at the end of that run should also serve as a warning for anyone looking to chase extended price action into areas of potential distribution.
We are now a few weeks into the new year and while the character of the market appears to have changed, astute traders should keep an eye on price action and wait for the market to conform to their expectations/scenarios, instead of allowing the market to force them into poor trading decisions.
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The Week in Crayons
While the markets opened down on Friday looking tired and ready to roll over after a week of positive gains, they gained traction midday and eventually rallied to close just below the days high’s. Friday’s price action was part of a larger pattern of afternoon strength that has become prevalent during the early stages of the 2012. While this is typically bullish in nature as it shows that sellers are having difficulty in gaining control of the markets from the buyers, traders should also take into account that sellers are consistently attempting to push the market down but are eventually becoming overwhelmed as buyers continue to step in during intra-day pullbacks. Another key factor to consider is that this price action is occuring at relatively strong levels of resistance.
This behavior is evident as we look at a chart of the e-mini futures contract for the S&P 500. Notice the string of candles with long lower wicks over the last couple of weeks. Most of these are some form of doji candle and reflect indecision as the markets attempt to find a fair price. While there are a few hammer candles sprinkled into the mix and the overall pattern looks fairly bullish, context should always be taken into consideration when examining candles for clues on future price behavior. While a hammer candle often signals a potential for a bullish reversal, this must occur after a prior downtrend in order to be viewed as a valid signal. When hammer candles occur after a long uptrend, they instead hint at future weakness as sellers are beginning to appear even if they have yet to truly gain control of a market. While this is not necessarily a bearish signal, it certainly is a warning that bullish momentum is beginning to wane.
Another point to consider is the strongly oversold Stochastics reading we are printing on the S&P futures. We have been oversold for a few weeks now and are certainly due for some sort of pullback as price attempts to find equilibrium at new levels. However, traders should not take these signs of temporary weakness as flat out bearish signals as overall price action this year has been strongly bullish. There has been a consistent bid throughout the last two weeks and price is now clearly above the critical 200 day moving average. We have also just cleared the pivot high formed in late October and are in the process of forming a critical higher pivot high indicating that we are now techically in an uptrend.
One level to watch if we pull back is 1260. This was the scene of our breakout at the start of the year and held as support when we tested the gap created from that breakout. This will likely also coincide with the rising 20 day moving average which should provide additional price support as well. Past that, the next key level would be around the 200 day moving average in the neighborhood of 1242 or so. Depending on the timing, this could also coincide with the bottom trendline of the symmetrical triangle we formed over the last quarter of 2011 which would also likely support falling price action. If those two levels do not hold, 1200 would be a likely area of conflict and would present a critical test regarding the state of the markets.
Looking at the overall picture, traders should recognize that while the potential for a squeeze higher is possible, the odds are not in favor of buying now when you consider that we are at levels of fairly strong resistance while the market is showing signs of becoming tired after a nice 3-4 week rally. Now is the time to identify key levels of support on stocks and patiently wait for them as the markets begin to work off their oversold nature whether it be through a retracement or a slow sideways drift.
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Stockguy22 Level 2 Chart Display
Introducing the Stockguy22 Level 2 chart display. This indicator displays the Level 2 Order Book for your datafeed. Chart examples use /TF futures because the ICE provides the full book as far as I can tell. /ES , /NQ, /YM, and most of the CME / NYBOT only provide around 5-7 deep to retail traders. Complete garbage if you ask me.
Showing Level 2 data that is way outside the current days range.
Intraday Level 2 with contract amounts.
Download Here: SG22_Level_2
To import:
1. From the Control Center window select the menu File > Utilities > Import NinjaScript to open the Import NinjaScript dialog window
2. Select the file you want to import
3. Press the “Open” button.
To add an indicator to a chart:
1. Open the Indicators window.
2. Left mouse click on the indicator (SG22_Level_2) you want to add and press the New button.
3. The indicator will now be visible in the list of applied indicators.
4. The indicator’s parameters will now be editable on the right side of the Indicators window.
http://www.ninjatrader.com/support/helpGuides/nt7/working_with_indicators.htm
Join the stockguy22.com Diamond membership to learn how we use the SG22_Level_2 to trade the futures everyday.
The Year in Crayons
The last week of 2011 in the markets was mostly uneventful as price action basically drifted sideways finishing the week right around where it started, capping off a year that also finished right around where it started. Of course, while the action this week was fairly quiet on low holiday volume, most of this year’s sideways action was done in a much more spectacular fashion as bulls and bears both were trapped on several occasions resulting in explosively volatile moves up and down the charts as the markets figured out the edges of our broad range of consolidation.
Looking at a chart of the e-mini futures contract for the S&P 500, we can see that this year’s action was littered with several bull and bear traps as we probed the key levels of our wide trading range. We can basically divide the year into two periods;
(1)The massive head and shoulders pattern we formed in the first eight months of the year.
(2)The two staged recovery during the last few months as the bulls clawed their way out of the huge hole formed during the breakdown from period one.
Dividing the two phases of this year’s action is the slightly rising neckline of the head and shoulders pattern which supported price action strongly during phase one, but ultimately became a key level of resistance as it became a price ceiling during the second phase of the year. Keep an eye on this trendline as it figures to affect the direction of future price action as we open trading in 2012.
In examining the first period of trading of 2011, one important point to keep in mind is the context under which it took place. We had rallied sharply over the previous two years after a disastrous plunge during the back end of 2008 and there was quite a bit of debate as to whether the markets could break past the highs we formed just prior to the 2008 crash on the back of quantitative easing or if we would drop back down to new lows on a “double dip” move. Each of the key points of the head and shoulders pattern were moments where either the bulls or the bears became convinced that their scenario would win out only to see the market “inexplicably” run away from them. Of course, eventually in late July, the bears finally won out after a strong hammer candle fooled the bulls into thinking that the neckline would indeed hold on the “too obvious and easy” to see head and shoulders pattern.
This spectacular fall led to the second phase of our year’s action in which the previously shell shocked bears now dared to dream of a double dip while the bulls desperately tried to recapture the gains they had made during the previous year’s rally. The markets first attempt at stabilizing after the steep drop we experienced in late July and early August occurred during a volatile two month stretch that featured several swift moves as bulls and bears repeatedly fooled each other as price sharply fluctuated between the extremes of the short term range. In late september, price action finally exited this range to the downside, but ultimately failed as the market instead formed a double bottom as price quickly reversed course and headed higher. The bear trap formed during this false break down can be viewed as the sister move to the bull trap that led to the breakdown from the neckline and amazingly led price back to and through the level from which we had initially broken down from to begin the second phase of the year. Even more amazingly, volatility actually expanded during this tremendous squeeze and even continued for another month as price spectacularly failed at the new price ceiling formed by the neckline from the head and shoulders pattern and threatened to break down back to our lows after several days of repeated distribution with no buyers in sight. However, the bulls eventually stepped in and were able to push the markets back to ground zero to end the year and form a big doji candle on the yearly chart.
Below is a yearly chart of the SPDRs S&P 500 trust etf (SPY) showing the action of the last couple of decades. As we can see, this year’s action formed a doji candle reflecting the indecision that marred most of the year’s trading. This was to be expected after three years of strongly trending action (one down, two up) and is likely to be followed by more indecisive behavior as we are firmly in the middle of a fifteen year range that has now had two major tops and two major bottoms defining it.
The two multi-year tops occurred during the overly exuberant heights of the dot-com era and the real estate boom. The two bottoms occurred during the desperate depths this country experienced shortly after 9-11-01 and after the financial collapse/debacle that led to our most recent recession. These are all MAJOR events and traders should keep in mind that price will likely stay contained within these parameters until there is a proper catalyst to push it through. Of course, part of the reason why trading was so erratic this year is because the threat of major catalysts has become pervasive during the current environment. For instance, the last three years of free money can be construed as the third “good times” era of the last couple of decades and may end up culiminating in another major top if we continue to fall back on quantitative easing. On the other hand, the continued threat of insolvency across the world can ultimately lead to a calamitous drop either to or below this multi-year range and ultimately lead to another major bottom at some point in the next few years.
As we close this year and look towards the next, traders should step back and look at the big picture as they develop their game plan for the coming year(s). Good luck as you enter 2012.
If you have any questions or comments, feel free to contact me on twitter @stockdarts or in our great chat room if you are a stockguy22 member. If you aren’t a member, what are you waiting for?
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The Week in Crayons
Although the markets opened the week in an ugly fashion, they quickly reversed course and drifted higher for most of the week. Other than a few moments of weakness, there was almost no selling pressure this week as the bulls roamed freely while the bears sat back and let them have their holiday break. However, any illusions (delusions?) of a “Santa Claus Rally” are just that as we have not moved significantly from a technical perspective for quite some time now. The silver lining to this recent lack of movement is that volatility has calmed down allowing the markets to rest constructively as they digest the explosive move they had after making what looked like disastrous new lows in early October.
Looking at a chart of the e-mini futures contract for the S&P 500, we can see the recent constriction in price action as all of this month’s candles are clearly inside of the pivot high and low we formed from late October to late November. Keep an eye on these two areas as there will be significant implications concerning them once they are breached.
A move above them will likely signal a new rally and lead to a retest of this year’s highs while a move below them would invalidate our bounce from this year’s lows and probably lead to a retest and possible failure of those lows as well. However, in the short term, we are now testing the key 200 day moving average once again as we bounce between several important moving averages. Watch for the rising 20 day moving average to support price action if it stalls here as the bulls attempt to clear the recent highs we formed in early December. If the bulls fail here as we close out the year, watch for 1200 to be the first line of support followed by much stronger support at the 1140 level which forms the key pivot we discussed earler.
Next week’s trading will close out the year, and traders should expect action to remain light and mostly muted as the holiday season winds down. Watch the edges of our range this week as price is not likely to move with any real conviction as many of the big boys are on vacation and not likely to return until the start of the new year.
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The Week in Crayons
After taking last week off, the bulls came back ready to work this week lifting us well off our recent lows in all of the broad market indices. Once again as has become par for the course, price action changed course immediately and quite violently as we surged upward negating much of our recent fall with one huge day of buying. Our current environment continues to be a field of landmines trapping both bulls and bears alike each time setiment suddenly shifts depending on what news item or rumor happens to come up. However, while price action has been extremely volatile, it has been contained within a reasonably well defined range for the most part. While there are still plenty of mixed signals and the possibility of strong moves in either direction, the likely scenario is one in which we continue to probe the extremities of our trading range as the markets continue to find their proper value.
Looking at a chart of the e-mini futures contract for the S&P 500, we can see that for the most part we have actually been in a pretty well sustained uptrend after bottoming out early August. While we actually formed new lows in early October, this proved to be a false breakdown and price quickly reverted back its rising channel. This move up culminated with a false breakout above this channel as buyers got ahead of themselves and eventually cascaded down over the last couple of weeks as supply finally overwhelmed demand. The downward momentum was finally reversed this week as we formed a critical higher low pivot price around the 1150 area. While this channel isn’t perfect and has had trouble holding price action on several occassions, it does give us a rough picture of the strengthening price action over the last half year or so.
As we approach the close of 2011, too reference points that are likely to become key levels of support and resistance are the recent pivot low and high we just formed at around 1150 and 1290. The more immediate area of concern would be the recent pivot low we just formed. A break below that would place us firmly out of our rising channel as well as invalidating the higher low we formed and would almost certainly lead to a retest of the year’s lows. A break above our recent pivot high around 1290 however could lead to several scenarios depending on the action prior to a breakout. If we were to surge past it early next week, it would likely be part of an unsustainable squeeze higher destined to fail. On the other hand, if price action were to consolidate and give demand a chance to catch up with the overhead supply then the chances of a breakout holding above this area increase tremendously. As long as price remains in between these two reference points, the markets can be viewed as being in a neutral state of range bound behavior.
If you have any questions or comments, feel free to contact me on twitter @stockdarts or in our great chat room if you are a stockguy22 member. If you aren’t a member, what are you waiting for?
The Week in Crayons
I mentioned last week that the bulls would likely be tested this week as the bears attempt to regain control of this market, and while the bulls can use the light trading / short week excuse to defend themselves, the bottom line is that they failed that test this week as we not only closed red on each session, but saw downward momentum actually increase as we followed through on last week’s breakdown. While we are oversold and due for a bounce, we have now negated much of the feel good rally we had in October and find ourselves back in the middle of the trading morass we resided in for several months this year. While a bounce from our current levels would still be very positive step in leaving behind are summer lows, the recent weakness gives us a strong reminder that we continue to chop around in a broad range consolidation and it appears we will be flying the same holding pattern for a bit longer as we continue to deal with the same regurgitated mess in Europe we have been dealing with all year.
Looking at a chart of the e-mini futures contract for the S&P 500, we can see clearly that we are right smack in the middle of the 1100-1200 mess we were stuck in for several months after breaking down from our yearly highs. While we are still well off the lows we formed around 1080, we are forming new lows on Stochastics creating a bearish divergence hinting that we may have more weakness in store even if we can hold these levels and create an important higher pivot low.
Traders looking for a an oversold bounce should keep this in mind and continue to use the hit and run tactics that have been the only option available to swing traders for most of this year as we are likely to stall out on any bounces into the heavy supply just above our current price action. The 1180 -1200 area will likely be the first area of distribution if we bounce next week and traders should watch the action in this area closely as failure to get above our October breakout will potentially form a bear flag, not a new leg up. If we can reclaim 1200 and emerge from our current range, look for more supply to emerge just above 1215 or so as we begin to encounter several key moving averages. However, if we continue to have trouble finding a bid, we will likely test 1100 in short order which would serve as a critical level of support for the bulls to defend. Traders waiting for the Santa Clause rally should be very careful here and wait for momentum to clearly turn upward before getting sucked into any of the fakeouts that have become all to common this year.
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The Week in Crayons
We had another week of mostly sideways action again as upward momentum in the broad markets continues to wane. While we finished off on a weak note, the bigger picture remains neutral as we have mostly traded in the same range for several weeks now. We are now at the bottom of this near term range and a hold above these levels would be a big win for the bulls as we approach the typically bullish holiday season. However, price action has been weakening throughout the recent consolidation and needs to firm up in order for us to resume upwards.
Looking at a chart of the e-mini futures contract for the S&P 500, we can see the falling momentum clearly as this week’s close broke the upward trend we had maintained since breaking out of our late summer range. While the markets have shown impressive strength in holding above the key 1200 area as they digest the late October run, we are now below several key moving averages and on the wrong side of a short term trendline.
With momentum still on the decline as illustrated by both the declining stochastics readings as well as the red Momo Trend Bars, odds are that the bulls will be tested yet again next week as the bears desperately try to regain control and push price action back down to our previous range. If we pull back furthur, watch for the area around 1200 to 1800 to become a likely area for bulls to defend. If we fall and stay below that, it would likely signify a win by the bears and a return to the 1100 to 1180 mess we chopped around in from August to early October. If the bulls can regain control and push price back up, the first level that would need to be retested would be the 200 day moving average at about 1259. This would likely coincide with the top of our recently contracting wedge and would probably serve as a stalling point for the bulls.
As we approach the traditionally bullish holiday season, astute traders should continue to scan for strong setups that have begun to develop during our recent consolidation and patiently wait for momentum to turn back up and take price action with it.
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The Week in Crayons
Despite some rather volatile moves from day to day, this week’s action in the broad markets was still basically sideways as we continue to digest the massive gains we made through out the month of October. While volatility is still somewhat high for “prototypical” consolidation, most of this week’s action was contained within the ranges of our most recent price action on all of the major indexes and is for the most part technically healthy. As I mentioned last week, we were likely to chop around this week as we contended with overhead supply while being buoyed by several layers of support just underneath us. That scenario is likely to continue into the near future as we are still basically in the same situation and probably need another week or two of healthy consolidation in order to try and make our way back to the upper part of our yearly range.
Looking at a chart of the e-mini futures contract for the S&P 500, we can see that while we have mostly gone sideways over the last two weeks, we are still technically in the uptrend that we began in mid-October as we broke from our summer range around the 1200 level. While we are still making higher lows at this point, notice the waning momentum now that we are firmly wedged between most of our important moving averages as we well as facing very strong technical resistance at our recent highs around 1280 which coincide with the neckline of the head and shoulders pattern we formed over the first half of the year. Note the emergence of some yellow and red candles on our Momo Trend Bars indicating a likely end to this particular thrust upwards. Also, stochastics is now firmly moving lower giving us another clue that momentum is slowing down.
Of course, momentum is supposed to slow down after the ridiculous pace we had as we shot up from our year’s lows, so in and of itself it doesn’t necessarily mean we are headed lower, but it does give us a clue that we are likely in need of more consolidation. If we were to have a more substantial pull back, look to the area around our previous breakout around 1200 as a likely level of support. A hold around this level would give the bulls a strongly definable higher pivot low confirming that the recent downtrend is broken. Of course, the market does what it wants to do, not what we want it to do, and if it decides it wants to squeeze higher, traders should not chase as any move above our recent highs is probably suspect and likely to fail and return to our current range [unless there is some substantial news event behind it.]
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The Week In Crayons
After breaking out sharply last week from the cup and handle pattern I mentioned a couple of weeks ago, the markets spent this week consolidating those gains while holding some key levels of support in the process. We have now worked off some of the overbought conditions we had built up while rallying sharply from last month’s lows as we head into the typically bullish holiday season. However, not everything is peachy as the markets also regressed back to their recent paradoxical pattern of volatile consolidation with this week’s action.
I thought I would change up things a little this week and share the type of chart I typically look at when watching the intraday action in the futures and forex markets. Instead of the typical candles you would normally expect to see on a chart, this chart uses the Momo Trend Bars our resident wizard @jstantrades designed for the Ninja Trader platform. These candles do a nice job of showing the momentum of the price action allowing the trader to not get too caught up in the actions of each individual candlestick and instead observe the overall swings of the instrument. In this case, we are looking at the e-mini futures contract for the S&P 500. Looking at this chart we can see that momentum has obviously been bullish for the better part of a month now, but has started to wane as we pulled back this week after hitting some stiff levels of supply.
While we were able to hold the now swiftly rising 20 day moving average, we are now back under the key 200 day moving average as we form a broadening rising wedge. This is typically a bearish pattern and hints that we likely have some more consolidation coming as we come to terms with our new price levels. However, this doesn’t necessarily mean that we are reversing lower, only that the recent move up is having trouble sustaining itself. In fact, we actually have now formed higher highs and higher lows as we work our way out of the ditch we dug a few months ago. Now that price is wedged between many key averages, there is a good probability that it will chop back and forth as it comes to terms with this area. This would actually be a healthy sign as volatility would again quiet down in order for true demand to build up for the next move up into overhead supply. The breakout area from our last range (1200-1210) should serve as the first line of defense as it did earlier this week for the bulls, while last week’s highs around 1290 should serve as the near term resistance. If we lose 1200, 1600 becomes a likely stalling point while 1100-1080 become the critical lines in the sand for the bulls to defend. While this market continues to tax many swing traders, it has recently shown signs of improving, and continued chopping in this area should help many charts begin to set up for nice runs into the year’s close.
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Correlation between price action and VIX
Some background information for new traders about the VIX. A simple Google search has ‘several’ results for the question: “What is the VIX?”
VIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period. The VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, which is then annualized. The VIX Index developed by Prof. Dan Galai and Prof. Menachem Brener from Israel, introduced by them to the CBOE at 1987. 6 years later it was introduced in a paper by Prof. Robert Whaley in 1993 while he was at Duke University. Prof. Whaley is now on faculty at Vanderbilt University. ( http://en.wikipedia.org/wiki/VIX )
The VIX is calculated and disseminated in real-time by the Chicago Board Options Exchange. It is a weighted blend of prices for a range of options on the S&P 500 index. The goal is to estimate the implied volatility of the S&P 500 index over the next 30 days.
So what does it really mean to your trading?
Here is a chart of the correlation between the daily ATR(3) of the /ES and the VIX. The /ES is the e-mini S&P 500 futures, btw. The upper area of the chart shows the VIX overlay on the /ES. At a basic level you should notice the inverse correlation between the market and the VIX. VIX goes up, market goes down. It’s not always the case, but let’s assume the correlation holds for our purposes.
The lower chart is the ATR(3) for the VIX and for the /ES. Again let’s assume that the ATR(3) increases in both the VIX and the /ES with a degree of correlation worth noting.
The next chart shows the /ES on the upper area, just for perspective. The lower shows the price of the VIX with an overlay of the ATR(3) of the /ES. If you haven’t guessed as the VIX increases so does the ATR(3) of the /ES.
The chart should tell you that the markets move a larger average amount each day as the VIX increases. Conversely, the markets move less on average with a lower VIX.
I trade intra-day price action using range bars, tick charts, and a larger time frame to play with the general trend. I noticed my stops were being hit much more during higher levels of the VIX and that the swing highs and lows became much larger. The significantly larger price action swings no longer worked with my standard stop of 2.5 points or less. Trading in general became much harder with an elevated VIX.
The easiest solution was to reduce contract size and wait for trade setups around key support and resistance levels. This reduced my % risk to my trading account while forcing me to refine my trading entries.
Think of the market as an engine and the VIX as the throttle, the more you increase the throttle the more vibrations you get. It is also the case with fear, greed, and price. Increase fear and risk going forward and price acts wildly.
I like to keep things simple at first to formulate a hypothesis then, if it’s warranted, expand upon my hypothesis. The VIX is a lot of calculus and voodoo that’s not important to the average trader. I know that many of the people who do statistical analysis of the VIX and the VIX futures will carry this out in excruciating detail. They will also calculate correlations and try to estimate volatility. The correlation is worth noting. So, if you want to do further research there are many articles and research papers at your finger tips with a simple Google search.
So what should you take away from this? When the VIX is up, try to reduce your risk.
There is one last question to think about: When will I finally get around to telling you the simple secret that will make you the next Warren Buffet?
Market Profile Concepts
Market Profile
http://en.wikipedia.org/wiki/Market_profile
http://tuckerreport.com/articles/market-profile-a-primer/
And of course if you really want the secret to success: http://tinyurl.com/6yxspbx
Market Profile
A frequently asked question in our forum is: Where can I learn more about Market Profile?
The most common answer is to read Jim Dalton’s book Mind Over Markets.
Jim Dalton also wrote a sequel to Mind Over Markets called Markets in Profile.
A Market Profile is the arrangement and presentation of market action as a vertically aligned bell curve. Here is an example of a market profile:
1285.00 M
1284.75 HM
1284.50 DEGHM
1284.25 DEGHM
1284.00 DEGHM
1283.75 DEFGHIMN
1283.50 DEFGHIMN
1283.25 DEFGHIMN
1283.00 DEFGHIJKMN
1282.75 DFGHIJKMN
1282.50 DFGJKLMN
1282.25 DJKLMN
1282.00 DJKLMN
1281.75 DJKLMN
1281.50 DLMN
1281.25 DLMN
1281.00 LMN
1280.75 LMN
1280.50 MN
Each series of letters represent a 30 minute time bracket and placing that letter against the price indicates that the market traded at that price during that time bracket.
Volume Profile
A Volume Profile is similar to a Market Profile inasmuch as they both show a profile (a bell curve) against the Y-axis of the chart to represent the most traded area(s) of the time period that they have been constructed against.
The major difference, a significant one, is that a Volume Profile is constructed using the volume traded at each price while Market Profile is constructed based on time brackets traded that the market traded at each price called TPOs.
Against each price on the vertical axis you will typically see a bar that represents the number of contracts that were traded at that price. This type of chart can also be normalized to show a percentage of the day’s total volume traded at that price. Volume Profile is agnostic about time that the market remained at each price.
The philosophy behind Market Profile is that the more Time Periods at Price=N in which an issue trades, the more significant is that price. Volume Profile does not care when an issue trades at Price=N, it cares only how much of an issue trades at a particular price.
In theory, an issue could trade one contract at Price=N in each of 48 1/2 hour time periods during a trading day. The same issue could trade 50,000 contracts at Price=X in only a single 1/2 hour time period. In Market Profile, Price=N would appear as a “peak” and Price=X would appear as a valley. In Volume Profile, X would be the “peak” and N would be the “valley”.
Opening Price: If the opening price is higher or lower than the previous days close this creates a gap on a price chart. In market profile, this gap represents a shift in market sentiment. Like all gap, the greater the gap the more its significant. For example, a market gapping up 80 points on a CCI economical news has alot more significance than a market gapping up on 30 points with no news and light premarket volume. The first gap has a chance of being a contiunation gap while the latter one has a high probability of a gap fill.
Opening Price in relation to the value area: Here is a rank of market balance vs market imbalance. If price opens above/below value and the previous days range, this creates a complete market imbalance. This offers a high risk but high reward trading opportunity. If price opens above/below value but within the previous days range this indicates a market imbalance but not as significant as the earlier example. This creates a medium risk and medium reward trading opportunity. If price opens within value and within the previous days range, this indicates a complete market balance. Unless price extends above/below value, this creates a low risk but low reward trading opportunity.
Previous days close in relation to todays open: Any late afernoon rally or decline can mean two things: either the longer time frame participant has stepped in to buy/sell aggressively or the short term traders are liquidating their position. To understand the difference is crucial. For example, let’s say the previous days late afternoon market action was a rally and price closed at the upper extreme of its range. This could indicate a short covering which fueled a rally or actual longer-time frame buyers stepping in. The opening price action is crucial to understanding this. If prices can remain above the previous days high and value high, this means that the rally was valid and longer time frame buyers was present. The previous days high and value high will act as support. However, if the markets opened above the previous days high and was quickly rejected falling below value, this indicates short covering. Understanding price acceptance from rejection is crucial.
Look for market excess: Market excess exists when prices have extended too far above/below value. Other time frame buyers or sellers will enter aggresiviely to return price back into value. A single print tail below/above value is a good sign of market excess. On a price chart, this is where prices find support/resistance with a quick reversal never to test that support/resistace again.
“Excess is created when the other timeframe recognizes an opportunity and aggressively enters the market, returning price to the perceived area of value.” from Mind over Markets
Why are these levels important? They can as key future support and resistance points. These levels represent price rejection. No time = no acceptance.
Previous days close: If the previous days close remains in value, this indicates market balance. If the close remains above/below value this indicates market imbalance.
If the markets rotated above and below the opening price to close at its upper extreme, we have a temporary victory by the bulls. If the markets closed at its lower extreme, we have a temporary victory by the bears.
Understanding the POC: The Point of Control is the price level in which the highest volume occurred. This can act as a key support or resistance point. This is also commonly used as a level to place stops.
Value high and value low: These are two important pivots when using market profile. When prices are trading within value, the value high will act as resistance and the value low as support. If prices do break out of value, the VAH will act as support and VAL as resistance.
Opening Range: Also known as the initial balance. If the initial balance is narrow in the morning session, any break above/below willl most likely be the trend for the day. A wide initial balance can indicate a market rotation from the upper range to the lower range for the trading day.
(b) Shape Profile: A profile shaped like the letter (b). Skinny at the top and fat at the bottom. This formation is typical of long liquidations.
(P) shape profile: A profile shaped like the letter (P). Skinny at the bottom and fat at the top. this formation is typical of short covering rallies.
Types of Days
Normal Day - Profile structure in which prices auction between two extremes. Extremes are usually established in the opening hour causing a wide initial balance. Prices will then rotate back and forth without upsetting the initial balance.
The normal day has a wide initial balance price range that equals approximately 80% of the day’s total range. This is the most common pattern.
Normal variation of a normal day - Similar to a normal day in which prices auction back and forth between two points. However, the initial balance is usually narrower until the other time frame market participant will extend the range sometime during the trading session. The initial balance is usually upset during the morning session.
Trend day - Buyer or seller remains in control the entire day. Prices usually will not return to the opening price. There is a high level of confidence attracting new market participants fueling the rally or decline. The trend day has a small initial balance representing less than 25% of the entire day’s range.
This profile shows domination by either buyers or sellers with long range extension in one direction. The trend day will close within 5 to 10% of its daily high or low price.
Double distribution trend day - Similar to a Trend day except for a quiet morning session. Confidence among market participants are not as strong as a Trend day. However, later in the trading session strong buyers or sellers enter the market extending the range. Example: late afternoon decline
Objective and Subjective Elements in a Market Profile
The objective part of a Market Profile is the profile display. This comes directly from the data itself, creating TPO’s (either from LDB or tick data (11)). A key element is the Initial Balance, the range and price location of the first hour of trading.
Subjectively, Steidlmayer recognized a few behavior patterns or ‘Day Types’ in the early part of the day (tied to the Initial Balance), defining 3 types (CBOTMPG1, Pg 12) and later, 4 (CBOTMP2, PG 4, 12). Each type developed certain characteristics, telling which sort of trader is in control (short term traders, longer traders, etc.). Mind Over Markets lists 9 day types . See reference 10 for a discussion of this point.
Day types, of course is chart reading and forecasting. The well known problem with interpreting charts is the multitude of potential interpretations for most any chart. Mastery theory offers some hope for traders who are willing to spend the time and effort in understanding the auction market environment. But that path can well take 10,000 hours of training. A large part of CBOTMPG1 and more particularly, CBOTMPG2, is devoted to ‘reading’ the profile as it develops throughout the day. CBOTMPG1 suggests that it will take six months to a year to learn the Market Profile methodolo
Limitations on Market Profile
1. The primary condition for a valid profile is a normal, equilibrium distribution. If the market is not in equilibrium there is no valid POC or standard deviation. A simple visual examination will often be enough to certify that the distribution is abnormal: the day may have two distributions (two peaks) or the trading may be directional, etc. Although unfit, non-equilibrium data can still be operated on as usual by a computer program, the results are likely meaningless or misleading. Most traders who use Profiles seem oblivious to the requirement for normality.
2. Even in overall equilibrium markets there can be days in which the market prices jump out of bounds (false breakouts) and then return later in the day or the next day. A single day’s Profile does not provide a reliable measure of market condition. Research indicates that a three day measure is the minimum preferred.
3. Markets have changed since 1985/1991. Pits are approaching extinction. In 1985 and earlier, trading by members in the pits was by open outcry; commercial traders were in view and the ‘trade’ dominated the markets. Today (2011) there are few pits and public traders dominate the trading volume. Certainly, an intelligent and alert trader like Steidlmayer in the pit had much more to go on than just the Profile graphic available today.
4. Profiles were defined to use LDB data. Point of Control is the price at maximum cleared volume. Few traders today have access to LDB data.Research on cleared volume being substituted by TPO’s found the TPO’s were reliable in locating the Point of Control. The Meta-Profile Point of Control from TPO’s is not an exact duplicate of the Market Profile Point of Control . Users of the Meta-Profile need to be aware of the differences and their potential differences in trading.
Futures Trading Hours for Labor Day Holiday
| Global Futures Treasury Department Hours |
|---|
| Friday, September 2, 2011 |
| Early Cut Off – There will be an early cut off of 7:45 AM PT for checks and wires on Friday, September 2, 2011. |
| Monday, September 5, 2011 |
| Closed – The treasury department will be closed on Monday, September 5, 2011. No checks or wires will be processed. |
| CME Group Electronic Trading |
| Friday, September 2, 2011 |
| Regular Close – CME Group Equity Products, NYMEX, COMEX®, and DME Products on CME Globex, TAS/TAM Products, Livestock, CBOT, KCBT, and MGEX Grains, CBOT Ethanol, Dow Jones UBS ER, Weather, Real Estate, TRAKRS, Dairy, Lumber, Eurozone HICP, KOSPI 200 Futures on CME Globex, Bursa Malaysia Products on CME Globex, EUA Daily Futures
3:15 PM Early Close – CME Interest Rate Products, CBOT Financial Products, CME Group FX Products, GSCI, Wood Pulp, Crude Palm Oil, The Green Exchange Products on CME Globex Please note: Modified grain pre-opening between 2:30 PM – 3:15 PM |
| Sunday, September 4, 2011 |
| Regular Trading Hours – CME Group Equity Products, CME Interest Rate Products, CBOT Financial Products, CME Group FX Products, NYMEX, COMEX®, and DME Products on CME Globex, Real Estate, Eurozone HICP, Wood Pulp, Bursa Malaysia Products on CME Globex, The Green Exchange Products on CME Globex, EUA Daily Futures
Closed – Dairy, Crude Palm Oil, GSCI, Weather, CBOT, KCBT, MGEX Grains, CBOT Ethanol, Dow Jones UBS ER, TRAKRS, Lumber, Livestock |
| Monday, September 5, 2011 |
| Closed – Dow Jones UBS ER, TRAKRS, Lumber, Livestock
Regular Trading Hours - Eurozone HICP, KOSPI 200 Futures on CME Globex, Bursa Malaysia Products on CME Globex Trading Halts (Order Entry, Modification, Cancellation Allowed) 10:30 AM – CME Group Equity Products 11:00 AM- EUA Daily Futures 12:00 Noon – CME Interest Rate Products, CBOT Financial Products, CME Group FX Products, Real Estate, Wood Pulp 12:15 PM – NYMEX, COMEX®, and DME Products on CME Globex, TAS/TAM Products, Real Estate, Wood Pulp, The Green Exchange Products on CME Globex Halted Products Resume Trading 5:00 PM – CME Group Equity Products, CME Interest Rate Products, CME Group FX Products, NYMEX, COMEX®, and DME Products on CME Globex, TAS/TAM Products, Dairy, Crude Palm Oil, GSCI, Weather, The Green Exchange Products on CME Globex, EUA Daily Futures 5:30 PM – CBOT Financial Products 6:00 PM – CBOT, KCBT, and MGEX Grain Products, CBOT Ethanol |
| CME Group: Floor Trading |
| Friday, September 2, 2011 |
| Regular Trading Hours |
| Monday, September 5, 2011 |
| Closed |
| ICE |
| Friday, September 2, 2011 |
| ICE Futures US
All Markets Open Regular Trading Hours – Softs, Open Outcry 4:15 PM ET Early Close – Financial Products, Index Products |
| Monday, September 5, 2011 |
| ICE Futures US
Closed – Softs 11:30 AM ET Early Close – Index Products 1:00 PM ET Early Close – Financial Products ICE Clear Credit Closed ICE Futures Canada All Markets Closed ICE Futures Europe 1:30 PM ET Early Close – Crude and Refined Products |
| KCBT |
| Sunday, September 4, 2011 |
| Closed
Electronic Trading |
| Monday, September 5, 2011 |
| Open
Overnight Trading for September 6 trade date Closed Daytime Trading |
| Eurex |
| Monday, September 5, 2011 |
| Eurex is closed for trading and exercise in Hurricane Futures, Brazilian, Canadian, and U.S. equity derivatives. No cash payment in USD. |
Wednesday Trading Summary – $4980 in profits roughly
Overall I had a good day for trading. A nice back and forth between bulls and bears gave us a wide first hour of trading.
I took a short pre-market and profits at the early AM swing highs.
We were able to grab the momentum off the open for a nice long for a few points.
The one mistake I did was trying to buy the breakout over yesterdays close, trying to anticipate a breakout isn’t ever a good plan. I knew we might try to support near 778 again (prev swing low here I covered pre-market), so I added on the way down at each reversal.
Ended up riding it back up into resistance at 684, this time it broke. Figures.
Caught 2 nice shorts before 11 am and netted a nice profit for the day.
One of the members in our chat asked if /ES was a good short up near 1175. Indeed it was. Nice parabolic buy rolled all the way back to the lows. We found support again near 678-680, and ended the day making new intra-day highs.
I missed some of the afternoon trades managing a GLD options position. Opportunity cost wise I could have made more on trading /TF, but was good to take a break for a bit.
Charts and summary attached. Very nice trading opportunities. These are 3 contract lots.
Tuesday Trading Summary
I was on the wrong side of the market today, but sticking with it and trading the position let me come out with a win.
I would have been much easier to simply buy and hold. My initial long was fast, and I tried to trade the numbers @ 10am. Instead of waiting for the market to show me direction, I shorted the no great econ data. Wrong choice.
I had a stop at the overnight highs and planned to add right up to them, around 665-666.
I added to the short on every swing high, not a bad plan. I had a chance to get out with a profit on the dip at 10am, but got greedy. It gave me another chance when we found resistance at the prev swing high and initial balance high.
I didn’t take the long after 11:30 AM and I have no good reason why. Missed a lot of profit.
I grabbed a short when started to roll over just after lunch. A good trade, but failed to really after that because I got myself worked up from the morning being ‘short in the hole’.
Tomorrow is a new day. Let’s get on with it.
Summary of Monday trades …
Just some scalps today – trading a small account to see if I can turn another 25k into 1000% in a year. All shorts.
Had I followed my system gains would be larger, but that doesn’t work in all markets. You don’t shoot for home runs, you shoot for consistency of returns.
$TF_F inside my mind from 10:30 am until close
This isn’t everything that goes into my trade decisions but its a good portion. I also look at how the market is trading, so buyers seem weak. Are the trades mostly firing off on the bid or the ask? What does jul0625 think ? (had to throw that in there b/c he made a great call near 1150 to short today)
Here is my range bar chart for TF, with a 5 min as well. I have 4 screens, 1 screen is a 6R TF, one screen is a grid with 5 min charts, and one screen is a grid with 15 min charts. The final screen is for looking at women stockguy22.com chat and twitter.
So you should be aware that I am looking at ES, TF, NQ, 6E, GC, ZB, and CL on 15 min charts. If you aren’t sure why I do this or you don’t know how these all interact will each other, that sounds like a good topic for you to use http://google.com.
Check out the chart for my thinking. Blame public education for my bad grammar.
$TF_F support at prev swing lows – What we gonna do now?
So far a pretty normal options expiration day, big action in the AM and stagnation in the afternoon. For the most part the market appears weak; will see what the close brings.
$TF_F bottoming wicks and a fib level bounce – op-ex then what? [charts]
Intraday chart – no real buyers to speak of and higher volume – not a good sign considering most of the bounce was on low volume. We couldn’t get back above the open and after a short lived rally, everyone agreed that value is lower.
120 min chart, fib ext level held with some pretty big wicks on the candles. Price probed lower and was quickly rejected near 650 area, which is not surprising considering options expire tomorrow and that typically limits the range.
There is going to be one of two possibilities here, we just made a higher low or we are going to test the previous lows near 620.
I’m long some IWM and SPY and selling covered calls; high premium + time decay = yummy. The indices will always go up eventually, so this is a good income strategy. I am also long XIV, VIX reversion play as a higher risk in case we rally, thanks to the dedicated guys in the chat.
Congratulations are in order to several members of our chat for getting long some SPY puts and selling them for 300-1000% profit, not bad for an overnight play.
For me it was a good day, I got stopped out on one short, but ended the day up nicely. I will post the summary below.
Someone asked what do the people with a long bias in their trading plan do in times like this. My response, as an intra-day trader, was to say that having a bias should not be part of a trading plan. But if you are still long and in the hole, you really have two choices, you can sell calls, or you can wait for a bottom.
I’m not a fan of buying puts in this environment, the premiums are high and the move is getting long in the tooth. Your opportunity to buy puts was when the market made a triple top last month and volatility was low, or even the first day after the downgrade by S&P.
If you are a deer in the headlights, its too late, make sure you are in decent companies and look into options strategies to sell calls against your stock.
EOD Summary
$GC_F $ZB_F $ZB_F Flight to safety in a bubble … [CHARTS]
Shiny metal, 30 year treasuries, and 10 year treasuries all on a rocket as investors find safety.
Weekly Economic Calendar
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Help you help yourself become a better trader
In my efforts to become a better and more consistent trader, I read a lot of books on trading, psychology, and how to build trading systems.
For the last 6 months or so, I have been reading books on market profile and the auction process. I started with the recommended reads:
Steidlmayer on Markets by J. Peter Steidlmayer
Markets in Profile by James F. Dalton
Mind Over Markets by James F. Dalton
If you strip away the technical aspect of the above materials on the subject, they all focus on the trader really knowing his market. How the players in the market influence trading, how the auction process specifically relates to the psychology of buyers and sellers, and what you can do as trader to prepare yourself to take advantage of opportunities in the market are all important factors in success.
I recommend EVERY trader read them even if you have no interest in trading market profile.
What follows are some excerpts from Mind Over Markets first few chapters:
Market Understanding + (Self Understanding x Strategy) = Results
I can’t stress this enough. Too many people think that trading success comes from a system, when in reality it is but one part of having success. Think about this carefully. Do you understand what you are trading? Do you have control of yourself (emotions,bias, ect) when you are trading? Are you even confident in your strategy or are you following someone else’s strategy because it works for them?
Many perceive futures trading to be a glamorous, high-profit venture for those with the nerve to trade and that, through the purchase of mechanical systems and computer software, you can bypass the time and dedication it takes to succeed in other professions.
Futures trading is not a glamorous or profitable experience for most of the people who attempt to trade. Futures trading is a profession, and it takes as much time and dedication to succeed as any other profession. You will start as a beginner, learning the objective basks about the profile, then proceed through the stages towards the ultimate goal of any professional in any trade—becoming an expert.
Can you confidently say you have put in the time diligently and honestly required to be considered more than a beginner? Would you let someone who bought a $99 e-book on heart surgery operate on you? Seems like that would be suicide. So I guess that means blindly following some system about trading is suicide for your money.
Most people do not want to know the purpose of the market. They do not want to have to think rationally and objectively about the bigger picture. Most market participants, in fact most people in general, would rather be given a set of rules to blindly follow than to have to use personal insight and innovative thought. Again, the majority of the people who trade futures do not make money.
The above goes back to having all the parts that will make you successful. In the chat/teamspeak this week I had a discussion with alexpmorris (http://yourika.com) about my colored bars indicator. It simply colors the candles on my chart with regard to the momentum of the trend. He asked me about taking entries and how I manage targets and stops. We went back and forth about targets and went over a few charts of the /YM.
He was using a 5 range bar on the /YM. While it worked, it appeared that the 5R was not optimal as there were a lot of fake outs. This lead to a discussion about what I consider ‘tuning’ that charts and setting to adjust for the market vibration. So I ask you, do you think he understands the system?
We also talked about what to do if you have a 30 tick target with a 30 tick stop and it only goes 29 ticks in your favor. This became a heated debate because I try my best to never let a trade run back against me. While my stop is not a trailing stop in the mechanical sense and is more discretionary, I asked why he would ever sit and watch a trade come all the way back. You may be reading this and thinking its common sense, but I will tell you now there are people that will let a trade walk all the way back to hit their stop.
Is it because their system doesn’t have a trailing stop? Maybe. Is it because they don’t fully understand their system and the market they are trading? Maybe. More likely it is because they are following rules that they don’t own, meaning they are following something without thinking or understanding even some of the basics of the trading style they are using.
Just because you have a race car doesn’t mean you will win ‘The Cup’. If I gave you the same tools as Michelangelo could you paint the Sistine Chapel ceiling with the same skill? Doubtful, if not impossible.
Failure to recognize and accept that one is in a Trend day is one of the most costly mistakes a trader can make. Several days of trading profits can be lost in one trading session if you are positioned against the trend.
Nothing really needs to be said here other than ‘don’t fight the trend’. Recognizing trend days as they develop is a skill that I have yet to master. Every good system should have a way to recognize a trend day. I use the GMMA ribbon to look at trend strength and the pattern of swing highs and swing lows. Most of the time the trend is apparent, but my short time frame for trading influences my bias.
Trading logic is largely a product of experience, but it is more than just careful observation and practice; it is an understanding of why the market behaves the way it does. This understanding is best gained over time and through a conscious effort to understand the forces behind market movement.
Why does something trade like it does? It is because of the high frequency traders? Is it because of news? Is it because its the hot thing for the day? Do the traders in the pits influence it? Does it even have a pit? Is it a derivative of something else (ie IWM to the RUT, SPY to the ES to the SPU)?
If you would like to discuss things further after you have read the books I mentioned, please join us in the VTF chat and teamspeak.
If you haven’t read the above, or even taken the time to read the first few chapters, don’t waste your time or mine. I have very limited tolerance for those who don’t make the effort to help themselves, mainly because I want to take your money in the market.
EDIT: From my friend http://twitter.com/tbg4321
Your post for new traders was very well written & so true. I would add tho that to follow a strategy of a successful trader in paper could help the trader find out if that strategy is a basis for their own.
Bear Food and a Top Down Approach
I don’t think I stress the importance of looking at multiple time frames in a top down approach enough. When I am trading I always have 15 min charts of ES, TF, NQ, and YM up and running. It helps you keep perspective of the direction as well as support and resistance. The volatility over the last week has given many opportunities for some great trades.
2 days ago the world was ending, double dip recession, and the zombie apocalypse was not far off. This evening after quite an intra-day reversal to end green, I am getting emails telling me that this is the time to buy stocks and we have hit a bottom. As one trader in our chat brought up – markets don’t just bottom, they double bottom or more. On the same token markets don’t just top, they double top or more. Parabolic tops are their own topics of discussion.
I thought it would be a benefit to everyone reading this to start with the daily on my favorite instrument and work down through a basic technical analysis.
TF Daily
The daily chart made a nice bottoming candle after breaking the prev low of the prior day. But was unable to get above the prev high. If you look closely, we stopped at the prev low of the last bounce candle. Seems like this 700 price area is going to be an area of contention, what was once support is now resistance. GMMA Ribbon looks extended as well, so a bounce seemed in order.
TF 240 Min (4 HOUR)
This chart shows the are of contention around 700 much clearer than the Daily chart. You can also see levels around 650 on the low side and 720, 770, and 800 on the high side. I also drew a trend line for the drop and as you can see we were pretty extended, so a bounce was inevitable. So it seems we might have some trendline resistance around the 700 area. Mean reversion folks are cheering.
It’s worth noting that the current high to low (if it holds) fibonacci retracements line up with those areas we talked about in our analysis above.
Full disclosure: I am long SPY IWM and have been adding at key levels on the way down and selling DEC covered calls with strikes above my entries. My way of shorting the VIX. 
TF 30 min
Working our way down the line to the 30 min chart the reversal is much more obvious as are the intra-day levels. The 30 min chart shows and interesting resistance area around that 700 level, the gap from Sunday. Trend line resistance still @ 700. You could draw a more recent secondary trend line through 739 and angled down, giving us some support near term around 680.
The chart also shows a pattern of higher lows, from 623 to 636, and if we fall back to 680 and support.
TF 15 Min
Now we are getting down to the smaller time frames, the 15 min chart shows a very similar patter to the 30 min. You can also see some support in the 640 area, we will be liberal on the dip because of the release of FOMC minutes. We can also see a clear break of the 680 area and resistance around 700. Zoomed in like this you can also see that the gap fill could go as far as 714, notice the sideways action of the previous days in that area.
TF 5 Min
Finally a 5 min chart, by now the important levels should be pretty evident to you. If you noticed, the smaller the time frame the more bullish we look. This is the importance of starting at the long term and working to the short term. The long term is still in a down trend, but is extended and has some overhead resistance. The short term time frames have clearly reversed and overcome near term resistance. The 680 level is now support and should act as such on any technical retrace.
I drew several trend lines, the most important is the down trend line at the breakout over 665. If you were short as soon as we broke over that it was time to get long or stop out. You can also look back and see that the sub 700 area was going to be resistance because of all the previous sideways action. And you can also see that if we continue to rally the real area of sideways action is around 720-730.
Food for Thought
Just too keep some perspective, because as Mark Twain said “History doesn’t repeat itself, but it does rhyme.” Compare the 2009 financial crisis with the current debt crisis. The swing drop was just over 3000 ticks on /TF, the current correct is just over 2000 ticks. Is this correction almost over ? History would suggest there is some down to sideways action coming, but there will also be up days.
The point I am trying to make is that as a trader you should stay nimble. The market will surprise you when you least expect it.
2010-2011 Market Crash / Correction
2008-2009 Market Crash / Correction
Flash Crash Black Monday action …
Today’s Bullish Trading
Despite the high levels of volatility and the substantial market losses suffered in August, some individual names continue to see bullish order flow – as investors take positions in options rather than shares of specific beaten-down companies. Dendreon (DNDN), for example, lost $2.19 to $10.37 today and has tumbled 71 percent since earnings were reported last Wednesday. Yet, sentiment in the Seattle, WA biotech seemed decidedly bullish today as about 28,000 calls and 6,200 puts traded in the name. The top trades of the day were part of a spread, in which the strategist apparently bought 2,900 Sep 12 calls at $1.18 and sold 2,900 Sep 18 calls at 23 cents. They paid a 95-cent debit of the spread and are probably using the position to play a bounce in the stock. That is, instead of buying shares, they’re locking in the right to buy or “call” the stock at $12 through the September expiration. They could have it called away at $18 (the higher strike) if shares rally beyond that level through September expiration.
Bullish trading was also seen in Weatherford (WFT), Virgin Media (VMED), and Human Genome Sciences (HGSI).
Today’s Bearish Trading
Bank of America (BAC) saw a surge of options activity today. Shares sank $1.66 to $6.51 in volatile trading after an analyst suggested the bank might need to raise capital. The bank was out with a statement today saying that it has more than enough capital. Yet, given the volatility in the financial markets lately, BAC shares were aggressively sold today and options volume hit more than 3X the average daily for the bank. An impressive 662,000 calls and 969,000 puts traded in BofA Monday. August 10 puts, which are now 34.9 percent in-the-money, were the most actives. 74,530 traded. Jan13 12.5 calls, Jan 5 puts, and Jan13 20 calls were very busy as well. Players are jockeying for position in the options in anticipation of the next move in the bank. Consequently, implied volatility in BAC options surged 69 percent to 145.
Bearish flow also surfaced in Research In Motion (RIMM), Quicksilver (KWK), and Masco (MAS).
Index Recap
CBOE Volatility Index (.VIX) added 16 points to close at session highs of 48. The volatility index made a run higher early and then the rally gained additional momentum in the late-afternoon. The market’s “fear gauge” is now at its best levels since May 21, 2010, when the index briefly touched 48.2. VIX has rallied 200 percent in the past month! The surge in the volatility index reflects the bearish sentiment and high anxiety levels that investors now face. Index option volume has been heavy as well. 1.25 million puts and 643,000 calls traded on the S&P 500 Index today, which is more than double the average daily volume for the SPX trading pit. CBOE Volatility Index tracks the expected volatility priced into S&P 500 Index options and tends to move higher when there is aggressive buying of puts to hedge stock portfolios.
Analyzing the ETF Market
SPDR Oil Exploration and Production Fund (XOP) saw a day of heavy trading. The ETF, which holds shares of major oil companies like Chevron and Exxon, tumbled $5.99 to $47.12 after crude oil prices plunged $6.29 to $80.59 a barrel. Meanwhile, options volume in the fund was 6X the average daily. 180,000 puts and 12,000 calls traded in the XOP today. The top trades were part of a ratio spread, after an investor sold 35,000 September 55 puts and bought 52,000 September 50 puts on XOP. This spread likely rolls a position down in strikes after the big move lower in shares. That is, they’re closing out a position in the 55s to open a new larger position in the 50s. XOP is down 24.3 percent month-to-date and both contracts are now in-the-money.
Insights to Identifying Potentially Lasting Market Bottoms
Back in February 2009, with the markets plunging relentlessly day after day, after day… I still recall how many traders were waiting in anticipation for some sort of crazy, panicky, high volume day to mark a capitulation bottom. This latest market downswing took the DOW down nearly 30% in just over two months from 9,088 to a low of 6,470 on March 6th, 2009.
Many traders whose market analysis and insights I respect seemed to be waiting for some massive “fireworks”-type event that would all but shout “THE LOW IS HERE”; a sign that all the weak hands have most likely thrown in the towel, and that it was now time to BUY BUY BUY hand over fist.
Of course, Mr. Market will never make it quite that easy, even for its smartest participants to figure out what its current “jig” will be. The DOW closed below 6,700 for several days before breaking out higher and closing above 6,900 on March 10th, 2009 on a bit higher average volume. It also marked the first day since this leg of selling began in early February that the DOW was able to close above its downward-sloping trend-line. However, that super-charged high volume capitulation day we were all looking for and expecting to occur never materialized. While in September and October 2008 the VIX volatility index hit highs just over 80, in February and March 2009 the VIX topped out in the low 50’s. This peak was 35% lower than its earlier spikes, even though the market was now trading at lower price levels.
I have long been a student of market behavior, mass psychology (or perhaps I should say mass psychosis), and price action. While I have observed this type of behavior in the past, it disturbed me that I couldn’t quite piece together why this debacle completed its course in such a relatively quiet and unassuming way. Certainly, after such heavy multiday liquidation, it seemed almost necessary that at some point everyone left would throw in the towel and say, “I’ve had enough”! I thought about this for a long time, and remained on the lookout for any insights that could help me better understand the market dynamics that were in play at the time.
Recently, while re-familiarizing myself with an old 1931 trading classic, “Tape Reading & Market Tactics” by Humphrey B. Neill, I found my answer in chapter 5 – and it hit me as if I had just walked into a brick wall:
“Many factors must be taken into consideration when we are interpreting the volume of turning trends. For example, the volume on June 18, 1930, which marked the approximate bottom of a severe decline, was 6,000,000 shares. At the end of the decline in August, 1930, owing to the decrease in the number of active margin-accounts, the selling climax came with only 3,400,000 shares traded. I well remember that day, because I was short of the market, and was trying to decide whether there was sufficient volume to mark the turning point or whether the selling was likely to carry much farther. However, the action had many of the ear-marks of a “clean-out,” of a temporarily oversold condition. Although there was a terrific churning of stocks, little headway was made for approximately three hours. There was no progress on heavy volume. That was our signal.
However, when the market temporarily reversed its trend later in the year, in November, following a decline which had continued steadily for fifty-one days, we did not have the big volume day. Why? Because margin accounts with brokers were at the minimum; brokers’ loans were down to the lowest on record. Actual liquidation had gone on for weeks. Liquidation from strongboxes and necessitous selling by large interests are not dumped upon the market as are stocks held on margin by the public. [emphasis added] (The speed of the crashes in the fall of 1929 was caused by this panicky dumping of margined stock.) Therefore it was necessary to estimate the extent of liquidation already accomplished and to wait for the signs of the turn.”
There was the answer in black and white. First Neill lays out the scenario, which in this case took place about a year after the 1929 crash: “following a decline which had continued steadily for fifty-one days, we did not have the big volume day.” The reason? Because most of the weak hands, along with most of those trading on margin, were largely wiped out in the earlier market panics. As Neill states, “The speed of the crashes in the fall of 1929 was caused by this panicky dumping of margined stock”. This last move was steadily fueled by heavy liquidation day after day for 51 days, and this time around it was the professionals, the institutions, and the market specialists (the strongboxes and necessitous selling by large interests) that were “throwing in the towel”. Institutions holding huge positions in stocks could not throw out their positions using market orders all at once even if they wanted to. They are forced to sell a bit at a time, day after day, in a very meticulous and controlled fashion.
This sounds like what must have unfolded in February and early March 2009. The remaining “smarter” participants and the “big money” funds were liquidating their positions. Mutual funds and hedge funds meeting redemptions, risk managers raising cash and reducing risk, pension funds hoping to preserve some semblance of value, you name it. When big money throws in the towel (so long as the liquidation is not the result of heavy margin selling) it will almost always (and generally by necessity) be a slow, steady, and controlled liquidation process. The turning point will materialize once the heavy selling subsides, and the market finds stability at a price level that once again attracts accumulation by strong-handed buyers.
The book was right on, and I recommend anyone serious about trading to revisit this old classic trading book, as the most valuable market insights are truly timeless. In retrospect, I have observed variations of this pattern unfold many times (even intraday), and have often sought to use it to my advantage. On a larger scale, it is especially noticeable with public companies that receive massive news coverage over highly emotionally-charged issues. Think Toyota Motors (cars driving themselves) or British Petroleum (massive gulf oil leak). One minute, thousands of new headlines and commentary a day. A few months later, nary a mention. Swine flu, anyone? But I digress…
Take the above example from Toyota Motors (NYSE: TM). You can clearly see the height of the media coverage and outrage into the issues revolving around “sudden acceleration” of Toyota cars into early February 2010. Volume well exceeded 10 times its normal average on that last day of panic selling. The first move off that low runs right into downward resistance before turning back down, albeit on much lower volume. In addition, while implied volatility in TM nearly doubled at 44% into the early February down move, it topped out around 37% the second time around before sharply reversing and breaking above the downward trend line on a closing basis. As a side note, notice how the trend line I chose was the least “steep” I could draw (indicating reduced downward momentum). While TM move lower later in the year, it did recover to nearly $82.50 before rolling over.
British Petroleum PLC (NYSE:BP) is another good example. By the end of June, when all the weak hands, the bargain hunters, and the margined players were out of the picture, BP went on to make another new low, taking out anyone left who had not yet thrown in the towel. This new low occurred on much lower volume (as well as on lower option implied volatility) than other recent panic lows that took place on heavy selling. Once BP’s stock closed back above $30/share, breaking its key downward trend line resistance, it fueled a powerful 35% move back up before finding support around the $35/share level.
As a final example, notice the large volume spike that took place in Boeing (NYSE:BA) in late June 2009 when fears again materialized regarding more delays with Boeing’s new 787 jetliner. Notice how the final low again took place on much lower volume as compared to the initial panicked selloff that took place. As with the other examples, implied volatility on BA options was also lower this time around. As price broke above its downward trend lines, BA staged an impressive recovery for a stock that no one seemed interested in at $40/share.
When markets top, they often go out with a roar once “everyone wants in”. Likewise, markets will often find a bottom once everyone’s thrown in the towel, given up, and lost interest. I suppose we can sum it up by saying that more often than not, “markets will top out with a bang, and bottom out with a whimper”.
Alexander Paul Morris has been involved in the markets for over 15 years trading stocks, forex, options, and futures. He is the designer, creator, and programmer of the tymoraPRO tradeSCAN trading platform and scanning system, which received exceptional reviews in both Active Trader and Technical Analysis of Stocks & Commodities Magazines, and was designed to empower traders with a real-time trading edge.
You can directly follow Alexander on twitter @alexpmorris.
CME & CBOT Rollover
- Rollover is 8 days before contract expiration.
- Rollover is usually on the second Thursday of every month. However, if the first day of the month is a Friday, the rollver day will be the first Thursday of the month.
- Expiration day is the 3rd Friday of the following months: March, June, September, and December.
- The contracy symbol associated with the expiration months are: March = H, June = M, September = U, December = Z. For example, the emini S&P symbol is the ES. So the symbol the emini S&P December contract would be ESZ06. (06 being the year)
- Liquidity of the contract will shift on the rollover date. Make sure you trade the correct contract. You should be able to notice by the lack of liquidity in your underlying instrument.
- If you are swing or position trading several days before rollver, make sure to use the newer contract instead.
Debt ceiling and economic data hit the markets – today’s notable action in stocks
Today’s Bullish Trading
Manitowac (MTW) shares lost 96 cents to $12.75 and options on the Manitowac, WI farm and construction machinery company were heavily traded today. Total volume was 17,000 calls and 920 puts, which is 5X the recent average daily volume for the name. September 15 calls, which are now 17.6 percent out-of-the-money and expiring in 46 days, were the most actives. 12,865 traded including a 1260-contract block at the 60-cent asking price on the CBOE. About 52 percent of the day’s volume was at the offer, suggesting that some of the action was driven by upside call buyers looking for the stock to perform well from now through mid-September. There’s no recent news to explain the heavy trading in MTW calls today. Earnings were last reported on July 26. Dow Jones Newswires options report today notes that other machinery companies – Pall Corp and Timken (TKR) – also bullish trading today. Some investors might be “call”ing a bottom in the group.
JC Penney (JCP) is seeing a third day of bullish trading. As noted in yesterday’s midday, August 30 calls on the retailer were being bought Monday and August 31 calls were busy on Friday. Today, shares saw a morning spike on heavy volume and are up 28 cents to $30.73. Options volume in JCP includes 18,000 calls and 9,825 puts. August 35 calls, which are 13.9 percent out-of-the-money and expiring in 17 days, are the most actives. 3,530 traded. August 31, 33 and 34 calls are seeing interest as well. The relative strength in the stock and increased call activity in JC Penney comes ahead of monthly same store sales numbers on August 4 and an earnings release on August 12.
TEVA was the subject of an interesting three-legged options spread today. Shares are down 96 cents to $42.80 and have now suffered a two-day 8.2 percent loss after the company announced disappointing results from an FDA trial of its MS drug. Yet, while shares have been under pressure, one strategist seems to view the weakness as an opportunity for a bullish trade and sold 3,000 December 35 puts on TEVA at 59 cents and bought 3,000 December 45 – 50 call spreads at $1.22. They paid a 63-cent net debit on the three-way spread and are apparently looking for the stock to rebound through December. If shares fall below $35 instead they would be on the hook to buy the stock (have put shares at $35) at the strike price of the put option.
Today’s Bearish Trading
Central European Distribution (CEDC) saw a day of heavy put volume today. Shares of the Mount Laurel, NJ exporter of alcoholic beverages touched new 52-week lows and finished down 73 cents to $8.79. Meanwhile, 48,000 calls and 3,425 puts traded in CEDC today. August 9 puts, which are now 21 cents in-the-money, were the most actives. Some investors might have been closing out positions after a 61.5 plunge in shares since February. 14,572 Aug 9 puts traded against 14,507 in open interest. Meanwhile, August 6, December 5, August 8, September 10 and even December 2.5 puts on CEDC were busy as well. The heavy put activity comes ahead of the company’s earnings release, due August 4.
Ten of the top twelve most actively traded options contracts are puts on the SPDR 500 Trust (SPY). The so-called ‘SPYders’ are trading down $1.72 to $127.06 and in the midst of an 8-day 5.6 percent decline. The ongoing slide has triggered a lot of activity in SPY put options. The August 127 puts, which are now at-the-money and expiring in 17 days, are today’s most actives. 137,400 traded. August 120, 125, 126, 128 and 130 puts are heavily traded, as are Sep 105, Sep 125, Nov 118, and Nov 124 puts. Total volume in the exchange-traded fund is 1.73 million puts and 754,000 calls through midday. Some investors are likely buying downside puts on the Spiders on concerns about additional losses for the US equity market in the weeks/months ahead.
Put volume is picking up in William’s Companies (WMB) ahead of earnings. Shares of the natural gas producer are trading down 86 cents to $30.75. Options volume in WMB through midday is 33,000 puts and 8,145 calls. The action included morning buyers of August 28 puts. 24,660 now traded and some of the action might be closing. Open interest is 46,153 and the contract is nearly 9 percent out-of-the-money with 17 days of life remaining. August 27 and 31 puts on Williams Companies are seeing interest as well. The increased put activity in WMB comes ahead of earnings, due out Wednesday afternoon.
Volume Signals
NVidia (NVDA) options volume is running 2.5X the (22-day) average, with 74,000 contracts traded and call activity accounting for 66 percent of the volume.
TEVA options volume is 2.5X the average daily, with 45,000 contracts traded and call volume representing 60 percent of the activity.
Leap Wireless (LEAP) options volume is running 8X the average daily, with 41,000 contracts traded and put volume representing 62 percent of the total volume.
Increasing options activity is also being seen in Hertz (HTZ), Merck (MRK), and JC Penney (JCP).
Volatility Alerts
Ctrip.com (CTRP) is trading down $5 to $39.98 in volatile trading after the online travel company reported in-line second quarter profits, but guided estimates down for the third quarter. CTRP options are heavily traded, with 19,000 puts and 8,000 calls in the name so far. August 40 puts, which are now at-the-money, are the most actives. Volume is approaching 10,000. Some investors might be selling these short-term puts, as 80 percent of the volume has been on the bid and implied volatility in CTRP options is down 17.5 percent to 39.
Index Recap
CBOE Volatility Index (.VIX) dipped in morning trading, but finished the day up 1.13 to 24.79. VIX hit a low of 22.65 early and was in negative territory through midday. However, a late-day sell-off sent the S&P 500 to session lows in the final hour. The volatility index, which tracks the expected volatility priced into S&P 500 options, rallied in the final sixty minutes of trading and closed at its best levels of the day. Meanwhile, trading in the VIX options pits was very busy today. 487,000 calls and 144,000 puts traded on the session. August 30 call options on the volatility index were the most actives. 67,469 traded. August 25 and Sep 35 calls saw heavy trading as well. Some investors were probably buying short-term out-of-the-money VIX call options on concerns that market volatility will remain high in the weeks and months ahead. September is historically one of the more volatile months for the US equity market.
Analyzing the ETF Market
Volume was heavy in the exchange-traded funds today. 6.2 million puts and 3.9 million calls traded across the SPDR 500 Trust (SPY), iShares Small Cap Fund (IWM), and other ETF products, which is 1.5X the recent average daily volume, according to Trade Alert data. The three most actives were puts on the SPY, or “SPYders”. Shares lost $3.29 to $125.79 and closed near session lows. The August 127 puts, which were at-the-money through midday, are now $1.21 in-the-money and traded 194,783 contracts. SPY 125 and 130 puts were the next most actives. Heavy trading was also seen in the iShares Small Cap Fund (IWM) Sep 75 and 77 puts, as well as SPDR Financial (XLF) Aug 15 puts. Some options traders were probably taking bearish positions in puts on the exchange-traded funds on expectations for additional losses in the weeks ahead. Others were probably closing out positions after the 8-day market decline – which is the equity market’s longest losing streak since 2008
What are futures doing after #debtceiling announcement for July 31st & August 1st, 2011
Let's Play Kick the Can -
Use to be fun to play kick the can when I was young.
Politicians seem to enjoy playing that game too , Just they playing with a bigger can now "the US Debt. "
Update Aug 1st 2:30amEst live chart connection experiencing problems tonight so shut it down.. Looks to be modem/internet problems on this end. Feel free to check into morning if restarts itself. If i set up a new link i will post it here.
Looks like USA won't default – as per President Obama speech at 8:40pmEST tonight ( Sunday July 31st , 2011)
but still more work to be done by the politicians in Washington
What are futures doing tonight Sunday July 31st, 2011 after #debtceiling announcement?
As i said on July 11th in an earlier blog http://sg22.ly/qxUyiv
#9 Politicians will likely wait till the last minute as they seem to do with other crisis situations. (Did not think they would wait till last second)
as of 10:41pmEST July 31st 2011 here are the most recent quotes ( you can see the live stream all night at link below)
ESU1 1306.5 TFU1 803.70 #oil $96.96 , #silver $39.405 , #gold $1613.83 , #EURO 1.4384
for you night owls or early risers that want to see live futures/ #silver #gold #oil charts LIVE FREE feed all night here http://sg22.ly/qkFJAo
its limited to the first 200 people only ) Just put in any name & u're email address if you want to be notified of other future webinars http://sg22.ly/qkFJAo ( or fake name/fake email if u don't want to be emailed – i don't mind ) The charts are free so enjoy them or if you have an #iPad use the Free GotoMeeting app has to be Version 4.8 & type in Webinar iD #357-332-928 or just click the sg22 link above right from your ipad.
If you have a Mac & it freezes up when you try to enter a gotomeeting webinar- you can go here to fix the problem @gotomeeting is working on a fix but by downloading Firefox on your Mac fixes it info here http://sg22.ly/ro56Wb
Charts look like this : There is a scanner on the left then ESU1 TFU1 CLU1 SIU1 #gold & #EURUSD charts all running live in real time
Futures prices ahead of Monday August 1st , 2011
what are futures at after Debt Ceiling announcement
Did futures spike on Debt Ceiling announcement
Debt Celing
Debt Cieling
Debt Ceilin
Debt Celin
what is oil doing after debt ceiling announcement
Free streaming charts of live oil, silver and futures pricing
Free streaming live charts of emini Futures (ES_F /ES )
Free Streaming live Russell Futures TF_F /TF)
Where can I get free Live silver , gold , oil, futures charts?
Kick the Debt Ceiling Can
Kick the Can
Paul Tudor Jones – Trader
As I try to determine what makes a good trader; I routinely look at what has made others successful in the past. Paul Tudor Jones is a legend, so what makes him successful? Does he have some insight that you and I don't ? Does he have some magical indicator that foretells the future ?
Below is a series of brief interviews and articles where Jones answers questions about trading. If you are a struggling trader, please listen to what he says about money management, taking losses, and keeping your ego and emotions in check. Where have you heard this before? If you aren't doing these things, why do you think the outcome will be in your favor ?
More to the point, if you are struggling right now, why do you continue to do the same thing and expect a different result ?
Someone posted a link in the chat today that detailed where the money had been flowing the last few weeks. There was money selling longs into the strength, and getting short the SPY and QQQ. Imagine that, selling into resistance, not getting greedy and day dreaming where the market could go. Where have you heard this before ?
I can't stress this enough to people. There is no secret to this game. There is no sauce. There is no indicator that will make you $1 million from $1000. What there is is a market that has repeatable behavior that you can learn to exploit.
Why do you think there all these penny stock pumpers out there ? Because people make the same reckless decisions over and over. They buy them on some email, pump, or rumor, then watch them fall all the way back while they dream of what they are going to buy with all the money they will make. We call them bag holders.
So read these interviews, watch the documentary, and pay attention to what the man does.
Then join us in the VTF live.
stockguy22 ThinkorSwim Advanced MACD Indicator
Here is an chart comparing my smoothed MACD using Laguerre polynomials. I have seen a few implementations of this using difference indicators.
It performs similar to a faster MACD, but is relatively unaffected by gaps. Remember that even a standard MACD is not to be used for determining overbought and oversold conditions. What it excels at is determing momentum, and divergences in price patterns.
Free Live #silver #gold Streaming Charts & Quotes for July 20th , 21st 2011
Free Live #silver & #gold Streaming Charts & Quotes for July 20th , 21st , 2011
for you night owls or early risers that want to see live futures/ #silver #gold #oil charts LIVE FREE feed all night here http://sg22.ly/nmJl2c
I've put up link for Free Live #Gold & #Silver #euro & /ES_F & /TF_F & #oil ($CLU1) futures charts to run through the night tonight July 20th & July 21st, 2011 ( its limited to the first 200 people only ) Just put in any name & u're email address if you want to be notified of other future webinars http://sg22.ly/nmJl2c ( or fake name/fake email if u don't want to be emailed – i don't mind ) The charts are free so enjoy them.
or if you have an #iPad use the Free GotoMeeting app has to be Version 4.8 & type in Webinar iD # 359-036-312 or just click the sg22 link above right from your ipad.
Charts look like this : There is a scanner on the left then ESU1 TFU1 CLU1 SIU1 #gold & #EURUSD charts all running live in real time
There is no sound in the webinar but feel free to type questions & if we have time we'll answer them.
Enjoy Courtesy of TymoraPro & Stockguy22.com – Ipad1 Ipad2 Friendly live Futures/Stock Charts
Correlations and Price Swing Patterns on ES TF NQ YM futures in relation to DX (usd futures)
I am going to try to post these correlation charts more. What I am noticing is the markets while predominantly inversely correlated to the USD, can and do at times move in degrees of postive correlation with the USD.
I bring this up because of the current state of politicis in Washington. I have a feeling that if a debt deal is struck we may see a USD / market rally scenario.
More research needs to be done, but the breaks in correlation seem to be at places of market stress. ie temporary market tops, or some news related issue.
Note: this uses a 100 period Pearson correlation for smoothing
TF [ Russell 2000 emini] – wide blue line is DX correlation – other lines are ES YM NQ TF
ES [S&P 500 emini] - wide blue line is DX correlation – other lines are ES YM NQ TF
NQ [Nasdaq 100 emini] - wide blue line is DX correlation – other lines are ES YM NQ TF
YM [DOW emini] – wide blue line is DX correlation – other lines are ES YM NQ TF
Free Live #gold & #silver charts streaming all night July 13th & 14th 2011
Gold hit a new high tonight (July 13th ) & Silver hit a new recent high too- Watch the live Streaming charts all night at the link below
I've put up link for Free Live #Gold & #Silver charts to run through the night tonight July 13th & July 14th, 2011 ( its limited to the first 200 people only ) Just put in any name & u're email address if you want to be notified of other future webinars http://sg22.ly/nTispL ( or fake name/fake email if u don't want to be emailed – i don't mind ) The charts are free so enjoy them.
Free Live #gold , Silver Futures & Euro (EURUSD) Charts
Here is the link for it
#futures Charts running all night -just click here to log in http://sg22.ly/nTispL or if you have an #iPad use the Free GotoMeeting app has to be Version 4.8 & type in Webinar iD # 274-787-864
looks like this :
For tonight July 13th
& 14th , 2011 the futures I have up are Free #silver Futures Charts( SiU1) , Free Russell Futures ( TFU1) , Free live oil Futures Charts (CLQ1) , Free live Euro (EURUSD) & Eminis ( ESU1)
Hope you find them helpful they will be live thru the night – Check back here in our blog if we run them again on different nights.
There is no sound in the webinar but feel free to type questions & if we have time we'll answer them.
Enjoy Courtesy of TymoraPro & Stockguy22.com – Ipad1 Ipad2 Friendly live Futures/Stock Charts
Free Euro (EURUSD) live charts & futures for July 11th & 12th, 2011
EURO had dropped tonight under that key 1.40 area & sitting in mid 1.3950's as of 11:40pmEST July 11th, 2011
I've put up link for Free Live Futures charts to run through the night tonight July 11th & July 12th, 2011 ( its limited to the first 200 people only ) Just put in any name & u're email address if you want to be notified of other future webinars http://sg22.ly/p2TL4p ( or fake name/fake email if u don't want to be emailed – i don't mind ) The charts are free so enjoy them.
Free Live Futures & Euro (EURUSD) Charts
Here is the link for it
#futures Charts running all night -just click here to log in http://sg22.ly/p2TL4p or if you have an #iPad use the Free GotoMeeting app has to be Version 4.8 & type in Webinar iD # 396-587-033
looks like this :
For tonight June 29, 2011 the futures I have up are Free #silver Futures Charts( SiU1) , Free Russell Futures ( TFU1) , Free live oil Futures Charts (CLQ1) , Free live Euro (EURUSD) & Eminis ( ESU1)
Hope you find them helpful they will be live thru the night – Check back here in our blog if we run them again on different nights.
There is no sound in the webinar but feel free to type questions & if we have time we'll answer them.
Enjoy Courtesy of TymoraPro & Stockguy22.com – Ipad1 Ipad2 Friendly live Futures/Stock Charts
Are you looking for free futures charts?
Sunday Night Charts for Monday July 11th 2011
Here is some fun with the currencies, let's face it, they rule the market. Noticeably missing from this evening's fun is AAPL, GLD, SLV, and /CL, with uncertainty any real technical analysis will be thrown out the window on a european or U.S. default anyway; selective or not. I hear enough about AAPL during the week, it's making new highs until Steve Jobs runs out of cult recruits and they all take a space comet to the next universe.
Back on topic. Watch what the EUR/USD does this week. If earnings and guidance come in strong and that wedge breaks down on the Euro, we could see one of those less than correlated weeks. Notice the cycles on the 2nd chart. The indices are green,blue,yellow,orange, and the red is the Euro. Red line is near perfect negative correlation to the USD.
That means when the Euro [first chart] goes up the /DX [second chart] basket of currencies will go down., mostly b/c of the 60% Euro weighting. (need to check that %)
What you should take away from these charts is, we have previously and will in the future have a USD rally and a market rally. It might not be perfect, but it will confuse and delude.
Also note that that IWM (green line) is somewhat more negatively correlated recently. The small caps have been on a tear with the USD falling, small cap rallies are typically considered a bullish 'risk on' play.
Fun Euro wedge pattern developing — if Euro doesn't get that 1.50 – should test that lower trendline at least. Unless the US Fed can print faster and Europe can burn Euros …..
In case anyone doubts the USD correlation to the markets. Predominantly negative correlation, except for when its not. If you are into visual patterns and believe history rhymes, we might be in for a rally over the next 2-3 weeks with the USD rallying as well. All eyes will be on Europe and the US debt, which one will produce more fear?
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The indices look relatively the same, sideways to up action. I find the QQQ pattern the most interesting and obvious, with NFLX, AAPL, ect leading the way.
We are up into resistance, if you didn't buy the 200 day when everyone was in panic mode, its probably a bit too late to chase. We have earnings and an early opex this week, best to wait or play small.
AA – Alcoa – Earnings coming up. Some key levels on the chart.
Can the financials put in a base here and get us some lift? We will see. GS key $130 level, JPM, MS, BAC, WFC – all pretty similar charts. Looking range bound and weak.
Will be watching CNO around $8 level, has some good upside from here.
===
And now for the OMG WTF did I do to miss this charts.
First up. The Spicy Burrito – $40/lb pine nuts can't stop this. When you sell $9 burritos fast food style, the sky is the limit.
GMCR, SBUX, PEET – Coffee is hot, hot, hot !! SBUX and GMCR team up to bring the apocalypse, seriously. PEET follows along for the ride, just don't spill it in your lap.
AZO – Huge margins, check. Consumers that have to fix the car b/c they can't afford a new one, check. New highs, check.
All American oil company. WTF. That is all. DBLE
LOW – Lowe's
HD – Home Depot.
Who is building? I guess maybe consumers might need to repair stuff since they can't buy a new house without a job ? Let's see what they do at the top of the range.
jstanford649′s simple trading system – Make profits or don’t – its up to you
click for larger image
So why do so many traders lose money? Fear and greed for one. Time wasted trying to find a holy grail to make them millions with $100 is another reason. There is no secret to trading. Why would you do the same thing over and over and expect a different result?
If you can’t follow 5 basic rules, you will lose and continue to lose.
1. NEVER risk more than 1%-2% of your account on a trade. Money management is key to longer term profits.
2. NEVER panic sell, or panic buy. So you missed a setup, so what. The market is always here. Don’t chase. Price will always find some equilibrium and create another setup.
3. ALWAYS follow the trend. Yes, you can fade a market and fight the trend, trying to pick a top or bottom. But if you can’t take risks, or panic sell at losses, then you can’t fade. Fading is fighting, you will get a bloody lip.
4. ALWAYS have faith in yourself and your system. Trading is 90% in your head. Moving averages, trend lines, indicators, fancy pattern, monkey business, and magic lines are easy to learn. What is hard is controlling your fear and your greed. A good system has profit targets and stop losses.
5. ALWAYS remember that losses are part of the game. You are going to be wrong. Trading is no place for ego.
So there you have it. 5 Rules for Trading, follow them or lose.
Now how do we trade the chart above. It’s a system I put together in 20 mins, using ThinkorSwim.
- Use a 200 EMA for longer term trend. Have a rule that if you are unsure, you dont take a short if price is below, and you dont take a long if price is above.
- Use a 20 HullMovingAvg for scalping and entries/exit with the longer term trend. Price cross above (buy), price cross below (sell).
- Use multiple timeframes and understand the scope of your trade. Are you taking a long in a longer term down trend ? If so, then that should give you a different target/stop than taking a long in a longer term uptrend.
The indicator on the bottom is a MACD (moving average convergence divergence) variation of my own. It’s a SMI stochastic, with a linear regression based histogram at its simplest form. It shows you momentum and potential overbought oversold.
What is the best way to use it all?
That is up to you. I have given you an outline and a simple intraday trading system that is profitable to trade. What I don’t cover is how to spot support and resistance, draw trendlines, and price action. Price action is how something trades.
There are things you need to understand about the instrument you are trading.
How does price move?
Does it gap?
Does it move up and retrace repeatedly?
Is there slippage?
On a side note,GOOG’s business is to organize the worlds information. If there is something you dont understand or dont know a term. Google it, take charge of yourself and your trading. Simply ask the question in google.com’s search. GOOG has spent millions and employs Phd’s to make the search heuristic.
http://www.google.com
Some google results …..
http://www.justdata.com.au/Journals/AlanHull/hull_ma.htm
http://ensign.editme.com/t72hull
http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_averages
Attached .zip file, unzip and import into ThinkorSwim studies
Euro and USD relationship to markets – can it hold?
USD (/DX) basket of currencies to give a value to USD. Notice the tight action in price. Waiting for the US debt negotiations, waiting for Greece.
Next up is the /6E Euro (60% of the /DX). Notice the inverse action and tight price consoldiation. Partially related to Greece, partially related to uncertainty in US debt ceiling.
Also notice how old trend lines can be used to gauge future price action (white dashed lines), even after being violated.
What you should gather from both charts is CONSOLIDATION, UNCERTAINTY, and energy is building for a move. If you are unsure, check out the ribbon, we just ended large moves and are now compressed. Price agreement currently, and can only last so long.
Does the USD rally and can the US Markets muster a rally as well? It has happened before, and can happen again.
Free Live Futures Charts- Oil (CLQ1), Silver (SiN1), TFU1, ESU1, & Euro #EURUSD for July 4th & 5th, 2011
Free Live Futures Charts- Oil (CLQ1), Silver (SiN1), TFU1, ESU1, & Euro #EURUSD
Happy 4th of July -
I’ve put up link for Free Live Futures charts to run through the night tonight July 4th , 2011 into July 5th ( its limited to the first 200 people only )
Free Live Oil & Silver Charts – Also Russell & Emini Futures live free charts ( TF_F ES_F) /TF /ES
Here is the info to link into the 1 page live charts -
#futures Charts running all night – Just click here & log in immediately http://sg22.ly/mB0cxi or if you have an #iPad use the Free GotoMeeting app has to be Version 4.8 & type in Webinar iD # 516-826-177
looks like this :
For tonight July 4th, 2011 the futures I have up are Free #silver Futures Charts( SiN1) , Free Russell Futures ( TFU1) , Free live oil Futures Charts (CLQ1) , Free live Euro (EURUSD) & Eminis ( ESU1)
Hope you find them helpful they will be live thru the night – Check back here in our blog if we run them again on different nights.
There is no sound in the webinar but feel free to type questions & if we will check them.
Enjoy Courtesy of Stockguy22.com & tymorapro.com – Ipad1 Ipad2 Friendly live Futures/Stock Charts
free live oil & silver futures
free futures chart
free oil chart
live oil chart
live oil pricing
live silver pricing
what are futures doing premarket
what are futures doing afterhours
live free charts
live free oil charts
Happy July 4th America, Red, White & Blue and charts too
Free Live Oil, Silver, Emini, Russell, Futures & Euro Charts ( iPad Friendly)
I've put up link for Free Live Futures charts to run through the night tonight June 29th , 2011 ( its limited to the first 200 people only )
Free Live Futures Charts
Here is the link for it
#futures Charts running all night - http://sg22.ly/kT2mM9 or if you have an #iPad use the Free GotoMeeting app has to be Version 4.8 & type in Webinar iD # 508-017-664
looks like this :
For tonight June 29, 2011 the futures I have up are Free #silver Futures Charts( SiN1) , Free Russell Futures ( TFU1) , Free live oil Futures Charts (CLQ1) , Free live Euro (EURUSD) & Eminis ( ESU1)
Hope you find them helpful they will be live thru the night – Check back here in our blog if we run them again on different nights.
There is no sound in the webinar but feel free to type questions & if we have time we'll answer them.
Enjoy Courtesy of Stockguy22.com – Ipad1 Ipad2 Friendly live Futures/Stock Charts
When not to trade
Knowing when not to trade is more imporant than knowing when to take a trade. Anyone can buy or sell at anytime for any numbers of reasons, and for the most part your odds are 50/50 realistically.
I posted this chat in the morning in the trading room.
I don't use the moving average rainbows for cross overs or any other sort of generic indication. I use them to judge the trend strength and direction. The simple answer is when the ribbon is compressed, I find other things to do.
The end of the day there were 2 potential trades. One long, one short, as noted by the expansion of the ribbon and the color change of my custom candles. The market moves in waves, we rush to a price (expansion), then we build energy (compression) for the next move. This is also a prime example of why you should obey stops and not add to losers. Had you been long into the end of the day, you would have added all the way down and closed with a nice loss.
Here is the chart I posted on Sunday. Notice how we fell right to the support/chop level. Sure it was on news and the Euro being unpretty, but who cares, price showed you what level the market was considered 'cheap'. Gold and Silver were both up, as was oil. I am expecting a bounce sooner than later, may up to that resistance level. We will see, the next leg down has a fair amount of chop areas.
Charts of the Week – On Stranger Trends
Charts of the futures are confirming the difficulty with trading the past few weeks. That markets have been sideways and filled with false breakouts.
Most of the charts have some SHORT BIAS to them, however bonds are coming into resistance and might be due for a pull back, at the same time many of the futures markets are coming into support levels. Pullbacks don't last forever and neither do rallies.
I would be cautously short here, as I don't think we are basing quite yet. I'd expect a quick drop and then a rally this week. Remember last week was options expirey and many of the charts pinned around specific levels.
If you are unsure of what 'strike pinning' is, you can read more here: http://en.wikipedia.org/wiki/Pin_risk_(options). OR you can do a google search for 'options pinning'. Quick and short, its a by product of market makers reducing risk , therefore making the most options possible expire worthless.
I'll be watching the currencies this week, the Euro (/6E) is coming into some good support and the USD (/DX) is chopping around a resistance area. Any debt worries about Eurozone defaults have the potential to push our markets lower as it will give a boost to the value of the USD. I'd be carefully watching the 1.40 to 1.38 level on the Euro (/6E). There is some potential for a double bottom at the 1.40 area.
Commodity plays in stocks like MCP and PCX should be interesting. Also the pending investigation by the US into Goldman Sachs (GS) will give some volatility in the financials which have been beaten down lately anyway.
As always trade only with what you can afford to lose, follow your plan, and obey your stops. If you don't have a plan then you will lose, so get one. See you in the Virtual Trading Floor.
Chart are below, click to open a fullsize chart in a new window.
/ES S&P 500 Emini
/NQ Nasdaq Emini
/YM Dow Emini
/TF Russell Emini
/GC Gold Futures
/SI Silver Futures
/ZB U.S. Treasury Futures
/6E Euro Futures
COMMODITY PRICES, EXCHANGE RATES AND THE INTERNATIONAL MONETARY SYSTEM
COMMODITY PRICES, EXCHANGE RATES AND THE INTERNATIONAL MONETARY SYSTEM
Presented by
Dr Robert Mundell
University Professor of Economics
Columbia University
(1999 Nobel Prize in Economic Science)
In discussing commodity prices, one is dealing with commodity prices in currencies; so it may be expected that monetary variables are among the explanations of real change. International commodity prices are mostly expressed in dollars, for example, in the IMF International Financial Statistics, or in terms of indices based on dollar prices. Such commodity prices are obviously affected by inflation as well as real developments, and also by the value of the dollar exchange rate. There is a definite link between monetary policies, exchange rates and commodity prices, and this is the subject which I wish to discuss today.
Pricing in gold and dollars under fixed rates
Prices are relationships between two quantities, a quantity of the object for sale, and a quantity of a quid pro quo-usually money–offered for it. It may therefore be expected that changes in prices could reflect not only market-specific trends but also monetary development. In a world of inflation, for example, commodity prices would be rising, and in a world of deflation they would be falling. Both would be clear manifestations of monetary rather than real disturbances. There would not be a problem of "commodity prices," there would be a problem of monetary stability. To analyze significant trends in "commodity prices," therefore it is important first to isolate the monetary disturbances (if they are present) from the real disturbances.
Superimposed on general movements of world-wide inflation or deflation are influences of exchange rates. In our world of multiple currencies and flexible exchange rates, commodity prices might rise in one currency but fall in another. The statement of commodity prices in dollars could reveal either a problem concerning commodity prices or a problem of the dollar. This bring sup the question: in what currency or currencies should commodity prices be quoted?
In the post-war world, the dollar was by far the most important currency in the world and had been since World War I. It was natural to use it as the basic unit of account and the convertible dollar –the "1944 gold dollar"– was the anchor for exchange rates. Parities for currencies were expressed in weights of gold (the dollar was 1/35 of an ounce or .888671 grams of gold), but currency units and exchange rates were more normally expressed in terms of the more familiar gold dollar. As long as the dollar was exchangeable into gold at $35 an ounce, the dollar had the legal role and legitimate status as the international unit of account. It was natural also to use dollar quotations as the basis for the index of commodity prices.
All that changed with the international monetary system broke down in the early 1970s. The dollar was no longer convertible into gold, and foreign currencies were no longer convertible into the dollar. The dollar lost its judicial status as both monetary anchor and unit of account. Exchange rates became flexible. The IMF Board of Governors then officially scrapped the IMF constitution based on fixed exchange rates and officially accepted the a new regime of market-based "managed" flexible exchange rates. The idea was to let markets determine exchange rates. At the same time it was decided to rid gold of its "mystique," and to auction off at least part of IMF gold stocks as well as US Treasury holdings, and to introduce in its place as a numeraire the index of the value of a basket of a few major currencies that the Special Drawing Rights (SDR) had become.
What numeraire under flexible exchange rates?
Unfortunately, there was not at the time much understanding of how the new regime would work or of what would fulfil the functions formerly filled by gold and the dollar. Unlike the previous system, which had been built upon the experience of hundreds of years of monetary history, there was no precedent for the new regime of paper currencies connected by fluctuating exchange rates. In addition there had been little theoretical analysis of the problems likely to be encountered.
One of the problems related to the use of a unit of account. With all currencies on the same footing, international payments would be in chaos. At the most rudimentary level, how would exchange rates be quoted? With n currencies in the world there are ½ n (n-1) exchange rates. If n = 200 there are 9900 exchange rates! Flexible exchange rates in the absence of a numeraire in which to express currency prices would involve enormous confusion.
Fortunately, the market found the solution. Under flexible exchange rates the dollar was more rather than less important than before. Exchange rates were quoted mainly in dollars, the currency most frequently used in exchange markets and the main reserve asset (apart from gold) of central banks. If all currencies were quoted in dollars and perfect arbitrage could be relied on there would be "only" 199 independently flexible exchange rates.
The same solution was adopted in the statistical monthly, IMFIFS. There was no longer any legal basis for using the dollar as the numeraire for expressing exchange rates but it was the expedient solution. Dollar exchange rates gave some coherence to international monetary transactions. But it was far from a solution. The usefulness of a currency as numeraire depends partly on its stability. But was the dollar stable?
Impact of the dollar cycle
There would have been no problem if the dollar had been stable vis-à-vis other currencies. But in fact that has not been the case. Since the 1970s, the two most important currencies, besides the dollar, have been the German DM and the Japanese yen. The dollar has gyrated against other major currencies. Against the DM, for example, the dollar was DM 3.5 in 1975 and fell in half to DM 1.7 five years later, in 1980. Then the dollar doubled to DM 3.4 by early 1985, and then fell below DM 1.35 in August 1992, at the peak of the ERM crisis in Europe. Since that time the dollar has risen far above DM 2.0 This instability of the dollar/DM rate means that commodity prices in dollars and DM would be for much of the period moving in opposite directions. In a period when the commodities prices were rising in dollars, they might have been falling in DMs, and vice versa.
Yen-dollar fluctuations have been just as extreme. In the hey-day of Bretton Woods, the yen-dollar rate was fixed at 360 yen to the dollar. After the 1970s this rate became flexible. By 1985 the dollar was 250 yen. Ten year later, by April 1995, the dollar had fallen to 78 yen. In other words the yen had tripled in value against the dollar. This was the period in which the balance sheets of Japanese companies were undermined, and Japanese banks ended up with the non-performing loans that persist in trillions of dollars to this day. But from April 1995 to June 1998, the dollar soared from 78 yen to 148 yen, creating the setting for the Asian crisis. After 1948 the dollar fell to 105 yen but then rose again. During these fluctuations, dollar and yen prices frequently moved in opposite directions.
The instability of dollar-mark and dollar-yen exchange rates does not prove by itself that the dollar is unstable. The instability could equally be due to events in Germany or Japan or elsewhere. Yet there has been a distinct cycle of the dollar measured against other major currencies, and this means that quotations of commodity prices in dollars may give rise to grave misinterpretation.
The movement of the dollar with respect to the SDR was one way of measuring the stability of the dollar. Initially, the SDR was equivalent to 1/35 of an ounce of gold, i.e., a 1944 gold dollar, but its gold basis was stripped away in the later 1970s and it eventually became a basket of five major currencies including, besides the dollar, the yen, the mark, the pound and the franc. The weights were changed as seemed appropriate with changing circumstances. The value of this SDR basket in terms of the dollar was of course unity in 1970, when the first issue of SDRs were made. Then it rose to $1.32 in 1979 with the dollar's depreciation, fell to $0.98 in 1984 as the dollar soared in the early 1980s, then rose to $1.49 in 1995 with the weakening of the dollar and then fell to $1.24 at the end of 2001 as the dollar strengthened in the late 1990s. These fluctuations, it should be noted, have been extremely large, especially in proportion to differences in price levels and inflation rates.
Commodity price cycles
The question needs to be asked whether the cycle of the dollar against major currencies is related to the cycle of the dollar commodity prices. A casual reading of the statistics suggests that this relationship is quite close. Thus the index of non-oil dollar commodities tripled in the 1970s when the dollar was depreciating sharply relative to the SDR; it then fell by more than 20 per cent from 1980 to 1986 when the dollar was soaring; then it rose by 50 per cent from 1986 to 1995 when the dollar was again depreciating; and it has fallen by 30 per cent since 1995 when the dollar has been appreciating. There is therefore a very pronounced association of the cycle of the dollar against other major currencies (as measured by the SDR) with the cycle of dollar commodity prices.
This is of course not unexpected. It is natural that there would be a correlation of the prices of commodities in dollars with the price of currencies in dollar. Whenever US monetary policy is easy, as it was in the late 1970s and the late 1990s and early 1990s, the dollar depreciates against foreign currencies and commodities; and when it is tight, as in the early 1980s and the late 1990s, the dollar appreciates and dollar commodities prices decline.
It makes a great difference if commodity prices are quoted in dollars, euros or SDRs. The IMF world index which covers about 50-70 non-fuel commodities quoted every month in dollar terms, indicates that prices have fallen in the last 3 years. Starting in 1970, the index, with 1995 as one hundred, was 32.8 in 1970, and 57.0 in 1975, and 90.7 in 1980. From 1980 to 1986 it dropped from 90.7 to 67.8, and then rose to the peak of one hundred in 1995. Subsequently it fell to 70.2 at the end of 2001, a very precipitous 30 percent drop.
Broken down into major commodity groups, the index in 2001 for food was 76.5, beverages 47.2, agricultural raw materials 68.7, and metals 71.2, while that for fertilizers was quite different at 102.2. Another index, that of the World Bank for lower middle income countries' commodity exports stood at 62.4, with 1995 equal 100. All these numbers show that except for fertilizers which can be considered more of a manufactured product, all other commodity prices showed a very steep decline during the 1995-2001 period.
Let us look again at the dollar-SDR rate. From a parity of 100 in 1970 in the dollar-SDR rate, by 1975 the SDR price of the Dollar had fallen to 82.4 cents, and by 1980 had dropped further to 77 cents. Then it soared to 98 cents in 1986. Subsequently it fell to 66 cents and then it rose again, to 89 cents. With one exception in the 1970s, that cycle mirrors that of commodity prices fixed in dollars. When the dollar is weak then commodity prices rise.
From 1967 to 1981 commodity prices in dollar terms tripled, while the value of the dollar fell to one-third over that inflationary period. These were the years of the very strong oil prices that brought euro-dollars into the system, a big expansion of the euro-dollar market and inflationary prices in the United States, with two-digit inflation rates during 1979 to 1981.
Then from 1980 to 1985 a big fall occurred in commodity prices, with the index dropping from 90.7 to 67.8. That coincided almost exactly with the soaring value of the Dollar. The reversal of the policy mix under Ronald Regan included sweeping tax cuts. Marginal tax rates were cut from 70 percent at the federal level to 28 percent for the highest income tax brackets. Corporate taxes were cut from 48 percent to 34 percent and capital gains taxes were also reduced over that period. Big increases in government spending were combined with a tightening of Federal Reserve monetary policy. There was a sharp fall of the price in gold, which dropped from 850 Dollars/ounce in February 1980 to 300 Dollars/ounce within something like two years. This was a period of big deflation or disinflation. The inflation rate in the United States fell from 13 percent in 1980 to 4 percent in 1986. And that period of disinflation was a period of very sharply falling commodity prices.
After 1985, there was another shift in United States policy, aimed at depreciating the US Dollar. The Dollar started to go down slowly against the Yen first, and subsequently the Yen soared following the drop in oil prices in 1985/86. Over that period, Dollar/SDR rate fell from 98 cents in 1986 to 66 cents in 1995, and commodity prices soared from an index value of 67.8 in 1986 to 100 in 1995. However, from 1995 onwards index of commodity prices fell to 70, while during the same period, the Dollar soared against the SDR, rising from 66 to 89.
Future of the euro and the dollar
What are the indications for the future? Many believe that the Dollar has reached its peak and that the future will see a much weaker Dollar and a stronger Euro as a result of many positive developments in the European economy. However one long-run force which might contribute to a weakness of the Euro would be the accession of countries, such as Poland, Romania and other countries of Central and Eastern Europe, which could raise the level of debt in the Euro zone.
On the other hand, the factors which might contribute to a weaker Dollar include a 400 billion Dollar current account deficit, or four percent of the country's 10 trillion Dollar GDP. And with the United States recovery, the trade deficit could rise to 600 billion Dollars, or 6 percent of GDP. Of course, there were deficits of 3.5 percent in the 1980s, but this was a time when the United States was still a net creditor. Now the United States has become the biggest debtor in the world to the extent of 25 percent of GDP; in other words, its international liabilities exceed by 2.5 trillion Dollars its international assets, and that amount is rising by 4-6 percent of GDP every year. At that high rate, the ratio will increase to 29 percent at the end of this year and 35 percent in the year following. Such a rate of increase in indebtedness cannot be sustained for long without giving rise to strong pessimistic views about the future of the Dollar. The only way in which this situation can be corrected is to reduce the United States current account deficit, and to do so would require the depreciation of the Dollar. A halting of lending to the United States would correct a good part of the deficit but probably not all of it, but when market sentiment starts to turn, there could be pressure for a very rapid downward trend in the value of the Dollar. The resultant portfolio shifts could be expected to cause a correction of commodity prices.
Productivity, the dollar cycle and commodity prices
The link between the commodity price cycle and the dollar cycle is apparent, but the underlying causes are not clear. Obviously, arbitrary exchange rate changes can lead to commodity price changes, and as I have said before dollar prices may not reflect truly trends in real commodity prices. Prices in SDR terms would be better, as would in some cases an index of gold prices. Using some other types of measures, the swings in commodity prices are much attenuated.
It should be pointed out that despite the weight of the United States economy in the world economy, there is not necessarily a direct causal relationship between the strength of the dollar in currency markets and commodity prices. It could be that the same factors that cause the dollar cycle also cause the commodity cycle. One of the factors, for example, which has caused the dollar cycle has been the IT revolution and the resultant very rapid increase in productivity in tradable goods, which meant that the real Dollar had to appreciate. With the United States inflation rate around 2.5-3 percent throughout the period, the appreciation of the real Dollar needed because of the "internet economy" was something like 5 percent, which was accompanied by deflation in all the countries that kept their currencies fixed to the Dollar such as Argentina, China, Hong Kong SAR, the Gulf States and Panama. Every one of those countries had deflation in this period, prime evidence that productivity effects were behind this strong Dollar.
The United States economy accounts for about 25 percent of the world economy measured at current exchange rates. So anything that affects the Dollar, the currency of that big economy, is certainly going to affect real events; and those factors that led to the Dollar weakening or strengthening can also lead to fluctuations of commodity prices. Thus, very strong productivity growth and the change in the real exchange rate, coupled with tightness on the part of the Federal Reserve to keep the consumer price index below 3 percent contributed to the slowdown in the United States and the global economy, and that would certainly be an important factor in depressing commodity prices.
However, looking for a single cause, is simplistic. For example, there are two kinds of mistakes that one can make in relating exchange rates to basic real commodity prices.
One is to say that exchange rates do not matter, while the other is to consider exchange rates as responsible for a whole series of different problems. In fact, in the short run they matter, while in the long run they do not matter very much. Therefore, it would be a good idea to have a reform of the international monetary system in order to avoid any possible link between exchange rates and commodity prices. Moreover, a restoration of a fixed exchange rate system would provide countries with a new rudder for monetary policy and would be a great step in the improvement of economic policy.
I want to conclude by emphasizing that the current international monetary arrangements are far from optimal. They do not constitute a system. If the Balkanized world were suddenly transformed into a centralized empire, its first act would be to create a common currency that would be acceptable everywhere, with a great improvement in potential welfare. In the absence of a hegemonic empire, monetary efficiency depends on cooperation which in turn requires a world at peace that can be enforced. The end of the Cold War opened up a new era of globalization and the emergence of a global economy. As Paul Volcker has said, a global economy needs a global currency.
Is what CME did to silver margin requirements manipulation?
Survey Results Posted May 16, 2011
Do this quick survey, I wanted to see other Traders view on this is. If you want to comment on it send us you're comment in blog & we'll post any interesting ones. Click here to take our Online Survey
Was a friend's house yesterday , he doesn't trade much but asked me an interesting question on the stock market .He said isn't what Bernanke has done with QE1 and QE2 & what the CME did with silver margin changes, Manipulating the markets & the price of silver ? – I had to agree with him , then he said " if anyone else had done that would they not be investigated by the SEC ?" He was actually quite funny in saying that since CME & Bernanke don't really have to answer to anyone for any "manipulation" that they may have caused that they are like a type of "mafia" with no repercussions on anything that they do ( good or bad).. Although that may be stretching it a bit , he did have a few valid points about manipulation and if that had been an individual or firm that caused those dramatic moves then someone would be held accountable (unless they are Goldman Sachs ($GS) . Guess since only speculators got hurt on that silver drop then its not so bad , is it?
I guess we will never know what would have happened to markets if Qe1 & Qe2 were not introduced. Would we have had a total market collapse and/or major banking crisis ( as many have suggested)?
We are always telling the world about the North American "free market system" but we've seen how easily it is to change that when it doesn't work out.
We've seen it recently with the Housing industry, Auto Industry, Airline Industry, Interests Rates and now Silver. I'm glad I've done well trading the markets due to this volatility we've had but when the government can see how easily they can correct a commodity going up on speculation ( like silver) should they apply it to oil or other commodities? I'm sure most people would like to see oil prices down and gas prices lower so is the easy fix just to do a continued fast round of increases in margin requirements or should the market ( supply & demand ) still determine a fair price on oil or any other commodity? Oil has been trading pretty crazy lately with the Middle East problems , US $ moves so we've relied less on supply/demand anyway. But maybe no one would be too upset (except for the Saudis , OPEC and the oil producing countries ) if oil was manipulated down. I still have faith that "supply & demand" will eventually be the determining price factor on these commodities but amazing to see how the CME was able to correct that monster Silver run with a few strokes of the pen.
Do this quick survey, I wanted to see other Traders view on this is. If you want to comment on it send us you're comment in blog & we'll post any interesting ones.
Click here to take our Online Survey
I'll post results to this survey later today on here
Stockguy22
Made $8,294.65 Profit the past Week on Silver & Oil Moves
Made $8,294.65 Profit the past week on Silver & Oil Moves ( & I wasn't even the big winner of the group)
Biggest question a lot of traders had last week was "Why did Silver drop so much in 1 week" .
Many posts on Twitter on silver & oil the past week and 1/2 but how many traders actually made some money from those moves? We were on top of the moves and traders in our group traded oil & silver in different ways but using similar chart reading skills.
We were lucky in chat to having played $ZSL and $SLV put options ( @mmassassin probably played it best with his short play on Silver on Friday April 29th ) you can see his post here We had been talking that week of possible silver topping into $47-$50 areas. Some in the chat had $ZSL some had $SLV options plays & some traded #silver futures ( $Si_F) – Worked out well into the next week as we saw Silver drop from $49.52 to $34.39
@MMassassin on one batch he closed out Friday May 6 th made over 1,100% profit but had other 100%+ gainers as he locked up profits on weekly silver options. Amazing trading & works out for him as he was away this past week on holiday ( big congrats MM)
@stockguy22 I made a monster recovery on $ZSL , although I was too early to trade it but made another play a long on Friday May 5th on $SLV that I closed out on the Monday May 9th for just under 6% profit along with #oil long $UCO for another 6% profit — Was great couple of weeks on just silver and gold plays ( $ZSL $SLV $SCO $UCO I made $8,294.65 profit with nice %s from Thurs May 5th to Monday May 9th ) I was most pleased with the ZSL recovery which I would have taken a big loss if we popped Silver $50 and dropped ZSL $10 that would have been my line in the sand on ZSL maximum loss.. Worked out a bit lucky but we had some great analysis in the chat during this time.
@CaptKirk has made amazing long/short plays just playing the futures & provided great commentary – I actually think he called the top on Silver in the chat the week before by saying we had topped into that $47-$49 level ( He said " Stockguy22 i think u are going to recover on u're $ZSL since i'm joining you short on #silver today ") That was Thurs April 28th.
Another trader in our chat followed the long silver play by trading Canadian ETF HZU.to for a silver bounce from last week and locked up over 10% profit into this past Monday. by end of day was up over 13% on remainder.
So why did silver ($SI_F) drop ( or crash down so much ) recently ?
1) the major reason was the change in margin requirements by the CME – The CME Group tightened restrictions for speculative trading on Silver trades by making traders put up additional cash to hold the same positions.
2) over 70% of commodity trading is being done by speculators – 10 years ago was only 30% ( so on the chart below before major crashes like the March 2000 .com bubble you had many "speculators" (me included) playing .com names – I think this had a factor in the recent silver drop too. We have been talking in the chatroom if the CME will get pressure to apply what they did with Silver margins to do that to Oil ($CL_F ) they've done a few but it is an easy way for them to push down the price of commodities. May be more difficult on #oil since so many other factors involved like supply/demand , US $ , OPEC etc. but we'll see going forward if we hold this $100 level , pop to recent highs of $114+ or drop into the $80 -$90 levels again.
3) US $ ( US dollar ) moves have an effect on it as well
4) Osama Bin Laden getting killed? – well it did coincide with that evening of Sunday March 1st just before news broke of the US Forces killing him but then partially came up that evening.
5) Volume activity – Prior to the drop we had noticed major volume increase in $SLV $AGQ and $ZSL silver ETF's prior to the monster drop of the week of May 1st & 2nd ( i've posted some charts in the chatroom to show that & one of the reasons I still kept & added to my ZSL )
Will Silver recover from recent huge drop ? -
We had made a good bounce play on silver from Thurs May 5th to May 9th but i'm currenly out of Silver plays– If we bottom out this week I may try another bounce play but with tight stops in case silver drops back towards $30-$34 — but watching today's recent drop to $35 as its providing a good risk/reward long play – Join us in the chat to see when the next time we play #oil or #silver
We had people in the chat making for more on this silver drop & bounce then I did but I loved the analysis shared by different traders in our chat as the moves were occuring ( prior & from the current Silver levels) – You could have traded Silver Futures, $SLV options, $ZSL $AGQ $HZU.to $HZD.to — We had used these same techniques on trading the recent oil volatility by trading $UCO $SCO $USO $HOD.to or HOU.to so you don't have to just play Oil Futures and the ETFs have provided another good vehicle to play these commodity moves.
If you want to join us in the chatroom for a 2 week Free Trial CLICK HERE & see what learn from our group of excellent traders. One nice trade like this & can pay for the membership many times over " One of the newer members made enough on the most recent $UCO trade to pay for an entire year's membership with change to spare.
Thought to share this chart on Markets – Capt shared the first chart & I was saying you can apply that chart to the recent silver run & crash if you change the public name to "speculators" - Only thing the chart does not show is how silver had gone up nicely like a escalator but down like an elevator so quickly in 1 week.
Double click any of the charts to see them bigger
If you were a member of @stockguy22 then these are the privateFeed posts & charts you would have received on the past oil & silver moves _ Live buys when i enter/exit & charts with notes as per each trade. Again if you want to join us test us out for a 2 week Free Trial click here and check through our past charts/ trades so you can see if its worth it. I think you will find the information very valuable and should provide you with some great profits. You can also see a chart on ZSL where i was a bit soon calling the top on Silver but i started to notice the huge spike in volume on ZSL
check the live trades on our stockguy22feed ( private feed for members only)
Gathering perspective after a blow off in Silver
As an intraday day futures trader, I try not to give much weight to longer term charts, because price will tell me whether to be long or short intraday. I don't really care where the market goes, just as long as there is volatility along the way.
But every now and then I still look at the daily charts, just to get a bit of longer term perspective back. It's good to be aware of any important support and resistance that could create intraday reversals or breakouts.
I don't know about you, but the sell off/blow off top/correction in silver and oil had me occupied most of the week. When I looked at the daily charts of the indices, it felt like we should be a lot lower than we are. The truth is the market has held up very well, and it doesn't seem like the uptrend has been broken.
The daily charts below are using the same indicators that I trade intraday futures with, they are trend and momentum based. Occasionally there are whipsaws and each futures instrument tends to have its own setings, these daily charts are using the defaults. I was impressed about how well they caught many of the trends on longer timeframes.
If you want to check out the complete watchlist or any of the past watchlists, simply sign up for a 2 week free trial.
This week the community did very well, not only in the futures, but using the weekly options to find a nice pin on SLV. One of the best things about this community is we have no ego to overcome, everyone is interested in making good trades and offering a helping chart or analysis when its needed. There is no chest pounding.
My personal thanks to jgwilson929, for MPEL and SLV premium sells.
Here are just a few of the stocks that were mentioned by our community members.
All That Glitters
You might hear some traders talk about the historical gold to silver ratio. These charts hint that there may be more correction in silver to come, or perhaps a rise in gold.
Pigs get slaughtered, and there were and probably are still lot of pigs in silver.
Silver Correction – Gold is hanging tough
Bottom line is silver looks like a penny stock chart, it got out of hand, people got hurt.
Silver may have found support, there are definately some key levels to watch below with $40 being resistance.
Gold corrected as well, but nothing more than what the indices look like.
The next few weeks will determine if we bounce at support and grind higher throughout the summer or not. Either way, it doesn't much concern me, just give me a decent intraday range along the way.
The SPY, IWM, DIA, QQQ
S&P 500 ETF (SPY) looks fine – uptrend intact and finding support at 133 (1330 /ES).
The Russel 2000 ETF (IWM) is a bit weaker, but the uptrend has no been violated.
NASDAQ (QQQ) is strong – tech is something to watch for a breakout.
Dow Jones ETF (DIA) looks well withing its uptrend channel.
Partial Watchlist
Here are just some interesting charts from my basket of stocks. Before trading futures I used to trade a small basket of about 20 stocks. I would rotate the ones that were going 'flat' out with whatever stocks were the flavor of the week.
While doing the watchlist for this week, I thought I would put up a post with some charts. I left my momentum indicators (candle colors) as well as the GMMA on the daily charts.
AAPL AMZN BAC BIDU DAN DELL GEOY GNW GOOG GPK IO JNPR KFN KLIC LUV MCHP MON MPEL MS NFLX NVE POT SBH SOHU
-
- S&P 500 ETF (SPY) looks fine - uptrend intact and finding support at 133 (1330 /ES)
Great Chart Comparison on US$ & $SPX
CaptKirk from our chatroom posted this comparison chart in our Community Charts Section
showing the comparison of US $ and $SPX –
If Bernanke actually thinks the policies will give a stronger US $ then this chart is as clear as it can get.. IS QE2 Working to give us that strong US Dollar?
Double click on the chart to make it full screen if you want to see it bigger.
Stockguy22
Today Oil hits over $110 & what oil ETF’s to trade ( 2x Horizon Beta & Ultrapro)
Thought to do some charts on oil today as it broke over that key $110 level and what oil ETF's I've traded in the past.
I get this question a lot "what oil ETF are good to trade if you think oil will go up or down? I've traded Horizon Beta ETFs HOU.to & HOD.to as well as Proshares Ultra $UCO & $SCO which provide approx. the same percentage moves although the prices are much different. What I like about UCO & SCO are the ability to trade them in premarket or afterhours which you don't have that on HOU.to and HOD.to ( also known as HOU-tc or HOD-tc which trade on the Toronto Stock exchange).
I've had great success playing HOD.to HOu.to ( canadian oil 2x bear & bull ETFs) This time on this last oil spike played $SCO bear ETF since i thought we were topping into $108+ oil last Friday-Tuesday -You can see the top on the charts below – I've posted charts below on $CL_F ( oil futures ) or also known as $CLK1 which is the May 2011 futures price – sometimes you will also see it as CLK11.nym on yahoo finance – The June 2011 oil futues are CLM1 , July CLN1 , Aug CLQ1 , Sept CLU1 etc. etc.
I did 6 charts below the 1st 2 charts show the price of oil today on a 5min chart as well as on a daily chart so you can see the trend.
The following 2 charts show some 2x ETF's for oil that are the Bear ones ( so when you think oil will drop back these are the one)
The last 2 charts show 2 x Oil Bull ETFs ( so when you think oil will go up as it did today you can play either HOU.to or UCO) – another ETF bull is USO but doesn't move as fast as these 2x ones so if you prefer safer slower moves then USO is the one for you. I know some traders that trade the underlying options on USO to get a bigger percentage move. (calls & or puts)
Reminder: double click on the charts to make them bigger or right click and open them in another window or tab
Hope you found these ETFs & charts helpful
Stockguy22
What is Quadruple Witching?
What is Quadruple Witching? When is Quadruple Witching? and what does it mean?
Has nothing to do with 4 witches or Halloween –correction prior to 2002 Triple Witching did refer to the 3 witches in Shakespeare's "Macbeth". Could also be that most option/futures traders look a bit like witches but that's as far the definition goes..lol But what is it exactly and why should you be aware of those dates as a trader? Also when did that 4th witch join the Friday party?
When is Quadruple Witching ?
Today Friday March 18, 2011 is Quadruple Witching and it occurs the day when Contracts for Stock options, Single Stock Futures, stock index options and stock index futures all expire: (There are 4 different expirations that is why its called Quadruple)
If you have been in the market for a while you will have heard the term Triple Witching Friday which was used prior to 2002 before single stock futures contracts were added ( single stock futures can be considered our 4th witch and that's why the term Quadruple is used representing the 4 different expirations)
Is Quadruple Witching every month ? the answer is NO !
It happens on the third (3rd) Friday of the following months ( March, June, September and December) –
How or Why does Quadruple Witching Affect the Stock Markets or Trading on those Fridays ?
Quadruple Witching is also known as Quad Witching and can have some volatility on the markets on that Friday since money is being moved around and its one of the most volatile and heavy traded sessions. Some swing and longer term traders don't like to trade on days like today but some scalpers and daytraders love the volatility a day like Triple/Quadruple Witching provides. Traders are unwinding options & futures and either rebuying or selling their positions so that's why we see a bit more volatility.
What does it mean when I hear Pinning a Stock ?
Pinning a stock means the stock closes at or near a strike price where the majority of the option activity is. For example: today (Fri. March 18, 2011 ) what stocks were pinned at key expiry levels today?
1) AAPL pinned near $330 ( closed @ $330.67 ) most of the calls/puts with a March expiry were at $330
2) CRM pinned @ 120 ( closed @ $120.01)
3) others : PCLN $450 ( closed $449.53) , GOOG $560 ( 561.06 ) HGSi 27 ( $27.01) NFLX $210 ( 209.40 ) , & AKAM TSLA YHOO RIMM were also close but if you look you can find many more
You can see above how many were so close to the key prices.
If you want to learn more about Pinning – @optionsizzle - (Josh) from http://optionsizzle.com did a video post on option pinning a few months ago that might help out those that don't understand or want more detailed info. http://bit.ly/f2eaC1 You can also find alot of great info on options at his site:
The 4 stock/index options & futures expirations (4 witches) in more detail below :
What are stock options ?
a stock options is a contract betwen a buyer and seller that gives the buyer of the option the right , but not the obligation , to buy or sell a specific asset on or before expiration at agreed price ( Strike Price) So for example March $330 calls for $AAPL or March $340 puts for Apple would fall into this category. So keep in mind that some option traders take on the stock so causes buys or sells that wold normally not be there on a normal day. That's what causes volatility or sometimes you may get a term called pinning the stock –" Looks like they may pin AAPL stock at $330 today "
What are single stock futures or SSF's ? (this is the 4th witch that joined the other 3 in 2002 )
Single stock futures are futures markets (they trade like futures) but are based on an individual stock They are available monthly or quarterly and are worth 100 shares of the individual stock. Advantages of these are lower commissions, no daytrading restrictions and lower margin. The disadvantages are that they are not as heavily traded and relatively new ( been trading in the US only since 2002)
What are stock index options?
These are options tied to the broad indeces or indexes like the S&P 500 index or the Russell 2000 Index or could be tied to a particular industry sector like : semi-conductor or health industry
What are stock index futures ?
Stock Index futures are the futures markets but based on a stock index like the FSTE 100 (footsie – 100 of the most capatalized UK stocks) or the DOW JONES (30 of the top blue-chip stocks on the NYSE) They can also be for the European indexes (DAX-Deutcshe Boerse , CAC40-Euronext Paris, and Asian indexes (HSI- Hang Seng -Hong Kong Exchanges , SPi – Sydney Futures Exchange)
Other US index Futures you may have heard of are ES or $ES_F ( The Eminis S & P 500 index future ( CME- Chicago Mercantile Exchange) or TF or $TF_F ( Russell 2000 index futures)
Hope you found this helpful and have a great weekend,
Stockguy22
What is Quadruple witching? What is Triple Witching? When is Quadruple Witching? When is Triple Witching? hope that answered your questions and didn't confuse you too much. You may have to read it over a few times.
Why have a Trading Mentor?
Why have a Trading Mentor?
When we first started the STOCKGUY22.com website & chatroom we had 3 goals of
1 ) Live Trading 2) Education & 3 ) Mentoring
From member reviews we've done a great job at 1) & 2) so now we are starting our 3) Mentoring
Here's how it will work……..
Commit to joining Stockguy22 for 6 months to 1 year and get up to 4 hours of Free Mentoring with Stockguy22 and team
If you've always wanted to learn in a 1 on 1 environment from experienced traders then this is your opportunity.
It will be a limited offer and has not been offered before :
SOME of the Mentors that you can choose from
@optionsizzle – options expert
@mmassassin – weekly options expert
@stockdarts – chart & market analysis
@jstanford649 – futures setups & ninja trader
@jgwilson929 – options hedging and earnings plays
@alexpmorris – chart expert, created tymoraPRO platform
If other Mentors are added you will be notified. You can also split up the 2 hours between different mentors in 1 hour blocks. Example: take 2 hours with @stockguy22, 1 hour with @optionsizzle & 1 hour with @jgwilson929
If you have any special requests or would like to make other payment arrangements such as: check or money order or if you recently joined stockguy22.com or are on a month to month member then you have the opportunity to upgrade to this Mentoring package just email us at admin@stockguy22.com or send us your phone # and we will contact you over the phone or skype.
If you are a current 6 or 12 month member then send frank a direct email at frank@stockguy22.com to put you on a list for mentoring for existing members ( a may take on a few of these people for free so send your email early since will be first come first serve )
First come , First Serve for mentoring hours. Preference of available times will be given in order that you signed up.
I look forward to having a positive impact on your trading. You can sign up directly HERE
Stockguy22
get Trading Mentoring from a succesful trader. We think this limited offer will be the Best Trade Mentoring on the internet since its not from teachers but actual traders so if you've ever wanted to get guidance from experienced traders or have a trading mentor or stock trading mentoring, this is your opportunity.
Saturday Chart & Chat Session w/ stockguy22
February 19th 2011 : Saturday Chart & Chat Session w/ stockguy22
Join stockguy22 as he reviews charts and potential trades for the week. Bring your charts and questions to this free session.
Register: http://gotowebinar.com/186767761
Weekend Update for Monday 2/14/2011 – Target is All Time Highs
Friday was a buy day, and the markets were determined to make new highs and hold them. The crisis in Egypt seems to have been averted for now, and the bulls are back in control.
If you were with us in the Virtual Trading Floor, you know that I tried to fade the run up all day. I ended the day with the nice loss on /TF and a sore finger from vigoriously clicking sell on my DOM. I was determined to tell the market what it should do and not do what the market was telling me.
I wrote a post a week or so about listening to the market and detailed how i was rewarded for bad trading. I was not rewarded Friday. Every dip is bought. Eventually the market will be there to humble the dip buyers, but until then it is business as usual.
Reading the Tape
The moment we broke the previous days highs on volume, that was the markets telling you to get long. That rally lasted through lunch and the close and would have netted me over 10+ points on /TF. Coulda. Shoulda. Woulda. And late to the party.
Several times sellers tried to defend by putting what was 8-10 time the normal offer on /TF, and each time the bid pressed into the offer and we went higher. But I was bound and determined I was going to make a short work., instead of just buying and sitting tight.
So while price action, trend, and volume where saying buy, I just ignored them. I was trying to outsmart the market and was ripped and bloodied with the rest of the shorts.
Weakness in Commodities
On the positive side, I pulled off a nice short on /SI (Silver) and covered my losses on /TF. The one time that day just did what the charts were telling me to do. I will assume that it was the resignation of Mubarak that made everyone leave the safety of metals and run to equities.
I hate having wash days, probably more than having loss days. It means I have nothing to show for a full day of trading, not even a scar to brag about. The only guy that made money was my broker.
New week and new trades ahead. No worries, what's done is done.
The Friday Chart
Here is the chart of /TF i looked at all day. Completely ignored the nonstop buy signals. Prefect trend and a perfect GMMA Ribbon.
Weekend Charts
Most of the charts still look to be in good shape. I think we see a down day this week as breadth has really been bullish 10 or so days, should be some profit taking.
You may notice that I have skipped DOW and Nasdaq daily charts. You are better off looking at CAT, IBM, and AAPL, they account for so much of the indices per weight. So I will stick to weekly charts and avoid the prices affected by the next Steve Jobs rumor et all.
Before looking that the Indices and Commodities, I want to show you 3 charts I think are telling. The VIX with potential to head below 15. And the SOX which has clearly been on a tear to the upside. Very much bullish cases, whethre a correction looms is anyone's guess. Finally, the XLF is looking ready to breakout.
VIX - lower and lower
SOX - Semiconductors
XLF - potential breakout for the finanacials
Daily
Weekly
/ES S&P 500 emini
Daily – some extension but I thnk the we test 1350 first
Weekly
/YM - DJIA – weekly
/NQ - Nasdaq – weekly
/TF Russell 2000 – clearly a break out and a test of support
IWM – Russell ETF
Daily
Weekly
Commodities
/GC Gold – seems to have trend supported
/SI Silver – seems to have supported at $26 – secondary trend
/CL Crude – in a channel on the weekly – wonder ing if we test $80-82 per barrel
Daily
Weekly – you can see the channel on the weekly
/ZC – Corn – doritos are going up in price
/ZW – Wheat – bullish for price – bad for anyone who eats
/ZB – Treasuries – bak to trend with rates rising – more QE to push them up – will watch closely at this juncture
/6E Euro – ready to make a moved down as USD rallies ?
/FDAX – Germany – a couple different potential trends – still bullish I think
Gallery of all charts below.
Weekend Update for Monday, 2/7/2011
Being an intra-day trader, I don't look at the longer timeframe charts more than once or twice a week. I find that while its good to analyze and know where you stand, it can intefere with your attitude and bias.
Its important as a day trader to not have a bias, to play what the price gives you, and make every trade a blank slate. Keep that in mind when you are looking at long term charts.
Not much to talk about this week. Monday and Tuesday saw some good action. Wednesday, Thursday, and Friday were range bound chop days.
You can see from the /TFH1 (Russell 2000 Futures), also playable using the IWM ETF that we have gone essentially nowhere in the general market since making a high of 810. What is interesting to note is that every dip has been bought very fast, money is flowing into the market and making it very hard to swing any short positions.
While the small caps (/TFH1) are in a range, the /ESH1 (S&P 500 emini Futures) seem to have broken out. The 1320 target is on the table for the S&P 500.
I hesistate to mention the Nasdaq or the DOW, because AAPL, CAT, and IBM have so much influence. However, they look the same as the S&P, targets are into resistance, with upside bias.
I also added the USD and the Euro for good measure. Though the markets haven't been playing exactly to the tune of the currencies, I think you can make an assumption as to why. Both are at decision points. Does the USD rally, and the Euro fall ? Does it take the markets with it? Or can we continue to rally based on fundamentals and growth?
The Fed will take the training wheels off slowly, this week one of the governors said they would consider more QE if needed. Are we addicted to free money?
Some of the commodities are in correction mode. Gold (/GC) and Silver (/SI) had rough weeks as investors and trader sold them then ran back to the security of bullion with incertainty in Egypt.
Wheat (/ZW) ended weaker after testing all time highs. Corn (/ZC) and Coffee (/KC) both broke all time highs. Food is going to get more expensive in the future.
Nymex Crude (/CL) had some of the tightest days I have seen in a while. It found resistance at $92 several times and had a early Friday sell off on news that the Egyptian president will step down. (We think.) Stockguy22 and members of the room played oil both long and short in the room for roughly 5-8% gains each time using ETF's.
Click the chart to open the imade in a new window. This /TF 60 min chart for the last 30 days says it all. Traders market.
And incase you didn't believe that last 3 days were a wash. Here is a /TF 15 min chart.
S&P 500 Emini 60 min 30 days
Nasdaq (/NQ) 60 min 30 days
The USD (/DX)
The Euro (/6E)
After Hours Report for February 01, 2011
Update on my swings (+$828):
S&P 500 Index (.SPX) 1,307.59 +21.47
CBOE Volatility Index (.VIX) 17.63 -1.9
DJIA 12,040.16 +148.23
NASDAQ 2,751.19 +51.11
Stocks staged an impressive rally on Wall Street Tuesday. The table was set for early gains following a round of mostly earnings news from companies including Pfizer (PFE), Baidu.com (BIDU), and Archer Daniels Midland (ADM). The rally gathered additional momentum in morning trading after the ISM Manufacturing Index showed improvement to 60.8 in January, from 58.5 in December and significantly better from what economists had expected (58.4). The domestic news seemed sufficient enough to take the focus off of problems in Egypt and other parts of the Arab World. The Dow Jones Industrial Average added 148 points and closed above 12,000 for the first time since July 2008. The tech-heavy NASDAQ gained 51.
Bullish Flow
Amphenol (APH), a Wallingford, CT electronics maker, touched a new 52-week high Tuesday and finished the day up $1.55 to $56.89. Options volume surged to 10X the recent average daily levels. 6,400 calls and 340 puts traded in Amphenol today. February 55 calls, which are now $1.89 in-the-money, were the most actives. 4,415 traded. February 60 calls saw heavy trading as well. It’s not clear what was driving the trading, but it seemed bullish because most of the volume (about 80 percent) was trading at the asking price. Shares have performed well lately and got a boost last week when the company announced a stock repurchase program. Shares are now up $4, or 7.6 percent, since earnings were reported on January 19.
Bullish trading was also seen in Tibco Software (TIBX), American Eagle (AEO), and Hovnanian (HOV).
Bearish Flow
Cavium Networks (CAVM) shares rallied $3.41 to $42.95 on earnings Tuesday and are now up almost 90 percent since late-August. Some investors might be looking to protect recent gains, as the March 40 – 45 put spread saw increasing interest today. The top trade was 1,000 at $2.10. In this spread, the investor apparently bought 1,000 March 45 puts at $2.80 and sold 1,000 March 40 puts at 70 cents. The spread, for a net debit of $2.10, offers a potential $2.90 pay-off (excluding commissions) if shares dip back below $40 through the March expiration. It traded 3000X on the session.
Bearish flow also surfaced in Riverbed Technologies (RVBD), Pulte Homes (PHM), and SM Energy (SM).
Index Trading
Trading in the index market included 711,000 calls and 619,000 puts, which is about 1.2X the recent average daily, according to Trade-Alert data. The CBOE Volatility Index (.VIX), which rallied nearly 4 points Friday, lost 1.90 to 17.63. The decline in the VIX comes as the S&P 500 rallied 21.5 points and closed at its best levels since the summer of 2008. Meanwhile, in VIX options action, 283,000 calls and 119,000 puts traded. While some investors were likely entering bullish trades on the weakness in the VIX today, others were likely opening new positions in anticipation of higher volatility in the weeks ahead.
ETF Trading
After a two-day 7.4 percent run higher, the US Oil Fund (USO) lost 54 cents to $38.07 Tuesday. A noteworthy options trade was a bullish “risk-reversal” in morning action. The strategist sold a block of 5,000 January 35 puts at $2.85 and bought 5,000 January 45 calls at $2.15. They collected 70 cents on the combination. It traded more than 20,000X total and appears to be a bullish play on oil through 2012. USO is an exchange-traded fund that tracks crude oil through futures contracts. By selling $35 puts (to buy the $45 calls), the strategist is taking a bullish position calls and also saying that they are willing to buy (have put) USO shares at $35 through the January 2012 expiration.
Market Updates – 1/31/2011
I added the follow swing positions: AMD GFRE LUV MGM MPEL NLY (thanks alphaloft) SOL UNG URRE URZ
And one penny stock: HAFC
Airline (LUV) stock was probably not a good buy considering oil is rocketing higher on Egypt concerns and possbily Syria now.
HAFC was mentioned in the stokguy22 chat, first profit in 2 years. It's high risk, so please due your own DD. I am prepared to lose 100%.
US MARKETS
NYSE up 93.65 (+0.9%) to 8,136.29
DJIA up 68.23 (+0.6%) to 11,892
S&P 500 up 9.78 (+0.8%) to 1,286
Nasdaq up 13.19 (+0.5%) to 2,700
GLOBAL SENTIMENT
Hang Seng down 0.72%
Nikkei down 1.18%
FTSE down 0.31%
UPSIDE MOVERS
MEE sold for $69.33 per share.
SLAB upgraded.
XOM beats with earnings.
DEPO jumps on drug approval.
ICO gains on deal speculation.
DOWNSIDE MOVERS
HD upgraded.
ANR buying Massey.
CVS downgraded.
BGP to protect liquidity by delaying payments.
LOW downgraded.
Market action is orderly on the last trading day of January 2011. The underlying tone remains cautious after stocks sank Friday on fears about mounting political unrest in Egypt and after economic data released early Monday showed personal spending up .7 percent in December, which was .1 percent better-than-expected. Incomes rose .5 percent and below expectations (of .5 percent).
However, after a 178-point slide Friday, the Dow Jones Industrial Average opened steady and saw morning strength after separate data showed the Chicago Purchasing Managers Index, a gauge of regional manufacturing activity, up to 68.6 in January, from 66.8 the month before and much better than the 65 reading that economists had predicted.
Meanwhile, a merger was announced after Alpha Natural Resources (ANR) made a bid for rival coal producer Massey Energy (MEE). Exxon Mobile (XOM) gained 1.9 percent and is the second best gainer in the Dow (behind Alcoa) after reporting earnings that topped Street expectations. The industrial average has added 60 points.
The tech-heavy NASDAQ gained 18. After closing above 20 for the first time since early December on Friday, the CBOE Volatility Index (.VIX) gave back .64 to 19.40. Options action is much slower than Friday, with 3.6 million calls and 3.5 puts traded through 12:00pm ET.
Bullish Flow
Cisco Systems (CSCO) is seeing some action. Shares are up .9 percent to $21.12 and one of twenty Dow stocks moving higher through midday Monday. Meanwhile, options volume in the networking giant includes 53,000 calls and 49,000 puts. February 22 calls are the most actives. 16,500 have changed hands and, with 68 percent trading at the asking price, it appears that call buyers are dominating the action. February 19 puts are seeing interest as well and implied volatility in CSCO is down 3 percent to 28. The increased options activity might be in anticipation of Cisco's earnings, which are due out next Wednesday, February 9, after market.
NPS Pharmaceuticals (NPS) shares touched a new 52-week high and are up $2.23 to $9.84 following favorable Phase 3 data for Gattex, an intestinal drug. Shares are higher and options volume is 5X the average daily, with 14,000 calls and 3,770 puts traded. May 9 calls, which have traded more than 5,000x, are the most actives. Feb 7.5 calls, May 10 calls and Feb 7.5 puts are seeing active trading as well.
Bearish Flow
Excel Maritime (EXM), a Greek bulk cargo shipping company, is trading down 3 cents to $4.64 and options volume is 5X the average daily, driven by put buying. 4,230 traded, which compares to call volume of 250 contracts. The focus is on the March 4 puts. 3,730 changed hands and 84 percent hit at the asking price, which indicates that buyers are initiating trades and dominating the action. It might be a play on earnings, which are expected around February 23.
The biggest options trades so far today are in the Financials Select Sector ETF (XLF). Shares are up 18 cents to $16.43 and, despite a volatile session Friday, are set to close the month of January with a 2.5 percent gain. Meanwhile, the top trades of the day are block of 50,000 March 15 puts at 16 cents and a separate block of 50,000 April 15 puts at 23 cents. These massive blocks of puts were part of 2X1 put ratio spreads, in which the investor was also selling 25,000 March 16 puts at 38 cents and 25,000 April 16 puts. The spreads might be closing or liquidating trades on diminishing fear about future volatility in the financials.
Implied Volatility Movers
ARM Holdings (ARMH), a British Semiconductor maker, implied volatility is moving higher ahead of earnings. Shares are up 16 cents to $24.94 and options volume includes 11,000 calls and 1,925 puts. February 26 calls are the most actives, with 2,600 traded. Feb 25, 27 and 28 call options are actively traded. Implied volatility rose 6 percent to 58 ahead of the results, due Tuesday before market
US Oil Fund (USO) options volume is running 2.5X the average daily, with 199,000 contracts traded and call volume accounting for 79 percent of the volume, according to data from WhatsTrading.com.
Massey Energy (MEE) options volume is 3.5X the average daily, with 85,000 contracts traded and call volume representing for 65 percent of the activity.
Alpha Natural Resources (ANR) options volume is running 5.5X the average daily, with 57,000 contracts traded and call volume accounting for 71 percent of the activity.
Increasing options activity is also being seen in JC Penney (JCP), Pepsico (PEP), and ARM Holdings (ARMH).
Weekend Update 1/30/2011
This weekend update is going to be primarily chart driven due to the action in the market this week. Charts for the major indicies as well as a selection of the futures and ETF's. Click the chart to open a large version in a new tab / new window.
There is a gallery of all the charts that you can flip through on the bottom of the post. I also added a few throughout, like Wheat and Oil.
As for the market, it was a hard week for anyone taking swing positions. I imagine profits were given only to those who took them quickly and methodically. For myself, weeks like these are great for the intraday action as long as you forgot what you think and follow the chart. My average time in the market was about 30 mins, skewed a bit by Friday, where I pretty much held some amount of /TF (Russell 2000 E-mini) all day to the short side.
If you missed it Friday afternoon, @stockdarts posted a great wrap up of the week. http://bit.ly/hjJ01R
Wrap Up and Charts
Stock futures closed near session lows as the S&P 500 suffered its biggest one day loss in six months. Stock prices slid across the world as Egyptian President Hosni Mubarak imposed curfew on the cities of Cairo, Suez, and Alexandria after a day of clashes between police and protesters demanding the end of his regime, according to Egyptian state television.
The protests in Egypt from many political and student factions raised concerns the government was losing control, which would lead to instability in the oil rich region. Protests there led to violence including the takeover of many local police stations there by the protesters. By nightfall Friday, martial law and a curfew were imposed by the Egyptian government and Army.
As of Friday, 207 of the S&P 500 companies had reported, representing 56% of the index’s total market capitalization, with the upside surprise ratio standing at 71% versus 70.4% the prior week, according to Charles Blood Jr., senior financial markets analyst at Brown Brothers Harriman & Co.
The market will a watchful eye on the events unfolding in Egypt and the Middle East on Sunday night’s trade and into Monday morning, as this is the main story for now. Earnings results on Thursday and Friday were mixed at best and so too was the economic data with bearish jobs and slightly bearish GDP data.
On to the charts.
The sector list: XBD, BKX, BTK, DRG, GOX, IUX, XOI, ASK, RLX, SOX, UTY, $DJUSHB, $DJUSSW, $DJUSIT
Uptrends are still intact, some have more downside than others. I think a further correction is possible if the news coming from the middle east doesn't improve by Sunday night / Monday.
/TF Daily – some estimated correction targets on the small caps. Weekly candle isn't all that great, but its also news driven with Egypt.
770 – 5% | 730 – 10% | 670 – 17%
IWM
/ES Daily – 1250 is support
SPY
/NQ Daily - Didn't feel the need to do a QQQQ or a QLD, sorry AAPL is blah.
/YM Daily
DIA
Silver Futures
Play along with the SLV
Gold Futures
Play along with the GLD
Finally, a quick look at oil, on a daily basis we found support around $85, on a weekly chart at that 20 peroid moving average. Any supply disruptions in Egypt or the Middle East could easily rocket is to above $90 a barrel.
Pay attention to the charts of /HO and /RB at the end of the post. They are at or near some critical levels.
/CL Daily
Now the DOW Transports and the SOX. The Semiconduction Index (SOX) is looking good, the DOW Transports not so much.
Transports – 50 day?
SOX – support at the trend.
For my friend captkirk in the chatroom, short Wheat called to him.
All the charts above plus /RB, /ZC, /ZW, /SB, /KC, /HG, /HO, /PL, /PA, /NG
Platinum Trading Idea – APR 11 Futures
Today's Idea
The recent sell-off in April Platinum has prices holding just above the 20-day moving average. Should prices close below this short-term indicator, the next major support area looks to be near the 1710.00 area. This is also the 61.8% retracement from the October 2010 low to the recent contract high. Some bullish traders may wish to go long April Platinum should the market reach support around the 1710.60 area, with a protective sell stop at the 78.6% retracement at 1680.00.
Fundamentals
The long awaited price "correction" in the precious metals group (PMG) has finally come to fruition, with Gold futures off well over $100 from its highs, Silver down about 5 cents, and Platinum plunging $70 in the past few sessions. The entire PMG complex may be a victim of its own success, as large speculative long positions are now being liquidated as sell-stops are triggered and longs late to the market are exiting their trades and licking their wounds. Gold may be the weakest of the complex, with prices falling nearly 7% so far this year, as investors seem to have regained some confidence in the global economic recovery efforts and are now switching some assets from the "safe haven" of Gold and into equities and bonds. Silver has historically been a favorite trading vehicle for "smaller" speculators and investors, and although it has outperformed Gold lately, this much less liquid market can produce wide daily price swings, especially during a bout of liquidation selling. Ironically, the most expensive of the PMG's, Platinum, may end up being the best performer, as its prices have not reached all-time highs like Gold's — plus its use in the production of catalytic convertors has a built-in demand component, especially as automobile demand continues to increase in Asia, and especially in China. In fact, Chinese demand for Platinum rose by 40% in 2010 due to the surge in auto production. Though long liquidation selling may continue for the near future, some traders may wish to investigate the Platinum market as a potential upside play in the precious metals sector this year.
Technical Notes
Looking at the daily chart for April Platinum, we notice that Tuesday's sharp sell-off was halted right at the 20-day moving average. However, given the record long position being held by speculators, it may take further long liquidation selling, possibly to the 61.8% Fibonacci retracement level just above 1710.00, before health can be restored to the bull market. The 14-day RSI has moved back to a more neutral reading of 53.70. Volume on the recent sell-off was moderate to heavy, but not at an extreme level. Support for April Platinum is seen at 1710.60, with resistance seen at the recent high of 1851.10.
Support / Resistance & Oscillators
S2 S1 Pivot R1 R2
Apr Platinum Pivot 1756.80 1772.10 1796.40 1811.70 1836.00
Apr Platinum Chart 1710.60 1851.10
No News Monday Recap – 1/24/2010
As 'No News' Monday ends, and the markets are closed briefly, I like to sit back and review the charts. I wasn't expecting much for the day, but somehow in the in morning I got it in my head that I think the market should sell gradually down. I'll tell you why later.
You know what that means, the market doesn't give a 'F' and rips in your face. I want to give you a summary of what was going through my head.
=====
I sold nearly ever pop, and all was going well until 10:30 AM EST, at that point we just started to stair step up. I kept selling pops, taking 5 tick profits.
Next thing I know I am adding to a losing trade. I stop out when we break the high of the day. So I set aside for lunch and brew over why I just gave back my AM profits, grab some lunch.
I come back, review the chart, and decide to sell short with a stop somewhere above 780. Now, most new traders might look at this chart and say why are you selling, thats bullish. Wrong. Look back a few days, weeks, and that 780 was an area of contention. It's also R3 on the pivots.
So I sell into 780, and we drop back to 778, nice. Take 5 ticks, 10 ticks, 15 ticks, flat.
We rally back to 780, so I'm thinking I remeber those days when everyone bought all day and they sell at 3pm maybe 3:30pm if they are being greedy. Sell it again. 780.
And we aren't moving. Just sitting. 3pm no sell. we break above 780. Big bids. I hate taking loses. I sit tight.
We drop to 779. Do I take 5 ticks? Now I am being greedy, I want my morning profits back. Back to 780, a few ticks over.
Now, I think 'guess I should have sold'. I add a few contracts. Now I am just being obnoxious. I fully expect to get slapped.
3:19 PM, we break 779. R2 is my target. and bam 777 prints, close enough for me. Flat. Profits. Happy. I win Mr. Market.
Looking back its easy to say , o' triple bottom I would buy thee. Except bottoms look more like a cliff.
And you know what? This is bad, stupid trading. The whole day I am fighting the market as it rallies. I add to a losing position. BAD TRADING.
What's worse? I am rewarded for it. For breaking my rules, I am rewarded. BAD TRADING.
What should I have done? Looked at the chart. Got Long. Stayed Long. Sold into resistsance. No Stress. GOOD TRADING.
====
Ok, so that was my thinking. Why was I adamant about selling short? Silver. Gold. Oil. Nat Gas. They were all selling, commodities were selling. Euro was in rally mode, cognitive dissonance.
What happened today? The Indices found buyers, commodities did not. We are still balancing. Topping. Consolidating. Faking you out. Trading.
I think the move in the Indices SPY, DOW, NQ, RUT was due in part to the currencies. I still can't explain the sell off in commodities, though.
Why aren't the commodities in rally mode with the USD falling ?
And the currencies, I loath thee.
The Week in Crayons
Posted by stockdarts on February 13, 2012 · Leave a Comment
Much to the chagrin of bears everywhere, the markets continued their relentless march up for yet another week as the rally to open 2012 continues. While there continues to be sporadic bouts of selling intraday, there has been a strong and pervasive bid that has supported price action and has consistently thwarted all attempts at selling this market down. From a technical perspective, nothing has changed in about six weeks now as we remain perpetually oversold and extended as we slowly squeeze higher.
This is clearly evident in a chart of the e-mini futures contract for the S&P 500 which shows all of this year’s price action contained within a narrow rising channel. Almost the entirety of this move has occurred with an overbought stochastics reading as well. Also note the preponderance of longish lower wicks on many of the candles during this rally indicating that while there have been some attempts to push price down, it has inevitably been met with a strong afternoon bid.
While this traditionally is a sign of strength, it can also be a hint of future weakness when this behavior occurs after a prolonged rally. However, while it may become tempting for traders to gamble and try to pick a top when the market behaves like this, the more prudent course of action is to assume that the market will continue to behave in the same manner until it breaks out of this channel. Ironically, a breakout above the channel would result in a possibly unsustainable acceleration of the current trend leading to a higher probability short than a corresponding breakdown from the channel which would likely lead to a more benign sideways consolidation. However, while it is prudent to anticipate what the market will do, it is all conjecture until the theories either succeed or fail and astute traders must also recognize the present and profit from it…and the present remains a buy the dip environment until proven wrong.
If you have any questions or comments, feel free to contact me on twitter @stockdarts or in our great chat room if you are a stockguy22 member. If you aren’t a member, what are you waiting for?
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