UPCOMING (MAJOR) U.S. ECONOMIC EVENTS...
* Wed. Oct. 20 @ 2:00 pm ET - Beige Book Report
* Tues. Oct. 26 @ 10:00 am ET - CB Consumer Confidence
* Fri. Oct. 29 @ 8:30 am ET - Core PCE Price Index m/m Data
* Wed. Nov. 3 @ 2:00 pm ET - FOMC Announcement + FOMC Forecasts and @ 2:30 pm ET - Fed Chair Press Conference
* Fri. Nov. 5 @ 8:30 am ET - Employment Data
* Tues. Nov. 9 @ 8:30 am ET - PPI m/m & Core PPI m/m Data
* Wed. Nov. 10 @ 8:30 am ET - CPI m/m & Core CPI m/m Data
* Fri. Nov. 12 @ 10:00 am ET - Prelim. UoM Consumer Sentiment
* Fri. Nov. 12 @ 10:00 am ET - Prelim. UoM Inflation Expectations
* Tues. Nov. 16 @ 8:30 am ET - Retail Sales & Core Retail Sales Data
* Wed. Nov. 24 @ 2:00 pm ET - FOMC Meeting Minutes
*** CLICK HERE for link to Economic Calendars for all upcoming events.
Tuesday, January 31, 2012
Below are 20-day 4-Hour charts for YM, ES, NQ & TF. We can see the steady rise in price from the beginning of January. The NQ & TF made a new swing high in pre-market trading today, while the YM & ES have made progressively lower swing highs over the past four days...none of them has made a new swing low yet. Today's initial drop from 9:00 am was made on considerably higher volumes on all four e-minis...whether this is the beginning of a bear pullback remains to be seen. Near-term support sits at the lower Bollinger Bands, followed by their respective next lower Fibonacci retracement level...that would be the 60% level for YM, 50% level for ES, and 38.2% for NQ & TF. My very short-term RSI indicator is nearing oversold conditions for this timeframe, but it is very sensitive to minor corrections and can be easily relieved by minor price corrections before a trend resumes.
Question #1 from my post of January 30th has been answered, in part, as the ES closed above a moving average Golden Cross formation on the Daily chart...time will provide the answers to the rest of that question, as well as to the other two.
In the near term, we'll see whether the NQ and TF can continue a strong push up for February from here, with the YM and ES finding support to follow. Important sectors to watch in support of such an advance would be the High Dividend-paying Stocks ETF (DVY) and Emerging Markets ETF (EEM). As mentioned in my post of January 23rd, they are both facing a great deal of resistance at their current levels, and a push above would be at a considerable risk-to-reward ratio. In my opinion, we'd need to see higher volumes come in and stay on all these Indices and ETFs to confirm that a sustainable advance was viable in the face of such a high risk/reward scenario.
The Daily chart below of the Homebuilders ETF, XHB, shows negative Stochastics and MACD divergence and that a topping process may be underway. Near-term support sits, first, at the confluence level of monthly Volume Profile POC and monthly VWAP of 18.58, and then at the -2 monthly VWAP level of 17.65. Near-term resistance is at the +2 monthly VWAP level of 19.50.
As this ETF has had a strong run from its October 2011 lows, it remains to be seen as to whether it runs out of favour on the buying side any time soon.
The Monthly chart below shows that this ETF has been slow to recover from highs made in 2006, and has made a rough triple top formation, beginning from the April 2010 highs. Resistance on this timeframe sits at a Fibonacci confluence of level of 20.00...a very important level for the bulls to break above and hold. However, with data like we've seen of late, it makes such a bull case very weak, in my opinion, and I would not look to this sector to lead the general markets higher.
Monday, January 30, 2012
Overlayed on each chart are Bollinger Bands, monthly Volume Profile POC (horizontal yellow lines), 50 sma (red), 200 sma (pink), and a Volume Profile for the one-year period (POC is red horizontal line).
Price on YM is currently trading in between its upper Bollinger Band and middle Bollinger Band, above both POCs, and above both moving averages (which are in a bullish Golden Cross formation). Using these parameters, I'd put near-term resistance at 12761, and support at, first, 12499, then 12377, and, finally, 12195 (one-year POC).
Price on ES is currently trading in between its upper Bollinger Band and middle Bollinger Band, above the current month's POC, immediately below the one-year POC, and above both moving averages (which are are forming a bullish Golden Cross pattern as tomorrow's candle begins to form in after-hours trading...an important formation to watch for completion in tomorrow's close). Using these parameters, I'd put near-term resistance at, first, 1311 (one-year POC), then 1328, and support at, first, 1303.75, then 1297.25, and, finally, 1266.50.
Price on NQ is currently trading in between its upper Bollinger Band and middle Bollinger Band, above both POCs, and above both moving averages (which are in a bullish Golden Cross formation). Using these parameters, I'd put near-term resistance at 2493, and support at, first, 2431.75, then 2404, and, finally, 2317.75 (one-year POC).
Price on TF is currently trading in between its upper Bollinger Band and middle Bollinger Band, above its current month's POC, below its one-year POC, and above both moving averages (which are still under the influence of a bearish Death Cross formation). Using these parameters, I'd put near-term resistance at, first, 804.70, then 823.10 (one-year POC), and support at, first, 770.80, then 760.90, and, finally, its lower Bollinger Band at 736.90.
In conclusion, three important questions worth monitoring over the coming days relative to these charts are:
- Can the moving average Golden Cross that is forming in after-hours trading today remain intact on ES after tomorrow's close, and in the days ahead? (This question is pertinent to the conclusion in my January 28th post, which was that the bulls will need to focus on boosting ES higher if they are going to keep the upward momentum in play, as well as to break and hold above the major downtrend line from the 2007 highs.)
- Can TF can, ultimately, push high enough over the coming days to reverse its Death Cross to a Golden Cross, and, subsequently, push and remain higher above the one-year POC?
- Can bulls maintain price above the current month's Volume Profile POC on all four e-mini futures indices, particularly as February's trading action commences on Wednesday, in order to, potentially, keep this rally moving up to form a higher monthly POC for February?
Consumer personal spending has been, generally, declining since it peaked in August 2011. Since "consumer spending accounts for a majority of overall economic activity, and is one of the most important gauges of economic health," it remains to be seen whether this will have any effect on the buying mindset of the equity markets that has been in play for the past couple of months.
Sunday, January 29, 2012
The next play has yet to become clear, as price failed to hold above this level, as shown on the updated Daily chart below. Therefore, 12800 is still resistance and support is 12600. However, it is still in uptrend on this timeframe, so current momentum is with the bulls. Additionally, price has closed and held, so far, above the downtrending green line, which is taken from its 2007 high...since this trendline sits around 12600 now, I'd say that this level has become increasingly important for the bulls to maintain as support from this point, if they're going to launch an all-out rally in the coming days.
This conclusion is in keeping with the observations made in my posts on January 27th and January 28th.
One to watch!
As a trader, I can only take this to mean that I should ask myself, "What does the market think about this situation?"...that will show me the overall reaction of the market, and, since the market generates more force than I do, it doesn't matter what I think of the situation. It seems to me that the "truth" in trading, lies therefore, in how the markets are trading this situation, and not necessarily what the situation is (since the situation itself may be based on false information/perceptions/interpretations).
A trader's edge lies in being able to "feel" what the market flow is and get on board at the appropriate time...not an easy task. It really boils down to how good an "interpreter" I am at any given point in time of market action, not how good/bad I judge the situation to be.
So, on to another day of my life-long studies in "Market Interpretation 101"...
Saturday, January 28, 2012
The first Weekly chart below shows that YM took a slight loss from the prior week after attempting new highs, but closed just above a confluence of 3 trendlines (one from the highs of 2007), a 78.6% Fibonacci extension level, this month's Volume Profile POC (horizontal yellow line), and the lower one-quarter of the channel on higher volumes than the prior week. Current price sits well above its 50 sma (red). The weekly uptrend hasn't been broken yet for YM.
The second Weekly chart below shows that ES made a very slight gain from the prior week after attempting to break above the downtrend line from the 2007 highs, but closed just above a confluence of 2 trendlines, a 78.6% Fibonacci extension level, this month's Volume Profile POC, and the lower one-quarter of the channel on higher volumes than the prior week. Current price sits well above its 50 sma. The weekly uptrend hasn't been broken yet for ES.
The third Weekly chart below shows that NQ gained on the week and retreated slightly, after touching its upper Bollinger Band and upper one-quarter of the channel, and after nearly hitting its 78.6% Fibonacci extension level. It closed well above its channel "mean" (broken green line), well above this month's Volume Profile POC, and above last year's high of 2435.50 on higher volumes than the prior week. Current price sits well above its 50 sma. The weekly uptrend hasn't been broken yet for NQ.
The last Weekly chart below shows that TF gained on the week and closed near its high and very slightly above its 78.6% Fibonacci extension level on higher volumes than the prior week. Current price sits in between the channel "mean" and lower one-quarter of the channel and above this month's Volume Profile POC and 50 sma. The weekly uptrend hasn't been broken yet for TF.
In conclusion, it appears that the bulls need to focus on boosting ES higher, while keeping YM propped up, as well as to keep buying Copper, as mentioned in last night's post, if they are going to keep this upward momentum in play on these indices, as well as break and hold above the major downtrend line from the 2007 highs. This re-enforces what I said in that post.
Friday, January 27, 2012
Have the markets started building 2012's chocolate cake for a bullish Christmas tea party? Let's see what foundations have been prepared for the first layer, so far, in January. The following charts and graphs will help me to illustrate this possible scenario.
The problem with this analogy is that now I really want a piece of cake!
The chart and histogram graph below show a percentage comparison of price action from January 3rd to today's close of the Major Indices, the high dividend-paying stocks ETF (DVY), the Emerging Markets ETF (EEM), Gold, Oil, and Copper.
The Nasdaq 100, Russell 2000, Emerging Markets, Gold, and Copper have been strong players for the month, while the S&P 500 and Dow 30 have followed suit, albeit to a lesser extent. The high dividend-paying stocks have barely budged, and Oil has dropped.
The next graph depicts percentages gained/lost during Week 1. We can see the dip that Copper made, along with Oil and EEM, while markets were buying Technology stocks and Gold.
The next graph depicts percentages gained/lost during Week 2. The Copper market surged, while Oil lost further ground, and strong buying came in on EEM. There was buying in the Major Indices and Gold, some tepid buying in DVY, and continued selling in Oil.
The next graph depicts percentages gained/lost during OPEX Week 3. EEM was the strongest gainer that week, followed by the Major Indices, Copper, Gold, and DVY. Oil continued its drop.
From these graphs, I would suggest that any continued strong buying in Copper, Gold, EEM, the Russell 2000, and the Nasdaq 100 would cause buying to resume in the Dow 30 and S&P 500 stocks...ones to watch over the next week(s).
The Daily chart below of Copper shows that price closed right into a confluence of price and channel resistance, but above its downtrending 200 sma (pink) (note the high volumes on this year's advance)...one to watch for risk-on leadership, in my opinion.
It will also be interesting to see what the markets' reactions are to this Washington Post news article. Oil is trading just below Monthly WVAP (yellow broken line) and 78.6% Fibonacci fanline confluence, but just above its 50 sma (red) and 61.8% Fibonacci retracement confluence, as shown on the Daily chart below...possibly a bull flag in the making.
Gold has closed above a 1700 Fibonacci confluence level, as well as a confluence price level of 1733 (both forming support levels), as shown on the Daily chart below There is a lot of upside potential on this chart before price runs into further major resistance.
So, I'd say the markets are busy this month mixing the ingredients for the first one-third of the bottom layer of the delectable-looking cake above for bull markets to, potentially, consume by Christmas. The first layer represents Q1 of 2012, the second represents Q2, the icing represents Q3, and the tea and fairy cakes on top represent Q4. We'll see what the coming weeks whip up.
Thursday, January 26, 2012
Wednesday, January 25, 2012
By the way, it seems to me that an apparently stable stock market (i.e. proceeding in an orderly uptrend and higher than today) by the time the 2012 U.S. election is underway would not give Republicans cause to complain about the effectiveness of President Obama's policy measures during his term in office...an "offshoot benefit" of this "dual mandate" policy. So, I'll say that greed is good, particularly for the Democrats this year. While the VIX remains at low levels, the fear factor is, indeed, gone.
That being said, I would note the following with respect to support and resistance levels that I mentioned in my post of January 20th on the Major Indices. I'm adjusting some of these levels now since some resistance levels were broken and closed above today. The revised levels are as follows:
- Dow 30 (unchanged): Support = 12600 and Resistance = 12800
- S&P 500 (revised upward): Support = 1320 and Resistance = 1350
- Nasdaq 100 (revised upward): Support = 2438.44 and Resistance = 2470.58
- Russell 2000 (revised upward): Support = 785.00 and Resistance = 810.00
- Dow Transports (unchanged): Support = 5200 and Resistance = 5300
- Dow Utilities (revised upward): Support = 450.00 and Resistance = 455.00
A 100% Fibonacci extension (pink) from the 2011 lows to November lows would place an upside target price at:
- 13028 for YM
- 1348.75 for ES
- 2572.25 for NQ
- 832.80 for TF
Tuesday, January 24, 2012
The Daily chart below shows where tonight's price was hit...above the +2 deviation level of the upward-trending regression channel which began at the June 2010 lows. When tomorrow's candle opens, it may re-test tonight's high before dropping. Near-term support would sit, firstly, at the +1 deviation level around 440, followed by this month's Volume Profile POC (yellow horizontal line) at 422.32...the next level would lie at the channel "mean" (currently at 412.35), and, subsequently, at the 50 sma (red) at 397.15.
As I mentioned in my previous post, AAPL has, so far, been unable to remain above its +1 deviation level of this channel...we'll see whether the same applies over the next days/weeks ahead, or whether it's "different this time"...with 500.00 within reach, who knows!
Monday, January 23, 2012
DVY made a 3-year high on January 3rd of this year and is currently holding above last month's Volume Profile POC (horizontal red line) at 52.81. It has been in a daily uptrend since its December lows. If traders are interested in purchasing additional value stocks, I'd expect to see DVY break and hold above its high of 54.63.
In contrast, EEM made a 3-year high on July 2, 2011 and has retraced almost 50% from its October lows. It is currently holding above last November's Volume Profile POC, after a lower POC was made in December. It has also been in uptrend since its December lows. It's approaching resistance around 42.90. We can see that it is forming two interesting patterns...the first, a larger Head & Shoulders pattern with a neckline around 38.50 (pink horizontal line), and the second, a smaller Inverted Head & Shoulders pattern with a neckline around 42.90 (blue horizontal line), which also happens to be the right shoulder of the larger H&S pattern. If traders are interested in purchasing additional (higher risk and more volatile) growth stocks, I'd expect to see EEM break and hold above the IHS neckline of 42.90, and the yellow downtrend line just above.
The two graphs below shows a comparison of percentages gained and lost so far during two time periods on DVY and EEM, as well as on the Major Indices.
The first graph begins at the May 2, 2011 high of EEM until today's close. The second graph represents price action from January 3, 2012 to today's close. The first graph shows an overall gain in percentage from the May 2nd high for DVY, with EEM still in negative territory. The second graph shows a greatly reduced gain in percentage for 2012 for DVY, with EEM gaining the most.
In conclusion, using the reference points as noted above on the Daily charts in combination with these graphs, we can track to see whether money flows into or out of these value vs higher-risk, volatile growth ETFs over the next days/weeks.
Sunday, January 22, 2012
Friday, January 20, 2012
The first two are taken over the past three months. We can see on these that although the DAX and CAC began to rally in November, Greece continued to drop until last week, and Portugal has basically moved sideways from November.