Hello traders everywhere! Adam Hewison he
re, co-founder of MarketClub with your mid-day market update for Tuesday, the 18th of October.
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Is the market a buy or short sale?
That's the question that is going through many trader's minds this week. Should I buy this market, or should I go short this market? At the moment, this market is being driven by perception and sentiment. Eventually that will change and the market will become driven by the direction of the major trend.
Our major trend indicators remain negative on the equity markets. We are also looking at the S&P 500 at the top of the Donchian trading channel. I believe that was the reason for yesterday's sharp move down.
In order for this market to really get going on the upside it needs to clear the highs of 1230 on the S&P 500 in a convincing fashion.
There is so much confusion in the marketplace right now... Interest rates, mortgage foreclosures, contagion in Europe and the occupation of Wall Street. The markets always have numerous conflicting thoughts, but eventually the market figures it out and goes the way it wants to go. Our job here at MarketClub is to recognize those changes and alert you to what we are witnessing.
Now, let's go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.
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S&P 500 INDEX
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The S&P 500 closed yesterday below the 1205.65 level and we consider this to be a crucial area. Yesterday's close below that area indicates we are going to see further sideways to negative action in the near term. With a Chart Analysis Score today of + 70, we are stuck in a trading range waiting for some news to shake us out of the doldrums. We would not be surprised to see a pullback to the 1120 area. A 61.8% Fibonacci retracement takes the S&P 500 back to the 1130.94 area. Long-term traders should continue to hold short positions in this index.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 70
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Suggested S&P 500 Trading Instruments:
Non Leveraged ETF's: (Long SPY) (Short SH)
2 x Leveraged ETF's: (Long SSO)(Short SDS)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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SILVER (SPOT)
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The downside pressure that we were looking for in this market came to pass today when we traded down to the $30.50 level, basis the spot silver market. This is the lowest level we have seen trade in the last eight days. We believe that the markets are looking at silver as an industrial metal and if we are correct on the trend in the world equity markets, then silver should fall to around $20 an ounce. Our Chart Analysis Score moved to -70, indicating that we may have a few more days to go before we head to the downside. Intermediate and Long-term traders should continue to hold short positions in silver with appropriate stops.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trend = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 70
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Suggested SILVER Trading Instruments:
Non Leveraged ETF's: (Long SLV) (Short the ETF SLV)
Leveraged ETF's: (Long AGQ) (Short ZSL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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GOLD (SPOT)
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As we mentioned in yesterday's comments, we were somewhat concerned about the gold market based on the fact that the silver market looked very precarious. The sharp move down in gold today turned our daily Trade Triangle negative. However, intermediate and long term indicators remain positive on gold. Given today's action, we expect to see more of a two way market and would not be surprised to see further downside pressure, possibly testing the $1,600 level. I think most traders would be better off just watching from the sidelines. Only long-term traders should maintain long positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = + 65
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Suggested GOLD Trading Instruments:
Non Leveraged ETF's: (Long GLD) (Short the ETF GLD)
Leveraged ETF's:(Long UGL) (Short GLL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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CRUDE OIL (DECEMBER)
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The crude oil market continues to mirror the action in the equity markets. The highs seen yesterday in the December contract at $88.40 a barrel remains to be taken out if this market is going to move higher. With mixed Trade Triangles and a Chart Analysis Score of +70, there is no clear cut direction for this market at the moment. Crude oil is very overbought on the Wiliams % R indicator. We are looking for a pullback to the $80 a barrel level, which would represent a 61.8% Fibonacci retracement. Our long-term Trade Triangles continue to be negative and we expect they will once again dictate the tone of this market. Long-term traders should continue to be short the crude oil market.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 70
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Suggested Trading Instruments:
Non Leveraged ETF's: (Long USO) (Short the ETF USO)
Leveraged ETF's: (Long UCO) (Short DTO)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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DOLLAR INDEX
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The dollar index moved to a five-day high today before succumbing to selling pressure. We would not be surprised to see a rally back to the 78.50 area. We continue to be friendly to this index and want to hold long positions with money management stops. The Dollar index is coming from a large energy field that is capable of carrying it much higher. Long-Term traders should maintain long positions with the appropriate stops in place.
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 55
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Suggested DOLLAR INDEX Trading Instruments:
Non Leveraged ETF's: (Long UUP) (Short UDN)
Leveraged ETF's: (Long) (Short)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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REUTERS/JEFFERIES CRB COMMODITY INDEX
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The REUTERS/JEFFERIES CRB COMMODITY INDEX remains heavily overbought and we would not be surprised to see more sideways to negative action. As we mentioned yesterday, this market has rallied back approximately 50% from the highs that were seen in late August to the recent lows seen in early October. Our long-term Trade Triangle remains negative and we expect to see this market once again resume its downward trend. In the short term we're looking for a move back to the 305 to 300 level. Long-Term traders should maintain short positions with the appropriate money management stops in place.
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = + 70
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Suggested REUTERS/JEFFERIES CRB COMMODITY INDEX Trading Instruments:
Non Leveraged ETF's: (Long CRBQ) (Short the ETF CRBQ)
Leveraged ETF's: (Long) (Short CMD)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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As always, we rely on our market proven Trade Triangle technology for catching the big moves.
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This is Adam Hewison for MarketClub and I'll see you tomorrow with my mid-day update. Don't forget to enter for a free 1 year subscription to MarketClub on a HP WiFi Tablet.
All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub
Market appears fairly overbought and quickly jumps at excuses to sell.
This from Reuters just now apparently dropped the S&P by ten points:
"Plans to tackle the euro zone debt crisis have stalled with Paris and Berlin at odds over how to increase the firepower of the region's bailout fund, French President Nicolas Sarkozy said on Wednesday. Sarkozy told French parliamentarians the dispute was holding up negotiations. He then flew to Frankfurt to talk with German Chancellor Angela Merkel in an attempt to break the deadlock ahead of a make-or-break European leaders' summit on Sunday.
A French presidency source said the French and German leaders were meeting other euro zone policy chiefs and International Monetary Fund head Christine Lagarde on the sidelines of an event mark the end of Jean-Claude Trichet's presidency of the European Central Bank. France has argued the most effective way of leveraging the European Financial Stability Facility is to turn it into a bank which could then access funding from the ECB, but both the central bank and the German government have opposed this. "In Germany, the coalition is divided on this issue.
It is not just Angela Merkel who we need to convince," Sarkozy told the parliamentarians at a lunch meeting, according to Charles de Courson, one of the legislators present. His comments fuelled doubts about whether euro zone leaders will be able to agree a clear and convincing plan when they meet on Sunday. "
JACKSON
Thanks for the input. Could you explain in more detail so I can understand?
Thanks,
Sunday
Short strength and buy weakness. Best time to short is when you see the monthly triangle green.
Hi Sunday,
The answer is I don't know, but I don't think so. Frequently the market opens up gapped up or down and later fills the gap. Day traders know how to play this but they basically close all positions before the previous day close and start fresh every morning. I have been stopped out several times this way only to see the position recover by mid-day. I am PO'd by it, frankly.
If you are a swing trader I guess you have to become expert at setting wider overnight stops so as not to get knocked out.
Somebody more knowledgeable please advise Sunday and I.
Ralph,
I'm just learning the many nuances of this trading game. My question is -
What if the market, or a particular stock for that matter, opens in the morning say 10% under where your overnight stop was placed. Is there anything you can do, other than close out the position at the next day's market open at 9:30 a.m.? Is there anyway to protect yourself from a significant gap down opening on the following day? If there is, I'd love to find out how to do it.
Thank you in advance for your help,
Sunday
Chartwise, I see where Adam is coming from. RSI, MacD and Slosto all indicate an overbought condition in the S&P, although MacD still looks somewhat bullish. As of Tuesday's action, an ominous two-day longlegged doji has formed on the weekly chart. But, to my eye anyway, all this action is irregular. We may be in for lots of action but not really going anywhere. I cannot see us breaking through the low we have already established this autumn. There's a lot of energy - hope and fear - in this consolidation. I am going to lighten up. Small positions, tight stops.
Jim,
You are right on the money, Trade triagles have been useless.
Adam,
I have been following Monsanto (mon)for 30 days. Chart went from strong downtrend -100 to
+50. Stock moved from 58.00 to 75.00. These charts are useless.
Something remarkable with the calls here. The S&P and oil and Jeffries are all clocking +70 yet the advice is to go short.
Hum. Would you explain Adam please?
Chartwise, I will get back when I look at things a bit closer. On Friday, I took half profits and cinched up the stops and got stopped out of everything Monday, which was fine with me. Then I re-entered at the low Monday afternoon with small positions in cat, spy, & aa. Once again, I am tightly stopped overnight, protecting profits, and will probably get taken out in the morning. This market makes day traders of us all. Still, we're in a counter trend rally - my opinion - and I still think 134 for SPY is in the cards, with all that that implies.
I am very pleased with the triangles, although I play them my way. IO Words, plus 70 ain't all that bad!
Good wishes to all.
IMHO Angela Merkel has more pricing power over the US markets than any trade triangle. Watch the EU meeting over the weekend and be long for Monday
and you will win big.
Important to watch the signals before just making a guess. Some relationships are changing - we had a big rally without the $ falling - normally a strong inverse co-relation. Except for oil, commodities are still going down while equities rally - although some commodities are retracing some losses. It appears the dollar is in a strong uptrend and will resume soon - so metals are likely to continue down. 30 year also likely to continue down. Silver will fall big - maybe all the way to $20 as Adam suggests, but at least low 20's. (Bought ZSL calls to back it up when silver was at $42.)
In addition to S&P 1230, we need to close above Dow 11,650 which is also strong resistance. We peeked (and peaked?) above them today, but couldn't close it. Where's Mariano Rivera when you need him?? 🙂
But we shouldn't get too excited if we break 1230 as 1257 is next MAJOR resistance ahead - major Fib and unchanged on the year. Europe won't settle down for a while - nearest hope is for the Nov. meeting - like the U.S. and the debt ceiling, Europe will act only when the clock strikes 12.
Good trading and investing to all!
According to the Ministry of Truth, inflation is under control and the economy is starting to improve, so obviously it is a good time to buy stock and lots and lots of Treasury bonds, too.
sell the markets the "big down" is almost here. -save your money , - this is my opinion .
good luck