Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Thursday, the 6th of October.
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We are again faced with the question: Has the market bottomed out or is this just another dead cat bounce?
It's too early to tell.
Right now the major trends continue to be negative for equities, crude oil and some other markets we have identified in our videos.
No market goes straight up or straight down. You will always see counter-trend rallies. If you are familiar with the Elliott wave theory, you know that markets tend to go up in five waves, three with the trend and two against the trend. When a market is pulling back against the major trend, like we are seeing now, it can be an excellent opportunity to either exit a position if you are long or go short the market. It is definitely going to be important to see how we close out the week.
While the current rally looks exciting and may go higher, the bottom line is the trend is still down in the equity markets.
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3 STOCKS IN THE NEWS
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APPLE (Symbol AAPL) - Trade Triangle (Monthly) Long from $355.13 on 7/7/11.
Now trading @ $383.50
FIRST SOLAR (Symbol FSLR) - Trade Triangle (Monthly) short from $132.17 on 5/04/11.
Now trading @ $65.41
CONSTELLATION BRANDS (Symbol STZ) - Trade Triangle (Monthly) short from $20.19 on 7/29/11.
Now trading @ $20.47.
Now let's go to the 6 major markets we track and update every trading 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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Last week the S&P 500 index closed at 1131.42. Currently this index is trading around the 1156 area, making it higher for the week. We need to see a weekly close below the 1120 area if this market is going to go down and test the zone of 1000. We still believe that is going to happen based on our long term Trade Triangles that remain negative on this index. We would not rule out our ultimate target zone for this index which is the 1000 to 950 area. Intermediate and 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 = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 75
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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 silver market is higher for the week and possibly putting in a bullish engulfing line on the previous week's market action. Should this happen, it would indicate we have seen a low in the price of spot silver. Our Chart Analysis Score at the moment is -75, indicating some of the downside pressure has been relieved from the market. As always we will rely on our Trade Triangle technology to keep us on the right side of the trends. Traders who are following our Trade Triangle technology should be short this market 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 = - 75
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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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The spot gold market continues to consolidate around the levels mentioned in our previous blog posting. However, the Chart Analysis Score remains at + 55 indicating that a trading range in the short term is very much intact. We would not be surprised to see this sideways action continue for another week or so. For the week, gold is slightly higher by about $16 an ounce. I think most traders would be better off just watching from the sidelines until the volatility subsides. 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 = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 55
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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 (NOVEMBER)
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We expect the current recovery in crude oil to fade, as we have just seen a 61.8% Fibonacci retracement completed. While the crude oil market is higher for the week, we have not ruled out another move down to the $70 a barrel level. All of this is going to be predicated on what happens to the equity markets. As you know, this market has been closely tied in to the movements of the S&P 500. Overall we still view the trend in this market as negative. Intermediate and 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 = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 75
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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 current pullback from the highs seen on Tuesday should be entering two important Fibonacci support zones in the next day or two. The Fib support starts at 78.56 which is a 50% retracement, and 78.26 which is a 61.8% Fibonacci retracement. Overall the positive trend for this index remains intact and we expect to see some consolidation around current levels before resuming its upward path. We continue to be friendly to this market and want to hold positions with money management stops. This index is coming from a large energy field that is capable of carrying it much higher. Intermediate and 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 = Positive
Combined Strength of Trend Score = + 100
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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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We expect rallies back to the 302-304 level to run into resistance and we would not rule out a retest of the recent lows. We expect the trend to continue until our Trade Triangles inform us that the trend has changed. Short, Intermediate and 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 = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 90
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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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This is Adam Hewison for MarketClub and I'll see you tomorrow with my mid-day market 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
I, 'too', thought the resistance at S&P 1157-60 would be a good shorting level and bought 8 Oct SPY 116 puts about 10-15 points off the early high this morning. However, as the day wore on and all pullbacks were well contained, and I noticed that the dollar was weaker, the eurodollar stronger, and the news optimistic in the euro-area, and potentially on the jobs report out tomorrow which usually moves the market big time, i began to doubt the wisdom of my resolve. i ditched the puts for an $80 dollar profit and just watched. as i did so i became somewhat convinced there would be a late rally though probably muted pending the news out in the morning. I then decided to buy an Oct 22 SPY 116 put around 1:45-2:00 pm with the intention of marrying it to an Oct 15 SPY 116 call either at the market or on a pullback since if the market goes up on the news I can sell the call at the next resistance level of 1170, or higher, or not as the case may be. The idea being as i would be a short term bull if the news was good, and the oct 15 call was cheaper than the oct 22 put at the same strike price, i would have some flexibility. if the news is bad, all the better, i just ditch the cheaper call. the major trend should reassert itself at some point. i am just concerned about having so much company. is it possible this is a bull market in disguise?
I'm new to your commentary and was hoping you would advise how you are defining short, intermediate and long-term trades? For example, under the S&P review, you indicate "Intermediate and Long-term traders should continue to hold short positions in this index." How many months out do you consider intermediate? How do you define short or long-term trades?
Megan,
As a general rule we follow these guidelines for time-frames within MarketClub.
Long-term = 3 months and longer
Intermediate-term = 3 weeks to 3 months
Short-term = 3 days to 3 weeks
Here's a link to our Help Section PDF that you can download. http://club.ino.com/help/manual.pdf
Best,
Jeremy
you can't use trade triangles to trade futures except inasmuch as they give you the big picture.
if you want to learn how to trade commodities check out ira epstein's charting course and pay attention to what chris vermullion talks about on his occasional free offerings. you need to invest a reasonable amount of money to take ira's charting course, but it is worth it. it will teach you how to limit risk and how to enter and exit trades with good money management, and when not to. i recall making good money with his rec to buy crude oil at 12.96/barrel back in '92, and gold at #305 back in spring, 2004. these are some of my fonder memories, but there are also many others in between and since.
Is it possible for you to chart HW- Headwaters- for me? You did it once before and it was incredibly hRick Smidtelpful.TYVM
Hi Adam,
I have a question.. As future trading is highly leveraged..For future index trading (like ES, emini s&p future etc), I think it is very difficult to follow trade triangle. As per weekly trade triangle S&P cash sell signal was at 1136. After that we move down to around 1075, almost 60 points down but no trade triangle signal to book profit. Now S&p back to 1160 , loss of 25 points after leaving 70 points gain..Would like to know how this trade triangle works for future trading without putting any Stop loss.Thanks