Jul 272012

What a day we had today, and a fitting continuation of the rally I proposed would materialize early in the week. I admit, it is a bit tough for me to suspect the market will go higher when earnings aren't so great. I wouldn't doubt an economic crash with the S&P at 2000. But what good is pessimism anyway.

I did manage to miss the degree to which we would sell off early in the week, and before the rally, but this just seemed to give the rally more impetus.  The whole thing seemed to be initially put into motion (something like Newton's first law of motion) by comments out of Europe on the (future) strength of the Euro.

The bankers will save us :-).  That is all it took to send the US markets reeling higher. How can I complain, after all if fulfilled my prophesy.

So we traded down into the 1324 region instead of the 1340 I was thinking, but that is of relatively small scale now.   I am going to become a full time trend trader if we keep getting days like this.  Let's take a look at the value profiles:

Daily and Composite Value Profiles

Daily and Composite Value Profiles

The exuberance of the week left us with some virgin points to consider for testing next week.  1407.75, 1395.50, 1359, 1331.25 and 1312.75 to be exact.  So next week, I am thinking we will test a bit higher to either the 1395.50 or 1407.75 area and then test lower. Maybe by weeks end we will be seeing  1354.50 or so.   This is all presuming we do not get more exuberance right out of the gate Monday.  If we do, we could go higher.

We are approaching the top of the range which is at or about 1412 or so. I have also written about the 1429 level in the past. This is a projection off the Monthly chart. I usually do not rely on such things as it is not particularly tradable, but it is an area that is technical for resistance. Let's take a look at the cycle charts and see what has transpired there:

Weekly and Monthly Cycle Charts

Weekly and Monthly Cycle Charts

First off, I am noting the monthly chart has turned bullish again following quite a period of potential bearishness. This, of course is interesting on a seasonal basis. because in many years, the high of the year is in mid June, so this is bullish indeed. After all, it is an election year.

The Nindicator Stochastic and momentum tools are still showing a bearish cycle however, but the Linear regression line has not fallen below the Hull moving average on the Monthly chart.

Another thing I am noting on the monthly is this coming week is the last week of the month and the volume reading is looking quite low.  It does not look likely we will see average volume this month. This goes hand in hand with some strange volume anomalies I have been observing intraday. For one, typically we see what I call order book compression on rallies. but of late, we have had little or none. This is why it is smart to have a complete toolbox of technical indicators to work with as often, like hard coded trading systems, one thing works better than others at various times. So, the prudent trader moves to other strategies in lower volume.  Today's volume (Friday 7/27) was above average however and this is bullish for sure; at least for now.

I had mentioned the last few weeks that foreign money would seek a home in the US markets, and this is certainly part of the rally we are seeing. Markets have become very complex as it is really a world stock market now. It trades 24 hours more-or less and currencies move in and out of it. Add 84% of the market trading volume is (HFT) High Frequency Trading, and you can easily be harder to predict than ever.

Next week on the reports front, I am seeing a fairly busy week starting Tuesday with a big line op too much to enumerate. Here is a screenshot compliments of the ForexFactory.

Report Line-up for the Week

Report Line-up for the Week

I have been mentioning for many week also that trading in the shorter term is safer than swing trading. This is my opinion and it still holds. For this reason, I remind reader of the report schedule each week.  The basic theme goes like this: Where are we in terms of value? And, is the news such that we will stay in that value region (range trade), or leave it (trend). To me this is the key. Harder said than done however, but I believe if you have a handle on this concept, you are at a distinct advantage not only for trading but for learning from your mistakes. This is why I tweet value area reports throughout the day, as well as the daily targets etc.  After all, who would have imagined we would hit a daily target in the ES today that was close to 20 points off the open; on a 94% probability (ie. 1352.75 to 1374.50).

Speaking of Tweeted reports, Market Traders Journal started a Facebook page today, so you can use that to receive the tweets if that works better for you.  Put a like on there if you are so inclined. It helps me to get more of my articles to more people.

Back to the markets, I am noting we had a healthy jump in range after a bit of a slowdown last week with the average weekly range going to about 45 points (around 40 last week).  This, as I had written about before, if it persists into the rally is a bit bearish.

This week we also had a webinar with Big Mike's Trading and he recorded that. If you are not a member to Big Mikes, you should consider joining. It is very inexpensive, and it is an excellent forum and/or source of good information for traders. Mike is very concerned about the content of his site being top notch (and not scammish, which is so common in this industry). So it is a bit of fresh air. I believe this is why he has such a large and growing following there.  Here is a link to the Webinar for your viewing.

I have recognized I have the blog for articles, but I do not really have a place for commentary aside from this weekly article on The Coming Week. I post my commentary on the Nindicator YouTube Channel each morning. You might consider signing up for that as it covers overnight price action, trade set-ups, relevant market information for traders and educational information on Auction Theory and Analysis.

This about sums up my thoughts on the market for now. I wish you a very good weekend and will see you again next week.

Thanks for supporting the blog :-)


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