The week ahead 8/30 - 9/2

I think that this week is all about the Nasdaq. They are the strongest market and the leader to the upside.

Lately there has been a battle between the Nasdaq and the Transports. The Nasdaq wants to lead us higher while the Transports want to lead us lower. The difference between the two markets heading into this week is that the Nasdaq is close to testing a key technical area while the Transports are not.

Right now the Nasdaq is within striking distance of their 150 day smooth moving average (2176.01). If they can get back above it and sustain trade above it; I think that they will pull the rest of the market higher (including the weak Transports).

If they fail to get back above it then I think that the entire stock market will sell off. I posted some charts to show you what has happened the last two times the Nasdaq failed to sustain trade above their 150 day smooth m.a., it was ugly.

Have a great week of trading.

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Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day) Purple (150 day smooth avg.).  Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year. 

E-mini Nasdaq Futures

Dow Transports

S&P Cash

Dow Jones Industirals

VIX

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Q&A from August 24th

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Thoughts on tomorrow's trade

We had bullish action today from both the Nasdaq and the S&P.  The S&P filled their Globex gap from August 8th and the Nasdaq succeeded in closing above their 150 day smooth moving average (2179.77).

The S&P is still a good distance away from their 150 day SMA so they are by no means out of the bear camp and into the bull camp.  So for leadership I go to the Nasdaq.

I think that the Nasdaq now is caught between a rock and a hard place.   They closed above their 150 day SMA but could not get in positive territory on the year (2216.00). The fact they closed above their 150 day SMA was bullish action but the next hurdle is to get back in positive territory for the year (2216.00).  I think we could see a choppy trade between those two prices until the market makes up its mind.

I think that the S&P, Dow Industrials, and Transports are going to sit tight and watch the Nasdaq for leadership.  The Nasdaq is by far the strongest market so if they continue to rally then the rest of the markets will probably follow suit.  The flip side is; if the Nasdaq fails to hold above their 150 day SMA then I think that we will see the rest of the market dip back down.

We also have a bunch of numbers coming out tomorrow and Thursday.  Anyone of those numbers could be the deciding factor on our direction.  Either way I will be watching the Nasdaq for leadership.

Have a great night.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day), Purple (150 day smooth avg.). Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year).

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The week ahead 8/15 - 8/19

The markets have seemed to settle down (at least for now).  The Sunday night Globex open was pretty quiet. Going into this week the Nasdaq and S&P are both at critical areas.

The Nasdaq 100 futures are currently sitting right on their 150 day smooth moving average (2179.25). They have been able to get back above it but have been unable to hold. I think that which ever way the Nasdaq decides to go from here will set the tone for the week.

The E-mini S&P is still a good distance away from their 150 day smooth moving average (1236.70) but they are faced with a different technical hurdle. On August 8th we had a big gap down at the beginning of a Globex session.  We now have a gap from 1189.00 - 1197.75. The inability to fill in the gap sends a signal of weakness to the market.  If we cannot fill it in then I assume that the Nasdaq will be back below their 150 day moving average and the bears will be feeling good about themselves.  If we do fill in the gap then I assume that the Nasdaq will be trading above its 150 day moving average and the bulls will be looking to take control of this trade.

These are the two major hurdles that I see heading into this week. If the Nasdaq can sustain trade above the 150 day smooth moving average (2179.25) then I think we could see some short covering across the major markets.  This could result in the Globex gap in the S&P (1189.00 - 1197.75)  getting filled in rather quickly.

Have a great week of trading.

E-mini Nasdaq daily chart.

E-mini S&P daily chart.

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Thoughts on todays action.

Just another wild day in the market.  Today was important because the Nasdaq Futures tested their 150 day smooth moving average and failed to hold above it.  I talked about this today when I was doing my weekly Q&A on Ustream.  During this recent break in the market we saw selling escalate a number of times due to important technical breakdowns (amongst other reasons).  The Nasdaq breaking below their 150 day smooth moving average was one of them.

If the Nasdaq cannot get back above an important moving average then that is bearish action for them and the rest of the market.  When the leader (right now the Nasdaq is the leader of rallies)  fails to get above important technical areas; that causes longs to cover.  That is what I believe you saw at the end of the day today.

Although we had massive gains in the market today the last hour of trading was bearish action.  We have now tried to get back above the 150 day smooth moving average four times and failed.  What tomorrow brings I am not sure but I will definitely be watching that moving average in the Nasdaq.  Have a good night.

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Q&A from August 11th

The week ahead 8/7 - 8/11

The futures are now open and they are 30 points lower.  While I am writing this I expect that to change about oh...... every second.  But for now I want to talk about what is happening from a technical stand point.

We are trading below the 150 day smooth moving average in every major market and we also had a Dow Theory confirmation telling us that the trend is now bearish.  Not good for the bulls.  Like I always say "when news and trend coincide you see the biggest moves."  That is what we are seeing right now.

So what are traders thinking about going in on Monday morning?

I think that traders want to see a capitulation low made right away so we can see where we are really at. How much lower do we have to go to find buyers?  I'm not sure, but I think we are close.  Once a short term low is made we can start the talk....was this the correction or are we in a bear market?  I don't think that we will know that answer for weeks or even months to come.  Once a short term low is put in then we can go back to trading technicals and stop trading off of fear and panic.

"Keep it light and keep it tight" a fellow trader used to say to me.  That advice definitely applies in this market.  Remember to trade your plan and be able to come back tomorrow.  Have a great week trading.

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We have a Dow Theory confirmation

The Dow Industrials and Dow Transports have now made new lows for the year at the same time. This means that we have a Dow Theory confirmation that the trend has turned bearish.

What does this mean going forward?

Sell rallies until the market proves you wrong.....or shows you that it can hold support levels.

I think that this is what happens when you have Government involved with the markets. QE2 changed the way the market was going to naturally trade. We rallied and rallied and rallied without anyone thinking twice about buying it. Funds made a ton of money (if they were long) and everything appeared that it was back to normal.

On to tomorrow mornings unemployment number.

This could possibly make or break this market for the next month or so. If this number is bad we could be in for another sell off tomorrow. We broke all of the major support levels and we have a Dow Theory confirmation the trend is bearish. Not good for the bulls, really good for the bears.

The bulls better pray that this number is good and I mean really good or we could continue to sell off squeezing everybody out.

To all the newer day traders out trying to trade in this volatility;  remember to follow your trading plan and stick to your daily limits.  Remember to leave every day being able to trade tomorrow.  Have a good night.

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Q&A from August 4th

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Thoughts on todays action.

This morning the market shook out some more longs.  The E-mini S&P futures opened just above the 150 day smooth moving average (1244.25) and we started to rally giving the bulls some hope.  That didn't last long.  Sellers came back in and then we started selling off. Once we ended up violating the 150 day smooth moving average it was off to the races making new lows for the year.

That was bearish action but the market rebounded hard off of the lows.  The S&P ended the day with a 0.5% gain and back in positive territory for the year.  The bulls are 1 for the last 8 trading days.

What was interesting to me was that once again we have a Dow Theory non-confirmation.  The Transports made new lows for the year and the Dow Industrials didn't.  The Nasdaq is also keeping its distance from their lows for the year.

What does this mean for the market?

Confusion is my answer.  We cannot get all of the major markets on one side or the other.  That just means stick to day trading and let the long term guys try and figure this mess out.  Make sure that you have the right trading plan for this kind of volatility or you could get burned trading this market.  I look forward to tomorrow it should be another exciting day.  Have a good night.

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Will the U.S. get downgraded and where is the stock market headed?

Today was a reminder that there is no hiding from these debt issues.  I talked with a Bond trader today after the close and his first words to me were "we are going to get downgraded".  Is he right?  I have no clue but the market tells me that traders are betting on it.  Where is good old Bernanke?  The fact is the Government is out of bullets and traders are betting that we are heading for a double dip recession.

I would bet that one of the major business news networks has either Nouriel Roubini or Meredith Whitney on tomorrow to talk about this.  These two have been saying this for months and they have been right. I love people that have guts to tell us what we don't want to hear (right or wrong).

The question going forward is where is the stock market headed?

My answer is not what the bulls want to hear.  Today I wrote in my monthly newsletter about whether or not we are going lower, higher or range bound for the rest of the year.  Just after watching the stock market close today I can tell you that we are headed lower.  1255 was support for me in the S&P and we closed below that today.  I now think that we are headed to 1211.  1255 is my pivot.  If we get back above it and hold we could trade back up to 1300 (where I would sell'em again).

Tomorrow is going to be an interesting day because all hell could break loose.  The market is in panic mode and there is no where to hide except Gold.  Keep it tight and hold on because  the party could just be starting.  

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What I changed that helped me become a successful trader.

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August Newsletter

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August Newsletter

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