One day the market looks bearish and the next day it looks bullish. Back and forth we go...where well end up nobody knows. That old saying has more meaning now than it has in years. This is actually a day traders dream. The more confusion the better! Confusion creates volatility and I love volatility.
I have been either talking or writing about this divergence between the major markets for months now and I am still not convinced which way the market is headed.
Can the Nasdaq lead us higher when the rest of the market remains weak? I don't think they can.
Can the Transports continue to lead us lower with a strong Nasdaq? I don't think that they can.
The market loves a leader but if the leader does not actually lead the rest of the markets in their direction; the leader will then end up a follower. That is why I think that we are seeing such high volatility. When the technicals in the Nasdaq start to break down we see a collapse across the board. When the Transports start to firm up we have huge up days.
The tug of war is between the Transports and the Nasdaq.
Historically when we have a weak Transports and Dow the rest of the market also remains weak. The current Dow Theory confirmation is that the trend is bearish. That would suggest that the rest of the market would be weak (everybody is except the Nasdaq).
Historically if we have a strong Nasdaq the rest of the market also rallies. The Nasdaq is currently trading above most of their major moving averages and they are in an uptrend (but the rest of the market is not).
Although I am not a complete Dow Theorist I respect it because I have seen it work many times in the past. I have also seen the Nasdaq lead the market. With the split picture that we are seeing I am just identifying which one is working that day. If the Nasdaq is strong and the Transports look firm; then I am more aggressive when I am buying breaks. If the Transports are weak and the Nasdaq is failing to hold support then I am more aggressive when I am selling rallies. If one is weak while the other is strong you have to be a scalper.
Eventually we will see the market make up its mind but until then I think that the big swings are imminent.
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Tuesday, September 27, 2011
Wednesday, September 21, 2011
Divergence between ES and NQ and how day traders can take advantage of it.
The S&P is acting like they want to re-test the lows of the year while the Nasdaq is acting like they want to make new highs.
How can you take advantage of this if you are a day trader?
I key in on the Nasdaq because they are more dominant in their direction. If the Nasdaq remains strong (by sustaining trade above their 200 day m.a.) then I am more aggressive when I am buying the S&P. If the Nasdaq is below their 200 day m.a. then I am more aggressive with my selling (until the Nasdaq gets to their next area of support).
An aware trader sees that the Nasdaq is stronger than the S&P and applies that knowledge to their execution.
I know to be a cautious seller of the S&P when the Nasdaq is making intraday highs. Also notice if the S&P continues to make intraday lows and the Nasdaq does not; I am then ready to cover my shorts or possibly reverse and get long. If the Nasdaq starts to fail at support then I am more aggressive with my selling in the S&P because they are already weak and a weak Nasdaq will only add grease to the fire.
Something else to remember about the upside leader of the market; they usually go through resistance with ease and a lot of times they come up short of support.
An aware trader sees that the Nasdaq is stronger than the S&P and applies that knowledge to their execution.
I know to be a cautious seller of the S&P when the Nasdaq is making intraday highs. Also notice if the S&P continues to make intraday lows and the Nasdaq does not; I am then ready to cover my shorts or possibly reverse and get long. If the Nasdaq starts to fail at support then I am more aggressive with my selling in the S&P because they are already weak and a weak Nasdaq will only add grease to the fire.
Something else to remember about the upside leader of the market; they usually go through resistance with ease and a lot of times they come up short of support.
This is how I adapt to the conditions of the market. Remember that every strategy is supposed to create a return on your investment but the executor of that strategy has the ability to greatly increase that return. Be patient and watch what is going on in other markets when you are executing your strategy.
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Futures Talk today at 1:30 ET
Live video from your Android device on Ustream
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Sunday, September 18, 2011
The week ahead 9/19 - 9/23
The market is on a teeter totter. One week it looks good for the bulls and the next week it looks good for the bears. The overall picture to me still looks moderately bearish aside from the strength that we are seeing in the Nasdaq. Even though I think the rest of the market looks moderately bearish the strength in the Nasdaq is so impressive that they might pull everybody else higher.
I want to talk a little bit about how I view the market in terms of the market leader.....I am always watching to see which market is the strongest in their direction or trend. For example; during the sell off in August the Transports were the weakest market by far. They were the weakest because they were first to make new lows of the year. They were also the first ones to get wide separation from their major moving averages. The Transports were the strongest in their direction (lower) which told me that they were the leader to the downside.
I think that we are now seeing the same thing happening with the Nasdaq only to the upside. The Nasdaq looks like they are on a run to test the highs of the year. This would also mean that they would create separation from their major moving averages to the upside. If this happens then I think that we will see all of the other major markets chase the Nasdaq higher just like they chased the Transports lower.
On to this week.......
We are just getting out of rollover and now heading into a two day FOMC meeting. I hate to say it but technicals are not the most important thing in this market right now. Although I believe that technicals are always the most important thing to focus on right now technical traders have to be small and nimble. With a strong Nasdaq and weak everything else this market can do anything.
For my big picture direction I will remain focused on the Nasdaq and how their trading according to their major moving averages. Like I said; technicals are not the most important thing heading into this week the FOMC is. But when the meeting is over then the technicals will become more relevant. I want to see if the FOMC meeting collides with the bullish trend of the Nasdaq or goes with it. Once the meeting is over I will be using the Nasdaq to help me identify the direction that this market is headed.
With the Nasdaq being the leader to the upside I will be watching to see if their technical levels hold. Regardless if the news is bearish they should pull us up. If they fail to hold then down we go. If the Nasdaq can take a hit from bearish news and hold above their major moving averages then that will tell me how strong the Nasdaq really is. If the Nasdaq fails to hold from bearish news then we know that they are not as strong as they appear to be. If the news is bullish then we could see a big rally across the board. (see charts)
Have a great week everybody and I look forward to seeing what happens.
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.
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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| E-mini Nasdaq |
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| S&P Cash |
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| Dow Industrials |
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| Transports |
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Wednesday, September 14, 2011
Sunday, September 11, 2011
The week ahead 9/12 - 9/16
Last week's battle was won by the bears. The last thing that you want to see before you go into 9/11 weekend is a selloff. At this point I am not sure if the selloff was just weak longs covering before the weekend or if we are now heading lower to test the lows of the year.
All of the charts that I posted are showing bearish action. Even though the recent action is bearish I still think that the market has a little bit of proving to do before I am fully on board with the bears.
The Dow Industrials and Transports have already proven to me that they want to go lower. Ever since the bearish Dow Theory confirmation on August 4th both markets have been sustaining trade below that area. This is extremely bearish action and all of the pressure is on the longs in those two markets.
The Nasdaq is the strongest market and they are giving hope to all of the bulls out there. As strong as the Nasdaq is they have also had their problems. They cannot seem to hold on to positive territory for the year and their 150 day smooth moving average. If the Nasdaq cannot sustain trade above these two areas then I think that the bears have full control of this trade. If the Nasdaq can hold above both their 150 day smooth moving average and stay in positive territory for the year then I think that we will see a choppy trade that favors a rally.
Last but not least we have the S&P. The S&P is usually the best indicator of direction but right now they are in limbo. The S&P cash is currently holding its daily uptrend (not by much but still holding) and currently below all of their major moving averages. If they can continue to hold their uptrend and then sustain trade above their measly 10 and 20 day moving averages then I think you may see some buyers come in and take us higher. If they cannot hold their uptrend then I think that lows of the year are in jeopardy (1101.54).
I expect somewhat of a wild week ahead after the action we saw on Friday. I think that this week may tell us a lot about the next few months. Have a great week of trading.
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.
All of the charts that I posted are showing bearish action. Even though the recent action is bearish I still think that the market has a little bit of proving to do before I am fully on board with the bears.
The Dow Industrials and Transports have already proven to me that they want to go lower. Ever since the bearish Dow Theory confirmation on August 4th both markets have been sustaining trade below that area. This is extremely bearish action and all of the pressure is on the longs in those two markets.
The Nasdaq is the strongest market and they are giving hope to all of the bulls out there. As strong as the Nasdaq is they have also had their problems. They cannot seem to hold on to positive territory for the year and their 150 day smooth moving average. If the Nasdaq cannot sustain trade above these two areas then I think that the bears have full control of this trade. If the Nasdaq can hold above both their 150 day smooth moving average and stay in positive territory for the year then I think that we will see a choppy trade that favors a rally.
Last but not least we have the S&P. The S&P is usually the best indicator of direction but right now they are in limbo. The S&P cash is currently holding its daily uptrend (not by much but still holding) and currently below all of their major moving averages. If they can continue to hold their uptrend and then sustain trade above their measly 10 and 20 day moving averages then I think you may see some buyers come in and take us higher. If they cannot hold their uptrend then I think that lows of the year are in jeopardy (1101.54).
I expect somewhat of a wild week ahead after the action we saw on Friday. I think that this week may tell us a lot about the next few months. Have a great week of trading.
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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| Dow Industrials |
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| Transports |
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| E-mini Nasdaq |
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| S&P Cash |
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Wednesday, September 7, 2011
Monday, September 5, 2011
Sunday, August 28, 2011
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.
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.
www.eminiexecutors.com 239-594-6876 info@eminiexecutors.com
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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| E-mini Nasdaq Futures |
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| Dow Transports |
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| S&P Cash |
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| Dow Jones Industirals |
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| VIX |
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Thursday, August 25, 2011
Wednesday, August 24, 2011
Monday, August 15, 2011
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).
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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Sunday, August 14, 2011
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.
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.
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| E-mini Nasdaq daily chart. |
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| E-mini S&P daily chart. |
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Thursday, August 11, 2011
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.
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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Wednesday, August 10, 2011
Sunday, August 7, 2011
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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Thursday, August 4, 2011
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.
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.
www.eminiexecutors.com 239-594-6876 info@eminiexecutors.com
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