technical trading
Day Trading Course, S&P 500 moving into resistance with investor confidence at long time lows
The S&P 500 has just kept on moving, occasionally taking nothing more than a quick glance into the rear view mirror. This market has surpassed most people’s (including my own) expectations for this multi-month rally. But just because the market continues to slowly creep onwards into the sky, doesn’t necessarily mean that the bear isn’t poised behind the curtain waiting to come out for his turn on stage. (see below)
Some degree of profit taking in a market such as the one we have seen recently is inevitable. The question will really be to what extent it occurs? Previously, the last time the VIX reached the current lows it is seeing now we have witnessed sell offs ranging from the 20-30% area in the Dow Jones and S&P 500. While history does not necessarily repeat itself, often similar circumstances and situations do produce similar results. A key factor in the recent markets has been the underlying secretive QE3 and Euro zone swaps that have provided markets with billions of new dollars being injected recently into the markets, driving stock and other equity prices up while no real new value is being created as with most real bull markets. In fact, sentiment right now is a more conservative approach with a higher aversion to risk due to large and quick market swings. Seems light volume is showing that most investors are not buying into the current state of higher prices and doctored earnings. 
With pressure now on Gold, Silver and the Eur, the S&P could see a continue to float a bit higher on to 1407, 1421 or even 1445, but without the new highs coming early into the week prices could return to test the previous area’s of support in the 1370, 1350, and 1334 area’s. 
Trade what you see, I’ll see you at the starting line!
Day trading course will be in your area soon, join us for Day trading education in Calgary Alberta on May 5-7. Contact us for more details and to register.
The S&P500 emini futures is one of the largest professionally day traded markets in the world. Our Day trading course focuses on training you on how to see price and direction in the marketplace and how to leverage your strengths to take a profit out of the market.
Disclaimer: day trading is high risk, do your own work : The efficacy of both technical analysis and fundamental analysis is disputed by efficient market hypothesis which states that stock market prices are essentially unpredictable. Be responsible for your trades, do your own work and never rely on others. When searching for a Day trading course, be sure you understand the risks involved in trading.
Day Trading Course, Dollar, Yen, Aud, Gold, Week in Review
The dollar was stronger for most of the week against the Euro, Pound and Australian dollaras the theme of risk off, returned to the market place, reducing investor confidence. Commodities were under pressure, with gold and oil prices moving lower and equity bourses moving counter 2012 trends.
Day Trading Course teaches key entry and exit points for profitable trading in any marketThe dollar is likely to remain firm next week amid concerns that the global economy is losing steam. This dynamic should continue to drive positioning adjustments. Technical momentum may be supportive for the dollar as well after most of the majors failed to break the top end of their recent ranges. This should result in a reversal in the price action and may lead currencies to test the bottom end of their recent ranges as positioning adjustment continues. The flash reading of the euro zone PMIs disappointed expectations and failed to break the expansion level of 50, adding concerns that the economy has yet to stabilize. Germany’s manufacturing PMI even slipped to 48.1 from 50.2 in February. Next week, Germany’s IFO for March should help crystallize the near-term economic outlook. The combination of the weak February retail sales report and the downwardly revised figures in January brings into question the recent resilience of Britain’s economy. The dovish surprise from the recent minutes also keeps open the possibility of another round of QE in May. The potential for further policy easing should remain a headwind for sterling against the dollar but our sterling outlook against the euro remains more constructive amid renewed concerns over the economic outlook in the euro zone. Recent data disappointments in China (this week’s HSBC PMI Flash) have weighed on AUD/USD. Softer domestic data has also increased the probability that the RBA moves to cut interest rates in May. Expectations of a rate cut from the OIS have increased recently, with the OIS now pricing in roughly 60% chance of a rate cut in May, up from 48% last week. Current positioning also leaves AUD and NZD vulnerable to further adjustments. Day Trading Course trains students in important risk management techniques to always take minimal risk while maximizing profits. |
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| The Australian Dollar Breaks DownThe AUD/USD broke through resistance levels near 1.046, and is now poised to test the 1.03 levels. Momentum on the currency pair is negative. The MACD, moving average convergence divergence index has a negative index and created a sell signal this week. The RSI is moving closer to the oversold level but is still within the neutral zone.
Gold Prices Under Pressure Gold price test the 1630, support levels toward the end of the week, but were able to hold support level. With the 20-day moving average crossing below the 50-day moving average, additional negative momentum is likely to continue. This cross is generally a sign that a medium term trend is in place.
Day trading course will be in your area soon, join us for Day trading education in Calgary Alberta on May 5-7. Contact us for more details and to register. The S&P500 emini futures is one of the largest professionally day traded markets in the world. Our Day trading course focuses on training you on how to see price and direction in the marketplace and how to leverage your strengths to take a profit out of the market. Disclaimer: day trading is high risk, do your own work : The efficacy of both technical analysis and fundamental analysis is disputed by efficient market hypothesis which states that stock market prices are essentially unpredictable. Be responsible for your trades, do your own work and never rely on others. When searching for a Day trading course, be sure you understand the risks involved in trading. |
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Day Trading Course, Despite recent gains, S&P still stuck in bear market?
Day Trading Course teaches support and resistance necessary to navigate the markets.
This is an article I read this weekend that I enjoyed, and though you might too. It is exactly what I am seeing so I have not changed it at all. Enjoy….
Any talk about a continuous bear market is about as popular as hemorrhoids. In fact, suggesting the presence of a bear market seems almost as socially unacceptable as talking about hemorrhoids.
But just because it’s hidden behind a veil of silence doesn’t mean it doesn’t exist. In fact, the less Wall Street talks about a bear market, the more likely there are to be falling prices. Just think of April 2011 (shortly before the summer meltdown) or April 2010 (shortly before the ‘Flash Crash’).
Unfortunately, sentiment is no longer fail proof (we’ll discuss why in a moment). The absence of any fear in December 2010 for example had no immediate consequences.
Fortunately, there are other measures and indicators to gauge whether this is a new bull market or a giant bear market rally. Here are some:
Before we talk about alternate measures of strength and weakness, supply and demand, it’s important to establish that price is the only measure that counts. But because price is often deceptive it tricks investors to move in precisely the wrong direction at the worst of time. The more you know, the more likely you are to call a ‘price bluff.’
Day Trading Course teaches volume and how to read it to see the direction of the markets.
Trading Volume
Trading volume measures the enthusiasm of buyers and sellers and is a totally independent variable from price.
The first chart below illustrates NYSE trading volume. The gray bars reflect daily volume. I’ve added a 50-day SMA to smooth out the daily peaks and valleys and allow for an easier volume trend analysis. The 50-day SMA shows that volume peaked in August 2007 and has since declined.
Obviously, the larger-degree trend for volume has been down. Particularly noteworthy is the drop in trading volume since the March 2009 low (black box). Various stock indexes like the Dow Jones (DJI: ^DJI – News), S&P (SNP: ^GSPC – News), Nasdaq (Nasdaq: ^IXIC – News), and Russell 2000 (Chicago Options: ^RUT) are up more than 100% since March 2009. Trading volume, however, is down in excess of 40% over the same period of time. What does that mean?
In his book Technical Analysis Explained, Martin J. Pring explains the significance of this: ‘Rising prices and falling volume are abnormal and indicate a weak and suspect rally. This type of activity is also associated with a primary bear market environment.’
Ouch, the long-term picture doesn’t look good. What if we zoom in to the short to mid-term time frame? The second chart plots the S&P 500 (weekly bars) against a 5-day SMA of trading volume. We see that since the 2007 market top, stocks have rallied on extremely low volume (red arrows). Periods of declines, on the other hand, were accompanied by massive trading activity. Technical analysis 101 says that’s bearish.
Volume Abnormalities Explained
Lowry’s has been monitoring buying and selling pressure for over 70 years and notes that contracting supply rather than expanding demand fueled the rally from the October low. The absence of demand rarely bodes well from prices (that universal law applies to baseball cards on eBay as well as German luxury cars and yes, stocks).
Demand would be dismal (and prices much lower) if the government (domestically and abroad) didn’t artificially prop up prices. QE2 in 2010/11 in the U.S. and about 1 trillion euro worth of long-term refinancing operations by the European Central Bank, have force-fed money into the market. Low trading volume is a dream for central bankers, as a little bit of artificial demand in a small market creates a bigger
splash than in a highly traded market.
Practical Value of Volume, Breadth and Momentum Data
Volume, breadth, and momentum indicators help evaluate price action. Think of them as an x-ray image that reveals developments hidden from the naked eye.
Slowing momentum or weakening breadth, are often precursors of a market top. If you like charting stuff, take a moment to chart the percentage of stocks above their 10, 20 or 50-day SMA and you’ll see that more stocks are falling below short-term SMA’s, even as the prices of broad indexes move up.
Fewer stocks above their SMA, means that rising prices are driven by a small number of stocks (can you say Apple?). A tell tale sign of a weakening up trend. The McClellan Oscillator uses a formula to calculate moving averages of advancing, verses declining issues.
The Relative Strength Index (RSI) measures momentum of stocks. The RSI provides some valuable clues, especially since we are in a liquidity-driven momentum market.
In August 2011, we predicted new lows based on a typical divergence between price and RSI seen at major market bottoms.
This expected RSI divergence was one of the reasons the September 23, 2011 we expected that: ‘A bottom at 1,088 should spur a multi-month rally’ and explained that: ‘From its May high at 1,370 to its eventual low, the S&P will likely have lost about 300 points (22%). This kind of move validates a counter trend rally. The plan is to square short positions and buy long positions around 1,088. The rally, once underway, will probably re-inspire a certain degree of confidence into the market before it runs out of steam.’
Divergences Raise Red Flags
We currently see bearish divergences between the McClellan Oscillator and prices, and RSI and prices. While the S&P has recorded new highs, the McClellan Oscillator and RSI have not.
This doesn’t mean that prices can’t go any higher, but it cautions that either a push to the next resistance or a drop below important support could result in a sizeable correction. Some say corrections are healthy, but I say that corrections in such an overextended market can easily turn into some sort of meltdown. So, there’s no reason to hold stocks for better or for worse.
If resistance is reached or support is broken, it’s prudent to scale down long positions and perhaps add short positions.
In summary, technical indicators (and support/resistance levels confirm this view) point towards a rally that’s running out of steam. Long-term indicators (one of which is trading volume) suggest we are still within a bear market.
The only silver lining is provided by central banks force feeding banks and financial institutions (NYSEArca: XLF – News), and a spike in seasonal strength.
Day trading course will be in your area soon, join us for Day trading education in Calgary Alberta on Feb 25-27. Contact us for more details and to register.
The S&P500 emini futures is one of the largest professionally day traded markets in the world. Our Day trading course focuses on training you on how to see price and direction in the marketplace and how to leverage your strengths to take a profit out of the market.
Disclaimer: day trading is high risk, do your own work : The efficacy of both technical analysis and fundamental analysis is disputed by efficient market hypothesis which states that stock market prices are essentially unpredictable. Be responsible for your trades, do your own work and never rely on others. When searching for a Day trading course, be sure you understand the risks involved in trading.
