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ES NQ Futures Trading
- Thread starter Jahajee
- Start date
"The current market is a challenging one in many respects, not the least of which is the understanding that it can't seem to make up its mind where it wants to go. The indecision is not that surprising. The economy and earnings are no longer in a state of freefall, but they are still falling as the unemployment rate continues to rise along with the personal savings rate, home foreclosures, government intervention, and geopolitical concerns. In brief, the market is stuck in a rut, much like we thought it would be as the summer progressed and as the requirements to keep the spring rally going got more demanding."
"Month-end Battle for 919 on the SPX
This week started off very bearish with the SPX dropping aggressively out of a mini-3-day Bearish Flag pattern on Monday for a -3% loss, closing below its 50-day moving averages in the process. However, on Tuesday the steep correction found support along its minor mid-May uptrend line near 888/890. Since then we've seen a decent rally here for the month-end "mark-up" with the SPX reclaiming its 50-day moving averages to challenge the May Close of 919. As I've pointed out in previous columns, price action tends to gravitate towards the prior month's closing price around the week of month-ends, particularly quarter-ends.
Looking at the SPX chart below, we see the Positive Divergence/Double Bottom in RSI-5 has played out very nicely, so hopefully you leaned Long on weakness early this week, particularly among a beaten down Energy and Commodity sector and a a strong performing Technology group. For this Friday and Monday, market internals are looking short-term "overbought" on this bounce, so you'll want to consider booking some profits and start considering the Short-side above 919. I outlined a potential Head & Shoulders Top that could be developing over the last 2-months, suggesting we could be in for a serious correction during this summer if the 880 "neckline" support is broken. The Fibonacci Resistance levels off the current June range lie at 914, 922, 930 (38%, 50%, 62%).
On a side note, don't forget the old axiom of "Sell in May and Go Away." The time frame between Memorial Day and Labor Day is often referred to as the "summer doldrums" in which the market action is "corrective" and "consolidative" in nature. The October through April time frame tends to be more of a "trending" environment. Be aware of this seasonality and adjust your trading plan accordingly. "
This week started off very bearish with the SPX dropping aggressively out of a mini-3-day Bearish Flag pattern on Monday for a -3% loss, closing below its 50-day moving averages in the process. However, on Tuesday the steep correction found support along its minor mid-May uptrend line near 888/890. Since then we've seen a decent rally here for the month-end "mark-up" with the SPX reclaiming its 50-day moving averages to challenge the May Close of 919. As I've pointed out in previous columns, price action tends to gravitate towards the prior month's closing price around the week of month-ends, particularly quarter-ends.
Looking at the SPX chart below, we see the Positive Divergence/Double Bottom in RSI-5 has played out very nicely, so hopefully you leaned Long on weakness early this week, particularly among a beaten down Energy and Commodity sector and a a strong performing Technology group. For this Friday and Monday, market internals are looking short-term "overbought" on this bounce, so you'll want to consider booking some profits and start considering the Short-side above 919. I outlined a potential Head & Shoulders Top that could be developing over the last 2-months, suggesting we could be in for a serious correction during this summer if the 880 "neckline" support is broken. The Fibonacci Resistance levels off the current June range lie at 914, 922, 930 (38%, 50%, 62%).
On a side note, don't forget the old axiom of "Sell in May and Go Away." The time frame between Memorial Day and Labor Day is often referred to as the "summer doldrums" in which the market action is "corrective" and "consolidative" in nature. The October through April time frame tends to be more of a "trending" environment. Be aware of this seasonality and adjust your trading plan accordingly. "
End-of-month and Holiday seasonality would suggest market goes higher but these are not normal times and the 3-month 35% rally looks like it is running on fumes.
"In summary, the indicators are mixed, with $VIX and market
breadth having quickly swung from bearish to bullish, leaving the
equity-only put-call ratios and the $VIX futures premium as sell
signals. All of these are valid indicators with good track records.
Since they are at odds, it seems to say that the trading range environment will persist..."
"In summary, the indicators are mixed, with $VIX and market
breadth having quickly swung from bearish to bullish, leaving the
equity-only put-call ratios and the $VIX futures premium as sell
signals. All of these are valid indicators with good track records.
Since they are at odds, it seems to say that the trading range environment will persist..."
"Leadership Stock Ratio Update for June 25th., 2009 ... (See today's chart below.)
Every night, we get a count of the Very Strong Leadership stocks and a count of the Very Weak Stocks in the Broad Market. From this data, we create a Ratio showing the advantage or disadvantage Leadership stocks have over the Broad Market.
The result shows if Leadership stocks are growing faster than the broad market (a rally condition), or if Leadership stocks are falling relative to the broad market (a negative condition). (In market corrections, the Ratio goes Negative indicating that Weak Stocks have outnumbered the number of Strong Stocks.)
So ... what is our Leadership Stock Ratio showing now?
Well, on March 23rd, the Leadership Ratio finally went positive and started to pull the Broad Market up.
The Leadership Ratio continued to trend higher until May 13th. when the primary trend's support line was broken. That ended the primary move, and was the beginning of a secondary up trend on the Leadership Ratio.
On June 2nd, that second Leadership up trend hit its peak when it tested the resistance line at Label 1 and failed to penetrate it. And then recently, on June 15th, that second Leadership up trend had its support line broken to the downside. The market has been moving lower since that break on the 15th. * See the chart below for the Leadership Ratio action on these dates.
What now?
Well, our Leadership Ratio is down very low, but it still positive ... so here is the Big Question right now:
Which Condition will prevail in the coming days?
1. Will the Leadership Ratio start a third up trend?
2. Or, will the Leadership Ratio move down and go negative which would set the motion in play for a correction?
3. Or, will the Leadership Ratio stay very close to the zero line which has historically correlated with a "sideways market"?
Well during the past few days, our Leadership Ratio has been moving "close to its zero line" which would indicate a sideways market condition. In the coming days, this will be an important indicator to watch in order to see if it shifts to a "Condition 1 or 2". "
Every night, we get a count of the Very Strong Leadership stocks and a count of the Very Weak Stocks in the Broad Market. From this data, we create a Ratio showing the advantage or disadvantage Leadership stocks have over the Broad Market.
The result shows if Leadership stocks are growing faster than the broad market (a rally condition), or if Leadership stocks are falling relative to the broad market (a negative condition). (In market corrections, the Ratio goes Negative indicating that Weak Stocks have outnumbered the number of Strong Stocks.)
So ... what is our Leadership Stock Ratio showing now?
Well, on March 23rd, the Leadership Ratio finally went positive and started to pull the Broad Market up.
The Leadership Ratio continued to trend higher until May 13th. when the primary trend's support line was broken. That ended the primary move, and was the beginning of a secondary up trend on the Leadership Ratio.
On June 2nd, that second Leadership up trend hit its peak when it tested the resistance line at Label 1 and failed to penetrate it. And then recently, on June 15th, that second Leadership up trend had its support line broken to the downside. The market has been moving lower since that break on the 15th. * See the chart below for the Leadership Ratio action on these dates.
What now?
Well, our Leadership Ratio is down very low, but it still positive ... so here is the Big Question right now:
Which Condition will prevail in the coming days?
1. Will the Leadership Ratio start a third up trend?
2. Or, will the Leadership Ratio move down and go negative which would set the motion in play for a correction?
3. Or, will the Leadership Ratio stay very close to the zero line which has historically correlated with a "sideways market"?
Well during the past few days, our Leadership Ratio has been moving "close to its zero line" which would indicate a sideways market condition. In the coming days, this will be an important indicator to watch in order to see if it shifts to a "Condition 1 or 2". "
"Stock Indices dropped to new recent lows,
increasing the potential for an overall decline into July
6--10, when several cycles and indicators could reach
fruition. These new lows reset the time for when a
secondary peak is possible. The daily trend pattern
now points to June 29th, but would need corroboration
from other indicators.
This could be validating two intriguing short-term
cycles⦠Stock Indices have been trading in line with a
6-trading-day cycle. This Cycle Sequence began with
the May 7th peak and then included the May 15th low,
May 26th low, June 3rd low, June 11th high and June
19th high. The next two phases come into play on June
29th and July 8th.
A related 12-trading-day Cycle Sequence
connects the April 21st low to the May 7th high to the
May 26th low to the June 11th high. The next phase
comes into play on June 29th⦠and should be a high
(lower high). A rebound into that date - which could
also include the potential for a test of 1500/NQU (see
6/20/09 Weekly Re-Lay) - is possible."
increasing the potential for an overall decline into July
6--10, when several cycles and indicators could reach
fruition. These new lows reset the time for when a
secondary peak is possible. The daily trend pattern
now points to June 29th, but would need corroboration
from other indicators.
This could be validating two intriguing short-term
cycles⦠Stock Indices have been trading in line with a
6-trading-day cycle. This Cycle Sequence began with
the May 7th peak and then included the May 15th low,
May 26th low, June 3rd low, June 11th high and June
19th high. The next two phases come into play on June
29th and July 8th.
A related 12-trading-day Cycle Sequence
connects the April 21st low to the May 7th high to the
May 26th low to the June 11th high. The next phase
comes into play on June 29th⦠and should be a high
(lower high). A rebound into that date - which could
also include the potential for a test of 1500/NQU (see
6/20/09 Weekly Re-Lay) - is possible."
"
SHORT TERM TREND Bearish
INTERMEDIATE TERM TREND Bullish
Weâll we did have a rally and breadth was quite good, but the market sold off considerably from its highs. Part of the problem was that Congressman Darrel Issa accused Ben Bernanke of a cover up in the B of A â Merrill Lynch situation. This seemed to cast a pall on the market after about an hour and one half of trading. Talk about something right out of the blue.
Certainly the FOMC communiqué did nothing to dampen spirits. The Fed said that the economy was slowly improving and that they would keep rates low to allow that to continue.
We continue to be oversold by many short term measures and normally we would look for a multi day rally under these conditions, but the fact remains that the S&P 500 and most other important indices remain in a pattern of descending lows and descending highs on the daily charts. Regardless of the oversold condition, we have to wait until that changes.
Iâm also a bit concerned that we became oversold as shown by 4 day RSI and then became oversold again (arrows).
BOTTOM LINE:
Our intermediate term systems are on a buy signal.
Short term traders sold the SSO at 25.10 for a profit of .29. Since it was a one half position, the profit was .15. Stay in cash on Thursday."
SHORT TERM TREND Bearish
INTERMEDIATE TERM TREND Bullish
Weâll we did have a rally and breadth was quite good, but the market sold off considerably from its highs. Part of the problem was that Congressman Darrel Issa accused Ben Bernanke of a cover up in the B of A â Merrill Lynch situation. This seemed to cast a pall on the market after about an hour and one half of trading. Talk about something right out of the blue.
Certainly the FOMC communiqué did nothing to dampen spirits. The Fed said that the economy was slowly improving and that they would keep rates low to allow that to continue.
We continue to be oversold by many short term measures and normally we would look for a multi day rally under these conditions, but the fact remains that the S&P 500 and most other important indices remain in a pattern of descending lows and descending highs on the daily charts. Regardless of the oversold condition, we have to wait until that changes.
Iâm also a bit concerned that we became oversold as shown by 4 day RSI and then became oversold again (arrows).
BOTTOM LINE:
Our intermediate term systems are on a buy signal.
Short term traders sold the SSO at 25.10 for a profit of .29. Since it was a one half position, the profit was .15. Stay in cash on Thursday."