JSL's Strategy Lair

I like your thread, will follow it more closely.

Gut feeling tells me that we'll see sideways action untill next week (OP EX), and I'm still biased towards a downward correction to ring in the new years.

But then again, I'm no market maker.
 
My opinion of todays action is this. . .

It was all based upon talk. Basically, a man with a cell phone talked it up. Then some other analysts came out to applaud.

Suddenly the audience started to ask questions such as "who is going to provide the chips for the cell phone". Then all of the dog chip makers, like Marvell, started to rally based upon rumors and speculation.

Some chartists in a closed room somewhere, those guys who dont pay attention to this noise, saw the NDX rise and said to themselves, gee, the sideways action is over and then you had a whole bunch of people running into stocks because they saw a line on a chart go to a certain point.

Now there was a press release tonight about Cisco sueing Apple. Uh-oh, now what happens if the cell phone gets delayed. Apple shares wont go down because everyone loves Steve Jobs, but what about all the dogs that went up like Marvell. Will their audiences be so forgiving?

So I have to question a rally such as this that is basically mob behavior based upon a new cell phone. That is, a new cell phone that many people cannot afford and that wont be put up for sale for months. Lets not forget that the service is Cingular which drops calls all day long and there seems never to be a strong signal. Now with the Cisco suit, it may not even be named the IPhone afterall. Uh-oh...

The Fed didnt lower interest rates today, there was no great economic data, not any significant companies reported great earnings. . .it was all about a man in jeans waving a cell phone in the air. Its almost as silly as a bald headed man pressing red buttons on national television and driving up the price of a stock that many earnings calls and analyst upgrades could have never done.


Quote from JSL_Capital:

A look at the U.S. equity market on January 10, 2007

Here are some charts with my views.

NDX is now the strongest of the bunch:
http://img100.imageshack.us/img100/6125/ndxdailyod8.png

S&P and Dow still seem unconvinced about going higher yet:
http://img172.imageshack.us/img172/8468/spdailyao6.png
http://img100.imageshack.us/img100/2580/dowdailysx2.png

There are some gaps that are acting as support and resistance per this S&P 60-min chart:
http://img153.imageshack.us/img153/1772/es60minmf7.png
More...
 
Thanks Decel for enjoying my thread. The thread forces me to organize my thoughts and hope it's beneficial to other traders as well, even if just a little.

thehangingman, you described the situation well; like you say, it seems to me that the market (especially growth stocks) is showing signs of mania/mini-bubbles driven by speculators (who would bet on a PHONE that has yet to have been sold; that has its name being challenged; that will compete in a market with a bevy of tenured competitors and shrinking margins) and technical analysis only traders. This makes me think that the correction could eventually be a lot more severe than people would like to accept, but that's my bias talking.
 
I was just introduced to bullish percent indicator charts. It appears that every sector of the market has topped and turning the path on the bullish percent indicator charts. The only exception being energy and that is at 30% and trending lower.

I have a feeling when the bullish percent indicator for energy hits 12% and starts to turn around then the DOW will start its downward trend.

In thinking out the situation, last year's traders are probably very tired out by now and will probably take an early vacation. Last year, I had many friends who went on a vacation in May just like the saying goes.

However, I think a lot of traders are satisified with what they made last year and will probably take off for a bit in February and March when the market starts getting sideways.
 
The person who runs emini-watch.com also noticed the up/down trendline cross on S&P/ES (if the webmaster of that site sees this msg, I like your site! & what's your handle on ET?). We're at crossroads, with more and more bullish news coming out day after day, with the exception of some notable profit warnings by some household names (but hey, bad new is the new good news!). Will the market fade the improving economic news or will it be a catalyst for yet another run up (some floor brokers think 1450 on cash is a done deal). We're at a critical juncture with a lot of consolidation going on.
 
Posted below are charts of major U.S. indices with some notable trendlines drawn on them. It seems that NDX and SPX are near trendline congestion area, and it seems that the ST upside is rather limited, even if another leg of rally is to occur after some pull back. Dow, on the other hand, is not confined to any significant trendlines near its current price, aside from the previous all time high made on Jan 3. Overall, the market is primed for a rally in preparation of upcoming earnings reports (price action suggests the market expects optimistic guidance as well), but caution is warranted (AMD and SAP last week reminded us we're just a few earnings warnings away from a 10% correction).

S&P had a short term trendline breakout on Friday but it is hanging below another long term trendline.
http://img300.imageshack.us/img300/8108/spdailyxy8.png

NDX has had a non-stop rally of over 100 pts in the past few weeks and it may pull back a little before deciding where to go next.
http://img57.imageshack.us/img57/7460/ndxdailyig3.png

Dow's upside is not limited by any significant trendline until 12700 area but it is still slightly below the Jan 3 all time high, which may act as a resistance.
http://img409.imageshack.us/img409/2360/dowdailymg4.png
 
Here's a look at the Dow and the S&P on Jan 16 2007

The Dow has fought its way back up after a feeble start in the beginning of the year. With my own previous conjecture that the Dow would have topped by the second week of January shaken by the recent price action, it is time to regroup my thoughts and anticipate the next move the market may take. With IBM breaking above 100, MO about to break up (they are 2 of the biggest components on the Dow) and inflation reports due out later this week (PPI and CPI) that are likely to 'fuel' another round of market rally, thanks to falling oil and retail goods prices, low to mid 12700 area on the cash index is not out of question. Wild cards are the Fed's Beige book tomorrow (which has acted as short term sell off trigger more than as catalyst for a rally in the past few months) and the market's reaction to earnings guidance.
http://img293.imageshack.us/img293/8420/dowdailylx4.png

This is a chart of the S&P with EW numbers (yes, they are subjective! But EW is useful in so far as determining the broad market trend; less so when it comes to predicting reversal points). 'i' and 'iv' did overlap, but just barely, so I'm letting the current count stand, until proven otherwise. This current uptrend being the 'v' of the 5th wave (so called the fifth of the fifth), aside from the fact that the current rally has been on going for the past 6 months, one should be cautious taking either side.
http://img392.imageshack.us/img392/2010/spdailyre3.png
 
Here's a look at the Dow and the S&P on Jan 17 2007

OE is causing some intraday gyrations this week (i.e an options group spoiled a move up this morning on ES by dumping 'a few' contracts on locals on the floor, though that didn't stop the ever ubiquitous lunch time stealth rally from occurring) though they seem like blimps on longer time frames. A market that doesn't pull back is like a person who doesn't rest and we've seen some consequences of restless markets in the past. We don't even have to go back to the dot come bust or the Black Monday in '87; just take a look at what happened to the crude oil last two years and reminisce the euphoria on the way up (was it a GS analyst that jumped the gun and said we were headed for $100 first?) and the pessimism we have currently, now that we've come down 30% from the top (though a market that volatile will probably take a while to consolidate). Though the market is showing no signs of pulling back, that should be a predicate for one to be cautious, either being with the trend or against.

The daily Dow chart: http://img407.imageshack.us/img407/1436/dowdailykd2.png

ES chart in 60 min interval: http://img407.imageshack.us/img407/2316/es60mingi9.png

S&P Index chart in 60 min for comparison: http://img407.imageshack.us/img407/2523/spx60minkm5.png
 
Looks like breakout is to the downside, blowing through supports at least for now. S&P and Dow are still fighting this morning after the NDX breakdown though.
 
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