Market commentary

Market commentary for 10/19/2007

Good day!
Things can always be worse. That is the summary of Thursday's market action. Also remember that with Friday being option expiration day we could be in for some more choppy trading. On the 60 min charts we can see the kind of action we had on Thursday. The DIA and the SPY stayed in their trading channels and after a wild Wednesday, Thursday’s action brought a tight small daily bar. The QQQQ was again a different story and showed the strongest action and closed at its' daily high resistance area. Also we can see a 60 min triangle break up which resulted in its reaching its' previous high resistance.

http://www.ivicacharts.com/diagrams/2007/10192007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10192007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10192007qqqq60.jpg

The daily divergence continued. The QQQQ looks like it could break up, however the SPY and the DIA stayed under their 20sma and look like they have more weakness ahead. Again that will result in a high risk market action and with the addition of option expiration day we can expect a choppy Friday.

http://www.ivicacharts.com/diagrams/2007/10192007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10192007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10192007qqqq.jpg

It will not be unexpected to see the indices explode up, and in another second explode down. Since GOOG reported Thursday after the close, it is very possible we will see a gap in the morning. I don’t have a strong bias with the direction of the gap and I don’t have great expectations for trading on Friday (I’m out of market anyway). If I had to take a guess I would say the long side is more probable. The QQQQ could see new highs with choppy intraday action. There are two ways to trade a choppy market. One is to stay away and the second way is to trade with less risk and use bigger stops. This will help you to avoid false moves which can results with many stops. Also we must be faster with profit taking. This will result with less good risk/reward opportunities, but it also will prevent being stopped many times. Also I expect that the risk of overtrading will be higher then usual. We had good day on Thursday, HANS, PCP, FTBK were good to us. Use the same patience on Friday. Less trades and waits for the right moment to enter and exit. I will be back on Monday and I wish you all a nice weekend and a super trading day.
Thursday, HANS, PCP, FTBK where good to us. Use same receipt for Friday. Less trades and waits to right moment. I will be back at Monday and I wish you all nice weekend and best trading day.
 
Market commentary for 10/22/2007

Good day!
I guess Google didn't save the planet. While GOOG beat earnings the rest of the market got spooked with large multi-nationals like CAT, MMM, and HON saying that internationally they are doing great but the US economy is slowing and their US business is poor. Those comments brought the "R" word back and with the market fearing recession, credit problems still lingering and the largest financials in this country continuing to disappoint and the sellers just kept on selling leading to a strong trend day down.

http://www.ivicacharts.com/diagrams/2007/10222007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/10222007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/10222007qqqqweekly.jpg

Looking at the daily and weekly charts of the SPY and the DIA you can see the 20sma is support on the daily and the 200sma is the support on the weekly. If those supports don't hold the market can be in for a larger correction to perhaps to the April lows. The QQQQ is the strongest index but that also sold off hard Friday. It too is at the 20sma on the daily with the weekly well above the 200sma.

http://www.ivicacharts.com/diagrams/2007/10222007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10222007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10222007qqqq.jpg

While today is the 20th anniversary of Black Monday, the market would have to be down 3100 points to match that day. It is interesting to note that oil and energy stocks took a big fall Friday, with the OIH falling 6 percent and SLB falling 11 percent.

http://www.ivicacharts.com/diagrams/2007/10222007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10222007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10222007qqqq60.jpg

While I remain bearish on the markets in the longer term (one month) it is unusual for them to break the 20sma and the 200sma averages on the first try and continue lower, that leaves the markets to either consolidate prior to continuing down or we can have a dead cat bounce. Either way new swing shorts are high risk.

Earnings will again determine the short term market direction with AAPL being the big one after the bell to today. That will impact the QQQQ while the SPY and DIA will be dependent on what the large multinational companies report.

I will monitor the intraday market and find some "own way" stocks and some scalps or day trades.
Good luck and let’s have a great trading day.

Ivica
 
Market commentary for 10/23/2007

Good day!
After strong selling pressure last Friday, this week started with a gap down but that was all the continuation from Friday that we had. The Indices filled their gaps very quickly with a strong buying pace and volume that indicates we saw a bottom for Monday. Intraday breathe stayed the same with the QQQQ still the strongest and the DIA the weakest. We can see that on the 60 min charts. If we take a look at the DIA and the SPY charts we can see that the selling pace is stronger than Monday's correction pace which indicates that the 60 min chart will serve as resistance and very possibly bounce to lows again. The 20sma (simple moving average) is always an important support/resistance area and this time with the additional 100sma daily resistance as well this resistance area will be all the stronger. On the QQQQ 60 min chart we can see that the bounce pace, after the morning gap is stronger than the selling pace to lows. After the morning bounce, the QQQQ stayed in a triangle formation for the rest of the day.

http://www.ivicacharts.com/diagrams/2007/10232007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10232007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10232007qqqq60.jpg

On the daily charts we can see that the 100sma is resistance for the SPY and the DIA, while the 10sma is for the QQQQ. Since all indices closed near their simple moving average resistance areas, Tuesday open will be the important indicator for the intraday action. AAPL has its earning report after the close and those results can produce a morning gap possibility which can influence the market resistance areas.

http://www.ivicacharts.com/diagrams/2007/10232007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10232007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10232007qqqq.jpg

If the indices gap up above their 100sma daily and 20sma 60 min resistance for the SPY and the DIA and the 10sma daily and 20sma 60 min for the QQQQ, then very possibly we will see a reversal into their previous support areas (red lines). For the QQQQ that means back to it’s' highs and on the 60 min chart that is also its' equal move resistance area after Monday afternoons consolidation. That will be much harder for the SPY and the DIA and I will expect more choppy and gradual action there. In case we see morning weakness and a gap down, I will expect the SPY and the DIA to trade back to Mondays low and possibly even new lows. For the SPY that will be the 200sma on the daily chart. I want to note that Tuesday morning will be important and it is important to pay attention to Monday's low as the support area and the daily and 60 min charts moving averages) as explained above. My focus will stay on intraday moves because during earning season and extended moves, every overnight trade will have additional risk.
Good luck and let’s have a great trading day.

Ivica
 
Market commentary for 10/24/2007

Good day!

The QQQQ reaches new highs!!!!! The day started with a gap up and as usual the QQQQ gap was the strongest and opened right at its' 60 min equal move and previous daily high resistance area. The SPY and the DIA gapped under their 20sma 60 min resistance area which I mentioned in yesterday's commentary as their strong resistance areas. It was very important to saw how the indices acted at their strong resistance areas. The QQQQ held it with a gradual correction in the morning while the DIA and the SPY filled their gaps after the first 60 min. The QQQQ, supported by the strong internet sector (GOOG, RIMM, BIDU etc), broke out to new highs which resulted in new daily highs and a strong intraday buying pace. The DIA and the SPY didn’t follow with as strong a reaction which resulted in a 60 min divergence and they closed the day barely at new intraday highs.

http://www.ivicacharts.com/diagrams/2007/10242007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10242007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10242007qqqq60.jpg

On the 60 min charts we can see the divergence and difference between the QQQQ and the SPY/DIA, especially on the DIA 60 min chart. Daily volume is again weaker than Friday’s selling volume and right now it is hard to believe that the DIA and the SPY will easily get back to their daily highs. The QQQQ can continue with its' own way but I will expect that the resistance area (red line) and 20sma will serve as strong resistance for the DIA/SPY on any bounce from Monday’s low. The daily divergence action will continue to bring high risk for swing trades.

http://www.ivicacharts.com/diagrams/2007/10232007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10232007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10232007qqqq.jpg

Possible morning gaps as a result of the earnings season will also continue to bring additional risk for overnight trades. Because of that the only safe area is staying with intraday action and individual names. My primary focus will continue to be scanning for strongest and weakest names depending on the market action at the open. AMZN's earning report after the close (better then expected, but AMZN is trading lower because of concerns about operating margins) can result with another gap in the morning. THO did very nicely yesterday, but it is important to know that we are staying with less risk then usual, because of the above explained reasons. I will use the same tactic for today. That means small risk for o/n trades and focusing on the strongest/weakest charts after the market open. Also I will use gap possibilities to find good risk/reward setups. If anyone has any questions, please feel free to contact me

Good luck and let’s have a great trading day.
Ivica
 
Market commentary for 10/25/2007

Good day!
When we take a look at the table above and the results, we could say that Wednesday was a day without much change. But if we take a look at the charts then we can see that Wednesday was a day with huge intraday moves in both directions. The day started with a gap down, and for a change the QQQQ had the biggest gap down while the DIA had the smallest. All day the action was different then it has been lately, because the DIA was the strongest which was not the case lately. After the gap down at the open, the selling pressure started and the DIA/SPY broke their 60 min bear flags with strong pace and strong volume. The QQQQ was the weakest and reached its' 20sma daily support area and previous support. During the doldrums, the indices formed a double bottom pattern and the reaction after that was the same as the action in the morning, but in the opposite direction, much like a mirror image.

http://www.ivicacharts.com/diagrams/2007/10252007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10252007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10252007qqqq60.jpg

The Indices traded back to their open areas and finished the day flat which we can see in the table above. The reversal volume was the same and after Wednesday's action we were right back to where we started. We have had larger daily bars which can result in a larger daily range action in the future. Again we don’t have a clear direction, because the QQQQ looks like it could see new highs again and Wednesday's volume supports that possibility. For the SPY and the DIA the situation is the same. It will be hard for them to get back to their daily highs because the reversal was very strong with strong selling pace. In addition both indices have strong resistance areas above. On the other side, the support areas are holding and Wednesday's strong volume helped to maintain that.

http://www.ivicacharts.com/diagrams/2007/10252007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10252007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10252007qqqq.jpg

How do we trade in this market action when we can see reversals in both directions? The SPY/DIA can bounce to their 10/20sma daily resistance areas and at the same time the QQQQ can reach new highs. Also, the DIA/SPY can stay between its' support and resistance areas (red lines), and the QQQQ can trade back to its' previous support area (red line on the daily chart). On the 60 min charts we can see a wild range that could continue and there is only one way to trade this kind of market. That is trading on small time frames, exactly like we did yesterday in the trading room. Scanning strong and weak sectors and looking for the weakest and strongest intraday setups will continue to be my focus. There will always be swing opportunities but much less then usual, and it is important that we have “own way” set ups that don’t react to the market action. Earning season will add risk because the morning gaps are more frequent so the risk on overnight trades must be smaller then usual (at least 50%). My morning focus will be again on gaps and possible gap setups, and intraday setups. Don’t forget that the “whole picture” (view on all time frames) is very important for a successful trade. Right now I don’t have much of a bias. In the future I will look for a larger correction, but for now I just go with the market action and that depends on the intraday action. If anyone has any questions, please feel free to contact me.
Good luck and let’s have a great trading day.

Ivica
 
Market commentary for 10/26/2007

Good day!
The large range continued. We did not see a lot of change from yesterday's action. We saw trading again between the range lines and once again the DIA/SPY were stronger then the QQQQ. If we look at the 60 min charts we can see action between the blue lines (range). The DIA is forming a bear flag channel for now with a wild range while the SPY and the QQQQ are staying in a wild base range.

http://www.ivicacharts.com/diagrams/2007/10262007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10262007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10262007qqqq60.jpg

On the daily charts the DIA is creeping up to its' 10sma resistance which is its' first important resistance area. The SPY is also close and for now is staying in a range, while the QQQQ is back to its' 20sma support area. There is not much more to say. While the indices stay in this range we will have the same market action and that is a hard market for swing traders because without any market direction, swing traders are without the market's support.

http://www.ivicacharts.com/diagrams/2007/10262007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10262007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10262007qqqq.jpg

There will always will be good trades like FELE (http://www.ivicacharts.com/diagrams/2007/10232007fele.jpg ) which we had, but there will be many less good opportunities. MSFT beat its' numbers and that brought the market higher after the close which could affect Friday's open. We could see a gap up. I will expect a choppier move up for the SPY/DIA, and for the QQQQ, I expect for it to stay in its' daily range. My longer term focus is on the short side, but I don’t expect any significant move before the FED meeting next week. Until then my focus will stay on intraday moves. If you are interested in an explanation how to trade a range market, please look at yesterday's market commentary.
 
Market commentary for 10/29/2007

Good day!
Friday saw very sloppy action after a strong gap up. That is the short explanation for Friday’s market action. The day started with a huge gap up and since the QQQQ closed near its' low on Thursday and opened above Thursday's high, the QQQQ was in bear trap formation at the open as well as at its' daily high area. At the same time the DIA gapped under its' 10sma daily resistance area (brown line), while the SPY gapped above its' 10sma daily and had room to reach its' 20sma. Everything was set for a strong run up in the morning; however the indices started with a correction right after the open. The QQQQ was the weakest and almost filled its' gap, but the 20sma on the 60 min held that move. The DIA and the SPY's gap size were not that large and both filled their gaps right at the open. After that most of the day was sloppy and good only for scalp traders. It was a choppy move up from the morning lows and the SPY/DIA broke their morning highs but the action was not tradable for much more then a scalp. When all was said and done, it was a worthless trading day without true strength or weakness. On the 60 min chart we can see that the DIA stayed in its' channel, the SPY reached its' previous high and the QQQQ stayed without any direction after the gap trap.

http://www.ivicacharts.com/diagrams/2007/10292007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10292007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10292007qqqq60.jpg

Let’s take a look at the weekly chart to see what we can expect for next week. The QQQQ closed strongly near its' highs and definitely we can see that the bulls are not done and that the QQQQ is ready for new highs with the next resistance (after high) being the $55 number resistance area. The SPY/DIA are not that strong and still have strong resistance to get back to their highs. The SPY weekly volume is interesting. On the weekly chart it is stronger then the selling volume the week before, but if we look at the daily chart, we can see that the volume declined on the bounce from the lows.

http://www.ivicacharts.com/diagrams/2007/10292007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/10292007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/10292007qqqqweekly.jpg

That is not something that we like to see on a move up when we are looking for a reversal, but on the daily chart we can see that the SPY/DIA bounce from the low is very strong, must stronger then we like to see for selling continuation. There are two options after that strong bounce from the lows. One is a triangle action that will result with a higher lows and lower highs. The second possibility is a reversal pattern (cup and handle) which will result with us trading back to the daily highs. We really can't know yet what will happen because the bounce action is still in process and we don’t know where it will stop. The QQQQ already started with a daily consolidation and right now it is impossible to predict direction, because the correction just started.

http://www.ivicacharts.com/diagrams/2007/10292007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10292007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10292007qqqq.jpg

My focus longer term will be more on the short side, but that can change anytime because if indices will show strength on Monday the QQQQ could see new highs and that could bring the SPY/DIA back to their high areas. Both have resistance overhead but lately we have seen that was not a big problem. The environment has continued to have higher risk because the move up had a decrease in volume and quite choppy intraday action. Generally, the bulls are not dead, they are just wounded. Will they recover or will they die, that is what we must see (rest time after move). My trading focus remains the same. Focus on own ways charts for swing trades and the strongest/weakest names for intraday moves (day, scalp trades). Earning season is still here and don’t forget that news will cause morning gaps which will increase risk for overnight trades. In Conclusion: After 3 weekly buying waves the indices need a correction and I will look for that, but I will be also be looking for another bounce to new highs for the QQQQ. If anyone has any question about the market expectations or chart explanations, please feel free to contact me. I wish you all a nice weekend and a very profitable upcoming trading week.

Ivica
 
Market commentary for 10/30/2007

Good day!
The indices move up on declining volume continued. The day started with a small gap up and the indices held that area all day. On the 60 min charts we can see the type of range action we had yesterday. That kind of action increased trading risk and the number of good opportunities. Scalp traders had some possibilities, while others had a more difficult day, because we didn’t have any support from the market. It stayed in a range all day and because of that most of the day was worthless for trading. On the charts we can see that the indices reached their previous support areas, which is resistance now and the rest of the day just consolidated under it.

http://www.ivicacharts.com/diagrams/2007/10302007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10302007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10302007qqqq60.jpg

On the daily chart we can see that the DIA reached its' 20sma daily resistance area (big resistance area). We can also see a daily volume decline which is not the type of action that we like to see for a healthy reversal. The SPY was stuck between its' 20sma daily support area and its' previous support, now resistance area (red line), while the QQQQ continued to fight its' daily high resistance area.

http://www.ivicacharts.com/diagrams/2007/10302007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10302007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10302007qqqq.jpg

Monday was the narrowest day in the last 7 days which will increase the possibility for a trend day on Tuesday. With the FED meeting tomorrow and Wednesday, however, I will use caution with that possibility. For a trend day, it is very important to follow the intraday 10/20sma (5/15 min) and the 60 min high/low area. Those tools will determine the strength/weakness and from there we can recognize what kind of risk management should be used. Overall, I think that the market is at a crossroad and I have been and will continue to be cautious. I take several trades every day continue to use small risk (less then 0.5% per trade) and then I do elimination. At the end that has resulted with several breakeven trades, a few small loss trades and some nice gains, like TTEC and AVP today. I’m a swing trader, but is foolish to push something that is against the market development. So, there is no change from yesterday's commentary. Same focus, same risk and let’s wait for some truly healthy market action in any direction.

Wish you all great trading day!!!!
 
Market commentary for 10/31/2007

Good day!
Another choppy pre FED trading day. The SPY and the DIA's opening gap suggested the possibility in the morning of action on the short side, because both opened under Monday's low which could bring sellers as result of a mini bull trap. But that was not the case. The QQQQ broke to new highs and kept the SPY/DIA from a selling continuation. On the 60 min charts we can see the QQQQ's pennant action with a choppy move up on light volume. That kind of action can result with a break down and that was one reason why I was not interested on the long side for more than a fast trade. On the other side, the DIA and the SPY struggled with their 20sma support area with light volume and we can see that before the close both lost that support area and broke down. The volume picked up, and the selling pace was much stronger than the intraday buying volume.

http://www.ivicacharts.com/diagrams/2007/10312007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/10312007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/10312007qqqq60.jpg

The QQQQ closed under its' resistance area (red line) and the SPY/DIA's daily 20sma was too great of a resistance for the first try. Usually the first try to break the 20sma will fall and that was case on Tuesday. We can see that the bounce was on declining volume and I will look for more of a correction from the daily resistance areas, but that can change after the FED meeting that we have today. It looks like everyone is waiting for that moment and because of that I will expect the same intraday action on Wednesday morning. On the daily charts the first support area is the 10sma (brown line) which will be the test for a possible break down to previous lows(SPY/DIA) or for consolidation under the 20sma if that support area will hold.

http://www.ivicacharts.com/diagrams/2007/10312007dia.jpg
http://www.ivicacharts.com/diagrams/2007/10312007spy.jpg
http://www.ivicacharts.com/diagrams/2007/10312007qqqq.jpg

Usually, when we have a FED day, we will see some action in the morning (often is up) and during the doldrums things will settle down and everyone will wait until the 14:15 pm EST FED decision. After the decision things start to pick up very quickly with strong volume and extended bars. This is a very risky time for trading and for me that is the time to sit it out and wait for the market to show its' direction. My bias is on the short side and on the longer daily/weekly correction, but we can never be 100% sure. It is best to wait and see and then come in and follow the market action. Holding open positions into a FED decision is higher risk so please pay attention to that.

Wish you all a great trading day!!!!
 
Market commentary for 11/01/2007

Good day!
After the FED’s rate cut the indices broke higher. The QQQQ made a new high while the SPY and the DIA broke above their 20sma daily resistance areas.
The action before the FED was expectable, especially after the gap up in the morning. Lots of time we will see strength in the morning before the FED announcement and we had the same situation on Wednesday. The problem was the pace and the volume. We saw a slightly choppy low volume move up and that was not worth trading if our focus is on low risk setups. It was a scalpers market. Everyone was waiting on the FED announcement and after the news, (rate cut) we saw a very strong 5 min move down with strong intraday volume. That was the first reaction on the 5 min chart and when the indices reached their support areas it was important to see the reaction on the 2nd wave and that one was again very strong and indices moved back to the area they were trading at before the announcement. Usually the 3rd wave will show the final direction and that was on the long side. The QQQQ broke to new daily highs. Intraday volume was strong and the pace was as well and that was a sign that the bulls are still here.

http://www.ivicacharts.com/diagrams/2007/11012007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11012007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11012007qqqq60.jpg

The Indices closed strong and on the daily charts we can see that the QQQQ reached its' $55 whole number resistance area, while the DIA/SPY closed above their 20sma resistance areas, but still under their previous support areas (red line). Now we have a situation where the QQQQ is at a strong daily number resistance area and the SPY/DIA are at their previous support areas which are their resistance areas now. The intraday break was on strong volume and pace and that suggests a strong opening on Thursday, however, nothing is ever certain.

http://www.ivicacharts.com/diagrams/2007/11012007dia.jpg
http://www.ivicacharts.com/diagrams/2007/11012007spy.jpg
http://www.ivicacharts.com/diagrams/2007/11012007qqqq.jpg

I will closely follow the market action in the morning and I’m very interested to see if we will gap in the morning or not. The reason for that is because I have noticed that several times in the past we have gotten the true direction the day after the FED and that is the reason why I closed Wednesday without any open position. In case the indices resistances will hold, we could see a strong move down which could lead to a possible trend day down. In that case I will look for swing short ideas, but if the indices stay strong my focus will be again mainly on intraday moves, day-scalp trades etc. -as we have done over the last few days. Despite the strong close, including the QQQQ high, I don’t like the market action for swing long trades with full risk. I will use the strength possibly for a maximum overnight trade with less risk then usual. If the SPY/DIA will break above their resistance areas (red line on the daily chart) then very possibly they will trade back to their previous highs which is still a very strong resistance area. All in all it is very important to see Thursday's open. From there I will decide what might happen next. If anyone has any questions please feel free to contact me.
 
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