Market commentary

Market commentary for 11/02/2007

Good day!
If you read my Thursday commentary you know why we didn’t want to stay in our overnight positions, despite the strong close after the FED rate cut. I have noticed lately that the true market direction will come the day after the FED announcement, and that is exactly what happened once again. After a strong Wednesday close, the indices opened with a very large gap down, especially the SPY and the DIA. Both opened near their Wednesday low and the break under that was a trap. When we look at the 60 min charts it looks very easy, however, that was not the case. The QQQQ didn’t want to cooperate all day and because of that after the strong selling pressure, the indices fell into a range. I almost quit with my continuation expectation for the afternoon, but then finally in the last hour, the indices started to move with the same strong pace as in the morning. On the charts we can see the buying pace into Wednesday's high and the selling pace on Thursday (blue lines). Obviously the selling pace and volume is stronger which adds to the probability of more of a correction from the weekly highs.

http://www.ivicacharts.com/diagrams/2007/11022007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11022007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11022007qqqq60.jpg

I don’t expect it will go smoothly, because we still must respect the bulls and if we look at the daily charts we can see that the QQQQ is still very strong and still above all its' support moving averages. True, Thursday's selling volume was again stronger then the buying volume, but we have had that same situation before and every time the indices trade back up. What is the different now? Possibly the difference is that the SPY and the DIA made lower daily highs which could be the start of new daily down trend. That is the big difference from before when the indices traded back to new highs. On the daily charts we can see that the red bars are much larger than the green bars and the red bars have stronger volume than that green bars. That is telling us that the bears are slowly taking control of the market. In other words, the bulls are tired now need rest. Will they just rest or will they disappear??? My focus will be on the daily DIA chart. I expect that the SPY/DIA will retest their previous lows, and after a rest we could see the 200sma daily support area which will be also be the equal move support area.

http://www.ivicacharts.com/diagrams/2007/11022007dia.jpg
http://www.ivicacharts.com/diagrams/2007/11022007spy.jpg
http://www.ivicacharts.com/diagrams/2007/11022007qqqq.jpg

At the same time, it is important to see if the QQQQ will join in the selling pressure or if the daily divergence will continue. If the divergence continues, my expectation will be smaller and the market action will be choppier and harder to trade. It is always easier to trade when we have synergy in the market. My bias is on the short side. We have the jobs report on Friday before the open and that news can move the market in either direction. Also earning season is still continuing and because of that I will continue to use less risk for overnight trades. I believe, for now, that the Indices have seen their daily/weekly highs but I don’t expect that the bulls will quit easily, without a fight. We have the possibility for a downtrend on the daily SPY/DIA charts, but we still don’t have it. Because of that it is still important to be cautious. My focus is still, as usual, on the strongest and weakest names. The difference is that for swing trades I’m more interested on the short side than on the long side. On Friday I will expect to see more back and forth action and consolidation after Thursday's strong move down. It is important to not overtrade and lose Thursday's profit. We rarely see two trend days in a row. I will closely follow the indices action, because depending on the consolidation we see on the 30/60 min charts, we can start to determine what to expect for next week. If we have a consolidation near the lows, then we can look for more selling on Monday. If we see a strong bounce, then we can look for choppy daily action which will not be good for swing trades. I will continue to do updates in the room. If anyone has any questions, please feel free to contact me.
Wish you all a great trading day!!!!

Ivica
 
Market commentary for 11/05/2007

Good day!
Friday brought the expected action after the strong trend move down on Thursday. The day started with a gap up, but the market didn’t have the strength to hold the gap and started with selling pressure right after the open. The QQQQ was again the strongest while the DIA was the weakest. The gap was filled but that was not the end of the selling pressure. The QQQQ reached its' 20sma daily support area and the SPY/DIA traded to its' previous daily low support area. That is a strong support area and after the extended intraday charts and strong daily support it was quite expected to see the indices start with consolidation. Since the selling pressure was very strong I didn’t expect a strong bounce, more whippy action from the intraday resistance (10/20sma 15 min) to the support (low of the day) area. After the bounce from the low, the indices traded back and formed a 15 min double bottom pattern which marked Friday's low. The rest of the day was choppy, but the last 30 min reversal period showed us that the bulls are still alive and wont give up control that easily.

http://www.ivicacharts.com/diagrams/2007/11052007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11052007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11052007qqqq60.jpg

After the last 30 min strong intraday bounce the QQQQ closed flat, while the SPY/DIA closed in small negative territory. Friday’s volume was strong which suggests that the low will hold for now and the possibility for wild daily range action will increase. The QQQQ daily chart is still strong and in an uptrend. The SPY/DIA daily charts suggest range action between Friday's low and Wednesday's high. I will still look for a daily/weekly correction and I think that we can expect more weakness in the future, but that does not mean that a bear market has started.

http://www.ivicacharts.com/diagrams/2007/11052007dia.jpg
http://www.ivicacharts.com/diagrams/2007/11052007spy.jpg
http://www.ivicacharts.com/diagrams/2007/11052007qqqq.jpg

If a strong daily reversal and a start of a new trend (down) was expected, looking at the weekly charts will tell us why that is not realistic. The QQQQ weekly chart is still strong. The last weekly bar is a doji bar which suggests indecision. This can bring a reversal, but it can also bring a continuation. The QQQQ is still far away from first its' moving average support area and it is still very strong. From that view it is not reasonable to expect a downtrend, but it is more reasonable to expect a correction. Depending on the type of correction we will have either a higher or lower risk trading market. If the correction will be gradual then we can expect more choppy days, which adds risk to the market and makes it harder for swing traders. If we see a strong reversal to the first support area, that will bring less of a trading risk and more daily/intraday trend moves. If we look at the SPY/DIA weekly charts we can see that both are similar.

http://www.ivicacharts.com/diagrams/2007/11052007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/11052007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/11052007qqqqweekly.jpg

The SPY/DIA are already trading in a whippy range action and their weekly charts suggest that the same type of action could continue. Friday’s volume and reversal support that possibility for now. If both indices stay in these wild ranges than the risk for swing trades will remain higher. For now the safest trading is with intraday trades (scalp/day) and “own way” swing trades. Earning season is slowly going to end, and every day gaps should disappear which should decrease risk for overnight trades. For now I won’t change anything. Since Friday's action was not good for selling continuation on Monday, I will continue to focus on "own way” swings and strongest/weakest intraday moves based on intraday scanning. If anyone has any questions about the market explanation or the chart explanation, please feel free to contact me.
I wish you all a nice weekend

Ivica
 
Market commentary for 11/06/2007

Good day!
After Thursday's strong move down, the consolidation continues. Because of that Monday was a trading day without market support in any direction. The day started with a strong gap down into Friday's low, but for now that continues to serve as a strong support area. The indices moved quickly back to the middle of the range and stayed there during the doldrums. Before the 14:00 reversal period they tried again to retest the strong support area, but again failed and we saw a strong intraday bounce with a move back up into the close. In other words we had a up-down-up –down day. If you look at the 60 min charts, you can see Monday’s action

http://www.ivicacharts.com/diagrams/2007/11062007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11062007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11062007qqqq60.jpg

The Indices are forming 60 min triangles and until they make lower highs, they will form a bear setup (triangle). The support area is very strong and very important. The SPY/DIA support area is its' previous daily low. For the ideal setup on the 60 min charts, it would be best if the indices can stay in a triangle on Tuesday as well.

http://www.ivicacharts.com/diagrams/2007/1106007dia.jpg
http://www.ivicacharts.com/diagrams/2007/1106007spy.jpg
http://www.ivicacharts.com/diagrams/2007/1106007qqqq.jpg

If we take a look at the daily charts we will see why the indices are at an important area. Right now we have a fight between the bulls and bears which results in a 60 min consolidation and if the bears win then we can expect a move down. For the DIA, the next support area is its' 200sma which will be also its' equal move support area. But if the bulls win, then the DIA daily double bottom will hold the support area and we can expect more of a daily consolidation before a new try or a new pattern. If we look at that from a risk level, that means if the indices will break down on the 60 min triangle, we can expect less risk intraday with a trend move down. If the double bottom holds then we can expect more action in a daily range and in that case risk will increase and my focus will stay with intraday moves and faster trades. Because of that I will closely follow the intraday action to see what scenario we can expect. My focus is more with a daily correction from highs, but for tomorrow morning the picture is not clear yet.
Ivica
 
Market commentary for 11/07/2007

Good day!
Most of the day was quite choppy and stayed in a range so consequently there were not many low risk setups. The only way to be active in a range market is to look for the strongest and weakest names and use intraday setups for faster trade, or for possible swing setups. We had a high risk environment for most of the day and because of that I only traded with small lots. During the day I was able to eliminate the slow movers and by doing so I was able to stay with trades that I liked. In addition if the trades improve, then we can add to our positions with new intraday setups. One could have also waited and been patient, because the indices continued in their weekly range action and for now I don’t see an end to it. If we look at the 60 min charts, we can see that we had some action the last hour when the indices broke from their triangle consolidation. The SPY and the DIA have a lot of resistance overhead and any of it can stop it. Because of that it will be very important to follow volume and pace. Because the breakout pace was strong, we can look for a continuation on Wednesday morning.

http://www.ivicacharts.com/diagrams/2007/11072007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11072007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11072007qqqq60.jpg

On the daily charts we can see that there is quite a bit of resistance for the SPY/DIA. The previous daily high is the most important, and for support, Friday’s low seems to be holding for now. The QQQQ is trying again for a new daily high. Remember that the QQQQ formed a weekly doji bar last week, which means indecision. The pattern can break in either direction and right now it looks like it wants to go up. The previous high is its' strong resistance area and in case it tries to breakout again it is very important to follow the breakout volume and pace. That will tell us about the strength or the possibility of a false move. Also the next attempt at new highs could form a double top pattern and we must keep that in mind.

http://www.ivicacharts.com/diagrams/2007/1107007dia.jpg
http://www.ivicacharts.com/diagrams/2007/1107007spy.jpg
http://www.ivicacharts.com/diagrams/2007/1107007qqqq.jpg

After all is said and done, I can say there were no changes to speak of. The QQQQ is still the strongest and looks like it wants to see new highs. On the other side, the SPY/DIA looks like they want to form daily triangles for a possible breakdown. The high risk swing trade environment continues and I will stay in the same mode. My focus will stay the same as it has been for the last weeks. I will look for the strongest/weakest names from intraday scanning for day/scalp trades, and weakest/strongest names from night scanning for possible swing trades. This will help find “own way” charts. We have several open swing trades and my recommendation is to trade them with small risk. We can always add if they improve. Let’s follow the market action day to day and see where that will lead us. My bias for Wednesday morning is up with extra caution on the daily and intraday resistance areas. It is important to see reactions for future possibilities.
 
Market commentary for 11/08/2007

Good day!
The QQQQ lost its' 20sma daily support area. That is the main news from my chart analysis. If we look at the past action, we can see that the 20sma area held on the QQQQ, and the QQQQ held the SPY and the DIA, but after Wednesday's selling pressure the QQQQ couldn’t hold that important daily support area. Wednesday's start didn’t show the weak closing possibility. The Indices started with a gap down, but lately the indices have filled that kind of a gap and the QQQQ started in the same mode and made it. But the SPY and the DIA were much weaker especially the DIA which couldn’t break above its' 20sma 60 min resistance area. That was all that we saw from the bulls and the bear dance started with a strong pace. We can see that on the 60 min charts. It was the same selling pace as before the consolidation (blue lines). Now we can see that Thursday's break up from the 60 min consolidation was a false break up. This is the main reason that every overnight trade must be traded with a ssmall risk.

http://www.ivicacharts.com/diagrams/2007/11082007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11082007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11082007qqqq60.jpg

On the daily charts we can see that the SPY and the DIA made new daily lows and with lower daily highs we can say that a trend down has started. What kind of trend down we will see, but technically the SPY and the DIA made new lows, a lower high and again lower lows, which is a down trend definition. We can’t say that for the QQQQ, but we can say that the QQQQ broke under its' 20sma daily support area and under its' weekly doji bar which suggests continued selling pressure this week.

http://www.ivicacharts.com/diagrams/2007/1108007dia.jpg
http://www.ivicacharts.com/diagrams/2007/1108007spy.jpg
http://www.ivicacharts.com/diagrams/2007/1108007qqqq.jpg

Also we can see that the SPY and the DIA still have room for to their daily equal move support area. There is also the 200sma for the DIA on the daily chart. In other words, the indices have room for more selling and that will be my focus for the next days. We took several swing short trades and did nicely with them as they closed near lows, but I chose to protect some of my profits. The reason for that is CSCO's earning report which can bring the indices up in the morning if CSCO beats its' earning numbers. With a bad earning report, it can bring the market down, but since we have had quite a jumpy market lately with lots of gaps in the morning, I chose to protect some of my profits. If they continue lower, I will add again on intraday setups. From my chart analysis, my bias is down in the morning and I will look for an equal move support area. We will see what CSCO news will bring. Wish you all great trading!!
 
Market commentary for 11/12/2007

Good day!
The markets finished a turbulent week with another huge move down. Despite Thursday's reversal at the close, Friday started with a strong gap down into Thursday's low. Most of Friday traded in a range of choppy action without strong intraday direction and with a pitiful try for a reversal. But in the last hour the fear came back and we saw a strong move down into new lows and a weak close. On the 60 min charts we can see the big red bar formed into the close which pushed the QQQQ to new lows and the DIA/SPY into their previous intraday lows which was their lows of the day.

http://www.ivicacharts.com/diagrams/2007/11122007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11122007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11122007qqqq60.jpg

From a technical view it is not unusual when we have a very strong selling pace ,which we can see on the daily charts, to expect more then an equal move. When the breakout pace is weaker than the pace before the breakout, then we can expect less than an equal move. That is from a technical view; of course major banks warning of future losses helped and completed that expectation. The Indices closed at very strong support areas. Let’s look at the weekly charts. The DIA reached its' 50sma weekly, previous low and 130 number support areas. The SPY reached its' previous low and 145 number support area, and the QQQQ reached its' previous low (red line) and 50 number support area.

http://www.ivicacharts.com/diagrams/2007/1112007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/1112007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/1112007qqqqweekly.jpg

From that we can see that the indices are at strong support areas and the weekly volume is strong which suggests that we can expect to see a correction (rest) from the lows. That is one scenario. The second scenario is more selling with very possibly panic selling and a huge move down to August's low with heavier selling volume. That is the place the market will go in the future, that is my humble opinion, but right now the question is will that be in the near future or after a daily/weekly correction.

http://www.ivicacharts.com/diagrams/2007/1112007dia.jpg
http://www.ivicacharts.com/diagrams/2007/1112007spy.jpg
http://www.ivicacharts.com/diagrams/2007/1112007qqqq.jpg

On the daily charts we can see a clearer situation and information for a correction next week, and that is CCI. That is indicator that I use to determine oversold/overbought area. If it is under -200area that determines an oversold area and we can see that the SPY is very close and the DIA and the SPY are already in negative territory. If I must bet I will chose correction from lows before future weakness, but from this point it is very hard to say. The Indices are already on a strong move and above I explained several reasons that marked the bottom area, but remember that oversold area can become more oversold. As traders for us it is very important to recognize risk for new setups. Right now is very high. It is especially high for swing trades. Only safe area is “own way” charts. That means charts which are not influenced with the market action and have “own way” and own direction despite the market action. One example is RESP (http://www.ivicacharts.com/diagrams/2007/11122007resp.jpg ). We can see that RESP had its' own way and held very strongly, and that is an example of the charts I will try to find on my weekend scanning work. For intraday setups we must wait for reversals pattern (phoenix). That means I like to see a strong bounce first and after a consolidation (pattern) and the “whole picture” (view on all time frame charts) I will see if is worth a trade or not. Without a reversal pattern every trade will be very high risk and for me it will be more gambling than trading. Since my focus is to find low risk setups, I will be very picky at Monday. I like to see market behavior before any decision. If the Indices will start with the second scenario and start with panic selling I will look for possible intraday moves, because new short swing trades are too risky for me. The reason for that is the possibility of a strong bounces which could bring us into negative area. If anyone has any questions about setups or market expectations, please feel free to contact me and I will help as much as I can.
Wish you all good trading week.

Ivica
 
Market commentary for 11/14/2007

Good day!
What a relief for long traders. The day started with a strong gap up into Monday's range area before the late move down. The Indices held the gap very well after the open without a pullback which was the sign for short traders to cover their positions. It also brought the bulls out and resulted with a move up. The first resistance was the 20sma 60 min and during the midday, the indices held very strongly without a significant pullback. The DIA was the strongest and was the first to break its' resistance area. We finally saw synergy and we were ready for an afternoon continuation into the previous resistance area which we can see on the 60 min charts (red line). We can clearly see the nice trend day up, but during the midday it looked like we could bounce from the 20sma which would have been higher risk because of a reversal possibility.

http://www.ivicacharts.com/diagrams/2007/11142007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11142007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11142007qqqq60.jpg

One by one each resistance area was met with buying pressure (daily 100sma for QQQQ, daily 200sma for the DIA and 60 min 20sma for all). The volume was not as strong as the selling volume, but the reversal pace was strong enough to mark a daily low for now and very possibly it will hold for some time. The SPY closed under its' 200sma resistance area, while the DIA and the QQQQ still have some room for a possible gap up or move up in the morning.

http://www.ivicacharts.com/diagrams/2007/11142007dia.jpg
http://www.ivicacharts.com/diagrams/2007/11142007spy.jpg
http://www.ivicacharts.com/diagrams/2007/11142007qqqq.jpg

Despite the strong close and nice trend day, I still think that overnight trades are higher risk. The reason for that is the resistance that the indices reached by the close and because of the daily weak market. I don’t think that we are done with the bear move down and we could see more overlap from day to day. We can see a gap up on Tuesday's strength, but we could just as easily see a gap down from the resistance area. Because of that I’m still more focused on intraday moves. For swing trades, it is important to protect positions before the close. After every strong move in any direction, it is important to pay attention during the consolidation period to the 10 and 20 simple moving averages as key support/resistance areas. Those areas will be the test for a trend continuation. Right now that is a move down as the main move on the daily charts. On the SPY/DIA daily charts we can see that the last strong move down started from the 10sma daily resistance area and if we are in a trend move down, then we will see another bounce from the same resistance area. I will pay extra attention to that area. The SPY and the DIA are not far from it and still have room to reach it. Be careful with risk management because I believe that we will see more intraday strong moves in both directions this week. Don’t forget that the main move is down and until the reversal pattern we could see stronger moves with stronger pace in that direction.

Wish you all a good Wednesday.

Ivica
 
Market commentary for 11/15/2007

Good day!

Wednesday's action shows us how well the indices can act at resistance and support areas. I mentioned in the Tuesday commentary that the 10sma on the daily chart will be the first test for the SPY and the DIA. On the charts we can see that the first try to break it after a bounce from lows held very well. We also had previous support before last week's breakdown. The QQQQ didn’t reached its' 10sma resistance area yet, but its previous support was strong enough for a strong pullback. On the other side the QQQQ closed at its' 100sma support area and the DIA closed at its' 200sma support area. We can see how important it is to recognize support and resistance areas because they are very important for our trading plan and expectations.

http://www.ivicacharts.com/diagrams/2007/11152007dia.jpg
http://www.ivicacharts.com/diagrams/2007/11152007spy.jpg
http://www.ivicacharts.com/diagrams/2007/11152007qqqq.jpg

When we look at the daily charts, we could have expected Wednesday's reaction on the strong resistance areas, but if we look at the 60 min charts we will see that we didn’t have smooth market action nor easy trading. We had a range action almost all day after the morning gap up. The Indices opened higher and under their daily resistance areas and all of them started with selling pressure and filled their gaps right after the open. That was pretty much all the market action in the morning and until the last 30 min we had a range action that is always high risk for new setups. Whenever we have no direction, risk will increase. Most of the day we just waited and waited. I almost gave up and expected a strong close but the last 30 min brought the bears and a strong pullback right into the 20sma 60 min support area. Volume increased and told us that the bears haven't disappeared and the market reminded us that the main direction is down.

http://www.ivicacharts.com/diagrams/2007/11152007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11152007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11152007qqqq60.jpg

Moving averages, numbers and previous highs/lows are great tools to determine expectations and mark target areas. The combination of them coupled with looking at several time frames will help us to make trading plans for possible setups. Now what? What we can expect for Thursday? I will expect over the next few days that the indices will move between Wednesday's highs and Tuesday's lows. That means we must follow reactions on intraday support and resistance areas. If we will see a gradual action after support or resistance areas are reached, then we can expect continuation. If we see a strong bounce from resistance or support areas, then we can expect a wild range action, similar to what we had on Wednesday's 5/15 min charts before the last 30 min break down. If I must bet I will expect the second scenario. For the QQQQ that means action between $51 and $49, for the SPY between $149 and $145 area and for the DIA between $134 and $131 area. For now the charts suggest that scenario is most possible. In trading talk that means focusing on intraday moves (5/15/30 min charts) and focusing on the strongest names when the indices reach support areas and the weakest names when the indices reach resistance areas. If anyone has any questions please feel free to contact me.

Wish you all a great Thursday.

Ivica
 
Market commentary for 11/16/2007

Good day!
The bounce from the 10sma daily resistance area continued. That is the short explanation of Thursday's action. We saw a selling continuation that started late on Wednesday. The Indices reached their support areas which we can clearly see on the 60 min charts. Volume and pace are two very important tools. If we look at the DIA 60 min chart we can see that the selling pace is the same as Tuesday's buying pace, which suggests a double bottom pattern. Maybe the DIA will go a little lower, maybe it will reach its' daily low, we can’t know that, but we know that the bottom of the last move down is very close. The same applies to the 60 min SPY. The QQQQ 60 min chart is a little different. Tuesday's buying pace is stronger and that suggests a bounce from the support area. Since yesterday's move down is not gradual enough for a bull flag, and since we didn’t get a base, I will expect the QQQQ to form a 60 min triangle pattern.

http://www.ivicacharts.com/diagrams/2007/11162007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11162007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11162007qqqq60.jpg

Also the daily QQQQ Thursday bar is a doji which means indecision.. With the late bounce from the selling pressure the DIA formed a similar daily pattern. Also the DIA closed under its' 200sma daily resistance area while the QQQQ closed under its' 100sma daily resistance area. There are lots of resistances on the indices above and lots of support under. I will stay with the expectation that the indices will trade between Wednesday's high and Monday’s low,, or possibly even yesterday's low.

http://www.ivicacharts.com/diagrams/2007/11162007dia.jpg
http://www.ivicacharts.com/diagrams/2007/11162007spy.jpg
http://www.ivicacharts.com/diagrams/2007/11162007qqqq.jpg

That leads us to the conclusion that I will look for a 60 min bounce from the support areas, and I will use that possibility for intraday moves. My focus is the same. I will scan over the strongest names (for 60 min bounce possibility), and the weakest names (in reversal case after bounce). If the indices have a weak open and there is selling continuation that will no longer be my focus because the support areas are very strong and the intraday reversals can manifest with very strong intraday bounces and that is too high risk for me. The Thursday daily chart bar and intraday range action possibility tells us that risk is higher, especially for swing traders. I will be very surprised if Monday’s lows don't hold (unless we see a slightly lower low, which is still a double bottom pattern) and indices will continue with selling pressure. If anyone has any questions, you know where you can find me. I wish you all a nice Friday and upcoming weekend.

Ivica
 
Market commentary for 11/19/2007

Good day!
The consolidation after the strong sell off continued. We saw very whippy action on the intraday charts which is usual for option expiration day. If we look at the daily charts, however it is no big deal and basically was another range day. The Indices continued with the range action that I mentioned several days ago and we can see that very clearly on the 60 min charts. Thirty minutes before the close it looked like the DIA wanted to break down into Monday's low and everything looked very weak. The QQQQ held very strong, however, and stayed in a choppy 15 min bull flag, however in the last 30 min (last reversal period) we saw a very strong bounce and reversal into the middle of the range, which is not unusual for options expiration. That is almost all worth mentioning from Friday’s action.

http://www.ivicacharts.com/diagrams/2007/11192007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/11192007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/11192007qqqq60.jpg

Since it is the end of the week it is always good to take a look at the weekly charts to see what we can expect next week. The first thing we can see is that the support area is holding. During the week we saw a nice bounce, but the late week's reversal brought the indices back to their previous week's low. Without a strong bounce on Monday we will see a very nice continuation pattern and I will be ready for selling continuation. It also would be quite possible to have another consolidation week as well. If we look at the weekly charts in terms of low risk setups, then it would be best to see a few consolidation bars near the lows, or a gradual correction and then the charts will look good for another swing move down. Monday’s low will remain as the main support area for now and the SPY/DIA have resistance at their 20sma (blue line), while the QQQQ has resistance at it’s' 10sma (brown line).

http://www.ivicacharts.com/diagrams/2007/11192007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/11192007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/11192007qqqqweekly.jpg

To see the situation more clearly, let’s look at the daily charts. The blue lines are ranges which I have marked after Tuesday's high as I have mentioned in previous commentaries. On the SPY/DIA charts we can see that the lower range line held on Friday and we had a pivot bar with higher volume, which suggests that we could see a bounce from support. The QQQQ stayed above its' 100sma support area. True, the indices are in the middle of the range and it is not easy to predict the action for the next week, but for the Monday I will look for strength and a move up.

http://www.ivicacharts.com/diagrams/2007/11192007dia.jpg
http://www.ivicacharts.com/diagrams/2007/11192007spy.jpg
http://www.ivicacharts.com/diagrams/2007/11192007qqqq.jpg

How strong and what target we can expect will be more easily determined from the intraday action (pace and volume). On Friday I talked about pace and volume and how important they are. I plan to hold a class on that in the near future. It is always important to compare previous action (pace and volume) and from there we can form expectations. The DIA has resistances overhead on the daily charts (200 and 10sma), while the SPY has its' 10sma overhead and not much room for a move up. The QQQQ has the most room for an intra range bounce, because it has more room until its' 10sma daily resistance area. The market will be dealing with two options right now. One is staying in a range and waiting until the 20sma resistance area for a possible bounce into lows or new lows on the daily chart. That is one scenario, consolidation continuation. I believe and I think that will we see that one and I’m prepared for another range week. The second scenario is a strong bounce from the 10sma resistance areas, which is also very possible, bringing the indices into the August lows (50sma weekly for the QQQQ, 100sma weekly for the SPY and DIA) I think that the indices will see that area sooner or later, but for now I believe that the daily/weekly consolidation will continue. If anyone has any questions, comments or suggestions please feel free to contact me. I wish you all a great trading week.

Ivica
 
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