Market commentary

Market commentary for 12/12/2007

Good day!
It sure looks like investors expected more than a 0.25 percent rate cut and the disappointment was enough to bring the markets down. The DIA lost 3 points and traded back to its' 10sma daily support area. On the daily charts we can see that the 50sma and 100sma support areas were not strong enough to hold after the announcement's selling pressure. The SPY lost around 4 points and closed under its' 10/50/100/and 200sma daily support areas. On the daily chart we can see that the SPY opened the day above all its' daily moving averages. The QQQQ wasn’t different and closed under its' 10/50sma on the daily chart. Another important indicator is volume. We can see that the volume on the move up was much less than the volume on the moves down, which is something I have mentioned often in my commentary.

http://www.ivicacharts.com/diagrams/2007/12122007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12122007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12122007qqqq.jpg

On the 60 min charts we can clearly see the difference between the buying and selling pace, and the same applies to the selling volume. Also we can see that the indices hit their support areas. Additionally, the indices closed at support areas and the next support levels are not far. These levels are important to note in case of a gap down, or selling pressure in the morning.

http://www.ivicacharts.com/diagrams/2007/12122007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12122007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12122007qqqq60.jpg

So, one scenario that we can expect is selling pressure in the morning with a gap down at the open. In that case I will look for a correction after the opening weakness. Another scenario is a gap up and a correction right at the open, and, in that case, I will look for a continuation of the selling pressure during the doldrums. Right now those are just possibilities. We must see what kind of correction we get, the pace, volume etc. I will update the room during market hours, but one thing we know. After a move we need to see rest (trading pattern), and this rest action will bring a higher risk environment. On the 60 min charts we can see that the indices are extended, and now we must see what kind of correction (consolidation) we will see. With the reaction after the FED announcement, my bias is on the short side for now, but we must keep in mind that the indices are in a weekly range and we don’t have a trend on the weekly charts yet. If anyone has any questions, please feel free to contact me.

Wish you all good trading.

Ivica
 
Market commentary for 12/13/2007

Good day!
We certainly had erratic market action on Wednesday!!! I must say, I can’t remember action quite this crazy. The day started with a strong gap up in spite of the sell off from the disappointing FED rate cut. With the gap up the indices covered all of the Tuesday move down after the FED announcement. But that strong open was not strong enough for buyers to take control and it looks like long traders used Wednesday's strong open to cover Tuesday's losses. The indices took most of the day to do it but they still managed to fill the gap up. It is unusual for a gap of this size to fill the same day, especially when the open is above all daily moving average areas.

http://www.ivicacharts.com/diagrams/2007/12132007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12132007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12132007qqqq60.jpg

But that was not the end of the surprises. The indices didn’t just filled their gaps, they all made new daily lows. and Then, when everyone expected a weak close, or a small correction from the afternoon strong selling pressure, the indices covered all of the afternoon's move down and closed in positive territory. The bounce in the last 15 minutes was very strong with the same pace as the selling into lows and with strong reversal volume. On the daily charts we can see that all the indices closed above their 10sma which serves as their support areas once again. Volume was again high and we had another very big daily bar.

http://www.ivicacharts.com/diagrams/2007/12132007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12132007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12132007qqqq.jpg

Now what? It is rare when I don't have a bias or expectations (for tomorrow). This time, however, I do not. The Indices are in the middle of the weekly range. On the daily charts we had two extended bars with strong volume and after all of that we still have no real direction. I see a great deal of indecision out there. On the 60 min charts we can see very extended moves after the FED announcement. Risk is extremely high for new trades (unless they are scalps). I will try to find possible setups for tomorrow, but like I have said: risk is high and it is best to wait and see what happens and how the dust settles. Without any consolidation or trading patterns, there are no low-risk setups. In addition, right now we don’t have any trends on any timeframes and we don’t have any patterns. It is time for patience.

Wish you all good trading.

Ivica
 
Market commentary for 12/14/2007

Good day!
Prior to Thursday's open we had a hot PPI number which was considerably above consensus which makes it harder for the FED to move, we had a good retail number which means the economy isn't imminently falling into recession. We also had decent earnings from LEH and COST. All that put together and we had a modest gap down and little direction which continued throughout the day.

Thursday brought range action between Wednesday's low and high. We saw additional weakness and action near Wednesday's low, but it is important to notice that the low support area held. If we look at the 15 min charts we can see the 20sma was the key resistance area and during the day the 15 min triangle is getting tighter and tighter. At the 14:00pm ET reversal period the indices decided which direction to take. On the 60 min chart we can clearly see that Wednesday's low was too strong and the reversal came after 14:00 pm ET reversal period. The SPY/DIA were the strongest but finished under the 20sma resistance area and the previous 60 min high.

http://www.ivicacharts.com/diagrams/2007/12142007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12142007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12142007qqqq60.jpg

When we look at the daily charts we can see the indices are stuck between the support and resistance areas. The DIA/SPY closed under 50sma and 10/100sma is also around while the QQQQ closed under 10sma with 20sma as support area at lows. We basically have a big mess on the daily charts. When we exclude the moving averages the charts are clearer and most important for Friday is that low support held and on the bounce from low we saw an increase in volume which suggests that Thursday's low will hold for now.

http://www.ivicacharts.com/diagrams/2007/12142007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12142007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12142007qqqq.jpg

Of course this also depends on the open, but for now I expect the lows will hold. Unfortunately that does not mean we automatically we will see a strong bounce (which is always possible). I expect to see a choppy intraday move up or range continuation. Anyway the point is I think that we will see a continued high risk market action and a poor environment for swing traders. Since we have messy daily charts it is best to stick with intraday moves and not fall into an over trading trap. In the future I will look for more selling but right now we don’t have clear signal and until that time I will stay with the same risk management. Thursday's low is an important area for a future move down and I will pay attention to it. If that is broken I will start looking for swing short setups. For now the key word is PATIENCE.

Wish you all good trading.

Ivica
 
Market commentary for 12/17/2007

Good day!
Friday brought more weakness than I expected, but since we are in the middle of several support and resistance areas, any direction would not have been a big surprise. On the 60 min charts we can see that the 20sma resistance area was too strong and every try to break above it failed. That resulted in lower highs and in the last hour a pullback to Thursday's low. The QQQQ is the weakest over the last several days and Friday's action finished with a 60 min triangle with a potential for a breakdown. The blue lines are equal moves and that is one scenario that we can expect on Monday. The problem is that the DIA (strongest one) has strong support areas very close by (daily 20/200sma) and that can result in a 60 min double bottom pattern. On the other hand the DIA can also move down to a 60 min equal move and back above support areas and in that case both sides will be satisfied. The shorts will get their 60 min equal move down and the daily support area will hold for long traders. That is another possible scenario.

http://www.ivicacharts.com/diagrams/2007/12172007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12172007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12172007qqqq60.jpg

The problem with the market situation at the moment is there are lots of possible scenarios which bring us into a high risk area for trading. Let’s look at the weekly charts. We can see clearly that the indices are in the middle of the range. Volume is average and right now we don’t have a trend. Maybe the QQQQ will form a kind of whippy phoenix, but right now it is hard to predict that because we need more consolidation bars for that possibility. The weekly charts are telling us that we don’t have a trend and we all know that trading during range action (consolidation) is always much harder than when we have a trend.

http://www.ivicacharts.com/diagrams/2007/12172007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/12172007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/12172007qqqqweekly.jpg

The daily charts show us clearly the kind of mess we have. The Indices are moving around all moving averages and previous support/resistance areas are everywhere. Right now I don’t have a strong bias and I can see either direction for a day or two moves. If the indices will break down, I believe that the 60 min equal move will be the support area that will hold for some time. However, if the 60 min 20sma will be broken, we could easily see a move up to the previous daily resistance areas. Lately we can notice that the moves down have a stronger pace than the moves up, and in the case of a move up, I will expect more choppy and slower action.

http://www.ivicacharts.com/diagrams/2007/12172007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12172007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12172007qqqq.jpg

For the bigger picture, my bias is still down and I will expect more selling in future weeks, but right now we could see choppy action on the daily charts for the rest of the year. Right now I will go day by day and I will wait for a sign for a possible new trend on the daily/weekly charts. This is the last full trading week this year and I wish you all a great one!

Ivica
 
Market commentary for 12/18/2007

Good day!
Monday gave us a trend day. The scenario that I drew on the 60 min charts did perfectly. The QQQQ was the weakest, while the DIA was the strongest and all hit their equal move support areas. With downtrend days, the indices usually close at lows which was the situation on Monday. Even though we are at the support areas, I think that the indices still have room for a small move down in the morning. Maybe that move will be done with a gap down, or possibly a move down in the morning. Right now, however, that is not important for new setups.

http://www.ivicacharts.com/diagrams/2007/12182007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12182007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12182007qqqq60.jpg

It is more important to know that new swing short trades are now higher risk and I will avoid them. Depending on the open and the morning action, I will look for a possible intraday move (day/scalp trade). There were two things I didn’t like about Monday's trend day. One was the slow selling pace and choppy intraday action which brought indecision and some distrust to the trend action and another thing was the volume. On the DIA daily chart we can see that the volume decreased, which is not the case when we have healthy moves. Also on the QQQQ daily chart, we can see Monday's volume was lighter then the usual red bars we have had lately.

http://www.ivicacharts.com/diagrams/2007/12182007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12182007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12182007qqqq.jpg

This kind of action usually has one of two scenarios. One is an exhaustion move down with stronger volume, and another is a strong reversal. Since those scenarios are opposite that will bring indecision and some nervousness during trading hours. I don’t have a strong bias for any scenario, but for now I will look for weakness in the morning and a possible reversal during the doldrums hours. Another important thing to note is that after a trend day usually we will see a consolidation day and because of that my focus will mostly be on intraday moves.

Wish you all good trading!!!

Ivica
 
Market commentary for 12/20/2007

Good day!
A view of the daily charts tells us all about Wednesday's market action. On all three charts we can see a doji bar which means indecision. In other words both directions are possible for Thursday. The Indices opened flat and after the open the SPY and the DIA showed a weak buying pace until Tuesday's high which was too strong a resistance area. The QQQQ was weaker and Tuesday's close was too strong. On the 60 min charts, I drew one possible scenario and that is a breakout after Wednesday's consolidation day. It is a whippy consolidation and if we do see a breakout it will be important to see the breakout pace and volume. If it is strong than we can expect more than an equal move, but if it is choppy and has a weak pace than the previous resistance area for the DIA will be huge. For the SPY and the QQQQ they have resistance at their 200sma 60 min.

http://www.ivicacharts.com/diagrams/2007/12202007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12202007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12202007qqqq60.jpg

On the daily charts we can see that Wednesday's volume was light with a doji bar. For the SPY and the DIA the 20sma is still the first resistance area, and the DIA also has its' 200sma, so we can say we have plenty of resistance areas. The QQQQ still has resistance at Wednesday/Tuesday's high and after that the 100sma is very close. Because of all this resistances it is important to see how strong the breakout pace and volume is.

http://www.ivicacharts.com/diagrams/2007/12202007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12202007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12202007qqqq.jpg

Since we had a doji bar on the daily charts, we could just as likely see a breakdown and Tuesday's low will be the first support area. If that doesn't hold, very possibly the QQQQ could see selling continuation to its' 200sma daily support area, and the SPY/DIA to their previous daily low support areas. For that scenario the breakdown pace and volume are very important too. Of course the third scenario of a 60 min consolidation continuation is always open. Since we have several possibilities it is important to trade with small risk and wait to see the market's first move, pace, volume and the type of consolidation. Before that we could see a false breakout and because of that patience is important right now.

Wish you all good trading!!!

Ivica
 
Market commentary for 12/21/2007

Good day!
As we expected we saw whippy intraday market action. I had mentioned that it would be important to see if the morning gap would hold and that would give us answers for a possible move up. But that was not case, and after the gap up in the morning, the SPY and the DIA filled their gaps. We saw divergences between the stronger QQQQ and the weaker DIA all day long and that increased trading risk. I explained in yesterday's commentary that pace and volume will be the key for future expectations. Since the indices didn’t have strength for a breakout and they fell back to their 60 min range (the SPY/DIA) they lost the opportunity for a healthy break up. During the doldrums, we waited for direction. Yesterday the QQQQ won and pushed the indices up, but the divergences remained and risk stayed high. We can see that on the 60 min charts. The DIA closed under their morning high, the SPY closed at its' morning high while the QQQQ was the strongest and reached its' previous support area (now resistance area).

http://www.ivicacharts.com/diagrams/2007/12212007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12212007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12212007qqqq60.jpg

On the daily charts we can see that the QQQQ closed under its' 20sma and in the middle of its' daily range. The SPY and the DIA stayed in their 60 min range which resulted in their closing under all their resistance areas. After all there was not too much change. The possible try for a move up on the daily charts will be hard and choppy without volume.

http://www.ivicacharts.com/diagrams/2007/12212007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12212007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12212007qqqq.jpg

Nothing has changed for Friday's expectation. Without stronger volume it will be hard to expect to see a healthy move up, and if the SPY/DIA stays under their 20sma (daily chart) we could expect another move down. I don’t have a strong bias, and it is hard to predict future action, but for now I will expect that the choppy move up will continue. If the indices had only their 20sma as resistance on the daily charts, I would expect that would be broken. However with all the resistance areas overhead the move up most probably will be more difficult. Again the open will be important. RIMM's report can bring a gap up in the morning (depend on results) and that could move the market as ORCL did during Thursday's session. Anyway, everything stays the same for us. It will be best to stay with intraday moves and swing trades are still high risk. Also, Friday is the last day before the Holiday week as well as options expiration. I will expect that volume will decrease after the morning since most of traders will close this week and start the holidays.

Wish you all good trading!!!

Ivica
 
Market commentary for 12/24/2007

Good day!
RIMM's good earning report brought the market higher and we had a strong gap up on Friday. That was in line with expectations of seeing a daily move up, but as I mentioned yesterday, I expected that most of the move up would be the result of a gap. We had the same situation on Friday. After a strong open, the indices fell right into a range and only the DIA continued in its' same direction. We can see that the move up was slow on light volume. Until 14:00 pm EST we had a very slow pace with range action, which continued until the reversal period which gave more upside action before the close. The problem with Friday's action was very light volume which increases trading risk.

http://www.ivicacharts.com/diagrams/2007/12242007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12242007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12242007qqqq60.jpg

On the daily charts, we can see that the SPY and the DIA closed right in the middle of their daily ranges. The SPY has a small amount of room for another move up on Monday, but the QQQQ and the DIA closed right under their resistance areas. There is not much to say when the indices just jump around between range areas and do so on very light volume.

http://www.ivicacharts.com/diagrams/2007/12242007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12242007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12242007qqqq.jpg

Since it is the end of the week, it is always good to take a look at the weekly charts. We can see that all the indices closed right in the middle of their ranges and since we are entering a holiday week, it is very hard to expect that we will see any significant move on Monday. There is not much to say about the weekly charts, because we don’t have much of a difference from last week. But I can now draw one scenario which I will follow over the next several weeks. For the SPY and the DIA that is a head and shoulder pattern possibility, and for the QQQQ that is a lower high and equal move with short pressure continuation. Again I don’t expect to see that action next week, but it is always good to consider potential scenarios.

http://www.ivicacharts.com/diagrams/2007/12242007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/12242007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/12242007qqqqweekly.jpg

I will expect to see slow buying pressure on Monday, very possible with a choppy move up on light volume. The market will be closed at 1:00 pm and most traders will take off. I’m one of them because I think that it is a good opportunity to spend time with family and friends. I will recommend the same to all, but for those who want to trade it is important to recognize that risk will be high and the best low risk opportunities will be fast (scalp) trades. Don’t be greedy and be fast with exits. Also don’t fall into the overtrade trap. Monday probably won't be a good trading day, so use caution when trading.

I want to take this opportunity to wish you all a Merry Christmas, and for you who don’t celebrate a happy day off. I wish you all peace and a great time with family and friends. I will back after Christmas and I will spend time with you for the rest of the year.

Wish you all good trading!!!

Ivica
 
Market commentary for 12/31/2007

Good day!
Unfortunately the expectation for a slow Friday came true. The Indices moved between their 20sma 60 min (open gap) and their previous support areas. We can see that clearly on the 60 min charts. It is really hard to talk much about Friday’s action. Just a few points. Lately you all can see that the indices have opened almost every day with a gap. So far all those gaps have filled on the same day and Friday’s action was no exception. The move down was very strong and very fast and that was the only really healthy market move. The rest of the day was in line with the last days action and that means... slow, low volume and choppy action.

http://www.ivicacharts.com/diagrams/2007/12312007dia60.jpg
http://www.ivicacharts.com/diagrams/2007/12312007spy60.jpg
http://www.ivicacharts.com/diagrams/2007/12312007qqqq60.jpg

On the weekly charts we can see that the indices stayed in the same area as the week before. That means the possibility for a weekly short setup is still in line. Of course this is just one scenario. I don’t expect that trigger will come on Monday. But it is something worth watching next year.
http://www.ivicacharts.com/diagrams/2007/12312007dia.jpg
http://www.ivicacharts.com/diagrams/2007/12312007spy.jpg
http://www.ivicacharts.com/diagrams/2007/12312007qqqq.jpg

The daily charts show us range action. The last three days didn’t bring any change and no matter what Monday's action brings we can expect the true action after New Years. I will expect that volume will come back, but will the swing direction trigger... that is hard to know right now. When we are in a range market the safest way is to leave the first (initial) move and then look to trade after the consolidation pattern. That way we do not take false breakouts and fast pullbacks. If the initial move is the start of a new swing direction, than we will have opportunities for low risk trades. Before that risk remains high.

http://www.ivicacharts.com/diagrams/2007/12312007diaweekly.jpg
http://www.ivicacharts.com/diagrams/2007/12312007spyweekly.jpg
http://www.ivicacharts.com/diagrams/2007/12312007qqqqweekly.jpg

For Monday I don’t have a bias. It is still hard to predict intraday direction with a range chart without volume. Because of that the best way will be to stay with intraday moves and trade small. Volume will remain small and I expect the same type of action we have seen over the last three days.
Maybe it will be best to stay away and prepare for a New Year's party, have a great time and prepare for a new year. I will use this opportunity to wish you all a healthy and profitable new year.

Wish you all good trading!!!

Ivica
 
Market commentary for 01/03/2008

Good day!
The New Year started with strong selling pressure and Oil reaching new highs ($100 per barrel). We have a saying here in Croatia: The start of the New Year is what we can expect the rest of the year. I hope that isn't true because in that case we can expect more selling in the future. But if we look at the weekly charts which I drew on Monday than we can expect more selling and possibly a monthly market downtrend. It is too early to be sure but certainly good to have that in mind.

http://www.ivicacharts.com/diagrams/2008/01032008diaweekly.jpg
http://www.ivicacharts.com/diagrams/2008/01032008spyweekly.jpg
http://www.ivicacharts.com/diagrams/2008/01032008qqqqweekly.jpg

Let’s take a look at Wednesday’s action. The day started flat and in the first 30 minutes the indices formed a wild 5 min range with whippy moves from the high to the lows and back. At the 10:00 am EST reversal, the selling pressure started and continued until 14:00 pm EST reversal period. It was a strong move down which we can see on the 60 min charts. Also, as I mentioned several times, on the 15 min charts we can see that the 10sma resistance area was key which is quite usual on strong trend action. At the 14:00 pm EST reversal, the indices bounced and it was strong with higher intraday volume, but the 20sma 15 min second intraday resistance area was too strong. The Indices couldn’t hold and traded back to lows finishing in the low area. On the 60 min charts, we can see that this was the second selling way and the selling pace was strong with higher volume. This indicates the probability of another move down which I will expect in future days. Since the selling pace was strong, I will expect that the 10/20sma resistances areas will be very important for that possibility.

http://www.ivicacharts.com/diagrams/2008/01032008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/01032008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/01032008qqqq60.jpg

The Indices have room for another move down and we can also see that on the daily charts. That will bring them to their previous daily lows. Also we can see that the extended red bar's volume is again stronger than the extended volume on the green bars. This tells us about market breathe over the last weeks. When we include the weekly scenario possibility, Wednesday's strong selling pace, heavier volume and room for another 60 min 3rd selling wave, we have enough reason to expect more selling in the future

http://www.ivicacharts.com/diagrams/2008/01032008dia.jpg
http://www.ivicacharts.com/diagrams/2008/01032008spy.jpg
http://www.ivicacharts.com/diagrams/2008/01032008qqqq.jpg

My expectation for Thursday is a consolidation day which we typically get after an extended day. That means a small range day. It will be more of a day trade day than a swing trade day. The open swings did great on Wednesday and they are all protected. It will be wise to not use the same risk for Thursday and give back all of our profit. I will pay attention to the 60 min 10/20sma resistance areas and the indices behavior there. On the 60 min charts, we can see that for low risk continuation setups, the indices need rest and earlier continuation will be higher risk for new short setups. If anyone has any questions about this commentary or any particular setup please feels free to contact me.

Wish you all good trading!!!

Ivica
 
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