Market commentary

Market commentary for 03/07/2008

Good day!
Thursday's action gave us a trend day. When we look at the daily charts it is easy to see that but those who followed Thursday's trading saw that the intraday action had divergences between the weaker QQQQ and the stronger DIA. The last hour brought synergy, but most of the day the DIA and the SPY were in a very choppy slow downtrend move with low volume which suggested the possibility for a break up. With that action trading risk was higher and I was very cautious with the short side. Now we can say that the daily resistance held and that the possibility for a daily trend continuation is open. On the 60 min charts we can see that the indices closed at Tuesday's lows which suggest the possibility of a double bottom pattern.

http://www.ivicacharts.com/diagrams/2008/03072008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03072008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03072008qqqq60.jpg

Now we have a situation where the daily charts suggest possible selling continuation, and the intraday charts are extended for new short setups. We can see the support areas on the daily charts and they can very easily be broken tomorrow. Before the open, the jobs data will come out and that can determine Friday's action and because of that staying in positions is higher risk. For the morning action, we have a dilemma, will the double bottom hold or will the selling pressure continue with a gap down after the jobs data report.

http://www.ivicacharts.com/diagrams/2008/03072008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03072008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03072008qqqq.jpg

It is hard to put together a watch list with a full trading plan when we don’t know what the market reaction on the jobs report will be and because of that I will wait at least 5-15 min after the open for new setups. Generally, my bias is on the down side, but the question is will be there just be continuation after the open or we will see a bounce first. We have open swing trades and I will be focused on them. The Indices have room for a move down which will bring the QQQQ to new lows and the DIA and the SPY have room to retest their previous monthly lows. After the open we will see what the market will bring and then I will decide about Friday's activity

Wish you all good trading!!!

Ivica
 
Market commentary for 03/10/2008

Good day!
The jobs report brought the market down and all the indices opened on Friday with a gap down. It was a very whippy day because after the open, the indices filled their gaps and reached their 10sma 60 min resistance areas. But there was no strength for keeping that area and consolidation. The reversal period at 11:00 am EST and the resistance areas pulled the indices back to new lows which brought the QQQQ to new daily lows. The selling was steady on light volume which increased trading risk because of the potential bounce possibility. At the 15:00 reversal period, the indices bounced strongly again into the 60 min chart 10sma resistance area. We can clearly see how the 10sma can be a nice trend tool, The last two days every try to break it failed and finished with new lows. Also we can see on the charts that the morning and late afternoon bounces brought the strongest intraday volume which was the reason for the high trading risk for new short setups. All in all we saw a very tricky trading day for new setups. Our open swing short trades did well, but because of the intraday action I was not in a mode to open new short trades on Friday.

http://www.ivicacharts.com/diagrams/2008/03102008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03102008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03102008qqqq60.jpg

After all, on the daily charts we can see that Friday’s volume was higher and the day finished with a doji bar what suggests indecision for next week. The QQQQ reached new lows. The DIA and the SPY closed higher than January's low and still have room for more selling next week. It will be hard to find new low risk short setups because the market is already on the move and we don’t have consolidations (pattern) and we all know that we need them for low risk setups and reasonable risk/reward trading plans. With the daily doji bars, the indices can go lower and see new lows (QQQQ) or previous lows (SPY/DIA), but also can form higher daily lows. On the daily DIA/SPY chart we can see that both have room for their previous lows, but also that will be their equal move support areas and with the strong trend down I will expect more than that scenario.

http://www.ivicacharts.com/diagrams/2008/03102008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03102008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03102008qqqq.jpg

Since the week is over, let’s see what the weekly charts tell us. The DIA has room to meet January's low, the SPY closed at its' 200sma and the QQQQ reached its' 200sma and with the late bounce closed a little higher. With the market mode lately, we can easily see more selling in the first part of the week and that will be my focus for now. I will expect that move, but also I will expect a possible daily reversal in the second part of the week. Since the DIA has a more clear situation for the move down I will expect more selling pressure there, but that is just one scenario.

http://www.ivicacharts.com/diagrams/2008/03102008diaweekly.jpg
http://www.ivicacharts.com/diagrams/2008/03102008spyweekly.jpg
http://www.ivicacharts.com/diagrams/2008/03102008qqqqweekly.jpg

Again with the daily indecision bars we can see whippy intraday action with strong bounces and stronger reversals to new lows. For new short setups, risk will remain higher. Because of that I will be focused again on intraday moves on smaller time frames (5/15 min charts). The weekly third selling wave continued and we could see a weekly reversal soon and for swing trades that will be the best possibility. Before of that it will be best to be patient and trading activity must be lighter with less risk than usual. If anyone has any questions, please feel free to contact me.

Wish you all good trading!!!

Ivica
 
Market commentary for 03/13/2008

Good day!
Wednesday brought a correction after Tuesday's strong move up. As we expected the indices showed strength in the morning because there was room on the charts for that. After the indices reached their resistance areas, the correction started. During the doldrums time it was a tight slow correction but around the 15:00 pm reversal period the selling pressure increased and the indices finished the day in negative territory. That is a short explanation for Wednesday's action. On the 60 min charts we can see that the previous resistance was too strong and when the 10sma support area didn’t hold, that was the signal for selling pressure. Also we can see that the indices have room for selling continuation in the morning and that is the scenario that the charts suggest right now.

http://www.ivicacharts.com/diagrams/2008/03132008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03132008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03132008qqqq60.jpg

The late selling pressure and weak close resulted in a red bar on the daily charts and we can see that the moving averages again showed the reason why they are a good tool for market expectations. The DIA pulled back from its' 20sma and closed under its' 10sma, the SPY couldn’t stay above its' 10sma, while the QQQQ pulled back from its' 20sma. Right now we can say that the QQQQ is holding up the best because it closed above its' 10sma which will serve as its' support area. It will be important to see if the support areas can hold because if the selling pressure will continue in the morning then buying optimism will slow down and concern about the recovery will return to the market.

http://www.ivicacharts.com/diagrams/2008/03132008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03132008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03132008qqqq.jpg

Unfortunately the market didn’t hold Tuesday's gain very well and that increases trading risk for the next few days which could result in whippy intraday action with strong bounces from the support areas and strong reversals from the resistance areas on the smaller time frames charts. If anyone hoped that after the FED market support, risk would decrease and we will finally see healthy action supported with healthy pace and volume, I must say that right now we don’t have that situation and the charts don’t suggest it. I will stay with intraday setups and with faster trades. Swing trades are still higher risk and it is very important that every setup be taken with proper trading risk. My bias for the morning is down, but right now I don’t expect that the indices will retest Monday’s low. For now I think that we have odds for daily/60 min triangle action between Monday’s low and Wednesday's high. Of course that can change with the intraday action and because of that we need to know that trading risk is higher until the charts suggest a more clearly daily direction.

Wish you all good trading!!!

Ivica
 
Market commentary for 03/17/2008

Good day!
Someone in the room on Friday mentioned that right now the market action doesn’t have anything to do with technical analysis. I agree with those thoughts. Friday's action clearly shows that fact. After the BSC news, the indices fell and in just 20 min gave back all of Thursday's gains, and those were strong gains. On the 60 min charts, we can see that the large range is holding and the indices show very strong moves between the resistance and support areas. Obviously this is high risk action and I believe that most traders are not enjoying it. I don’t want to talk much about Friday's action because it was just another very whippy day after a series of them starting after the FED announcement.

http://www.ivicacharts.com/diagrams/2008/03172008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03172008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03172008qqqq60.jpg

Before that lets take a look at the daily and weekly charts. On the daily charts we can see that the indices are fighting with their support areas. Friday's volume was strong but still doesn't suggest any daily direction. I mentioned in Friday's commentary that one bottoming scenario is rounding lows. If that is how it happens, we will see more days like Friday and we can expect difficult trading days in the future. I always try to imagine the higher time frame charts with the smaller ones, because it is the same. Let’s say that we have 5 min charts. Then try to imagine rounding lows. We know that for rounding lows we see choppy action before the true reversal, and if that will be case, then we will need a number of days before any true reversal. Of course that is just one possible scenario.

http://www.ivicacharts.com/diagrams/2008/03172008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03172008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03172008qqqq.jpg

But let’s take a look at the weekly charts. You all know that I really like 3rd try patterns. The reason why I don’t like the second try is the possibility of a double top or bottom risk. Now look at the weekly charts. A double bottom possibility is here. We have strong support and the formation of doji bars which suggests indecision. With the possible double bottom we already have enough indecision, and the dojis bar just increase that. Last week's volume was stronger and increased over the last weeks. That suggests a bottom as well. There is another point: a double bottom can result with slightly lower lows, an exact low or with slightly higher lows. We can see that all three possibilities are open. When we add the doji bars the result is indecision and a high risk trading environment.

http://www.ivicacharts.com/diagrams/2008/03172008diaweekly.jpg
http://www.ivicacharts.com/diagrams/2008/03172008spyweekly.jpg
http://www.ivicacharts.com/diagrams/2008/03172008qqqqweekly.jpg

I don’t sound very pessimistic, but with this commentary I like to lead you to a real conclusion for the week in front of us. Maybe I’m absolutely wrong but this is the way I read the charts. From the text above, we can conclude that the market is at a very confused point. That will lead us to less activity and lower risk trading next week. But next week we will have just 4 trading days. The FED meeting is on Tuesday and options expiration is on Thursday. I can’t predict the market action 100%, but I can have expectations. After the emotional whippy Friday I will expect range continuation on Monday and Tuesday before the FED announcement. I expect that traders will wait and expect the FED to save the economy. After the FED we can expect to see a strong reaction (as usual). Thursday's option expiration day will most probably be the usual option action which most of the time is whippy. So in conclusion, if anyone plans to take vacation I believe that next week is a great opportunity for that. Maybe the market will finally pick a direction and I really hope that will happen. If the weekly support areas don't hold we could see a strong move down (panic) which would be the 3rd selling wave continuation. If the support areas hold, we must see which bottoming scenario we can expect. When the situation is unclear and when we don’t know what direction to expect, the best thing to do is to leave that initial move alone and then look for the continuation possibility. That means I can expect (at least for myself) to have a less active week. Please remember, especially if anyone had a difficult time last week, that CASH IS A POSITION TOO!!!

Wish you all good trading!!!

Ivica
 
Market commentary for 03/18/2008

Good day!
Indecision continued. I tried to explain in Monday's commentary why it is very risky to be active on days like this and why we can expect the same for this week. Because of that I just watched Monday's action and I feel good about it because we saw another whippy trading day. The day started with a strong gap down and everything looked ready for selling continuation. But again the indices did the opposite. The DIA was the leader and filled its' gap in about 90 minutes. The QQQQ was the weakest and didn’t filled its' gap but was very close to doing that. After the opening strength, the market was not strong enough to hold that area and consolidate for any kind of buying continuation possibility. Instead the market traded all the way back down and on the next move the QQQQ, the weakest indice, saw new lows while the DIA formed a slightly higher low. This was enough to bring the indices back again to the morning highs.

http://www.ivicacharts.com/diagrams/2008/03182008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/031892008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03182008qqqq60.jpg

Generally it was an up-down-up day. There just was not enough time for another down move. The market had a half move down before the end of the trading day. On the daily charts we can see that the DIA and the QQQQ formed double bottoms, while the SPY reached its' January low and bounced from it. It is too early but right now it looks like a possible weekly double bottom. Volume was high again and right now it is impossible to predict the action with a good % to be right. You all know that I use pace and volume a lot for my trading. When we have a day where buying pace is the same as selling pace and same again as buying pace, my style says the best idea is to stay with cash as my position.

http://www.ivicacharts.com/diagrams/2008/03182008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03182008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03182008qqqq.jpg

I believe that on Tuesday everyone will wait for the FED announcement. I will stay in the same mode as yesterday. I still think that there are too many situations out there with panic and emotions and that can move the market in any direction without reason. Because of that best I believe it will best to wait until things settle down. I think we are not far away from that (week or two). The best scenario is to allow the panic to play out so we can be finished with it and start again. We will see. We can expect some possible action in the morning, then choppy doldrums time and usually very whippy action after the FED announcement. I don’t expect that we will see any big moves before the FED announcement, but again, usually I have a bias when the market action can be predictable after TA, but when emotions move the market then is impossible for me to have bias. For the end of this commentary I would like to repeat again: CASH IS A POSITION TOO. Please don’t forget that.

Wish you all good trading!!!

Ivica
 
Market commentary for 03/20/2008

Good day!
Wednesday was an interesting day in that the indices were down considerably, however, the drop didn't seem to be that concerning. The FED did two things that surprised the markets. By only lowering the discount rate 75 basis points and a very strong statement that they are concerned and are going to act aggressively to curb inflation had a very strong reaction on the dollar. With the stronger dollar the entire commodity complex started to sell. Gold was down 60 dollars, Oil was down 6 dollars, copper, aluminum, etc was also down 5 to 10 percent. Commodity stocks were being liquidated or profit taking causing the DOW to be the weakest with Oil and Aluminum stocks in the index. We will have to see if the dollar's strength continues but eventually that will be good for the overall economy and the rest of the market.

The action Wednesday is the reason overnight trades after announcement FED are very high risk. True open was positive and the morning action was strong and brought the indices to new highs. The SPY and the QQQQ broke out from the 60 min range. After the correction from the high and the bounce to the lower 15 min high around noon the indices backed most Tuesday's gain and closed day at Tuesday low support area. We can clearly see that on the 60 min charts that we are back in the middle of the 60 min range. The DIA was weakest and filled Tuesday gap while the SPY and the QQQQ still have room for that. I am expecting that the SPY and the QQQQ will do that at the open Thursday morning.

http://www.ivicacharts.com/diagrams/2008/03202008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03202008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03202008qqqq60.jpg

Unfortunately if anyone thinks we have seen the bottom might be disappointed. However if the QQQQ and SPY hold my thoughts from the opening statement may hold true. All the indices closed weak at lows. The DIA still has 10sma as support area, while the SPY and the QQQQ closed under all moving averages. If Tuesday gap won't hold, then very easily indices will retest previous low support area. Also we can see on the daily charts that indices action is very whippy with bigger mixed red and green bars. If you anyone remembers that I told that worst what we can expect will be daily/weekly rounding low pattern, right now the odds for that increase. Try to imagine a bigger time frame with small time frame and you will see that is a possible case. We can expect that daily whippy action will continue. If that is the case the scalp market will continue.

http://www.ivicacharts.com/diagrams/2008/03202008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03202008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03202008qqqq.jpg

That is just one scenario. It will be clearer next week. We must concentrate on Thursday action first. It is last trading day before extended Holiday week. It is option expiration day. Look again on the daily charts, whippy action and big range bars. All that suggests is trading will be high risk. If anyone remembers Monday's commentary when I told you this week is great time for vacation, I still think that. Tomorrow we can expect whippy intraday action and there are two ways to survive that market action. One is with using bigger stops and be faster with taking profits. Another is cash and not trading. That is what I am going to do. Right now I don't have any bias and more and more I think that we could see the rounding action on the daily charts. I really hope that won't happen. Protect your account for new market opportunities. I will use this opportunity to wish you all a very nice holiday. I wish you all Happy Easter for those who will celebrate it and great long weekend for others.

Wish you all good trading!!!

Ivica
 
Market commentary for 03/24/2008

Good day!
After a weak Wednesday close with the indices reaching their intraday support areas (60 min), we saw strength on Thursday. The day started with weakness at the open, but the selling pace was choppy, slow and on light volume which made me suspect of taking short trades and going with the market action. Soon the indices bounced which was the start of a nice recovery after the strong selling pressure from the day before. Since it was options expiration day, we took several short and long trades and most of them did well. On the 60 min charts we can see that the indices made lower highs and the SPY/QQQQ closed under its' 200ma resistance area. Volume was lighter which was expected because of the long holiday weekend. We can see that the 60 min whippy range action continued and we can't really determine from it what to expect for Monday's action.

http://www.ivicacharts.com/diagrams/2008/03242008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03242008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03242008qqqq60.jpg

It is the end of the week so let’s take a look at the daily charts. We saw another large range bar, however, this time it was red. Over the last two weeks we can see that the action is very whippy without any trend direction. The action suggests that this daily indecision will continue over the next week too. Wednesday's high is the first resistance area for the DIA and the QQQQ, while the SPY has its' 50sma resistance area as well. Last week's volume is stronger which also suggest the bottoming process. I still think that the odds for rounding lows are higher. Unfortunately there is nothing new to add from the last few commentaries.

http://www.ivicacharts.com/diagrams/2008/03242008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03242008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03242008qqqq.jpg

On the weekly charts we can see that the double bottom is holding very nicely, but we have a number of resistance areas right above. The DIA has its' 10, 100, and 200sma. The SPY has its' 10 and 20sma and the QQQQ has its' 10 and 100sma. On the other side the DIA still has room to reach its' 200sma weekly support area. We definitely do not have a clear direction for the near future. From my experience and with the number of resistance areas close overhead, the weekly charts are another reason why I see increasing odds for a rounding bottom on the daily charts.

http://www.ivicacharts.com/diagrams/2008/03242008diaweekly.jpg
http://www.ivicacharts.com/diagrams/2008/03242008spyweekly.jpg
http://www.ivicacharts.com/diagrams/2008/03242008qqqqweekly.jpg

I think that the indices saw or they are very close to weekly/monthly lows. We do still, however, have the possibility for another DIA move down into its' 200sma support area. But for now definitely I think the bottom AREA is around. So far I don’t see strong bounces with heavy volume which will be the proof of a bottom and because of this reason I will stay in the same mode. I think that the bottoming process has started and now we must see where it leads us. Until the charts give us direction I think that every overnight trade will be higher risk, because the indices could continue with one day green, next day red bar action. Focus will stay on intraday trades and I will scan for the strongest and weakest names. I wish you all a nice holiday and long weekend and hope you all will have a wonderful time.

Wish you all good trading!!!

Ivica
 
Market commentary for 03/25/2008

Good day!
Monday brought a strong move up, especially for the QQQQ. Unfortunately the volume was not that strong and Monday was a great day for the market and open long trades, but it was not a great day for new setups. The reason for that was there were several resistance areas that the indices had to overcome and there was not enough room for low risk setups. My point is to find low risk setups and on the 60 min charts we can see the reasons for that. After a strong move up from the daily lows from last Wednesday, the indices correction was stronger than we like to see and that suggested the possibility for triangle type action. Thursday's action was long and because of the correction type Wednesday's high was a stronger resistance area and that was the first reason why risk was higher yesterday after the open. Since the indices opened with a gap up there was not much room for a move up before Wednesday's high.

http://www.ivicacharts.com/diagrams/2008/03252008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03252008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03252008qqqq60.jpg

The next resistance for the SPY and the QQQQ was the daily 50sma, another strong resistance area, and after all that the indices started with their intraday consolidation and that held for the rest of the day. Generally, after that move up in the morning, risk was high because of the resistance areas and the rest of the day risk stayed higher because of the daily resistance area. On the daily charts we can see that the QQQQ was much stronger and reached its' 60 min equal move. The SPY and the DIA have room for another move up.

http://www.ivicacharts.com/diagrams/2008/03252008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03252008spy.jpg
http://www.ivicacharts.com/diagrams/2008/03252008qqqq.jpg

We could see strength on Tuesday but also we could see a divergence because the QQQQ daily CCI is over 200 (+200) which suggests an overbought area, while the SPY and the DIA have room for another move up. My bias for Tuesday is on the long side, but we can also be prepared for a possible daily correction. Odds for possible daily/weekly rounding lows are still here and my focus will stay on intraday setups.

Wish you all good trading!!!

Ivica
 
Market commentary for 03/26/2008

Good day!
A quick look at the daily charts will tell all about the intraday action on Tuesday. It was an NR7 bar, meaning the narrowest bar in the last seven days. That is always an opportunity for a trend day the next day. On the 60 min charts, we will see the reasons. All day we saw a divergence between the strongest QQQQ and the weakest DIA. That increased risk in an already high risk range action. On the 60 min charts we can see that the DIA and the SPY are forming triangle pattern and without the QQQQ chart my bias would be absolutely on the long side. But when I see yesterday's QQQQ third buying wave and when I see the buying pace I must be more conservative with a long bias. The QQQQ daily CCI is still in overbought area (over 200) and yesterday we saw a third choppy buying wave on lighter volume. The QQQQ suggests that a correction is close.

http://www.ivicacharts.com/diagrams/2008/03262008dia60.jpg
http://www.ivicacharts.com/diagrams/2008/03262008spy60.jpg
http://www.ivicacharts.com/diagrams/2008/03262008qqqq60.jpg

If you remember, I mentioned in yesterday's commentary that we could see a divergence between the stronger QQQQ and the weaker DIA. The same applies for tomorrow. The SPY and the DIA have room for another 60 min move up (3rd buying wave), while the QQQQ already saw 3 buying waves and it is in overbought area. The DIA and SPY 60 min charts will be important to watch. If they will hold above their 20sma's odds for another buying wave will increase. If they break under this level, then we could see a selling synergy and the start of a daily correction. Right now the problem is that the last moves up on the daily charts were with decreasing volume and that is not what we like to see. That means less and less interest for the long side. If we add that to the still open odds for a daily /weekly rounding lows possibility, then we must be prepared for several selling days.

http://www.ivicacharts.com/diagrams/2008/03262008dia.jpg
http://www.ivicacharts.com/diagrams/2008/03262008spy.jpg
http://www.ivicacharts.com/diagrams/2008/0326008qqqq.jpg

I know that sounds “smart” but right now we have 50/50 odds for the 60 min direction. We could see another pop up, but we could also see a reversal. I drew that on the 60 min charts (purple line). Whatever does happen, I think that risk for swing moves up is too high and before that possibility we must see a daily correction. Of course anything can happen. There will always be “own way” charts and they don’t care about the market action. Since we saw an NR7 bar, odds for a trend day are higher. Usually we mark the 60 min high/low and whichever direction is broken is typically the trend direction. I don’t know for sure what the market will do, but for now I’m prepared for possible strength in the morning and then I will look for a reversal. Again this is one scenario and we will see after the open. For now, staying with intraday moves is the safest way.

Wish you all good trading!!!

Ivica
 
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