All Entries Tagged With: "Market Conditions"
Uptrend Aside, Trading Scene Set to Improve
November 1, 2010 at 10:45 am
August seems so long ago, doesn’t it? Stocks had rebounded from their July lows, briefly, and had turned back down hard for a test. The test passed, as an important higher low was established.
From there, we all know the story of how the seasonally-weak September and October stood conventional wisdom on its head to post big gains. What’s not been spoken of much, however, is the way this 2-month rally has changed in recent weeks.
What began as a rip-roaring rise ripe with short-covering has evolved into a slower, more steady uptrend channel. The pace has cooled off a bit, while still continuing to make upward progress. In fact, new intraday highs were posted multiple times last week, despite the indecision we saw between the opening and closing bells each day. Today we’re seeing more of the same, as early strength has delivered new highs while modest profit-taking has caused the indexes to back down from their best levels.
To put it another way, the “dumb money” has had great success in recent weeks. Those who waited for strength to return before becoming confident enough to join in have been fortunate enough to chase extended markets and stocks and still profit. But for those of us who prefer to see some kind of rhythm associated with market moves, it’s been a one-way street without many ways to play the long side while still protecting the downside.
Astute traders have instead found it a bit more difficult to navigate the current environment, as anyone with an ounce of discipline has felt the uneasiness of adding long-sided exposure for overnights while simultaneously recognizing the limited opportunity of trading intraday. It has left many of us to do more scalping while waiting for more lively day-to-day price action and higher-quality bases to come along. Those bases often rely on some back-and-forth price action, which we simply haven’t seen of late.
Watch The Horizon
Any trader worth his salt knows that conditions will shift. Maybe not immediately, but eventually.
That doesn’t mean prediction is necessary, because it isn’t, but it does mean staying alert.
When trading well, keep doing what works but be on the lookout for signs the setup may be changing. When trading poorly, it’s imperative to employ some other methods which are more suitable to the conditions. At the same time, hope can be had that a shake-up in the price action will bring more opportunities.
Right now, the market is in an interesting spot. The rally has brought the spring highs into play as we’re essentially testing them in this area. That’s a logical resistance area that could prompt some selling, depending upon the news flow. The uptrend channels seen in the averages could easily be penetrated to the downside, heightening concerns of whether that’s the end of the run. The other side of the coin is that the trend is still up, and no evidence has surfaced to suggest it’s changing.
So as a trader, here’s how I’m dealing with all this. The trend is up, so I’m favoring the long side while keeping timeframes short in order to offset the risk of walking the highwire here. I’m also mindful of potential shifts which could emerge anytime. We’re in the midst of earnings season, and that could easily sour the mood. We have the November elections tomorrow and the political implications of that, which is a major event. And then mid-week we have the FOMC, and with all eyes on the economy, the attention of traders will definitely be on Wednesday’s announcement and policy statement.
We could ramp from here and take out the spring highs before a pullback begins. It’s possible. We could break the uptrend channels and see some selling accelerate as traders recognize the trend line break and move quickly to lock in profits. Several scenarios are possible, and it’s important to keep an open mind here for that very reason.
I will say this: I’m expecting volatility to pick up sooner than later, and that means more opportunities for trading multiple timeframes. That’s where the real money is made, as you can have capital working for multi-day moves while still maneuvering to catch intraday moves for profits. Look alive out there, this is no time to get lulled to sleep.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 10-17-2010
October 15, 2010 at 5:07 pm
The bulls posted another solid performance last week as more cash was exchanged for shares. That took the indexes to new recovery highs, but also brought some important resistance areas into play.
The big question on the minds of traders at this point is whether the pace will slow now that resistance from the spring has been reached. We’ll find out soon enough, but there’s still no signs of emerging weakness at this point.
As we head into a brand new week of trading, let’s examine some important levels to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
Be sure to view in full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 10-10-2010
October 10, 2010 at 8:53 am
The market finished on a strong note last week, reaching new recovery highs after putting in some needed rest. This keeps the uptrends intact, and although resistance zones are quickly approaching, the bulls are showing no signs of concern at this point.
The week ahead is likely to bring a resolution to this short-term indecision, so it’s time once again to check out the big picture for clues of where momentum might return in either direction.
As we head into a brand new week of trading, let’s examine some important levels to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
Be sure to view in full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 10-3-2010
October 3, 2010 at 8:30 am
The major averages put in some much-needed rest last week as they were able to hold above key levels while consolidating. The dips have remained shallow and short-lived since the August lows were set. Although we’re short-term range-bound, it’s difficult to expect that to stay the same given all the movement we’ve witnessed over the past month.
The week ahead is likely to bring a resolution to this short-term indecision, so it’s time once again to check out the big picture for clues of where momentum might return in either direction.
As we head into a brand new week of trading, let’s examine some important levels to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me suggest going full-screen for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Video Review of the Indexes 9-26-2010
September 26, 2010 at 12:38 pm
Last week new highs were made as the indexes put more distance between current prices and former resistance zones. The bulls have some exceptional momentum, but how long will it last?
That’s the question on everyone’s mind right now. No signs of weakness have arrived yet, so it’s still not time to expect weakness to set in. However, at some point a good rest or some profit-taking will arrive, and it will be after that occurs that we’ll be able to better assess the technical situation. For now, it’s a one-way street and stocks are still headed north.
As we head into a brand new week of trading, let’s examine some important levels to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me suggest going full-screen for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are you following me on Twitter yet?
Don’t Dismiss This Scenario
September 24, 2010 at 11:45 am
It’s been a big run off the August lows, there’s no doubt about it. September, as a seasonally weak month historically, has caught many off guard with this relentless ramp.
And while the market has conditioned us in recent months to expect harsh reversals rather than continuation, this time may be different.
In other words, don’t dismiss the notion of a secondary advance into the end of the year.
There are a lot of factors at play, but one of them in particular is worth taking a closer look at. I put out an article earlier today that discusses The Case for a Year-End Rally, and wanted to be sure to let you know about it.
A pressing motivation for some is fast approaching, and it could prove to be a game-changer for what has been a range-bound market. Keep an open mind…
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Are Sellers Looking for a Catalyst?
September 21, 2010 at 8:44 am
Anytime we see market streaks emerge, we know someone’s been caught on the wrong side.
Monday’s session marked the 12th advance in the previous 13 trading sessions for the NAZ, including nine straight. Breakouts happened across the board, with the summer highs being cleared on solid volume. It almost feels like stocks may never decline again – and that’s a dangerous way to think.
The market will humble traders of all kinds, including bulls who become overconfident. It may not be a life-altering lesson, but in a tape like this, it could be one slip that brings a sudden pullback – even if it’s a brief one.
The technical picture is positive, there’s no doubt about it. We just established higher lows in August relative to July, and we just made higher highs. That’s a shift of trend, not only in the short term of the past couple weeks, but in the intermediate term of the past few months. The bulls are sitting pretty.
Things start to get really tricky though when momentum begins to run a little too hot, which is where we are right now. All news has been good news of late, and the buyers have dumped cash into this market relentlessly since the start of September. It’s been an impressive run, no matter how you slice it.
For a reality check, however, it’s safe to say that all the easy money has been made for this run. The pace is unsustainable, plain and simple. We could push higher from here, there’s no rule to prevent that from happening, but it’s far more likely that we’ll see some profit-taking kick in sooner rather than later. Those who are sitting on profits will be quick to lock them in at the first sign of weakness.
When it comes to excuses, the market is excellent at finding them. Right now, my hunch is that the bulls are needing an excuse to satisfy their urge to lock in at least some of their gains. And with a few key events on the horizon, it’s important that you and I stay on our toes.
Today’s FOMC meeting may be the first possible excuse for some profit-taking. It may not even matter what the Fed does or says – what matters is how the market responds to the news. And if it isn’t today, then there’s plenty of economic news slated for this week which could prove to be a market-mover.
So, I’m on the watch for a possible pullback. If I were predicting, I’d already be short – and I’m not. Instead, I’m watching carefully to see if some selling kicks in, which would then set up a favorable risk/reward scenario for a little round of selling. Here’s my game plan:
The QQQQ has rallied big, not only in recent weeks, but on the intraday chart as well. We have steep uptrend lines on both the daily and intraday charts, and I’m watching them both for downside breaks. First, let’s take a look at the intraday chart. Monday’s advance was smooth, and a break of the rising trend line at $48.70 would likely spark some selling. I’ll go short there with a stop in the $49 area, just above yesterday’s high.
On the daily chart, there’s also a steep rising trend line. A break of that wouldn’t necessarily mean price goes straight down, but it may be a worthwhile short for the nimble to catch the first move. The rising trend line currently stands around $48.30, and a break of that level could bring into play a multi-day pullback. Traders watching the daily chart should keep that level front and center today, and it will climb daily should this market happen to continue advancing. Once it’s broken though, the move could be a swift one to the downside for a quick trade.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
