All Entries Tagged With: "SP500"
Which Side Are You On?
September 2, 2011 at 8:22 am
We’re in an interesting spot here, no matter which side you find yourself on. Both the bulls and bears have reason to believe they’re going to win this one, so let’s take a brief look at the arguments of each.
From the bullish perspective, we’ve just carved out a higher (incremental) low compared to the early-August low, which was confirmed by a higher high this week (including multiple closes above the mid-August bounce high). We’re now pulling back after a sizeable short-term run, possibly to fill the gap from 8/29. A change of direction begins with the creation of a higher low and higher high, and we’ve seen both of those get created. The worst is behind us.
Here’s the SPY daily chart with notes for the bullish case:
From the bearish perspective, this is a low-level (albeit wide) counter-trend consolidation following a major decline. Advances have not seen meaningful follow through…the 8/9 to 8/15 bounce was met with nearly a complete retracement, and the bounce which completed August is again coming under some pressure here. This correction is just getting started.
Here’s the SPY daily chart with notes for the bearish case:
Charts don’t lie, but at times like this it’s all about perspective. The next direction is in the eye of the beholder, and that’s exactly what makes a market. What’s your perspective?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Just What the Bulls Need
July 20, 2011 at 11:41 am
I noted yesterday that we were getting an upside resolution to the bull pennant pattern in the S&P 500, and it was no doubt a big day. The point and percentage gains across the board were impressive, yes, but were still outweighed by the technical move.
Breakouts need to see follow through. Sometimes they need it immediately, and other times it just needs to happen soon after.
For example, a minor breakout really needs to be followed by some immediate strength to build on the breakout and prevent a failure. On the other hand, a major breakout doesn’t necessarily have to see second-day strength to prove its validity. In those cases, a day or two of digestion are perfectly fine.
That’s how I’m interpreting today’s price action. The market made great strides yesterday to leave the pullback phase it had been stuck inside of, and today has been pretty quiet so far. Because of the size of yesterday’s breakout, I don’t think it’s imperative that we see continued strength today. A day or two of rest are a healthy way to digest that move, particularly for the case of the bulls. It allows for some churning between profit-takers and those nibbling at shares, and it lets the market catch its breath before possibly making another run.
We’ll see how this plays out, but that’s how I’m viewing it at the moment.
Here’s a closer look at the S&P 500 daily chart:
This day of rest is also highly important for the charts of individual stocks, as sharper moves tend to lead to reversals rather than pullbacks. Keep that in mind as you work your watch lists.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Upside Resolution
July 19, 2011 at 1:13 pm
The 7-bar pullback off the July 7th high has been a pretty methodical one, despite some wide-ranging bars and overnight gaps. Nonetheless, the pace of the pullback has been well-defined by the upper descending trend line, while the lower descending trend line has marked support.
Monday’s test of the lower trend line resulted in a temporary breach, but the S&P 500 recovered enough to reclaim that level by the closing bell. Not only did that erase a chunk of losses from earlier in the day, but it gave a bit of an exhaustion appearance on the daily chart.
Today we’re seeing widespread strength with a solid thrust back up through the upper trend line. This is marking a multi-day high, at least for now making it an upside resolution to the large bull pennant pattern which had been building.
Going forward, holding this breakout on a closing basis and seeing the bulls follow through on this advance will be key to making it stick. If it does, we’ve got ourselves a higher low on the daily chart, and recent highs could quite easy come into view soon.
Here’s a closer look at the S&P 500 daily chart:
The wide trading ranges are still intact for now, but a continuation of the summer rally which started at the end of June is certainly a bullish technical event. I’m currently long and eyeing more setups.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Taking It to the Bank(s)
July 12, 2011 at 7:49 am
Banks stink. Since February they have stunk. (Stank? Stunken? I’ll figure that out later.)
What’s interesting though, is the overall health of the S&P 500 without the participation of the banks. Generally the banks lead the market, yet they’ve been sliding for months and this market has stayed afloat rather well.
So are the banks no longer important, or is this a signal waiting to be recognized?
Either this market is going to turn and follow the banks, or the banks will at some point turn and add another layer of strength to this market. What’s your take? I’ll give you mine down below. Let’s look at a few of the majors…
BAC – It’s difficult to locate a more methodical downtrend anywhere in the market than this.
C – One-for-ten reverse split included, this one has gone nowhere but south. See that downtrend line? Yeah, so does everyone else. But why isn’t anyone talking about it?
WFC – This one has had glimmers of hope and potential stabilization a few times, but in every case it has failed to do anything but produce new lows. Lower highs: check. Broken rising trend lines: check.
JPM – Bounces continue to get sold here as well. Why even think about getting long until that changes?
GS – The money-making machine continues to work its way toward lower levels with lower highs and a downtrend line currently driving it steadily lower. Great company, perhaps, but hideous stock.
MS – Another picture-perfect downtrend which will perhaps at some point end, but not yet. New lows were made yesterday, and while it’s getting ‘cheaper’ it clearly isn’t done yet.
Other brokers like SCHW, AMTD, ETFC and the like are suffering similarly, as are major asset management firms (JNS), other banks, etc. The technical damage in the financial sector is widespread, and while there will be bounces, I don’t think the market will be out of the woods until we see participation from this group.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Stretched is an Understatement
July 8, 2011 at 9:19 am
To say the run of the past two weeks has made the market stretched to the upside is clearly a major understatement. It’s been a face-ripping rally for anyone caught on the short side, while underinvested bulls gnash their teeth in nearly equal frustration.
It’s been a tricky environment in recent weeks, yes, but there is still opportunity if you search for it. The momentum run has offered some nice day trades, even if it has left many stocks overbought on the daily charts. Even a few days of rest would do wonders for those charts.
Speaking of rest, this market is poised for it, but will we get it?
The reaction to the jobs number this morning offered the perfect sell-the-news scenario as extremely overbought readings (no matter how you gauge it) left the market badly in need of some profit-taking, some lateral price action, or both. While the result of the turn lower this morning remains to be seen, we do know this: the buyers are finally standing aside to take a breather at the very least.
Thankfully, as short-term traders we don’t have to predict what’s going to come of this market in the next few days. What matters is that we continue to work the charts and trade what’s right in front of us.
With that said, a pullback here for a few days or even some short-term trading range price action would help to establish some new patterns and bases from which to take multi-day plays, one way or the other. That may not mean excitement for a few days (if we do get a rest), but it would certainly mean greater opportunity on the other side of it. I, for one, am excited about that possibility.
Those who have walked away for the summer have already missed considerable movement, and yet the market promises more going forward. Are you ready for it?
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Tricky Times
July 1, 2011 at 11:08 am
I’ll begin this post with a plain and simple statement that is always true, including now:Â the market is tricky. It is never easy, and anyone who tells you it is easy is either lying or an ignoramus.
With that said, if you’ve struggled of late, you have company. Traders of many timeframes have found these past several weeks to be quite challenging. During the past 6 weeks, here are a few phases we’ve witnessed:
Swift move lower. June kicked off with total abandonment of stocks as the indexes shed several percentage points in the opening days of the month. It was flat-out hard to get on board if you missed the initial turn. It rewarded chasing.
Whippy trading range. Following the initial slide, the market settled into a trading range marked by volatile shifts of direction and frequent reversals. It offered zero follow through. Chasing rallies or selloffs resulted in immediate pain as prices turned on a dime to revert back to the other end of the range. It rewarded fade trades.
Aggressive ascent. After a selloff and indecision, in recent days we’ve seen the market ramp relentlessly higher with upside gaps and rips inviting bulls off the sidelines while forcing bears to cover their shorts. Again, chasing has been rewarded.
Chasing strength or weakness isn’t inherently wrong, and you can make fast money if you’re good at it. Likewise, fade trading within ranges isn’t wrong either, so long as you know what you’re doing and you stick with your discipline. But for the trend-following trader who prefers to see stocks run, base, then run again, this market has offered little for you. It has been tougher sledding of late, regardless of whether you’re a bull or a bear, a momentum trader or a continuation player, a day trader or a swing trader. It has been a mess, so if you’ve struggled, that’s part of the reason.
Here’s a look at SPY showing the three phases of the past 6 weeks:
Good News
There is good news.
First, from a technical standpoint we know that the further this rally carries, the more likely the March & June lows are to hold. It just gives the market more breathing room for the next pullback (and we will see one).
Second, conditions are always changing. Just as in recent weeks we’ve seen nonstop selling, complete indecision, and then aggressive buying, going forward we’ll see a variety of conditions as well. That’s good, because it means at some point your ideal trading environment is going to arrive again. But you’ve gotta be ready for it. You can’t have your head down and be busy bemoaning the fact that you’ve missed a couple of moves.
Finally, this is a reminder to step up your game. It’s an opportunity for growth – a wake-up call. Missing out is only partly the market’s fault – the rest is in your hands. Learn some new methods, learn to assess conditions better, and understand which strategies are best suited for the environment you’re facing. Don’t be stagnant, or else you’re going to continue to find frustration anytime the market doesn’t cater to your current skills. Build your skills and become a more complete trader.
Attitude Matters
At all times you can complain and look back and wish you had seen a move coming or had the courage to join the momentum crowd. That’s always something you can choose to do, but honestly, it’s not going to help you. That’s not a winning attitude.
But take heart if you’ve struggled lately. Things will smooth out and when they do, you’ll have experienced a few more market moves to file away in the mental vault – ideally to serve you again later – and that means you’ll more readily identify opportunities you used to miss out on.
Stay on your toes, the market gives nothing away.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Two Ranges to Watch
June 21, 2011 at 11:28 am
Last week we saw an important test of the March lows in the NAZ and RUT, while the S&P 500 held slightly above support from the spring. Those March lows give us a well-defined area to trade against, even if it’s a long way back up to the May highs. Stated otherwise, we may have just carved out the low end of a very wide range.
But that’s not the only range found in this market. We also have the NAZ caught between the 2700 area (late-Feb low & mid-April low) and the 2600 area. It’s working its way back up toward 2700, so the key will be if that level can be reclaimed on a closing basis.
Here’s a look at the NAZ, including both the wide and narrower ranges previously mentioned:
The S&P 500 has a slightly different situation here as it held above the March low and is currently flirting with the 1294 area which has proven important. We saw the late-Feb selloff end at that level, as well as the mid-April pullback finding support at 1294. More recently, that level was broken on June 6 and has yet to be reclaimed on a closing basis. A push back up through there could certainly help this index, although it still has plenty of rebuilding work to do. It has a higher intermediate-term low in place for now (June vs. March), but still stands a considerable distance from prior bounce levels (most notably 1345 from May 31).
Here’s a look at the S&P 500 chart along with the noteworthy levels right now:
Needless to say, this market remains interesting and there should be no shortage of movement going forward.
On another note, the premium newsletter turns 7 today, so for those of you who are members and have stuck around from the beginning in 2004, we appreciate you and remain committed to providing ongoing, exceptional value which adds to your trading process!
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
