Before the Open (Aug 11)

Good morning. Happy Thursday.
The Asian/Pacific markets closed mixed and with a bearish bias. Only China moved more than 1% (it gained 1.3%). Europe is currently mostly down. Belgium, Norway and London are down more than 1%; France, Germany and Amsterdam are down more than 2%. Futures here in the States point towards a moderate gap down open for the cash market, but stating this doesn’t tell the whole story. S&P futures have gone from being up 25 in the middle of the night to being up about 7 two hours before the open to being down 16. Lots of movement.
The movement we’ve been having lately can only be compared to the financial crisis. The S&P typically moves 10-15 points per day and 20-30 per week. Nowadays a 20-30 point move at any random time of the day is normal. This is great for day trading, but if you’re looking for lower risk set ups that come with favorable risk/rewards, they’re hard to come by. Instead of risking 1 point to make 5, in many cases you have to be willing to risk more to make more. The risk/rewards are the same but because of the volatility, intraday noise can stop you out before the chart has a chance to fully play out.
My stance remains the same. I do not think what we’ve seen over the last couple weeks is a pullback within an uptrend; instead it’s the beginning stages of a downtrend. As much as stocks have fallen, I think there’s more to go on the downside. I hope I’m wrong because it’s easier to make money on the upside (a stock can only drop 100%, but it can rally several 100%), but I gotta trade in the direction of the trend and right now that is down. More after the open.
headlines at Yahoo Finance
today’s upgrades/downgrades
yesterday’s sector performance
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Aug 11)

  1. For anybody who has been following me regarding my day trading,
    please advise I am using the SPY 1min and 5min charts for the
    first hour of trading, and then the SPY 10min and 15min
    charts for the rest of the trading day. Thank you. HW

  2. Aussie: try standing on your head. You will then
    understand USA indexes a lot better. Is this what
    has been messing up your trading lately? Only
    the Zen master has the answer to that and a
    lot of other unanswered questions. HW

  3. Looking at SPX from a longer term perspective, it’s my opinon that we may have to see the 1050 area before there can be a more meaningful rally in the broad market averages. The only question in my mind is, do we rally above 1200 from this week’s 1100-1120 support first before heading lower, or do we go down from within this week’s trading range first?
    I agree with Jason that we’ve transitioned from bull to bear and the longer term approach is to find the resistance areas on rallies to establish short positions. I also agree with Neal that, from an INVESTMENT viewpoint, ownership of quality stocks with low P/Es, attractive dividends (above 5%) and solid balance sheets makes sense. But, if you want to hold them long term, it’s appropriate to hedge those positions in the current environment with bear market positions. At least, that’s what I’m doing.

      1. AussieJS – I hear you, but the problem with EW analysis is that I can make a case for a new low being a completed 5 waves from the MAY high OR, a new low can be 5 waves completed of a larger wave 3 from the May high. Either way, we should get a good rally. I prefer to look at EW analysis in conjunction with other technical indicators (once again, I learned that only through some hard learning experinces)and look for confirmations. What happens before then, I leave to those of you who day trade. I’m just sharing a perspective for those readers who may be more longer term oriented.
        Sometimes, I find that a ruler with trendlines drawn on monthly, weekly and daily charts clarifies an awful lot – sorta like a “forest for the trees” kinda thing. Can you feel me?!

  4. I am programmed to listen to Zen master. Thought control
    not allowing brainwaves to receive messages from PeteM
    anymore. PeteM program has been deleted from my files. HW

    1. Howard – as we both know, you are more programed for the day trade “fly by the seat of your pants” feel of the market at the moment (as evidenced by your 1,5,10&15 minute charts). I’m not criticizing that. Like Neal (am I agreeing with Sensei yet again?), I just think the odds are against you. But, as long as you manage size and risk of your trades and have deep enough pockets, you may survive if you can bat about .300. I’m too old for that game. You and I are just on different wave lengths – like 2 ships passing in the night. Best of luck to you!

  5. I see a exact retracement too 61.8 from 666 too 1370 SPX – – Also going back six years on the Dow weekly charts – we have took a braeak (sell in May) – Aug – could be QE2 held us up foe awhile – We also bounced off the 200 MA on the weekly Dow – Could be, we are in a new range ??

    1. Tim – isn’t a .618 retrace at about 935 & isn’t 1100 around a .382 retrace? Consider the weekly chart and look at that 935 area going back to APR-JUL ’09. Hmmm, maybe that’s the real downside support for this longer term bear move that I see ahead. That’s assuming that the MAR ’09 low was THE low since the SECULAR bear market (my opinon) began in calendar year 2000.

  6. Pete – had that reversed – FIB retrace from 1370-666 – my bad – http://stockcharts.com/h-sc/ui?s=$SPX&p=W&yr=3&mn=1&dy=0&id=p76977843497&listNum=4&a=241462917 – I’m with you in the secular bear market – Yet the powers in charge, will do what ever they have too, to prop it up – For a while (range for a while) Till the dam breaks – Been following you posts – Much appreciated on your TA – And agree – The ponzi can only go so long -= Thats for Auzzie 🙂

  7. From a TA perspective –
    Based on the weekly Nasdq charts, though we have not finished the week yet, we failed at the 2007 highs going through a triple top process through most of 2011. We have made a measured move down and trying to put in a bottoming tail. Many leadership stocks are showing good price volume action, better than the indices. This is short term bullish.
    The key will be if we have follow through tomorrow.
    From a FA and Economic perspective –
    There is a lot of fear and what ifs regarding debt and growth. But populations are growing, consuming. World Feds, unlike the US government, seem to be working collaboratively together keeping interest rates down. This is bullish. We can discuss all about the economy and rating agency opinions but like clocks they are only right every cycle and proven themselves to be basically useless charlatans.
    Lets see how we play out for the rest of this week. Mostly cash but net long.

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