Wednesday, September 29, 2010

Technical Picture - Minor Losses

Before we get to the U.S. markets, it's worth noting that Canada's TSX closed at recovery highs today, taking out the previous highs set in April. The TSX is heavily weighted in commodities and the three day run in oil pushed us over the top.

The major U.S. markets are still range bound despite some constructive sector rotation. One of the problems as I see it, is the Tepper gap from last Friday.

As you can see from the 15 minutes charts of the QQQQ and SPY above and below, when prices tried to break above Friday's highs, they were firmly rejected. The markets sold off Monday afternoon with follow through into Tuesday morning. The Qs filled the entire Tepper gap in early trade, but the SPY/DIA only did a half gap fill. The last day and half have been spent chopping around intraday support. One way to get resolution is for the SPY and DIA to go back in fill those gaps more completely. Other than that, we would need some really favorable economic data to propel us out of this range.


I always monitor the SPY, DIA, and QQQQ intraday for tells. Today, the Qs were lagging most the session. So when the SPY and DIA tried to break session highs, they were rejected. After three attempts, we printed a lower high and down we went into the close as depicted below.

Gapper trade - CRUS - Price consolidates the bullish gap by flagging in the upper range. Place fibs. from low to high of opening range to set targets. On a measured move basis, price should run to 100%. CRUS stalled just shy of the target.

TSL was a HCPG pick. Price hit the number in the OR, printed an inside bar and broke out. I missed the break, so I scaled in on the retest and added when price took out the previous high.


SNDK was carving out a bearish flag, but today it broke to the upside (short squeeze). I only caught a half point scalp, but the chart looks good for a retest of the base at $40.00.


7 comments:

M said...

Jamie:

Wonderful blog. I came to know about the market confirmation from your blog and was observing when the QQQQ's were lagging buting to make SPY was try a new high. Do you have a post where you describe this in a little more details? It would be great if you could point me to any resource/s on this.

M said...

Some problem with my cursor moving to wrong places. This is the corrected comment.

-------------

Jamie:

Wonderful blog. I came to know about the market confirmation from your blog and was observing when the QQQQ's were lagging but SPY was trying to make a new high. Do you have a post where you describe this in a little more details? It would be great if you could point me to any resource/s on this.

Do this non-confirmation apply to shorts only?

Jamie said...

Thanks M,

I mention the non-confirmation of Qs vs. SPY once in a while, but rarely get any comments. It's a really good model to predict market reversals. It works for both long and short. I especially find it useful when we are stuck in a range. For example, on the morning of August 27, the Qs breached Aug. 25 support, but the SPY and DIA did not confirm. The markets reversed and rallied for the rest of the day, closing near session highs.

I don't really know of any resources. I first noticed this through Briefing.com. They give updates on the technical levels of the markets during the day. I started to pay attention when they mentioned non-confirmation and noticed a pattern of intraday trend reversal, so I incorporated into my trading.

Mike said...

I am writing to ask for your permission to include your posts on
Investment Strategy and include a link to your blog in our
directory. We would
include a link back to your blog fully crediting you for your work
along with a profile about you listed on Investment Strategy.
Please let us
know as soon as possible.

Mike@InvestmentStrategyTips.org

Mike Thomas
Editor-in-Chief
InvestmentStrategyTips.org

M said...

Thanks Jamie. Your reply and some other posts on your blog about this has made it very clear. I am incorporating this in my trading too. Thank you for sharing.

I have a request. I am a total loser when it comes to trading reversals. I have tried but my results are a disaster. I know trading reversals is one of the hardest thing in trading (at least for me) but are there any pointers that may be useful to get started?

Jamie said...

M,

Let me see if I can put together a post on reversals in the coming days.You'll probably want to familiarize yourself with key candlestick reversal patterns and key chart patterns to start.

M said...

Great! I will be anxiously waiting for the post.