Equities vault higher
The S&P gained 2.1% today handily reclaiming the 1,150 level as the market leaders retook their places at the front of the line for investors. I have been on the sidelines since before the FOMC announcement two weeks ago anxiously waiting for the pull-in that occurred last week. But today was a day to jump back in even though it felt early, as it always seems to. The rally's cause has been pinned to the Bank of Japan's announcement last night that it is embarking on an unconventional quantitative easing initiative that involves buying ETFs and REITS. How crazy is that! Central banks, seemingly just since Alan Greenspan, have shifted the core of their focus to inflating financial asset prices, a major departure from their past stated goals of measuring CPI versus employment.
The large gap up was expected by very few traders and I likewise did not anticipate it and missed the bottom prices of yesterday. Yet, I shook that off and went after a few names early on after today's open. Notably, I snatched up Google (GOOG) at $529, Salesforce.com (CRM) at $114 and F5 Networks (FFIV) at $109. GOOG is back in breakout mode and heading higher while CRM was less exciting but I'll stick with it as it holds $110. FFIV had no pull-in at all in the last two weeks and looks primed to run. I missed the buy on Apple (AAPL) and am still kicking myself for not buying it early in today's session. I am most confident about AAPL and GOOG given their relatively low valuation and still very exciting businesses.
Amazon (AMZN) and Baidu (BIDU) also got away from me and their rich valuations have me hesitant to chase. I'm also watching Netflix (NFLX) and VMWare (VMW) closely for possible buys. Anyways, after messing around in oil service names, I was happy to get back to stocks I'm more comfortable trading. I have also recognized some clear mistakes I made in my oil trade. Murphy Oil (MUR), Hess (HES) and Apache (APA) are names much more levered to the underlying price of oil in contrast to the derivative service names I bought last week. This is painfully obvious now in hindsight and I will not make this mis-allocation in the future. I'm sticking with this trade for October but will be looking at better levered names on a pullback.
Ventured into a dollar long today
I bought the dollar (UUP) as per my post this weekend where I outlined my belief that pessimism is far too high against reality. The dollar index has a 57% allocation to the euro so the core of the bet is against the euro. This is precisely the trade I want to make as I think the US's economic prospects are much brighter than Europe's.
I've got some good thoughts together for a post I am writing for tomorrow titled: "Traders' Least Understood Concept: The Coefficient of Likelihood". So look forward to that!
Brandon R. Rowley
"Chance favors the prepared mind."
Monday, 11 October 2010
Market Vaults Higher Easily Clearing 1,150
Sunday, 10 October 2010
Grain Market Analysis from Jim Wyckoff
GRAINS: December corn futures closed up 19 1/2 cents
at $4.91 today. Prices closed near the session high today
and have now seen a strong rebound from Monday's low. The
key "outside markets" were in a bullish posture for corn
today as the U.S. dollar index was solidly lower, while
crude oil and the U.S. stock indexes were solidly higher.
There were rumors in the market today of potential
Russian demand for U.S. corn. Traders are gearing up for
Friday's USDA crop production report, which traders
reckon will be bullish for corn. Today's price action was
very important, as some near-term chart damage was
repaired. It does now suggest that Monday's low could be
the seasonal "harvest low" in corn. Key will be how the
corn market closes on Friday. A close near the weekly
high on Friday would suggest Monday's low was just a
"reaction low" in the overall price uptrend. A close near
the weekly low on Friday would hint that a near-term
market top is in place in the corn market. Corn bulls'
next upside price objective is to push and close prices
above major psychological resistance at $5.00 a bushel.
The next downside price objective for the bears is
pushing and closing prices below solid technical support
at this week's low of $4.54 1/4. First resistance for
December corn is seen at today's high of $4.93 1/2 and
then at $5.00. First support is seen at $4.86 and then at
$4.80. Wyckoff's Market Rating: 6.5
November soybeans closed up 17 3/4 cents at $10.71 3/4 a
bushel today. Prices closed nearer the session high today
and saw bargain-hunting buying interest following recent
losses. The key "outside markets" were in a bullish
posture for soybeans today as the U.S. dollar index was
solidly lower, while crude oil and the U.S. stock indexes
were solidly higher. Some fresh demand for U.S. soybeans
from China also helped boost the bean market today. A
three-month-old uptrend is in place on the daily bar
chart. Bulls have the near-term technical advantage. The
next near-term upside technical objective for the soybean
bulls is pushing and closing November prices above
psychological resistance at $11.00 a bushel. The next
downside price objective for the bears is pushing and
closing prices below solid technical support at this
week's low of $10.42. First resistance for November
soybeans is seen at today's high of $10.77 3/4 and then
at $10.88. First support is seen at $10.60 and then at
today's low of $10.49 3/4. Wyckoff's Market Rating: 6.5.
December soybean meal closed up $7.00 at $299.30 today.
Prices closed nearer the session high today and saw more
short covering and some fresh bargain-hunting buying
interest. Some of the recent near-term chart damage was
repaired today. However, the bulls have more work to do
in the near term. The next upside price objective for the
bulls is to produce a close above solid technical
resistance at $310.00. The next downside price objective
for the bears is pushing and closing prices below solid
technical support at this week's low of $286.60. First
resistance comes in at today's high of $301.00 and then
at $305.00. First support is seen at $295.00 and then at
today's low of $291.00. Wyckoff's Market Rating: 6.5.
December bean oil closed up 37 points at 43.82 cents
today. Prices closed near mid-range today and did score a
mildly bullish "outside day" up on the daily bar chart.
The key "outside markets" were in a bullish posture for
bean oil today as the U.S. dollar index was solidly
lower, while crude oil and the U.S. stock indexes were
solidly higher. Bean oil bulls have the overall near-term
technical advantage. The next upside price objective for
the bean oil bulls is pushing and closing prices above
solid technical resistance at last week's high of 45.45
cents. Bean oil bears' next downside technical price
objective is pushing and closing prices below solid
technical support at 42.50 cents. First resistance is
seen at today's high of 44.07 cents and then at 44.25
cents. First support is seen at the August high of 43.39
cents and then at 43.00 cents. Wyckoff's Market Rating:
7.0
December Chicago SRW wheat closed up 16 1/4 cents at
$6.63 1/2 today. Prices closed near the session high
today and saw short covering in a bear market. The key
"outside markets" were in a bullish posture for wheat
today as the U.S. dollar index was solidly lower, while
crude oil and the U.S. stock indexes were solidly higher.
The wheat bears still have the near-term technical
advantage. Bulls' next upside price objective is to push
and close Chicago SRW prices above solid resistance at
$7.00 a bushel. The next downside price objective for the
wheat futures bears is pushing and closing prices below
solid technical support at $6.25. First resistance is
seen at today's high of $6.67 3/4 and then at $6.75.
First support lies at $6.50 and then at this week's low
of $6.43 1/2. Wyckoff's Market Rating: 4.0.
December K.C. HRW wheat closed up 18 cents at $7.01
today. Prices closed near the session high today on short
covering. The bears still have the slight near-term
technical advantage. Bulls' next upside price objective
is pushing and closing prices above solid technical
resistance at $7.25. The bears' next downside objective
is pushing and closing prices below solid technical
support at $6.50. First resistance is seen at today's
high of $7.04 1/2 and then at $7.08. First support is
seen at today's low of $6.90 and then at this week's low
of $6.82. Wyckoff's Market Rating: 4.5.
December oats closed up 15 1/4 cents at $3.52 3/4 today.
Prices closed near the session high and closed at a fresh
two-week high close. Oats bulls have the solid overall
near-term technical advantage and gained fresh upside
momentum today. Bears' next downside price objective is
pushing and closing prices below solid technical support
at last week's low of $3.25. Bulls' next upside price
objective is pushing and closing prices above solid
technical resistance at the September high of $3.68 1/2.
First support lies at $3.50 and then at $3.45. First
resistance is seen at today's high of $3.54 1/2 and then
at $3.60. Wyckoff's Market Rating: 7.5.
Saturday, 9 October 2010
Market Memoirs: How I Got Back to Green The Streak Lives On
Well, another month is in the books. A couple of weeks ago I wrote about how I had found myself in the biggest slump in my career. My trading success is built on consistency, and for the first time in nine years I was heading for a losing month. I can happily tell you that after two weeks of rededicating myself to the principles that got me here, the streak continues. I came into the 9th inning 0-4, but I came through in the clutch (with a little help from a hanging curveball). This week I am going to discuss how I got out of my funk back into green territory and what I will do to make sure the same scenario never happens again.
With one week to go I was on my dead low P&L of the month. I was as frustrated as I had ever been in trading. What was I doing differently? Why was my confidence so shaken? Doing this as long as I have, I know slumps are inevitable. One would think I would be able to handle my emotions a little better than I did. After three weeks of pouting and basically taking my work home with me and making life miserable for everyone around me, I decided that enough was enough. For the next 6 trading days I would only trade the right setups for me (bull/bear flags, pennants, etc). That's my strength, not jumping into a stock because it had news or looking at AAPL because it just went up five dollars. I was trading only stocks that had breakouts or breakdowns with well defined stop losses. MMYT, REE , MCP and CCSC. Those were the stocks that had set up well and got me back on my feet.
This job is much easier when you take all the excess noise out of your trading. By following your own rules and trading only your own ideas, trading life becomes a lot less stressful. You will always make the most money in your own ideas. I tuned out all the other stocks that I don't make money in. I didn't care that BIDU just went $7. To me, that is not my forte. And I know it. Unfortunately, it took me 3 weeks of beatdowns to realize that I needed to get back to basics. Also, a little luck played a part in keeping the streak alive. On the last day of the month I was long CCSC on a great looking bull flag set up, sitting right under all time highs. Being that this was an IPO, I assumed that if we took out the high, maybe I could make a dollar more on a squeeze. I walked out of my office to pick my kids up at the bus stop. When I came back in, I was up $3500 in the trade. I sold the stock, finished the month green and stopped for the day.
Now knowing what I had to do to get back to green, it is definitely not the ideal way to make money. Like in a football game, having to overcome a deficit requires you to alter your gameplan, which will often result in failure. Being that it's the beginning of the month, I highly suggest having a basket of stocks to watch. Get to know them. Make them your best friend. Know the players in the stock, the way the stock moves and how much of a move you can expect. My current basket of stocks that I will trade every day and know like the back of my hand include MMYT, REE, MCP, JKS. When you can do this, the rest of the task is easy. Making money isn't hard, it's the process of how and where to find it that is difficult.
Daily Market Commentary: Japan Drives Markets
Positive news from Japan put pressure on bears, leaving them running for cover as the past two days of weakness was consumed by strong buying.
The S&P was the big winner as it powered higher, clearing six days of tight trading. For now - at least - the pending MACD 'sell' is stalled.
($SPX)
via StockCharts.com
The Nasdaq negated a bearish sequence of days; pushing new highs on higher volume accumulation.
($COMPQ)
via StockCharts.com
The biggest winner on the day was Small Caps. Yesterday's losses had threatened the trading range breakout, but the breakout was restored today. Technicals remain strong.
($RUT)
via StockCharts.com
The Dow is back at channel resistance so is looking vulnerable to selling tomorrow. On the plus side, there was a 'Golden Cross' between 50-day and 200-day MAs.
($INDU)
via StockCharts.com
It's back to square one for bears, bulls can probably afford a couple of down days and still maintain control of the market. Look for a mild down day as today's gain is digested.