The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. With markets largely unchanged yesterday we figured it was a good time to point out some interesting intraday action via a couple of snapshots. Those of you who skip the <i>Under the Hood</i> section every day and race down to the <i>Bulls & Bears</i> or the <i>Model Portfolio</i> sections, may want to take a gander at the ES pivot points a little bit closer regardless of whether you are a futures daytrader or not. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080925FOC2.gif"> <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080925ES.gif"> The upper picture is a shot of Wednesday's <i>Focus Report</i>. The lower is a shot of the <b>ES</b> or S&P Emini futures on a 15 minute timeframe from yesterday. Note how the high of the day not once but twice was exactly at the point called "pivot" which was listed in the report coming out the night before. This does not always work as textbook perfect as this, however, it works more often than not. Pauses or turns in the market (called pivots) often happen on an intraday basis exactly according to those figures. Plot the pivots daily and watch for awhile, you'll be pleasantly surprised. Not a futures trader, you say? That's fine. But why not use as many tools are are available to you to better time your stock and option entries? Being aware of where the pivots lie can help you do that and make a big difference. As far as the market is concerned, the top-line figures were inverted, creating a rather rare inside day which unfortunately does not give much clue. Market feels like its waiting for more news on the bailout. We remain patient and mostly in cash.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. With a solid day gain under our belts now, we can revisit with the major averages and see at least the beginnings of an uptrend in place. Way too early to tell, obviously, but the fact that the markets went up instead of down yesterday does at least make Tuesday's low a <i>higher low</i> in relation to the drubbing of 9/18. Let's peek at some charts and draw some trendlines (fun!). <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080926SPX.gif"> The S&P needs to stay above the red circle in our opinion so as not to spook new bulls and solidly cement in the higher low and possible inverted head and shoulders here. The green circle is where we would like to see the market go, to actually show and prove that it can actually test a downtrendline. Note that we didn't say break the downtrendline. If we can just rally up to it, then there would be the usual push back off of that area and judging by how shallow the pushback is would tell us if we are going to power on through on the next test and begin to change the tone of this market. 1187 is what we don't want to lose on the downside and 1240 would be the upside target. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080926INDU.gif"> Same situation in the Dow with a target of 11,250 (green) and a danger zone of 10,825 on the bottom (red). <br><br> <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080926COMP.gif"> Nasdaq also has uptrendline coming into place, however be aware the index was relatively weak to the others yesterday as seen in <i>Under the Hood</i> below. <b>RIMM</b> reported after the close and is down about $20 as of this writing taking the <b>NQ's</b> to minus 11.25 currently at 7:25pm EST on Thursday. So, the technical facts are above, and things remain tenuous. We would like to see the above mentioned levels hold to start to inspire some confidence that would create moves that could be built upon rather than just held for a day and half.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Little has changed since Friday mornings commentary where we discussed technical levels in the three major averages. Friday's action was lackluster and ended with a small bang as traders apparently didn't want to be short going into the Paulson Bailout Bash Weekend Jamboree. S&P and Nasdaq were basically flat but oddly enough the Dow jumped by over a hundred, mostly due to strength in <b>JPM</b> which had a monster day. With only 30 stocks in that list, its not hard to push it around. In doing our weekend scanning which nowadays consists of a scant 1153 stocks (we used to look over about 2,000 then heard about this new invention called "sleep" that actually made you trade better when taken periodically) and 35 sectors, we have basically come up with nothing. By nothing, we mean that there is simply very little out there that is compelling right now from a technical perspective. Bullish and bearish weekend scans usually return about 35-50 potential players for either direction. Today after poring over the lists, about 7 names were written down in the bullish left hand column (yes, we are old school here at ShadowTrader, none of those fancy spreadsheets, just good old fashioned 8.5 x 11 college rule and a couple of No. 2 Dixon Ticonderogas) and 4 in the bearish right hand column. Blech..... Sector-wise, things are not much better. What is continuing to unfold is that sectors are coming into support or resistance areas, doing the expected bounce or pushback and then basically not following through. Fire up your charting package of choice and pull up weeklies of <b>$STQ</b> and <b>$OSX</b> to see what we mean. Nice moves off of support and then nothing. When you look at those charts, you should see why we have been talking up small counter-trend moves for some time now, because that's exactly all the market has been offering. The one really good looking chart out there that we were able to find was <b>BLUD</b>. Unfortunately they <b>report on Wednesday after the close</b> but it's definitely worth a mention for those of you who are looking for a possible run-up into earnings or are willing to hold through an announcement. We don't do that per se, but fully realize that everyone's risk tolerance is different. Somehow <b>WAG</b> slipped through the cracks as we are long a small piece into their announcement today. We have strong support on our side, however. Anyways, take a gander at Immucor.... <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080929BLUD.gif"> As of this writing which is around mid-day on Sunday, eastern time, it appears that a consensus is near on the bailout plan. <b>ES</b> futures open in about 6 hours and should go nuts. Another chart destroying gap is expected. Which direction is anybody's guess at this point. Keep the pivot points from Friday's <i>Focus Report</i> in mind. We are thinking about counter-trend short reversal plays in <b>ABT, CASY, RYN, & JPM</b>. We'll keep you posted. Directional pickings remain slim and we like better odds than the market is currently offering. We remain patient and cautious.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Someday, decades from now, when the Shadow is too old to write the Focus Report anymore, I only hope that you look back upon our time together and remember "he didn't waste my time just rehashing everything that CNBC said all day long.........." We have been stating that there is no play here as many ways as we can say it for some time now. The market is driven by news which changes every minute. When new news comes out that alters the financial landscape as much as some of this news does, you get gaps of 20+ in the S&P with daily ranges twice that, on the regular. Furthermore the constant onslaught of contradicting news makes for no follow through. That is simply not a swing trading environment. So we remain poised and ready, dipping a toe here and there, and mostly in cash. What is the next point at which to dip another toe and try again? Probably somewhere at the 61.8% fibonacci retracement in the S&P as shown below. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/080930SPX.gif"> This was the same chart that we wrapped up the <i>Video Weekly</i> with on Sunday. There is a nice prior low and a fibonacci level tying in together within about 12 S&P points of each other and 12 S&P points with a $VIX at 45+ just ain't what it used to be. Yesterday's close is within spitting distance and if you check your <i>Under the Hood</i> section below, you'll see that you also have an S1 floor trader pivot at 1088.75 as well. There is no guarantee that it will be a definitive bottom right at that level, but you put it together with a nice $VIX spike, maybe a steaming side of -2500 NYSE a/d line, top it off with a dollop of 15 to 1 negative breadth, serve as climactically as possible and I'd say you got yourself a trade. (And mind you, thats spelled t-r-a-d-e, not i-n-v-e-s-t-m-e-n-t.) If you want to lay low until this current news cycle calms down that would be just fine too. Oh yeah, and before we forget, the market went down a whole lot yesterday.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. As we wait for the Senate vote on the bailout thingy, we remain in swing trading limbo. It's simply unwise to put positions on ahead of news that we know is going to rock the market one way or another. For that reason, <i>Bulls & Bears</i> down below is blank and we remain flat. This decision should be pivotal for the markets. Frankly, we hope that it passes, only because it would put an end to the indecision. This of course will not put any immediate end to the grander economic concerns, it will just take the "what's the government gonna do next" factor out of the equation and let the market function a little more normally as the "approximately 6 months to 1 year out discounting mechanism" that it's supposed to be. So, given that we are not making any prognostications or trade calls in today's report, we felt it was the perfect time to address some issues of trading psychology. The <i>ShadowTrader Model Portfolio</i> started on October 16th, 2007. This month will be the one year anniversary of the <i>Focus Report</i> in its current incarnation since we relaunched it under the RedOption banner. Up until June 1st, things went well for us and the emailed trades generated $9,591 in profits in 7.5 months. Given the fact that the model is $100,000 and we never used more than $60k of that and on average used about $40k of it, these figures were not too shabby. If you click on the link down in the <i>Model Portfolio</i> section where you can view performance, you can follow along with the commentary. Then things went south a bit and <i>Your Humble Narrator</i> was on the wrong side of the market for a little while. A number of losses ensued and while good discipline kept almost all of those losses smaller than the maximum allotted $500, profits still dwindled down to $7,017 by mid-July. Although still a solid performance in the face of a market that was at that point down majorly for the year, the number of losing trades in a row was concerning to us and something was definitely not hitting on all cylinders. <b>The thing is, figuring out that you seem to be on the wrong side of the market lately does not mean that you will automatically get on the right side of it from that day forward.</b> While you do get your footing back you MUST cut down your size. In the <i>Focus Report</i> of 7/18 we announced that trades from that point going forward would be cut in half in terms of size, taking risk per trade down from $500 to $250. Although we didn't mention it then, it was our goal behind the scenes to bring the Portfolio back to the same level of profit as before the slide started before raising risk back to the original parameters. Scrolling down to the bottom, you can see that we were able to acccomplish that and current profits now stand at $9,568. All of the losses of the prior few months were made back while trading on reduced size. Traders, we cannot stress enough how important this concept of cutting down size is. We could list a million obvious reasons but the most important one which is not so obvious is that it goes completely against human nature and what you really want to do at that point which is to at least trade the same size so that you can get it all back quickly, OR actually INCREASE your size so that you can get it back even faster than that! Hitting a nerve? Yes, been there done that, got the T-shirt. When you decrease size it allows you to do two very important things at the same time. Those being, staunch the bleeding by losing far less on future losing trades, and also give yourself some breathing room to figure out what is wrong with your style of play. You might not have it figured out yet and may keep losing. But you will be losing half as much. Although your winners will be smaller as well, they will build your confidence back in the same way as larger winners do. If you find your account drawn down considerably over a short period of time, whether it be accumulated profits given back or losses taking you back below your starting point, you need to set a goal for yourself which will be simply getting back to where you were, <i>regardless of how long it takes--the slower the better.</i> Doing it on decreased size makes it somewhat more difficult and will make you "respect" the profits more when you get them all back. Basically, it changes the game in your mind such that using your original size is not an entitlement just because you have the buying power. Think of it as more of a lost priviledge that you have to earn back. When you do, it should increase your sense of caution which will keep you out of trouble in the future.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month rning, Traders. Still waiting on the House to do their thing which should happen today and we can possibly shake off the shackles of this indecision that is driving the markets down into the depths of Hades. Let's keep a close eye on that Fibonacci retracement level in the <b>$SPX</b> that was in last weekend's video... <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081003SPX.gif"> The last two days of heavy selling have brought us back to being very close to those prior swing lows on the monthly which ties in with the Fibonacci retracement. The optimum scenario would of course be a huge selloff right into this level which should provide a tradeable bounce to the upside. If so, one name that is interesting right now is <b>GS</b>, also known as the venerable Goldman Sachs. Let's check out a chart. Yay! <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081003GS.gif"> Notice how <b>GS</b>'s last swing low was all the way back on September 19th, while since then <b>SPY</b> was destroyed on 9/29, went a little lower on 9/30 and retested that low yesterday. <b>GS</b> is seemingly coming out of this crisis smelling like a rose, and showing much relative strength. Around possible pivot lows in the broad market, these are the types of stocks you would want to go to first. We also like the fact that recent daily candles in <b>GS</b> have been small bodies which would allow traders to get into it with relatively tight stops. Furthermore, because of the nature of the triangle pattern, you know that you have to be "right, or right out", because a flop down below the uptrendline should send the sell orders cascading down on Goldman's head like...like...well, like <i>something</i>, we just can't think of anything right now but you get the idea. Next week the pickings should get better. Recent internal readings are showing things to be majorly oversold. There will simply not be any sellers left if the 10:1 breadth and sub 2000 a/d line readings continue. We've had a number of those days recently and that is of note. Remember: markets do not turn because the opposing side all of a sudden steps up to the plate with force because they all figured out at the same time that THIS is the bottom. They turn because the side currently in power runs out of bullets (sell orders) and then an automatic imbalance occurs with bulls just naturally outnumbering the bears due to their all leaving the market at once.
The ShadowTrader Video Weekly for October 5th, 2008 <object width="425" height="350"> <param name="movie" value="http://www.youtube.com/v/DDOvYg9DkLs"> </param> <embed src="http://www.youtube.com/v/DDOvYg9DkLs" type="application/x-shockwave-flash" width="425" height="350"> </embed> </object> enjoy........ shadow
Good Morning, Traders. Bailout, schmailout! The market sent a clear message on Friday afternoon to Capitol Hill, that the bailout package was not the panacea that it was supposed to be. From a technical perspective, this was good, as we are very close to that 61.80% Fibonacci bounce now, and it would have been nothing short of majorly annoying to see the market bounce hard ahead of that. Although the 9/29 drubbing was one of the worst on record, Friday's action shows that it is probably not the end. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081005SPX.gif"> Pretty basic descending triangle pattern above. Friday's action undercut the prior swing low and it's pretty obvious from the tone of the bar that the only reason we didn't close lower is because the closing bell rung! <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081005VIX.gif"> <b>VIX</b> chart is also in a high and tight formation that is basically the <b>SPX</b> chart turned upside down. Although these 40+ levels are historically high, note how the $VIX is basing there and refuses to come in at all. This would tell us that one more large spike is coming that will more than likely push well over 50. This would be a clear buy signal of epic proportions. "Ok, so that will be <b>500 SPY, 500 DIA, a side of 2 ES, and a Diet Coke.</b> Thank you for shopping at thinkorswim, drive through please..." Unfortunately until such final washout occurs, there is still not much to do. Weekend scans turned up only counter-trend rotation type moves, still nothing that is looking like a clean long setup off of a strong chart. Shorts are too far gone to chase at this point, we feel. Some names that are coming into support just around the corner are <b>WGL, UGI, RYN, D, LH, RTH, CHKP, RSG, WYE, LLTC, CNI, FE, ATHR, VOD, TTEK, FFIV.</B> Check out some of these names if the washout occurs for longs that are at areas where they have been in demand in the past.
The full version of this report with daily stock picks and real-time email alerts is available here for $20 per month Good Morning, Traders. Yesterday we put out an email alert to look to buy the market long over the high of an hourly reversal bar. The play never set up, as the market went much lower without breaking the high of that bar. The area in question was 105.50 in the <b>SPY</b>. The hourly chart below notes that area and shows how we closed. <img border=5 width=560 height=650 src="http://www.shadowtrader.net/focus_report_charts2008/081007SPY.gif"> The rally off of the lows which was on the right breadth, $VIX, and a/d #'s to be characterized as "oversold" was quite strong, although this is completely a function of volatility. 20 S&P points at a 50+ $VIX is not 20 S&P points with a 20 $VIX. Either way, most gaps fill, so we have annotated the chart above with the gap area in the <b>SPY</b> where we should move to on continued strength. The circled area (1) is what we thought would be the intraday bottom in the markets as described. Area (2) is known as a <i>bullish engulfment candle</i>. This is when the entire body of the previous bar is bearish and tucked inside of the range of the current bar which is bullish, ie: the bars have opposing colors. There is no way of knowing at this juncture if the low of that bar is going to end the bear market or not. We would be looking for the market to have some upswing to it if 50% or less of that bar (#2) was retraced and the market firmed up closer to the bottom of the gap area. At least for the short-term. It should be noted that the Fibonacci analysis of the 61.80 retracement of the move from 2002 to 2008 should be discounted at this point. It never came in to play at all, with the S&P gapping down yesterday right to that level but selling off immediately and making a low of 1008 (wow!). Yesterday's action closed below the monthly hammer of August '04 whose low was 106.02 in the <b>SPY</b> This really leaves the market with no clear reference of support to its left until <B>$SPX 800!</b>. Nobody is saying we are going there but if this volatility continues, we could be there in a month and a half. For now, there should be some buyers coming in if we can at least move up to the bottom of the gap in the chart above.