What the market is saying

Discussion in 'Trading' started by empee, Oct 21, 2005.

  1. empee


    Ok, I'm bored so I'm writing this. If someone could please post 60 min charts of nasdaq, S&P, and dow jones it would be helpful (You can even annotate it).

    Friday's action was uninspiring and for most traders I think they saw the clear divergences between NAS and SPY/DOW. NAS showed much strength with SPY/DOW were weak, obviously this means money flow is moving out of those sectors and into tech.

    Now, here's something you may not have seen. If you look at the 60 min charts of all these indexes you will see cup & handle breakouts, with both Dow and S&P failing and the NASDAQ DIVERGING by continuously trying.. and continuously rejecting its 60 min 200ma!

    Since the C&H is usually a pretty good trade, failure should say something on two of those indexes, it means there are still "hidden" sellers (ie sellers who aren't done selling yet). Because these sellers are breaking a cup and handle pattern (ie there are aggressive longs/shorts covering) the normal thing to do is let the short squeeze run its course. The fact that the SELLERs didn't let a bull flag form or some other bullish pattern suggests they are exiting, in a HURRY. This means they either have volume to dump (ie they are trying to get out of large positions instead of waiting to fade into the buyer/longs) or they don't have time -- either news is coming, etc., basically these sellers either dont have TIME or have VOLUME to sell.

    NASDAQ failed to break that 200ma so a good trade might be to short the nasdaq with a stop on a close above the 60min 200ma. Alternatively, its to wait and see if NASDAQ exhausts, if it does initiate shorts in your weakest sectors. Atlernatively, you could pairs trade it since they are out of sync.

    The question is can the nasdaq rally and break to the upside, my feeling is the tape is telling us that institutions are rotating into tech but the longer it takes for the longs to break it out the less probable it is. Alternatively, wasn't a heavy volume day and very choppy. My feelings is the sellers (shorts) are going to wear out the buyers, all day longs tried to break it above that 200ma and couldn't, this emboldens shorts and bring new shorts in.

    My opinion (although this can change minute by minute as a trader) is that the longs won't be strong enough to get this into an uptrend, I think we need at least 1 more flush and if the longs hold it together then start looking at longs in tech stocks. (the idea being that the "hidden" sellers need to finish or longs at the lower end of the range ("value buyers") have to be-enmass to buy up all the sellers).

    In any case, today's action communicated to me that techs will be the place to be for LONGs at least for now.

    There. Now I know whats its like to be brandonf (except I'm typing this).

    Not really fulfilling for me :) But, its amazing how the market says so much.

  2. empee


    as an addendum, most of my trading is based on psychology (not really technicals/fundamentals), but what does it say when looking at that chart that longs tried continuously for 2 DAYS to break above that 60 and failed (sold off end of day)?
  3. Agreed that the Nasdaq is strong right now and is the best place for longs.

    To me, the question is..did we hit a low point on Oct 13th or will we go farther down?

    With energy prices heading lower, inflation worries could recede.

    But will political scandal & uncertainty take us still lower? Bush poll numbers are at new lows.

    I am currently mildly bullish but will be quick to take any profits next week.