Sunday, February 22, 2009

Wk8: Market Recap

While the media focuses on the Dow, a more accurate gauge of market action is the S/P due to the fact that it is a barometer which contains 500 stocks versus the 30 in the Dow. We have to remember that the market prices in the emotions of traders and investors because it is in essence a balance of greed and fear.

Gold continued its bull run touching $1000 an ounce on the London board. Any pullback into the 90 dollar support range should be buyable. Oil has slowly made its way back up into the 40s so keep an eye on the Oil Services Sector (OSX).
One benefit that economic conditions like this have are the instilling of better business practice, spending habits, and ethical decision making by the people who make the mistakes that got us here. In the years to come we should be able to look back and see the power of free market capitalism as the economy finds its way towards equilibrium.

Wk9: Market Forecast

Get out your long playbook.
When everyone thinks sell, it’s time to buy!

The market prices in the FUTURE speculation of the economy so we believe that any sign of a positive 2010 or 2011 will produce a huge rally over the months to come.

In the week ahead make note of these important economic announcements.
· Thurs: Durable Goods 8:30 ET
· Fri: GDP 8:30 ET

We also have Consumer Confidence on Tuesday, Existing Home Sales Wednesday, New Home Sales Thursday, and Consumer Sentiment Friday.
While we are primarily short term swing traders, it is important to keep in mind the bigger picture. We are at a major support level across the indices. This could be an extremely low risk entry point for the stronger companies across the market.

Looking at some of the majors in the NASDAQ 100, AAPL, AMZN, FSLR, GOOG, and RIMM, 4/5 were up on Friday and big money is stepping in giving them some lift. While we can’t call the bottom before it occurs, historically this is an area where a bottom has occurred, so we are looking for signs of accumulation by big money at these levels.

A rally is evident. However there will be pullbacks and bear moves along the way. Stick to YOUR trading beliefs and trade YOUR plan, there will always be another trade out there so keep your risk managed today so you can trade tomorrow.

Wk9: Stocks to Watch

All of them. Especially the strong ones.
Here are a few that stand out...
Long: ALXN, AMZN, CHE, GILD, HANS, IPI, MOS, NITE, POT, SLGN
Short: FE, KR, MMS, PLCE
If we get a rally, you can expect the weakest sectors, financials, materials, and transports to get the biggest lift. Whereas the current leaders, healthcare, telecom, and utilities may not see as large of a rally at these levels.

Thursday, February 19, 2009

Black Friday 2?

Taking a look at the S/P and Dow, we are at, and coming into a major support level. The Dow, closing at the lowest level since 1997, has the potential to break down into "open space" meaning the next support level is not clear.
The S/P is not far behind, just off it's November 08 lows which coincide with the lows of 2002/03. If we see a break of the S/P 740 or the Dow 7450 we could be in for some serious panic selling. Be prepared for extreme volatility, and as we stated before, a potential surprise rally which could come at any time.

The largest bull moves happen in the context of a bear market.

Wednesday, February 18, 2009

Gaps, the EUR/USD, and DOW Correlation

With recent US and global economic new heavily influencing the market, we have seen morning gaps off the open. One indication on which way these gaps will play out is to look at the EUR/USD, as it trades 24-hrs a day.We recently saw a triangle breakdown in the EUR/USD. Measuring the high/low points of the EUR/USD triangle we get a target of 1.22. The Dow is sitting right at its support level of 7500 and any break lower may induce panic selling.

If a panic sell does come in, often times it is followed by extreme volatility and a surprise rally so be cautious and pay attention to the VIX. Of course, we also should be prepared for a bounce at these levels in case more global economic news acts as a catalyst.If we do see a retest back up to the of the triangle in the Euro, the Dow is likely to retest its old broken support around 7800 as new resistance, this would give us a great opportunity to get short if prices roll over at this level.

While we cannot predict what will happen in the markets, planning scenarios can give us great opportunities for higher probability trades. Good luck!

Tuesday, February 17, 2009

First 15-Min. Rule

One of our rules we use is to NEVER trade the first 15-minutes of the market. This is because many times noise and false moves take place in this time.

For open positions, if a stock gaps down below the established stop, wait for the first 15-min bar to fully form, and then place a stop underneath the low of that bar. More often than not the stock will gap below your hard stop then rally in the first 15 minutes.

The only exception for this rule is when taking profits. Profits can be taken at ANY time during market hours and override any rule.

Wk7: Market Recap

In week 7 we saw more sideways action with candles lining up same sized bodies on the weekly chart of the S/P. Once again the mixed internals confirm this. Gold is moving once again so keep that on your radar in weeks to come.
The VIX is still in its triangle formation on the dailies, holding in the 40s. Oil continues to decline, ranging in the mid to upper 30s. It's the speeches given by political and corporate officials have had a really touchy effect on the market. Often times what is said is more important than the actual number released. Keep that in mind when trading around economic news and announcements, pay especially close attention to what is said by president Obama and his staff.

Monday, February 16, 2009

Wk8: Market Forecast


OPTIONS EXPIRY WEEK!

In the week ahead make note of these important economic announcements.
· Weds: Housing Starts 8:30 ET
· Thurs: Industrial Production 9:15 ET
· Thurs: Producer Price Index 8:30 ET
· Thurs: Jobless Claims 8:30 ET
· Fri: Consumer Price Index 8:30 ET

If you look at the Dow versus the NASDAQ, you can see the divergence in strength. The NASDAQ is showing to be the strongest out of all the indices, putting in higher highs and higher lows, while the Dow struggles to hold at the bottom of its sideways channel.
Look for the NASDAQ to break below it's up channel and the Dow to break down from its sideways channel to get bearish. Be prepared for false breaks intraday as we are still moving sideways on the weeklies.

Wk8: Stocks to Watch

To recap last week’s watch list we had 8 winners, 0 losers, and 4 remain open (1 of which depends on where you placed your stop). View the detailed analysis below…

MYGN – Continues to break to new highs
CECO & COCO – Positions remains open. The gap down on Thursday did not trigger our stop since we do not trade the first 15-min bar. After the first 15-min bar closed, we placed a stop under the low of the day.
POT, MOS, BBG – After strong rallies on increasing volume, small pullbacks are making for more potential entry points. If you took profits on a position here don’t be afraid to jump back in once the stocks signals an entry.
MMC – Broke down to a new low the day before earnings, great point to take profits. It is wise to never hold a full position size over earnings.
KBW & FLIR – Both stocks were crushed, and continued lower after earnings hitting our profit targets.
ROG – Moving sideways.
SJT – Beautiful example of a bear flag, once again hitting our profit target.
COST – Made its move lower and it 10 cents away from our profit target, while it may continue lower through our target, if you are holding Feb options keep in mind they will begin deflating extremely fast this week.

For the following week keep these stocks on your radar.
Long (Enter over the high of the low day, stop under the low):

ABT, ATHN, FNF, MS

Short (Enter below the low of the high day, stop over the high):

NATI, VARI, ERTS, KSS

Thursday, February 12, 2009

Trader Interview

Back in October of 2008 I was interviewed by Tim Bourquin of TraderInterviews.com and The Money Show. I delve into my trading strategy, tactics, and market psychology, click below to watch.
video

VIX Triangle

Taking a look at the Volatility Index (VIX) daily chart, Justin noticed we are forming a symmetrical triangle as well as coming into the 200-MA. Watch for a contraction of the VIX into the 30's to signal a move higher, but if the VIX breaks to the upside, we should see stocks go lower.

Sunday, February 8, 2009

Wk6: Market Recap

Week 6 was quite bullish. We put in a higher low on the major indices and the NASDAQ broke to a higher high. The S/P, Dow and Russell are close behind sitting right at the previous swing high. We saw a divergence on the NASDAQ internals on Wednesday, again not something you see too often. This is a sign that a tug of war still remains between the bulls and bears, even as we move higher.

The Basic Material sector performance has been strong lately. Good old Potash (POT) and Mosaic (MOS) broke out on strong volume with Intrepid Potash (IPI) close behind. The VIX has held in the mid 40s and Gold and Oil remained flat on the week.

Wk7: Market Forecast

We are at a pivotal point here in week 7. While the last two trading sessions have been quite bullish, we are not rushing to go all out long. Watch for the S/P, Dow, and Russell to break their previous swing highs. Sideways action would be a sign of upside to come because it means the bulls are holding prices at these levels, however we remain cautious for short sellers will want to try and push prices lower at this resistance level.
· Weds: International Trade 8:30 ET
· Thurs: Retail Sales 8:30 ET
Thursday we have Jobless Claims and Friday Consumer Sentiment. The S/P $877.86 level is the previous high so watch this AREA for market direction.

Wk7: Stocks to Watch

If you’re still looking to catch a move in the Basic Materials Sector look to stocks like IPI and BBG as they are the lagers of the group. ALWAYS make sure to manage your risk. PNRA is forming a nice triangle, watch for a move higher or a continued breakdown on stronger volume.

MMC, KBW and ROG are candidates for bounces of resistance here and we are keeping our eye on FLIR as it has had a nice move down with earnings continuing the trend. Here are a few more stocks to watch…
CECO (long)
Ascending Tri
Entry: $22.52
Stop: $21.12
Target: $24
Option Play: Feb 22.5 Calls
Comments: We are making our way closer to options expiry so make sure to watch out for theta and consider March options for stocks with longer time horizons for their price targets.
MYGN (long)
Bull Flag
Entry: $84-85
Stop: $80 area
Target: $86-87, $90
Option Play: Feb or Mar 85 Calls (not much vol. on Mar)
Comments: We are keeping a loose stop on MYGN because the pole of the flag is so long. Many times after a few days sideways the stick will put in a hammer with a long shadow so we want to make sure not to be stopped out on a day such as this.
COCO (long)
Bull Flag
Entry: $21.39
Stop: $20.14 or under breakout bar
Target: $86-87, $90
Option Play: Feb or Mar 20 Calls
SJT (short)
Bear Flag (and other patterns)
Entry: $18.45
Stop: $19.69
Target: $17.50
Option Play: None, short the stock
COST (short)
Descending Triangle
Entry: $43.90
Stop: $45.68
Target: $42.50
Option Play: Feb or Mar 45 Puts

Friday, February 6, 2009

How to get the most from TJMacTrading

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Thursday, February 5, 2009

Diverging Indices = Higher?

As we take a look at the top line figures (S/P, DOW, NASDAQ) we see an interesting divergence. Let’s examine the price action and the Stochastic Indicator. All charts are daily candlesticks.

The S/P is forming symmetrical triangle with a Stochastic turning higher. Volume has decreased over the past week and the apex of the triangle is tightening.
The Dow is creating a descending triangle, in the context of a sideways market, and its Stochastic is forming a triangle with a lower high which is turning higher, forming a higher low.
The NASDAQ on the other hand has put in a higher low on the dailies and is about to break out to make a new high, forming a small up channel. The NASDAQ has been the strongest index over the past few weeks and we see a small increase in volume these past few days as it makes its way higher.
For the rest of the week and week to come, look to the NASDAQ to lead the market higher with confirming triangle breaks on the S/P and Dow. However, If we break lower, expect a quick, violent, and emotional move back to last November’s S/P 750 level.

Monday, February 2, 2009

Wk6: Watchlist Update

While there still aren't any phenomenal setups out there, keep these on your radar for the next few days.

Long: Buy over Monday's High (Stop under the low):
  • ATHN, AVA, HANS, MMS
Short: Watch for breakdowns in:

  • EMN, MMC, SIGI, SINA, SIVB, WAT

Wait for a small bounce in FDX, LNN, SJT to go short. A great way to keep positions managed in this market climate is to have a basket of longs and shorts. This way, if we move sideways or continue up, down every other day you have a hedge against your position.

Sunday, February 1, 2009

Jan09 Recap

2009 has been one of the worst starts in stock market history. We are still chopping around down near the old 2002/2003 lows and should continue the process during the months to come. We see a bearish engulfment candle on the SPY monthly with no sign of bulls stepping in.

Wk5: Market Recap

As many of us have learned the hard way, the markets will act on their own accord and many times it seems without reason. As we continue to see sideways action across the major indices, the short term 2-5 day swing trades have been the most profitable over the first month of 2009.

We made an attempted rally last week which only made it to the 50% Fibonacci retracement level (using the highs from January 09). Looking at the markets from the psychological side, many headlines, news reviews, and magazines speak of a gloomy 2009. Consumers are fearful, while the contrarian is preparing for a bounce. We see a hammer on the VIX however, following two inverted hammers this creates opposing tales, meaning indecision and once again confirming the sideways movement. The strength in the Financials (XLF) was quickly given back, filling the gap up from Wednesday.
On a broader note, we have seen an increasing divergence in the short term interest rate versus long term paper, that being, the 25 basis point short term interest rate versus the long term 10, 20 and 30 year treasury bonds. This is one of the largest divergences in history and should be taken note of.

Wk6: Market Forecast

In the week ahead, watch for a retest of the S/P $800 level. We made an attempted rally last week which only made it to the 50% Fibonacci retracement level (using the highs from January 09). Major economic data for the week is as follows…
· Mon: Personal Income and Outlays 8:30 ET
· Mon: ISM Manufacturing Index 10:00 ET
· Fri: Employment Situation 8:30 ET

Along with these reports we have Pending Home Sales on Tuesday, Jobless Claims and Natural Gas Report Thursday. While the market doesn’t always pay as much attention to these numbers, they can still have an effect on the market. Keep an eye on Gold tracked by GLD, any pullback should be buyable as it makes its way back to $100.

If you “Always Expect the Unexpected,” then nothing should ever come as a surprise.

Wk6: Stocks to Watch

Week 5 was a great week for our watchlist. We had a big streak of winners those of which were MYGN, GILD, PALM, CTX, and ERTS. As we move into week 6, look for updates in future posts as we would like to wait for Monday's price action to signal a direction.