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Strategies & Market Trends : Stock Attack -- A Complete Analysis

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To: drsvelte who wrote (21776)	6/29/1999 10:04:00 PM
From: Robert Graham	Read Replies (1) of 42787

It has been awhile since my last post. So I thought I would post the following related to the market and some new stuff that I have been learning recently as a short term trader. Interest rate run up by the long bond knocked the market down to support. Now the interest rate are in a downtrend and recently have broken through its own support and now is BELOW key 6% interest rate. Market is responding by moving to the upside. I am finding out that to really get a good handle on the pulse of the market, it is worthwhile to paper trade the current month S&P Future contract. Initially the long bond lead the market and the stock market was tightly coupled to the long bond. There has been a bit of decoupling between the bond and stock markets. Now the NASDAQ tends to take the lead with EBAY and YHOO two stocks to watch. YHOO tends to lead with EBAY validating even though the reverse sometimes is true. Following these two components is more important than the NASDAQ index itself. When a move here between these two stocks becomes visible in the NASDAQ index, I do look to other indicators for validation like the S&P 500, the DJIA, and even the long bond. TICK and TRIN can help here in determining the likelihood of follow through of a specific move. The market is rallying ahead of FOMC report. This is a very bullish sign. Up until recently even though the market has been wanting to move up, there have been underlying bearish signs in he trading of the Futures contract that end up dominating at key places and knocking the market back down. I think this is the bigger money still selling the market for whatever reasons. This is also why there have been many distribution type patterns showing up here. What has not helped was the relatively low volume last week that ended up in "search and destroy" missions by the floor traders. Now that we have put in a more solid bottom last week, we have been rallying since. In this mode, the market is looking to leadership which is NASDAQ and Internet leadership. INTC and semiconductors have not replaced this leadership. Perhaps when Internets meet with significant resistance overhead as it works its way up from a deep hole in the ground, this picture may change. Leadership in the tech sector can change. Do not confuse sentiment with technical health. On the S&P Futures I see key MAs converging in the longer time frames and a good W-type bottom placed in on the 60-minute chart. So there are more things to come soon for the market. I also find that paper trading the S&P Futures does improve ones trading skills. I am picking up a new set of tools with trading in multiple simultaneous time frames. Some traders may also want to try trading stocks in multiple time frames. Also using a scanning program to filter trades may prove to be worthwhile. Or at least look for relative strength relationships to determine where the money in the market is looking. Also it helps to understand rotation between stocks made by the day traders that occur when profits are being taken in the leadership group of stocks. A different group tends to be the interest to day traders on down market days. For those who have not seen how YHOO and EBAY would prove to be key to this market rally once interest rates continued its pullback simply have not been watching the market that closely. Much money could of been made on these two stocks over the past couple days. Today was basically a "no brainer" by playing on the momentum of YHOO and EBAY on the heels of the tweezer bottom formed late last week in the S&P 500 index, which coincided with a continuation of the rally of the NASDAQ index after its small pullback. Bob Graham PS: Besides setting up trades using multple time frames, I am finding the monitoring of Fib retraces a very useful tool. Also looking for Ross 1-2-3 and Trader Vic 2B bottoms is also very useful, including the identification of congestion and its proper boundaries. I find that very few traders indeed understand besides not even being able to recognize congestion areas. The congestion areas that stock can trade in are very important to be recognised by the short term trader, and particularly useful in the more volatile issues.

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