To: IntelligentSpeculator.com (36814 )
From: IntelligentSpeculator.com
Friday, Jan 7 2000 2:09AM ET
Reply # of 36946
The Trader's Notes for Friday, January 07, 2000
This morning, the non-farm payroll numbers will be released. The market has been
selling off into this piece of economic data, and all eyes are on this number as traders
begin their attempt to decipher what the federalreserve.gov FOMC
will do at their two-day meeting on February 1 and 2. Treasury bonds have been falling
and are trading below the October 1999 low, putting upward pressure on interest rates.
Interestingly enough, the Dow Utilities Index has been rallying, signally perhaps that
some sort of bounce is due for bonds, as higher rates begin to lure buyers back into the
bond market. For now, resistance remains at the October low.
We have been writing about the test of top on the weekly chart for the Dow Jones
Industrial Index, the S&P 500 Index and the CBOE Internet index for more than a
month. Although marginal new highs were made recently, to date, these indices have
been unable to gather momentum to move them to the upside, taking investors "to
infinity and beyond", as the NASDAQ 100 Index has done. These averages became
vulnerable to sellers while a wild speculative blowoff took hold in technology stocks. A
failure here produces two targets to the downside for the Dow and S&P 500. Target 1
is the 20-week moving average (which is also around the 50-day moving average), and
the October low is Target 2.
When we look at the CBOE Market Volatility Index (VIX), it is found to be at the
consensus-inc.com top end of the Bollinger Band
as well as having reversed from the high of Wednesday, while the S&P 500 pulls back
to the 50-day moving average. It is very important to hold support at this level. If we
look at the NYSE 52-week new highs and new lows, we are almost surprised that the
number of new lows is so small given the magnitude of the move to the downside this
week. Normally, we would expect to see much worse numbers. This is intriguing. For
now we watch to see if the S&P can hold support at 1380.
The Trader's Notes prepares the trader for the day ahead, providing observations on
market sentiment, internals, support/resistance levels and key pivot points in the major
market indices using the daily chart. Use of moving averages and the Average
Directional Index (ADX) indicator helps to determine whether the market is trending
up/down or chopping sideways. Using Japanese candlestick charting techniques,
observation of market action around support and resistance assists in the analysis of
supply and demand based on fundamental principles of classical technical analysis. The
results set up "if-then" scenarios used by the trader during market hours.
Technical analysis is not used as a tool to "predict" the future or to pick tops and
bottoms. It is used to detect areas of trend change and emerging trends. In a trading
range, traders generally look to buy at the low end of the range and to sell at the high
end of the range ? or stay out all together. In a trending market, traders generally look to
enter the market on every retracement until it enters a trading range and ends on a test.
The goal is to buy every dip in an uptrend and sell every rally in a downtrend. The trend
is your friend until the end when it bends!
Charts specific to this article are located at:
intelligentspeculator.com. |
