THE TRADER'S NOTES for Wednesday, September 29, 1999
Yesterday's Observations: First, the other shoe dropped as anticipated to test the lows from last Friday. Formed a decent double bottom on the intraday charts after lunch and the market rebounded from there.
Today's Theme: Analysts and TV commentators still excited by gold, but intraday action was not convincing. In the S&P we still see resistance overhead given that multi-month trading ranges were broken to the downside. There is room to bounce to the 20-day EMA without invalidating this observation. Would definitely trap more participants if this turns out to be the case. Market will enter Fedwatch as FOMC meeting is scheduled for next Tuesday.
Bring to attention that intermarket factors are still very much in doubt, with Dow Utilities going lower, U.S. Dollar stuck in a small trading range known as a "ledge", rates edging higher, and commodity prices rising.
S&P Futures/SPZ9: 1300-1310 area provides resistance going back to March and April 1999.
Intraday 45-minute chart=1291, 20-Day EMA=1326, 50-Day MA=1347, S1=1267, S2=1250.50, R1=1357, R2=1379.
S&P 500 Index/SPX: The 20-day EMA and 50-day MA are very close together, potentially providing resistance from sellers from two time frames in the 1315 to 1331 area.
Intraday 65-minute chart=1282, 20-Day EMA=1315, 50-Day MA=1331, S1=1256, S2=1206, R1=1338, R2=1361.
Market Internals: NYSE 52-week highs=32, NYSE 52-week lows=298. No real improvement in market internals.
Dow Jones Industrial Average/INDU: Trading range seen on the daily chart decisively broken. Resistance overhead at 10,600 area, at the low end of the multi-month trading range at the 20-day EMA.
Intraday 65-minute chart=10304, 20-Day EMA=10677, 50-Day MA=10863, S1= 10081, S2= 9625, R1= 10860, R2= 11142.
NASDAQ 100 Index/NDX: Trades back into July highs, trapping traders betting on a breakout. Cuts through 20-day EMA and is now testing the 50-day MA. Bounce so far has reached back to the underside of the 20-day EMA.
Intraday 65-minute chart=2418, 20-Day EMA=2446, 50-Day MA=2366, S1= 2345, S2= 2120, R1= 2539, R2= 2551.
CBOE Internet Index/INX: Still inside a triangle pattern on the daily chart, find resistance at 480. It's do or die time as it tried to break to the upside. At least the 20-day EMA is now rising.
Intraday 65-minute chart=474, 20-Day EMA=461, 50-Day MA=442, S1= 445, S2= 417, R1= 490, R2= 580.
EMA = Exponential Moving Average. MA = Simple Moving Average. S1 = Closest support on daily chart. S2 = Support below S1. R1 = Closest resistance on daily chart. R2 = Resistance above R1.
The Trader's Notes prepares the trader for the day ahead, providing information on market sentiment, internals, support/resistance levels and key pivot points in the major market indices. 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!
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