THE TRADER'S NOTES for Wednesday, October 6, 1999
Yesterday's Observations: Had observed that traders had jumped the gun to bet that there would be a good reaction to the results of the FOMC meeting. We had been watching for unexpected market reaction following the announcement such as "good news" that failed to spark a rally, or "bad news" that could not make the market go down. Seems we have now a case of can't rally on good news. December Treasury bonds made a new low, breaking a descending triangle seen on the daily chart to the downside, putting immense pressure on the U.S. dollar and interest rates. ADX for the T bonds has been going lower and low since mid-June and we can look forward to directional trading in the bonds soon, one way or another.
Today's Theme: Judging by the spinning top/hangman Japanese candlestick put in by the S&P 500 index at the 20-day EMA, we'll call yesterday's high a very important pivot. If the market cannot move up from there immediately, the high probability result will be a test of last week's low.
S&P Futures/SPZ9: Brief attempt to really past 1300-1310 area that provided resistance going back to March and April 1999. Projected target for small head and shoulders pattern seen on the intraday charts formed from September 24 to October 4 has been fulfilled. Now is the moment of truth. On first approach, there are sellers at resistance at the 20-day EMA. Can the buyers overcome the sellers? If not, then the S&P is headed back for a test of last week's low.
Intraday 45-minute chart=1311, 20-Day EMA=1318, 50-Day MA=1339, S1=1267, S2=1250.50, R1=1329, R2=1357.
S&P 500 Index/SPX: Same comments as the S&P futures.
Intraday 65-minute chart=1296, 20-Day EMA=1305, 50-Day MA=1323, S1=1256, S2=1206, R1=1316, R2=1338.
Market Internals: NYSE 52-week highs=54, NYSE 52-week lows=154. Continued improvement in new NYSE highs relative to the lows and the 10-day moving average of the high low net differential is beginning to point up. CBOE market volatility index has not really reached a point during any of the small sell-offs where widespread panic is been seen. This is a nagging concern. Usually a great deal of panic and put buying is seen at the bottoms.
Dow Jones Industrial Average/INDU: Was an extremely high volume day at resistance. 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. So far, only sellers at resistance.
Intraday 65-minute chart=10372, 20-Day EMA=10528, 50-Day MA=10789, S1= 10081, S2= 9625, R1= 10509, R2= 10860.
NASDAQ 100 Index/NDX: Now trading above the 20-day EMA and the 50-day EMA. Set to test the all time high shortly if the rest of the market can hold together.
Intraday 65-minute chart=2448, 20-Day EMA=2444, 50-Day MA=2382, S1= 2345, S2= 2120, R1= 2539, R2= 2551.
CBOE Internet Index/INX: So far, three narrow-range days in a row, marking time. A small test of top on the intraday time frame finds sellers at the 510 level. Index trading above 20-day EMA and 50-day MA.
Intraday 65-minute chart=496, 20-Day EMA=444, 50-Day MA=475, S1= 445, S2= 417, R1= 500, 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!
Charts specific to these comments have been posted to
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