I signed up for this newsletter (free) from esignal. Here's the first one, pretty positive:
Updated Saturday, 12/9 for Monday's Market
Key DOW Levels for 12/11
UP Current Trend
DN Through 10,600
Gap Up, Higher Low
Excellent odds for continued rally. Defensive exit is at
10,600
Recap from yesterday's commentary, "...At this point, we
are sitting precisely at 50% retracement on the Dow, since
10,600 is half way between 10,300 and 10,900. So, we again
have high (even higher) odds of a rally for tomorrow....
Thursday was the calm before the tornado - I think we
could see explosive movement Friday, and need to be ready
for it...."
Friday's rally was pretty much a no-brainer.
Unfortunately, the upward force is so great, the NASDAQ
gapped off the launch pad, making it difficult to take new
positions. But clearly, the market wants to go up, and
more upside should follow.
However, whether by design or not, key election news was
released just after Friday's close. When this happened, a
great many NASDAQ stocks dropped in after-hours trading.
So, while everything should be "good to go" for a continued
rally, we have very high odds of a retracement Monday at
the Open - and we could see a huge gap down, even as much
as 200 or 300 points. It's difficult to say.
Since I am first and foremost a technician, I tend to
ignore news like this, but any psychological factor that
increases greed or fear must be mentioned, as these forces
will definitely affect the market in the short term.
Short Term Dow. *
Technically, we are forming an upward pennant in the 15
Minute Chart. Monday will be a wild day, and I have two
different strategies to employ, depending on what happens.
The most likely case is a gap down back to 10,600 (due to
the election news from Friday). In the event of a gap
down, you want to wait for the reversal back to the upside
- the point where the market stops going down and
hesitates. That could be the second buy point of the year,
(the first was 2,650 last week).
The second scenario says we go up at the Open. If so, you
MUST conclude the upward pressure is there and buy. If the
market discounts the news and starts up Monday, that will
dramatically increase the odds of a major rally from here.
Medium Term Dow. *
In the medium term, we have formed a nice higher low at
10,600 so the correct posture now is most definitely Long.
I am expecting a retracement Monday for fundamental
reasons, and then a resumed climb. We have many clues that
the market is going to rally here. For just one example,
look at INTC, with bad earnings news Friday -- It went up
anyway.
Of course, wierd stuff can happen at ANY time, so we are
holding our mental stops at 10,600. If we drop through
10,600 you should exit Longs but I would hold off on going
Short. If we drop through 10,600 Monday and close lower
by day's end, we will reassess then.
NASDAQ and OEX (SP 100 index) **
The NASDAQ blew the doors off Friday, with a 100 point gap
and another 70 intraday. As I indicated, the market as a
whole is vulnerable to a slide Monday from election news,
but I do not expect the NASDAQ to slide below 2,825. The
intraday chart is quite bullish, but we will exit on a push
down through 2,800 for safety. As much as I believe this
market will rally, we could, feasibly, go into a short term
sell-off depending on how significantly the world views our
political situation. I believe 2,800 is the litmus test
for this. Again, however, the NASDAQ charts say "up". **
In Summary:
Everything in the charts says we are on the launch pad.
The cloud of the election news from Florida is the only
psychological factor that may precipitate a sell-off, but I
think it will be short-lived. If we do drop Monday, be
ready to buy the low of the day. That should be "the"
bottom for the next move. Defensively, if we drop through
10,600 you should exit Longs and wait for the next
crossing, or for a lower high to form, in which case we
will go Short. I don't think that will happen, though.
Thanks for listening, and good luck in your trading!
Ed Downs
edowns@nirvsys.com
----------------
* Short term vs. medium term. We define short term as 1-4
days, and medium term as 1-4 weeks. This column is designed
for both types of trading/ investing.
** We are now publishing charts on the NASDAQ and OEX (SP
100 index) in our Premium SignalWatch section, with short
and long term assessments, similar to this page. Click
"Subscribe" at www.signalwatch.com for more details.
*** Our software, OmniTrader, includes market commentary
and individual candidates posted each day. To find out more
about OmniTrader, visit www.omnitrader.com.
----------
"What to Trade?"
I received a very nice email from Mr. Walsh asking what
symbol to trade to mirror the movements we discuss on this
page. What I would suggest is, that you look for
individual issues which are poised to gain the most from a
break of one of our levels. I know this is a bit more
work, but you will often get a nice "spring" effect and
also reduce your risk.
As an example, the weekend of October 28, we speculated
that a rally was likely in store on the NASDAQ, and
mentioned MUEI. It jumped off the launch pad Tuesday, and
has been carried up by the initial momentum.
You can certainly trade the indexes directly (DIA, QQQ,
etc.) but I think your results will be better if you focus
on the issues which will move the most on any given
incentive. Good question - thank you, Mr. Walsh.
Thanks.. Ed Downs |
