Saturday, February 06, 2010

Weekend at DDT's - Blizzard Edition

No doubt, the charts sustained a lot of technical damage this past week, but now the real work begins. Whether or not they can get the wheels back on the bus is unknown, but we know by yesterday's miraculous dip buying right at the 200 EMA, they won't go down easily. The 200 is one of those few technical barometers the guys who tell you," we don't trade, we invest for returns," actually pay attention to, so it was of no surprise the first stomp on the floor provided a bounce. It was, in fact, the move over the 200 back in July that started the second feeding frenzy in the bear rally, and they left it in the dust.  I have also heard rumblings that yesterday could not have been a capitulation type bounce, and for sure, the volume spiked in the afternoon, but the daily is still showing a steady increase in volume, but nothing to write home about.  Yet.. look at the volume spike on my XLB chart, and it would be hard to deny that was a spike! I have not checked all of the sector ETFs on volume, but if you have time, be sure to do so and let’s see if we can find the best sectors to trade from that clue.  (short squeeze- we’re trading ninjas, we don’t care about direction…)

But let's move on, because now it's our job to navigate the carnage. Some of us have various opinions, and thank goodness we do or we'd be a bunch of drones around here- let's keep the debate open because I'll always believe that's exactly why we're having one heckuva trading year in this group. Below is Wallfly’s chart as well as DDT’s latest chart, and I’m just posting charts to depict what’s looming overhead for the most part, because I’m still of the technical point of view we have a short term (at least) change of trend downward, with the possibility of some kind of bump this next week (Monday/Tuesday?)  and a resumption of the move down, or at the very least a retest of that 200 level.  Some of these charts are already very close to resistance from the action late yesterday, so keep that in mind on Monday/Tuesday, as we may have to do some quick flipping around on our trades.  Big picture- make sure to keep your eyes on your weekly charts, not just the dailies.  From my point of view technically, the weekly charts look short-tardish.  I ignore Bollinger Bands, etc because price moves the whole fandango, and if you review some weekly charts from say.. 2008.. tell me how often price was touching or outside of those bands and never bounced… 

Additionally: we have something of interest outside of the normal economic calendar coming up this week, including: Benny will be testifying on his plan for an exit strategy from the emergency stimulus.  This will take place on Feb. 10th, fwiw, and is a potential market mover, IMO.  Humble Student also reminded me yesterday that this will be the last week the Shanghai Exchange will be open before they close between Feb. 15th- 19th for Chinese New Year.   Finally, I mentioned “Contango” yesterday, and if you’re not familiar with the term and what it means for trading oil, here’s a great little simple video that explains the whole thing clearly. 

Wallfly’s DeMark Chart
wallfly feb 6
2 DDT’s Charts
$SPX Hourly D-Wave as of 02/06/10 $SPX 60min with detailed annotations
2010-02-07_1216 2010-02-06_1914

spy_feb6 spy_feb_6 RUT_feb_6_1
gold_feb_6 hui_feb_6 copper_feb_6
compq_feb_6_a indu_feb_6_1 spx_feb_6_b
oih_feb_6 wtic_feb_6 tran_feb_6
kre_feb_6 xlf_feb_6 xlb_feb_6_002
vxn_feb_6 vix_feb_6 rth_feb_6
Finally, we saw a boatload of hammers on the daily charts yesterday,  and it’s probably a good time to review how to trade a hammer, and what to keep your eyes on.  First of all, white hammers are the strongest, and black hammers are weaker.  The smaller the body, and longer the shadow (wick) the better for a hammer.  One candlestick does not a change of trend make though (read that twice,) and the next session's candle will either confirm or deny.  For instance: if the next session opens below the body of the previous hammer, the downtrend is still in play. A confirmation of the hammer might be the next session closing above the main body of the hammer, and a white candle would be even better.  So we'll see what we get on Monday- it's like a box of Cracker Jacks.  There are no guarantees, only the next tick in front of you.

compq_candle indu_candle spx_candle iwm_candle
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