Blog Title: short-term trading

This blog intends to provide the possibility to discuss short-term trading ideas, trading systems, charts, books, statistics and market structure. Help me create a quality environment where we can share our knowledge.

emini S&P stats for 20 Aug 08

On the emini S&P the pattern:
- close of yesterday DOWN<-17.5 points
- close of today DOWN<-13.5 points has occurred 42 times.

71.43% closed UP the next day with a cumulative profit of 177 points.
An average UP of 4.21 points.

From a technical standpoint the market is very fragile. After what could be a rebound characterized by low momentum, bears are trying to push again prices lower to retest 1250 first and then recent lows. 1300 is a very important resistance now. We needs to how this move develops. It is a critical phase. Much depends on the financials and if they manage to find a decent support despite all bad news hitting them.

Here it comes again! Banks under pressure

IMF Economist: Credit Crisis to Worsen; Large Bank May Fail (big picture)

Large U.S. Banks May Fail Amid Recession, Rogoff Says (bloomberg)

Strongest & Weakest US Banks and Thrifts (big picture)

Lehman May Report $4 Billion Writedown, JPMorgan Says (bloomberg)

US banks scramble to refinance maturing debt (FT)

Potash Corp./Saskatchewan (USA) (POT)

A negative divergence of MACD signalled the June top. The correction is still ongoing. MACD has just printed a new low. The wide ranging bar of 4 August indicates heavy selling. Prices reached the support at $160 and printed a rebound at $180, which is now a resistance. I would not go against the trend in this phase. I would wait for a reversal formation. Prices are moving to attempt the retest of $160.
On the 60-minute chart you can see the positive divergence when the rebound started.

Toward a global slowdown?

The Perfect Storm of a Global Recession (rgemonitor)

World-Wide Recoupling Is Bad News All Around (WSJ)

Implications of the Slowing Global Economy (MISH)

Consensus Economist GDP Estimates and Recession Odds (bespoke)

Dr. Doom (NYT on Dr Roubini)

How much worse can "It" get? (rgemonitor)

Stephen Roach: "Pitfalls in a Post Bubble World (naked capitalism)

Recession of 2008? Evidence Is Still Weak (businomics)

Dell Inc (DELL)

Interesting congestion right above the $24.6 resistance for DELL. Looks bullish although there is a negative divergence of MACD and volumes are low. It could be traded in breakout mode or you could open a position within the range to reduce the stop loss. It is the usual trade off between having more information (waiting for the breakout) but reducing the risk reward ratio (you have wider stop losses) or having less information and therefore increasing risk but also the reward.

Apple Inc (AAPL)

The objective at $180 was reached and prices are testing the resistance. Next objective $190. I am positive on AAPL but I would not be a buyer here. Risk reward does not look fine as supports are too far to establish a stop loss. I would try and work on a pullback. On the 60-minute chart ranges are getting smaller and momentum is slowing down.

It is all about inflation

US inflation at highest since 1991 (FT)

Consumer Price Index Summary (department of labor)

US consumer prices up sharply, job market softens (reuters)

Editorial: How China's inflation wallops us (dallasnews)

Fed's dilemma deepens as inflation increases (bradenton herald)

Up, Up and Away (NYT)

A TURNING POINT FOR CORE? (the capital spectator)

Bank of America (BAC)

The bullish pattern in the form of a bullish triangle in the 60 minute chart (see my previous post LINK) did not materialize in a breakout to the upside. The drop was quite fast actually. Prices are testing an important support at $27.5-$28 level. It is possible that what has been printed to the upside so far is just a rebound, but I am inclined to be positive on the sector at this stage. We need to monitor how the correction develops and where prices manage to find support. Next support at $24. I would wait for a reversal pattern before attempting a long entry.

Exxon Mobil Corporation (XOM)

XOM is moving within a congestion after a down wide ranging day. And below important support levels. It is a bearish formation. An option is to trade the breakout to the downside should it occur.

AMEX Oil Index (XOI)

Interesting broadening formation. Prices are testing the lower trendline and support level.

US Dollar - EURUSD

EURUSD has reached an important support. It should now consolidate the impulse in the range below 1.535.

Gas price decline: Day 25

Prices at the pump continue to decline at last as described in the CNN
Gas price decline: Day 25 (cnn)

It was only a month ago the oil was at $150.
Who's Responsible For $150 Oil? A List of the Actual Villains (clusterstock)

A lot of discussions on American energy policy
American Energy Policy, Asleep at the Spigot (NYT)

and alternatives to fossil fuels
From WMD to energy (fortune)

today oil hits $113 while the dollar all of a sudden becomes stronger against other currencies. THis is quite impressive if you consider also the war in Georgia and the fact that an important pipeline runs in that region.
Oil falls to $113 in Asia on stronger dollar (AP)

Crude oil hits low not seen since May (seattle times)

Now we see forecasts of much lower prices for oil. But can we trust analysts, this is my question.
Lehman: Oil Back to $90 In Six Months (LEH) (clusterstock)

many are still still negative
No Relief from $120 Oil Anytime Soon -- or Ever, says Energy Expert (tech ticker)


and others hope to exploit arctic resources
Next Brilliant Idea To Fix Oil Crisis: Pillage The Arctic (clusterstock)

Econbrowser analyzes the correlation between exchange rates and the price of oil.
Oil and the dollar (econbrowser)

Presidential candidate talks about oil.
Obama's View of Oil Markets (greg mankiw)

Where all the windfalls oil profits will go?
Two challenges highlight the scale of the bonanza (ft)

Measuring Crude?s Wild Swings (marketbeat)

AT&T Inc (T)

T tested the lower trendline at $30 printing a positive divergence of MACD. Interesting. Resistance at $33.

Bank of America Corporation (BAC)

A bullish pattern on the 60 minute time frame. Objective$40.

Citigroup Inc (C)

C has developed several positive divergences that did not bring to a real trend change but only to rebounds.
Note the 2 up gaps printed so far. They are a breakaway gap and a continuation gap. We are seeing a consolidation move from there. $22 is now a resistance level. Support at $19. Obective at $27. I am positive on this sector. We need to expect again bad news and high volatility, but likely the worst has gone. Interesting is the 60-minute chart where C is developing a symmetrical triangle. The correction went down to close both the 2 up gaps testing the $16.52 level. I would expect an exit to the up side, but it can be traded in breakout mode as risk is high.

JPMorgan Chase & Co. (JPM)

Interesting congestion ($38-$42) after a powerful reversal pattern on the lower trendline of a broadening formation and a breakaway gap. I would expect continuation with an objective at $48. Unfortunately, as it often happens when patterns are quite clear the stop loss level is quite far and ine might argue if the risk reward ratio is good enough at this price. The problem in these situations is finding low risk entry points. The financial sector in my view continues to be interesting in the medium term.

US Dollar back on track

The Dollar?s Renewed Popularity (marketbeat)

Dollar puts in spurt of strength (ft)

Eurodollar (alpha global)

International Revenues and the Dollar (bespoke)

Oil and the Dollar (calculated risk)

US dominance

Is the Sun Setting on US Dominance? ? Part I (yale global online)

Is America Ready for a Post-American World? (rand)

Gates's Kinder, Gentler Strategy for Global Dominance (tpm)

National Defense Strategy (LINK)

A Warning to Africa: The New U.S. Imperial Grand Strategy (LINK)


see also my previous post
LINK

Potash Corp./Saskatchewan (USA) (POT)

The trend looks quite nice. A negative divergence of MACD signalled the June top. The correction is still ongoing. MACD has just printed a new low. The wide ranging bar of 4 August indicates heavy selling. Next support at $160. Resistance at $198. I would not go against the trend in this phase. I would wait for a reversal formation.

Google Inc (GOOG)

Google after the down gap has developed a trading range between $490-$500 and $460. $500 is now a resistance. A breakout would bring prices to close the gap at $525. On the 60-minute chart there is a positive divergence of MACD. On the daily chart you can see from the On Balance Volume indicator that Google has been constantly distributed during the past months. Although I would expect an attempt to close the down gap, the overall picture does not look particularly positive. I would look to trade in a breakout mode the ongoing trading range, but there are other stocks with better conditions.

Hewlett-Packard (NYSE HPQ) and Intel Corp (INTC)

MCD

IBM

JNJ

HPQ

INTC
Hewlett-Packard (NYSE HPQ) and Intel (INTC) printed today the highest close of the past 20 days. Pretty good signal in a very negative market. Also Johnson & Johnson (JNJ), IBM and McDonald's Corp (MCD) are performing quite well.

Apple Inc (AAPL)

Note the impressive trading day on 22 July when AAPL opened with a big gap to the downside. Closure of that gap was a good signal about the validity of the support level established. Prices in the next days consolidated moving down toward the $150 support. This occurred with lower volume and range and it is a positive sign for an up leg to be developed toward the first objective at $180. Support at $153.
On the 60-minute chart the positive MACD divergence printed on 4 Aug provided a low risk entry point. A short term pullback toward the moving average at $160 could again be used to build a position. Supports in this time frame for stop loss at $154.50 and $153.

TRADING THE U.S. MARKETS

Harriman House published on 31 July my book

TRADING THE U.S. MARKETS

A comprehensive guide for international traders and investors

Amazon

Harriman House

Is this the bottom for financials?

ETF Update: Financials Show Strength (a dash of insight)

Merrill Management: Disregard Everything We Say (bespoke)

Analysts Overstate Earnings Once Again (big picture)

Lex and the citi (FT)

Banks pressed to follow (FT)

Peak Oil, Inventories and Lower Oil Prices

Has Oil Broken Down? (marketbeat)

Energy Sector Declines (bespoke)

US OIL ETF (USO) (alpha global)

Oil prices and economic fundamentals (econbrowser)

Stagflation and Peak Oil: How Related Are They? (Part I) (seeking alpha)

Oil Price Targets (bespoke)