Market Falls

The US Stock mar­ket as mea­sured by the S&P 500 e-Mini futures fell after weak­ness appeared at the recent highs.  You can learn about the recent weak­ness and how it was detected from the last two blog posts dis­cussing com­par­a­tive weak­ness in the main US mar­kets and the clear evi­dence of sell­ing in recent days, among other signs of weakness.

2014-03-14 ES DailyWe are now prob­a­bly a bit over­sold short term.  (Click on the thumb­nail image to the left to bring up the chart dis­cussed here.)  Any lower prices early next week will likely be con­tained around the 1830 to 1825 level (green rec­tan­gle).  Any rally up will likely be halted around the 1845–1850 level (first mid­dle red rec­tan­gle).  An unlikely rally above that on Mon­day will find stiff resis­tance around the 1855–1860 level (upper red rectangle).


Weakness Appears

2014-03-11 Major marketsLast Mon­day, I posted that the Dow was lag­ging the other mar­kets and was com­par­a­tively weak. This often flags a trend change, though it can take a short while to unfold.  I men­tioned to watch for weak­ness in the Nas­daq, look­ing for the Naz to break sup­port. Well, that didn’t hap­pen, but on Fri­day, the Naz failed to make a new high along with the other mar­kets (see red arrow).


2014-03-11 ES Daily & WeeklyOn that day and again today, weak­ness came into the S&Ps.  This is des­ig­nated by the ‘S’ labels on the chart.  We see from both weekly and daily charts we are over­bought.  Given the com­par­a­tive weak­ness in the Dow, non-confirmation in the Naz, being over­bought, and evi­dence of sup­ply enter­ing the mar­ket, we should be expect­ing a reaction.

I would expect the reac­tion to at least run to the 1846 level and per­haps lower.

Time to be wary

2014-03-03 S&P DOW NQAlthough the S&Ps made new all-time highs last week, the Dow did not. Wyck­off talked exten­sively about com­par­a­tive strength and com­par­a­tive weak­ness.  When related mar­kets fail to make new highs together, you need to sit up and take notice.  We saw this in Jan­u­ary when the Nas­daq made new highs, but the S&Ps and Dow did not (see A on the chart).  This com­par­a­tive weak­ness in lead­ing stocks lead the recent reac­tion.  We have a sim­i­lar sit­u­a­tion today, only more obvi­ous.  Time to sit up, take notice and be wary.  Very wary.  Watch the Naz care­fully.  A close below sup­port will not be constructive.

Poised for a Good Move

2014-02-18 ES 3K TickYes­ter­day, I noted that the 1832–28 level was likely to be strong sup­port.  The mar­ket came down to 1831.50 an hour after the US Open and set up a lovely Spring of the trad­ing range that had devel­oped in the overnight trading.

The day was range-bound, and this is the sec­ond day in a row we have had nar­rowed ranges.  Watch for a strong move tomorrow.

Next up on the S&Ps

In the last post for trad­ing on Thurs­day, Feb­ru­ary 13 (click here to see that post), we sug­gested that that mar­ket could fall to 1805 to 1800 and then find sup­port. The mar­ket fell to 1802.25, found sup­port, and ral­lied to new monthly highs. We saw a con­tin­u­a­tion of that up move on Fri­day, to a high of 1838.75.  So, what’s next?

Next Up

2014-02-17 Daily ESRecent highs cre­ated on Decem­ber 31, 2013 are 1846.50. Will the mar­ket run up and through this high, fal­ter here and turn lower, or not even make an effort to run up and fall lower? This is the ques­tion many traders want to answer.

Actu­ally, the answer to that ques­tion isn’t that impor­tant. What is impor­tant is know­ing the lev­els at which the mar­ket is likely to turn.

Clearly, 1846.50 is a key resis­tance level.  A push above this level indi­cates strength and a sub­se­quent first retrace­ment would be a buy oppor­tu­nity. If the mar­ket fails here, how­ever, then look for down­side trades.

Given the SOT in prices over the last cou­ple of days, the mar­ket may pull back a lit­tle first. Should the mar­ket pull back on Tues­day, 1832–28 is likely to be strong sup­port. I would expect the mar­ket to find buy­ers there. If not here, then the next level would be 1824 to 1820. I will be look­ing for an intra­day sell­ing cli­max or shake out for a buy oppor­tu­nity any­where in this area as high­lighted by the green band.

Longer term, my read­ing is for new, all-time highs.

Rally Dying?

Or is it just a pause?

2014-02-12 ES DAily & 27K TickAs we await another win­ter nor’easter here in south­ern New Eng­land we are try­ing to stay warm and fig­ure out what the likely next move of the mar­ket will be and how much snow we will get.  The weather seems eas­ier.  It’s been very cold here lately.  I awoke this morn­ing to one degree above zero (that’s –17.22 Cel­sius).  It’s what we call pretty nippy. The ground is cov­ered with about a foot of snow from last week and we are expect­ing another foot of it tomor­row.  That’s the easy part.

The mar­ket has been up for seven days in a row.  That’s a pretty good run by mar­ket stan­dards and shows the strength of the rally.

The was obvi­ous nar­row­ing of range in today’s mar­ket with pretty good vol­ume.  It sug­gests some sup­ply is hit­ting the mar­ket.  We see a lit­tle today sell­ing on the 27,000 tick chart (on the down wave marked A–larger than any recent down wave, though not ter­ri­bly sub­stan­tial), but then the cor­rec­tion sim­ply went side­ways.  So far, the sup­ply has had lit­tle effect.

The key for tomor­row will be today’s high (1823.25).  I’ll be watch­ing this level closely tomor­row along with the snow.  An intra­day upthrust or a lower high should bring out greater sup­ply.  This will be best seen on the Weis Wave.  If it does, watch for the mar­ket to make a run down to the 1805 to 1800 level, or lower.  I see this as hav­ing the higher odds.

The mar­ket could also try to rally higher after push­ing up and through yesterday’s high, or spend more time going side­ways.  All three of the sce­nar­ios out­lined here are expected to be influ­enced by the sup­ply seen to the left of the chart that occurred dur­ing Decem­ber and Jan­u­ary (red arrow).


Big Morning Up

The S&P futures had a good run up this morning.

2014-02-06 ES 3K TickJust before the US Open, the mar­ket tested the overnight lows (T) and took off.  You can see the demand that came in off the US open, con­firm­ing the test (D1) and indi­cat­ing the overnight high would break.  The short pause here had light down­side vol­ume, open­ing the door for buy­ers to come in, and they did (D2).  Buy­ing extended some 20 points off the morn­ing low before dying out.  So far, the mar­ket is hold­ing its gains.

Live Trad­ing Tomor­row — Free Event

Tomor­row, I’ve been invited to join David Weis in a live trad­ing ses­sion start­ing at 10:00 AM East­ern Time.  It is being hosted by TradeGuider, and the event is free.  I’ll be there for a cou­ple of hours, and hope­fully, we will have some good trad­ing.  You can reg­is­ter for the free event at this link:  Free Live Trad­ing: Fri­day, Feb. 6 at 10:00 AM ET 

The Day After A Trend Day

One of my favorite days to trade is the day after a trend day.  Yes­ter­day was a big trend day down.  Some­times, it is hard to get aboard a trend day.  Yes­ter­day, there were sev­eral oppor­tu­ni­ties to enter short, but even so, traders often report that trend days can be frus­trat­ing events.  Trades are taken off too early and some­times it looks as if the mar­ket is bot­tom­ing, but it doesn’t.  Any aggres­sive trade taken long would get stopped out and lead to more frustration.

2014-02-04 ES 3 K TickIf you have dif­fi­culty with trend days, look for­ward to the next day.  Days after trend days are usu­ally very good trad­ing days.  The volatil­ity remains high and the entries are typ­i­cally pretty clear.  Today’s chart of the S&P e-mini shows numer­ous setups–all based on the Wyck­off principles.

The mar­ket ral­lied dur­ing the Asian and Euro­pean ses­sions, then began a trad­ing range after the US open.  About an hour into the US ses­sion, the S&Ps had a well-defined Spring. This ended in an UpThrust, which didn’t result in much.  Another UT occurred right at the sig­nif­i­cant low from mid-December.  More UTs and another Spring dur­ing the US after­noon ses­sion gave plenty of good trading.

Days after a trend day won’t give huge trades.  The mar­ket tends to move quickly back and forth as traders work to re-establish equi­lib­rium (fair value) after the large, trend day move.  You have to be nim­ble, act deci­sively, and exit within a few points into intra­day sup­port or resis­tance.  Nonethe­less, the trad­ing can be excellent.

Springs and UpThrusts are great trade setups after a trend day (and dur­ing trend days, too).  For more infor­ma­tion about these excel­lent trade setups, click these links:

Wyck­off Springs

Wyck­off UpThrusts

Friday: A Stellar Trading Day

2014-01-31 ES 3K TickToday was one of the bet­ter trad­ing days.  The day started with a con­tin­u­a­tion of yes­ter­day afternoon’s down move.  The lows were reached just before the US open where a rise in vol­ume with lit­tle progress down fol­lowed by light down­side vol­ume indi­cated the down­trend was over (1) and a first long trade.  Accu­mu­la­tion then became appar­ent along the 1765–6 level, which led to a trend.  Dips back to the demand line set up trade entries.

A larger pull­back ended in light down­side vol­ume (2).  This set off a strong rally and the first pull­back was a buy, as was the sub­se­quent dip to the demand line.

Another larger pull­back ended in a Spring (3).  This drew in what looks like cli­mac­tic vol­ume, fol­lowed by another push up on lighter vol­ume, indi­cat­ing that the uptrend is over for the day (4).

Trad­ing tends like this becomes straight­for­ward when you know what mar­ket con­di­tions to look for.  These are detailed in Trad­ing the Trend, a four-hour video tuto­r­ial on the sweet spot of trad­ing: trend trad­ing.  You can learn more at this link: Trade the Trend


The Damage

1-28-2014 S&Ps MonthlyWe’ve been dis­cussing the like­li­hood of a sig­nif­i­cant pull­back in Deep Prac­tice for the past sev­eral weeks. The monthly chart of the S&P cash mar­ket shows an over­bought posi­tion in the trend chan­nel. Because it is occur­ring on the monthly chart, the odds of a sig­nif­i­cant move becomes more likely. The mar­ket sell-off that began last Thurs­day is the begin­ning of the monthly cor­rec­tion. Of course, the mar­ket may trade within a range up here, going side­ways for a while, or trend lower. We will have to see how the data unfolds in the com­ing weeks.

The Thursday-Friday-Monday sell-off did do dam­age to the mar­ket, at least for the near term. Vol­ume has picked up, indi­cat­ing sup­ply is def­i­nitely present. Buy­ers have not shown them­selves to be very aggres­sive yet, although the mar­ket stopped falling yes­ter­day on high vol­ume, so there is an attempt to halt the down move. It is clear that the mar­ket is over­sold near-term.

1-28-2014 ES DailyAny rally up is likely to find trou­ble over­head. That’s because of the heavy sell­ing we have seen. Buy­ers would have to be will­ing to under­take sig­nif­i­cant buy­ing to over­come that over­head sell­ing, and typ­i­cally that has lower odds of hap­pen­ing right off. We will gen­er­ally see more back­ing and fill­ing until sell­ing has been taken out of the mar­ket before the mar­ket can rally much after a move like we have just expe­ri­enced. Plus, the higher time frames indi­cate a larger pull­back is likely.

For today, watch for evi­dence of sell­ing to re-emerge around the 1800 to 1805 level, if the buy­ers take it up to that level. The first level of resis­tance comes at 1792–yesterday’s highs. Any fur­ther down­side below yesterday’s low (1767) is likely to have dif­fi­culty around 1754.