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cunparis weekly S&P 500 Outlook
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cunparis weekly S&P 500 Outlook

  #31 (permalink)
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cunparis View Post
Most gaps are filled so the gap at 1007.75 would be the first target if price pulls back.

the dollar is up today and that could be why the indexes are down. I read on bloomberg that if the dollar goes up the traders have to sell their securities held/purchased with US dollars to avoid losing money on the dollar. That makes sense and could explain one reason why they're negatively correllated.

We're very near the gap, the question is now will it be filled or will it act as support. Stay tuned.

Also, I started a thread on using volume:

https://futures.io/general-discussion/634-how-use-volume-your-trading.html

So far it's geared towards intraday however everything applies to larger timeframes including daily & weekly. Check it out if you're interested. For example, when I say will the gap hold as support, I'll be looking at the volume for clues..

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  #32 (permalink)
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I posted a daily chart in the Volume thread with a little analysis based on the volume. Looks bearish to me.

https://futures.io/5338-post30.html

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  #33 (permalink)
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cunparis View Post
Basically I don't have any idea what's going to happen!

The commercial traders started buying again.

Next week should pick up a little but we probably won't get any big move until after labor day.

I'm watching the dollar.

So if that's the case then why are commercials buying? It could be one last bull trap, who knows. This is the part that's puzzling me.

I quoted a few relevant parts from last week when I clearly stated "I have no idea". Well I never expected that we'd break our trendline on very large volume! That was a big surprise. I read on CNBC that there was a rumor about banks and that caused the selloff. I have no idea if it's true and no way to prove it.

First chart is the bank index. We're still in an uptrend here. We don't get volume here so let's widen a bit and look at financials. First a list of the ETFs and the percentage they make up of the S&P 500. This is from 2006, I can't find one more recent (if you have one let me know):

From: ETF Components of S&P 500 | ETF Trends

 
Code
100% SPDR (SPY) 14% 
 10% Consumer Discretionary SPDR (XLY) 19%
9% Consumer Staples Select SPDR (XLP) 12%
10% Energy Select SPDR (XLE) 17%
22% Financial Select SPDR (XLF) 16%
12% Health Care Select SPDR (XLV) 7%
11% Industrial Select SPDR (XLI) 11%
3% Materials Select SPDR (XLB) 18%
19% Technology Select SPDR (XLK) 11%
4% Utilities Select SPDR (XLU) 17%
As you can see the largest sector group in the S&P is financials at 22%.

Second chart is XLF. Notice that we've broken two trendlines (each time marked with an arrow). The first TL broken (orange) there was a pullback up to the trendline. I've found this to be very common but it doesn't always occur so that's one one general enters on a TL break. The 2nd TL broken (blue) is just a small trendline inside the major orange trend. But then we make a new uptrend in purple and this uptrend is still in tact. It'll have to drop below the last swing low to make a downtrend. As long as XLF is in an uptrend, it's likely to pull the S&P up with it. We added XLF for volume so let's look at that. The big down day had really big volume and the bounce is on decreasing volume. Normally this is bearish, but when the decreasing volume is due to a holiday weekend it becomes less reliable. So we have to wait until Tuesday to see what's going to happen.

Third chart is QQQQ. This one tracks the nasdaq and it's not into financials. So if financials really were dragging down the S&P, it shouldn't have had as much of an impact on the Nasdaq. The QQQQ has been underperforming the the S&P recently, which you can see from the QQQQ:$SPX ratio in one of the bottom panels.

Here we see that QQQQ also broke it's trendline while falling out of a broadening top formation. We're currently in a pullback up to the broken trendline, and that itself makes a new trendline in blue. So QQQQ was hit pretty hard by the selloff.

It's important to point out that a trendline break does not mean a new trend in the other direction. It just means the trend is changing and is losing momentum. A new slower less steep trend can form, as well as consolidation or anything else. This is why we watch the new trendline and the major swing pivots. Until 38.5 is broken we're not in a downtrend.

Ok now for the S&P index which is chart 4. We pretty much see the same things as QQQQ. Trendline break and pullback to the trendline. So we're watching now to see if price stops at the broken trendline or if we're just in a new less strong trend.

I originally went to stockcharts because I wanted to compare the ES volume with the S&P. The ES volume was the highest since January, for the S&P it wasn't as high (we had more volume in August). I'm still trying to figure out what to make of that.

So back to tradestation, chart 5 is ES daily. I've marked off the broadening top, the trendlines, the S&R lines, and a couple volume patterns.

At the bottom is an almost High Volume Churn. Volume was slightly below average. If it were HVC volume would be above average. This shows traders buying it up and stopping the sellers from pushing prices down. But there weren't enough sellers to make high volume. So the result is inconclusive.

The next bar is a low volume bar and this could be forming a Low Volume Pull Back pattern which you can read about here:

https://futures.io/general-discussion/634-how-use-volume-your-trading-5.html#post5523

If the pullback continues on low volume and stops at the broken trendline, that would show the rally is losing steam. If volume increases and we break above the broken trendline, that would show the rally is still on. We're currently at resistance at 1016 which held twice in August and in my opinion only made it above because it gapped above (the book I recommend in the volume thread, Master the Markets, talks about gapping through S&R). So I expect continued resistance here. If we break 1016 then I think we're headed to 1038.75. If we don't break 1016 then we could be forming a sloppy H&S pattern.

So as you can see this week's action gives us a lot to think about and we can plan out what can happen and what we can do in each case.

There is one snag in the picture.. Nasdaq commercials were major buyers during the last COT report period which ended on Tuesday, the very day of the big decline. So I suspect they were buying on Tuesday since that's the only day with really big volume. S&P commercials were net sellers (barely) so we can say they didn't participate in the buying spree. The DOW commercials were net buyers, a medium amount.

This is interesting. I am wondering if maybe financials will have some bad news ahead, and the DOW and Nasdaq won't be affected. The next COT report should give us more information.

Last chart is the dollar index, we're stuck in a trading range so until we break out we're in a holding pattern. Commercials are supporting the dollar so I'm betting on a breakout to the upside.

Crude is hitting a projected reversal date very close to it's target. It recently formed a double top. Gold broke out to the upside. Usually gold and crude move together so we have a divergence here. Crude is at support now so we'll see if it follows gold or if gold falls down. If the dollar breaks out to the upside it could be a final knockout for the rally in gold.

Let me know if you have any comments or questions. I feel like I'm talking to myself but it's a learning experience for me so all is not lost.

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cunparis weekly S&P 500 Outlook-20090904-bkx-daily.png   cunparis weekly S&P 500 Outlook-20090904-xlf-daily.png   cunparis weekly S&P 500 Outlook-20090904-qqqq-daily.png   cunparis weekly S&P 500 Outlook-20090904-spx-daily.png   cunparis weekly S&P 500 Outlook-20090904-es-daily.jpg   cunparis weekly S&P 500 Outlook-20090904-dx-daily.jpg   cunparis weekly S&P 500 Outlook-20090904-cl-daily.jpg  
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  #34 (permalink)
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cunparis View Post
If volume increases and we break above the broken trendline, that would show the rally is still on.

If we break 1016 then I think we're headed to 1038.75.

Last chart is the dollar index, we're stuck in a trading range so until we break out we're in a holding pattern. Commercials are supporting the dollar so I'm betting on a breakout to the upside.

I quoted a few parts of last weeks update. We broke 1016 and went up above 1038.75 where we ran into some selling pressure. We went above the broken trendline so if we continue above it then it wasn't just a pullback to the broken trendline. And I drew a new trendline for our new channel. We're at the top and oversold so it's possible that we pullback a bit. As long as we don't break a low then the rally is still on. When will this thing every die??

Due to the fact we're oversold, on the upper channel, with bearish divergence on momentum, I think we're headed lower this week. 1034.25 could act as support, if not then down to 1011.50.

The dollar dropped below support but not by much and I suspect it's a fakeout due to the bullish divergences in the momentum.

Not much else to say, I've been focusing on scalping this week and also working on some really short term trading for ES (1-5 days). More to come..

Have a good weekend.

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  #35 (permalink)
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Quoting 
Due to the fact we're oversold, on the upper channel, with bearish divergence on momentum, I think we're headed lower this week. 1034.25 could act as support, if not then down to 1011.50.

The dollar dropped below support but not by much and I suspect it's a fakeout due to the bullish divergences in the momentum.

Last week I thought we'd head lower and it turns out we didn't. However I didn't see anything meriting a trade so no harm done.

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As you can see in the chart we poked above the upper trendline which often shows exhaustion, especially when we ran into Stopping Volume. We have a bearish divergence on my momentum indicator. We had above average volume this week and judging from the bars it was selling volume coming in. Friday we had a HVC climax bar (for more on HVC and selling volume please see my volume thread). Also there is a brooks reversal pattern in that we had a trendline break and then a retest of the high. In this case we made a higher high but we got a reversal (IMHO I'm still learning his patterns). Fore more on the Brooks book please see my brooks thread.

Commercials are not buying (or selling). It was commercial buying that triggered the move up after the climax down day.

All this tells me that the market has found supply and should turn down. We may retest the high again before heading down or that could come later.

Trading idea (at your own risk): Enter short 1059 STOP (a break of Friday's low) with a stop at 1072 (2 ticks above Thursdays high). Target is 1035 which is prior resistance which should act as support. This makes a reward:risk of 24:12.5 which is 2:1. It's a good trade in my opinion because it is supported by volume patterns and the bearish divergence. In fact I see no reason not to take it, if you do please let me know. I'll be taking trading it.

Also of note the dollar is pulling back from it's low and could be starting a pullback in its downtrend. I think there is still potential that the dollar will break out to the upside but until proven otherwise the trend is down. A breakout in the dollar will be bad for the indexes & commodities.

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  #36 (permalink)
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cunparis View Post
Trading idea (at your own risk): Enter short 1059 STOP (a break of Friday's low) with a stop at 1072 (2 ticks above Thursdays high). Target is 1035 which is prior resistance which should act as support. This makes a reward:risk of 24:12.5 which is 2:1. It's a good trade in my opinion because it is supported by volume patterns and the bearish divergence. In fact I see no reason not to take it, if you do please let me know. I'll be taking trading it.

I'm in at 1059. I debated on waiting for the day session but if other traders arrived at the same conclusion it could gap down and lock out the shorts. The risk of entering on globex session is that Friday's close was so close to the entry stop order that it was sure to trigger even if price is going to go up.

Will scale out half at profit target and if things look good swing the rest.

Let me know if any of you took the trade, even if it's on simulator. Which btw if you're interested in swing trading you should at least be paper trading.

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  #37 (permalink)
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Well I didn't count on the Fed FOMC news this week but it sure ruined my trade. Went up enough to stop me out.

In hindsight I should have exited at breakeven on Monday's reversal. that was a big clue that the market was heading higher. I regret having missed that one but I won't let that happen again.

Today we're making a higher high on lower volume and there is even more bearish divergences. My next trade will be a sell stop 1 tick below Monday's low. If we take that out I'll be more confident that we're heading down.

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  #38 (permalink)
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cunparis View Post
Well I didn't count on the Fed FOMC news this week but it sure ruined my trade. Went up enough to stop me out.

In hindsight I should have exited at breakeven on Monday's reversal. that was a big clue that the market was heading higher. I regret having missed that one but I won't let that happen again.

Today we're making a higher high on lower volume and there is even more bearish divergences. My next trade will be a sell stop 1 tick below Monday's low. If we take that out I'll be more confident that we're heading down.

Ok I really didn't intend this to be a journal but.. I liked the price action (i'm a bear) so I put in a sell stop 1 tick under today's low thinking it'd get hit overnight. I was surprised that it got hit today. So I'm now short again. The R:R is even better, my stop is 1076. I added an extra contract and I've almost made back what I lost on getting stopped out. It's very important that if you get stopped out and you see an even better setup that you take it. Several times I've gotten stopped out a few times and given up (like in Gold right now) and then missed a huge move. Trading small size so your losses don't hurt is the key to doing this. If ES is too big you can trade SPY.

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  #39 (permalink)
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I took the first trade on Sunday based on the HVC and bearish divergences, it looked low risk and good for me. I didn't think of the FOMC statement and the impact that can have. This goes to show that you can have a perfect setups (mine wasn't perfect but for the sake of discussion) and the outlook can change from one day to the next, even intraday.

If last week's setup was good, this one looks even better. I'm already short and as of now I've recovered my loss and even have some open profit. I will protect it this time.


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Here we have a sloppy double top (sloppy due to FOMC statement). I really think some professionals took advantage of that by accumulating on Monday and distributing on Wednesday. When i trade these I like to enter on a break of the swing low. I trade this every day on a 5min chart. If the swing low acts as support, as it is now at 12:49am ET, then price could stall here. If it breaks the swing low then the next support is 1035. I'll be watching this closely.

Also notice:

- A similar pattern happened at the last swing top (marked by the green line).
- There was a trendline break (purple) with a retest of the high.
- There are negative divergences with My Momentum & LBR310
- Monday & Tuesday were LVPB
- We're in a very tight range (see bottom indicator) and range contraction is usually followed by range expansion

on that last point, we know there is a big move coming but we don't know the direction. Yesterday's bar is telling me that the direction is to the downside but that could change at any moment.

Programming Note:

It still seems as if i'm posting to myself here so I'm probably going to stop. I post on the forums for three reasons: to share with others, I pay more attention to what I do (chart annotations, analysis, etc.) and to get feedback. Lack of participation means the former & latter aren't productive and I'm not sure the 2nd can justify the time it takes.

The other reason is that I'm moving away from a weekly outlook type idea and i'm looking for specific setups that I've been trading on the 5min chart. On a 5min I make no predictions, I just react to what price tells me. I see no reason not to do the same here. For example, on a 5min chart the way I trade CL & Euro every day, I would be long right now. On the daily I have too many biases about the economy, the dollar, bear market rally, etc. that I'm not reacting to what price is telling me. I'm looking for signs in the price that support my beliefs. This is very dangerous.

So let me know what you would like to see. I'm leaning towards starting a journal where I try to post all trades, swing & 5min all combined.

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  #40 (permalink)
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All I can say is "WOW!". Well that's not all but you get the idea.

I thought we'd have a pullback to 1035 and then make another attempt at the high. However the last two days were very strong down days on high volume. All that while the unemployment numbers & home sales were "good". Me thinks the professionals are hurrying to unload all their shares.

I was planning to take some profit at 1035 but now I think this has a lot more potential. the question is will we test the high? We already have a double top. We may get a double top pullback but I'm not sure.

Friday's COT report will unfortunately contain the data up until Tuesday, before the landslide. But if we see that the commercial hedgers were selling before the 2 big down days, then we could assume they were selling even more. If we see them buying that would give me some concern. The last time we had a down climax bar (9/1) we got a HVC the next day as the commercials bought up all they could. Let's see if we get a HVC, if we do it might be good to take partial profits. Can always reshort again.

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