Bill Cara’s Blog for Jun 20, 2012
CTA Trading Desk Morning Report
[7:00am ET] Good morning, Geoff here.
The Fed announcement will be released today and the debate is whether or not there will be QE3.
The recent rally has many wondering if Big Ben will pull the QE arrow out of his quiver or wait until it is needed.
As you know, we have been positive on the stock market for a number of weeks now, but it has gotten to overbought levels as shorts have been squeezed out of their positions by traders anticipating liquidity pumping by global central bankers.
Yesterday I showed you the following chart with the anticipation that it would reach the “Sell Zone”, which it has. Sure, markets move higher from overbought levels, but since we have been long for weeks, I would describe the initiation of positions at these levels as “risky”.
The only difference between the following chart and the one posted yesterday is the note in red regarding the MACD histogram. Watch the histogram for bar height shrinkage for that will be a sign of declining momentum. Also; do you see how yesterday’s high was on the fib retracement? If you don’t use fibonacci in your trading, please start.
I also showed you the following chart focusing on the moving average indicator that shows trend direction. It is great for catching the meat of the move in a trending market (but does not help in a chopping market). I have a number of charts that perform that same basic function. I want to note that quite often, when these charts look to be crossing into a new trend, EXACTLY at that time, the market reverses. In this news centric trading period anything can happen, but I would not be surprised to see the market decline right as this indicator’s “buy” signal is triggered – I have seen it happen before and I expect to see it happen many times again.
The following chart anticipated the recent low perfectly. The Red Arrow has been in place for many weeks – will it call this move lower?
I have not discussed gold in a while. Our intermediate to long term position is extremely bullish based on fundamentals. In the short term, please note the recent volatility squeeze. Often times, the initial move is a head fake, but I anticipate a large move once it is established – either way, so be prepared.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||11.85 (0.61%)||Components, Chart, More|
||9.50 (0.44%)||Components, Chart, More|
||7.23 (0.23%)||Components, Chart, More|
||9.45 (0.15%)||Components, Chart, More|
|^AEX||AEX General||Chart, More|
|^OSEAX||OSE All Share||450.23
||1.52 (0.34%)||Components, Chart, More|
||2.00 (0.64%)||Components, Chart, More|
||32.80 (0.54%)||Components, Chart, More|
||17.76 (0.32%)||Components, Chart, More|
||5.50 (0.61%)||Chart, More|
||9.37 (0.67%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||607.67
||7.60 (1.27%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Vad’s Catch of the Day
Kaimu’s Sound Money
Deron’s Daily ETF Analysis
This daily column is obviously focused on bringing to your attention specific technical-based setups for swing trading of ETFs. However, because many people actually trade the broad-based ETFs such as $SPY, $QQQ, $IWM, or $DIA, we typically do analysis once a week just on the main stock market indexes, which can translate into actionable ETF setups as well.
Although we now have a new “buy” signal in place with our market timing model, each of the main stock market indexes must now contend with key resistance of their 50-day moving averages (50-day MA). This suggests that stocks may either pullback from or consolidate at current levels over the next several sessions. As such, let’s take a look at the current technical support and resistance levels for two popular benchmark indexes, the Nasdaq Composite ($COMPQ) and S&P 500 Index ($SPX).
On a burst of volume, the Nasdaq closed above its 50-day MA yesterday, so this prior level of resistance should now offer new support. One of the most basic tenets of technical analysis is that a prior level of resistance becomes the new level of support after the resistance is broken (and vice versa). Nevertheless, it is not unusual for a stock, index or ETF to pull back from its first attempt to crack through a major moving average following a significant move lower.
If the Nasdaq holds above its 50-day MA, its next significant resistance level is near the 2,980 area. If the index eventually retraces from its current level, it will probably first retest and find resistance at yesterday’s high before moving lower. Above this mark, the Nasdaq has significant overhead resistance near 2,980 and 3,085. Yesterday’s (June 19) intraday low, the 20-day exponential moving average (20-day EMA), and the 200-day moving average (200-day MA) should all act as important support levels for the Nasdaq. Using supplemental Fibonacci retracement levels, the daily chart of the Nasdaq Composite below clearly summarizes all this:
The S&P 500 Index also surged above its 50-day MA yesterday, and on higher volume. Yesterday’s high (1,363), as well as the 1,380 and 1,420 levels all present near to intermediate-term resistance levels for the S&P. As with the Nasdaq, the 50-day, 20-day and 200-day moving averages are significant support levels on the S&P 500:
With the stock market in “buy” mode, we will be focusing most of our attention on identifying potential ETF and stock setups to buy during market pull backs. It would now take several significant “distribution days” (higher volume selling) to nullify recent bullish price action on the long side of the market. However, keep in mind that the first move higher following a substantial market correction does not generally yield stellar results because new leadership in the stock market is just becoming established. Most important is that we continue to see institutional accumulation during pullbacks, and as the stock market works its way higher.
The commentary above is an excerpt from The Wagner Daily newsletter, which we have been publishing since 2002. Subscribers to the full version receive our exact entry and exit prices for swing trades of the top ETF and stock picks, access to our market timing model, and more. To get started today, sign up for your 30-day risk-free trial to our Wagner Daily stock newsletter or visit our trading blog to learn more about our proven technical trading strategy.
Cara on the Metalminers
Cara on the International Markets
CTA Trading Desk Mid-Day Report
CTA Trading Desk Post-Close Report