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Friday, June 5, 2009

Friday Wrap

Today was a pretty slow day, and we seemed to be stuck right around 943. I got a little curious, because 943 was where the 200dma was a couple of days agao, but of course it had to have dropped by now. I took a look at the exponential moving average, and I'll be darned, it's at 943.

I put both simple and exponential 40 week moving averages. It seems the exponentail average may be supplying some resistance. Still, the SPX has substantial upward momentum. There is a very good chance of getting back to 1000.

The Nasdaq has totally blown away every resistance level it's encountered. There isn't much left below the July 2006 low.

The Russell 2000 has broken through both 40w averages and has one level of weekly resistance to get through to get a shot at pre-crash levels. Again, upward momentum is very high.

The dollar bounced off a strongf support level and is now facing a strong resistance level. Momentum looks to me like it is reversing. If the dollar gets a sizeable bounce here, it probably will not help the equities markets.

Is the bear market over? It makes no difference to me. Trying to figure out the "big picture" is to me a waste of time. I'm looking to profit from the short and intermediate trends. I'll let the Ministry of Propaganda tell everyone to buy and hold.

I'll have the new highs update shortly.


Anonymous said...

Hey there David. It's funny that you should say that the big picture is a waste of time. I am at the moment really getting into figuring out the "big picture" to time my trades. Ive been at this for about 1-2 years. There are times I think I've found out more than I really care to know since my holding time on my options are at max 10 days.( Hey it makes me sound really smart at parties. Now if I can only translate that into a good win loss ratio).When I check out your blog, I start thinking, " Gee maybe it is a big wasste of time".
I need your advice. I think its time to just focus on technical analysis with a little intemarket relationship anaylsis to the mix for some additional confirmation, and dump the whole big picture analysis. I think Its made me frustrated, not so much because I dont think Ill never understand it or that its boring, its just that I really dont its added any real value to my trading, especially since I only want to hold for a week at the most. Im think of just finding an intermdiate trend, and riding and milking it for what its worth when it pulls back into the
8ema. (I read in the book Master the trade that for swing trades this is a great signal.)
So Im really thinking of adopting your forget the big picture idea, since IVe contemplated it myself may times late at night, and just go pure only techicals and itnermarket relationships. Ill be honest, its the only thing thats really ever made me any money.
Here though is where I get stuck in TA.
1) I noticed that you put up a weekly and a daily of the S&P. Could you do a post on how to use them in combination. I know this is called mutiple frame analysis but I have yet to seen anyone give a good explanation of how to use it for short term trading (swings) without having to use 3 time frames. Could you show how to use the weekly and the daily in combination to find good "possible" entries and exits. Ive read that when the daily and weekly are "aligned", they give very powerful signal to enter or exit trades.(I think that mutilple time frame fibinacci clusters are basically the same idea). I think multiple timeframe analysis is probably a great to tool do away with the big picture.
Could you also please explain how to use moving averages for swing traders such I. Much like you, I really dont care anymore about when the bear market will be over. All I need to know is what are the key moving averages for swing trades. So far I think they are the 50/20/ and the 8ema. My reasoning is that swing trades are a basically short term trades, so they should get thier strength from the intermediate trend. But here is my confusion, should I be piggy backing of the 20 or the 50 for swing trades? keep in mind that my holding period is max 2- 10days.
I know this is a lot, but I really want to put this whole big picture business to rest and get more practical. I hope you can answer these questions:
1) how to read multiple timeframe
a) support/resistance
b) pattern set ups
2) What MA should I use for trades 2-8 days long.

As always ,I am very appreciative of your efforts.
Eddie from up the 15.

David said...

Hi Eddie, good to hear from you,

"Waste of time" was a poor choice of words, probably stemming from the frustration of watching too many CNBC videos (I really need to stop doing that). I am hearing more and more that the "bear market is over", which really is irrelevant to anything but a buy and hold investor. That is why I like IBD's approach: the market is either in a rally, or it isn't. Whether it's a bull or bear market makes no difference. Obviously it is important to know the major trend of the market, as most stocks will follow that trend.

I'm not real big on moving averages, but the 50 and 200 day are pretty useful. I also use a shorter term average (the 20 exponential) which I don't find especially useful most of the time. On an intraday chart I like using a 20 period moving average on a 10 minute chart, as it often will tell me if a breakout will fail or not. Unfortunately, on Scottrade that is a streaming Java chart and it does not show up well when I capture it and post it.

We'll be listening to debates about whether or not the bear market is over or the recession is over for months (or until the market crashes again). It's pretty pointless to sit out a 30% rally because you think the market is going to drop again, just as it's stupid to "back up the truck" and load up on stocks AFTER the 30% rally because Kudlow is saying the recession is over. Paying attention to what the market is saying is how you will make money (or better yet, not lose money), and right now the market is going up.

Next week I will try different moving averages on the charts. Trying the 200 day exponential average on the SPX chart was an eye opener.

I hope I could give you some help here. I really enjoy reading your comments.

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