Nemo's Findings week of 3/3/2013

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html  

Has the long awaited/anticipated pullback begun?

Well, the week started out in fine fashion creating what looks like a lower high on Monday.

Tuesday started out promising in a The-Grinch-Who-Stole-Christmas sorta' way, but the everfaithful Monthly Pivot did the Cindy-Lou-Who thing and stopped the pullback in it's tracks.  Notice:  I had mentioned how the Semesterly R1 in IWM and SPY had been providing support since January 25th or so.  Well, IWM violated it for less than 15 minutes and SPY spent about half a day under it.  Might be worth looking IWM SPY and FAS formation here.  Late in the day I shot off my mouth saying this chart formation looks very bullish for the 'morrow. (mmmmhhh, just heard the Canterbury Tales in my head).  Indexes had bounced basically at strong support, and if you look closely you will see a red "23.6" to the left of IWM and SPY on that day near the bottom of price action for IWM and SPY.  THAT, is the fib retracement from the November 2012 low in both instruments.  Confluence...funny how that works.

 

  Oops...I screwed up on the chart copy, so this will be for two days.  As you can see, the 27th proceeded as I thought bouncing off the support from the prior day.  Now what adjective will we use that I absolutely hate in financial headlines:  "rocketing"  "surging"  higher.  As you can see on the 28th SPY had broken the Weekly pivot, with IWM and FAS making the weekly pivot  and bonds found a floor at the Monthly pivot.

 

 

We had a quick sell-off in the morning with FAS IWM and SPY all bottoming basically at levels in different time frames, and frankly, this is something I look for:  an inflection level for each instrument doesn't have to be one defined by the same time frame, but often you will see inflection when the instruments all arrive at different multi-time frame levels at the same time.  In this case, the FAS reached QR2, which coincided with the breakout of the formation from the 26th.  IWM tested support of the breakout from the same day, whereas SPY only approximated the breakout level. 

 Of course, this raises the logical, but irrelevant question: 

"Well, how do you know which was the cause and which was coincidence?"  

Simple answer:  "I don't."   

But...the more levels that coincide for different trading styles the higher probability of something happening.  Then, it's up to your skill at understanding price action at that level.  Look, I had ADD/ADHD/multiple personality-schizophrenic psychosis long before they had a diagnosis.  This method allows me to focus on specific levels when price gets there without having to maintain concentration continuously.  When you have as much bouncing around in your head during the day as I do, that's a good thing.  

On a related note regarding distractions to concentration: had to corral bunny this week, she was attacking my father in a territorial dispute. Actually rather comic watching an 80 year old man with an oxygen bottle in his hand, balancing on one leg while attempting to shake the other leg to dislodge an attacking rabbit from his pants.  Amazingly vicious for such a cute little thing. 

Brings back memories:  http://www.youtube.com/watch?v=QM9Bynjh2Lk

Who'da thunk?

 

Back to the chart:  So, Friday basically left us treading water in the range we entered on Thursday.  Notice how TLT oscillated around the 50 day SMA.

So, we had pretty positive price action this week for all intents-and-purposes.  The Italians couldn't tank it.  Walmart's crappy results couldn't tank it.  The sequester, which is a thimble full of water in a septic tank full, couldn't tank it.  We'll see what Monday brings, but my bias is long going for new highs in the market this week.  Buy some lubricant for your local bear.

Anyway, the week that is...  

  

Nemo's Findings week of 2/24/2013

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html  

O.K. so we got a little rinse on Thursday....which we promptly recaptured 61.8% of it on Friday.  Checking for Chicken Littles.  I mentioned how the Semesterly R1 has been providing support for awhile.  This low did not get back to test it.  For those of you keeping score at home the low on Thursday in SPY, which basically tested the 23.6% retracement from the Dec 31 low to the Tuesday high.  So, IMHO, and we know how they are like a certain bodily orifice and they all stink, we now have reasonable support at the 150 level, in that whole numbers are always areas of support.  That 23.6 level is close enough for government work to the 150 level, and............  the SR1 at 149.48 which looks like the bottom floor of current support.

Also, IWM is also showing significant supports at the Semesterly R1 at 88.80ish, and finnies, by way of the FAS are showing significant support at the Yearly R1 at 140.80ish, with secondary support at the Quarterly R2 around 142.90ish.  Bonds in the TLT have been running in a $2 range since the end of January.  I'm also watching the VXX more closely.  It's showing signs of bottoming...we'll see.

Oh...one more thing for those of you keeping score at home.  Ya' know how they always say Price and Volume are king, and that all indicators are derivatives, yada, yada, yada?  Interesting thing on Thursday, which is not new by the way in these days of algo trading.  

So, there I was, watching the drop on Thursday, looking for clues as to the turn, especially that heralded volume.  SPY...nothin'   IWM...nothin'   FAS...nothin'  Now, I don't have the volume in the chart from Thursday, but trust me, I was looking.  There was no capitulation volume signals at the bottom, but notice the levels at which simultaneously IWM, SPY, and FAS bottomed.  Funny how that works....

The week that was:

The week that is:

 

Nemo's Findings week of 2/10/2013

(Course on chart pattern recognition is available now: http://www.realitytrader.com/111trades.html 

WOW!  Amazing I have had time to do this entry considering the time and effort it has taken to wreak havoc in the Northeast....;-)  

Economically, not much has changed.  All the indexes continue their steady ascent.  Bad news is bought,  good news bought more. "BTFD!"  is in full force.  Notice how the majority of stocks that sell off on earnings news and guidance react?  The vast majority of them are bought off their morning sell-off. That's strength.  The only clouds readily visible on the horizon is the "Sequester" and perhaps the nascent ascent of gasoline, traditional for this time of year.  Gasoline is at it's highest price ever for this time of year.  How high does it have to go to start dampening the market?  Anyway, the week that was:

 Btw...the "pink" lines and boxes are daily ranges I put in the previous night that demarcate levels for the day I think may be important.  They incorporate the daily Pivot levels that do not appear on  Freestockcharts until the next day.  Also, the data I use in my pivot tables sometimes varies slightly from that of FSC, so it creates a fuzzy range.  Also, as someone noted, and I paraphrase.

 You can have a line every 10 cents, so every price is a level.

 Of course, there is some truth to the statement, depending on the time-frame.  For instance, on a daily basis, the shorter term pivot levels, especially the dailies are much more relevant.  But, if you were to look at the SPY for instance and were tracking my weekly entries, among all the other lines, you would notice that the Semesterly R1 became relevant on January 23rd, and has been relevant ever since.  Arguably the the same level on the IWM has also become relevant.  The point of the analysis is to notice what becomes relevant.  Should the market retrace, the interaction of future, shorter term levels with the Semesterly R1, may indicate additional strength or weakness probabilities for the level, which then gives you a higher probability decision point. Of course someone could say, "Why don't you just draw a line at the level?"  Well, in a sense you do.  When there is price support/resistance at a level, we manually draw a line demarcating it as such.  When it coincides with a longer term pivot level, it becomes, drum roll please...........confluence, which means you now have pivot traders, and price level traders, looking at it.  When you have multiple time frames, price levels and perhaps fib. levels all coinciding in a tight range, then you have multiple types of traders all seeing that level as important.  Heisenberg strikes again.

 On that note, the week that is: