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On Thursday sellers sold fewer shares at slightly lower prices. The point of control dropped 0.15 to 36.55. Value area formed at 36.50 to 36.60 overlapping to lower. The hoped for confirmation of a strong up move did not occur. A small range consolidation resulted as expected. Looks like the difficult bracket market will continue.
Plotting the value areas, gives an island reversal at the bottom. If the Qs refuse to fill the gaps left by that reversal, then a strong upmove may still occur. The Qs usually fill the value area gaps with value areas. In the down move of the last few weeks there is a value area gap at 36.90.
There was alot of talk about $100 per barrel oil today. Why was this report released now when it could have been released at any time during the last year or sometime later? This is the kind of thing that comes out after extreme moves and it can excite many emotional traders. Does the company releasing this projection need buyers to allow them to sell a long futures position? I can't answer that question, but it makes one wonder.
Observe trading around 36.40, 36.50, 36.78, and 36.90 today.
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Joined: 12/1/2004
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How cynical of the Wall Street big boys. They would never try to unload worthless garbage on an unsuspecting public, would they? I'm thinking you may be onto something here.
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On Friday sellers sold more shares at lower prices in one of the largest range days seen in weeks. The point of control dropped 0.30 to 36.25. The value area formed at 36.20 to 36.40 to fill in the value area gap left coming off the bottom. This gap,a sign of strength, now eliminated.
Week four of the "undeniable" pattern (see March comments) begins now. The selling of the last five weeks likely to wane this week. The pattern in January and March worked extremely well.
This week should test the down move for signs of strength. Moving sharply lower to 35.69 would be such a sign of a strong down move. With the Qs coming within just two ticks of confirmig the up move at 36.90, and all the volume traded on Friday at what wasn't even a new low, the sellers may be losing control of the market.
Important points for today are 35.94, 36.03, 36.47, and 36.74.
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Buyers bought fewer shares at higher prices yesterday. The point of control rose 0.10 to 36.55. The value area, 36.49 to 36.60 was overlapping to higher. Market was in balance yesterday.
The Qs are in a bracket from 35.94 to 36.88. We are in a secondary rally within this bracket. As long as we stay in the bracket prices can move up or down at any speed. To trade this we gererally try to sell in the upper third of the bracket and buy in the lower third. The closer to the extremes a trade can be made, the lower the risk. Markets trade in brackets about 70% of the time.
Markets trade from trend to brackets and back to trends. The last known trend was down, the Qs are classified as such until it proves it is moving up. Markets trade vertical, to sideways, and back to vertical. It can not be predicted which way the market will eventually come out of a bracket and the market often moves just beyond the bracket then falls back into it.
Yesterday's range of 0.25 is extremely small. Expect a big range move from here. Being in the center of the bracket, the move could easily be in either direction. This may be a clue that this trading range is about to come to an end. Following the breakout to see if there is a strong vertical move might be worth trying today.
Important points for today are 35.94, 36.03, 36.42, 36.78, and 36.88.
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Wow! What a change of character. Patient buyers controlled the market all day. Buyers bought more shares at higher prices right up to 4pm close. Buyers would step aside for an hour, and then come right back to put more capital to work. I have not seen a day like this for a long time. Of the averages discussed here, the Nasdaq had the largest percentage gain today.
Up and down days lately have been 1.5 hour sharp moves with hours of sideways trading except for the last two days. This was a real change today. The capital flowing into the Qs had to find willing sellers at higher prices. Do not fight this move until capital starts to flow out of the market.
The steady down move of Wednesday, and the steady upmove of Thursday is the strongest reversal possible. It often predicts the direction of the market for sometime.
The Dow Utilities hit a new closing high for this market. Investors are still buying dividends.
The Qs are went into a natural rally when they exceeded 36.88. To tell if they are going into an uptrend they need to rise to 37.13. This is an interesting point because the 50 day moving average just happens to lie there.
I watch the S&P500 along with the Qs. It is already in an uptrend using the same classification, and has been since April 1. If you think about it, the S&P 500 is the leading average, and the Nasdaq 100 is the average of big capitilization laggards. When it rallies the market is healthy.
The point of control rose to 36.72 today. The value area is 36.68 to 36.86.
Important reference points to watch are 35.94, 36.03, 36.65, and 37.13
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Nasdaq 100 relative stronger than S&P500 for the last three weeks. Dow Industrials printed "undeniable" pattern for the week indicating loss of downside monentuem and maybe a turn up. This week the S&P500 may break a trendline drawn from the bottom of the bull market. Likely to drag the whole market lower if it does. Many traders us trendlines.
Again there was a one-way market from beginning to end on Friday. Patient sellers controlled the market all day. Sellers sold more shares at lower prices to the end. There is at least a little hope for the bulls, it was easier to sell at each new low (each break to a new low failed to travel as far as the previous one).
Point of control rose 0.08 to 36.80. Value area rose to 36.69 to 36.92. Buyers control over a period longer than a day.
Important reference points for Monday are 35.94, 36.03, 36.57, and 37.13.
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Qs fell for the first hour, then traded sideways for the rest of the day. Sellers sold fewer shares at lower prices. Result was a low volume narrow range day. I am looking to follow a high volume breakout from value area. Qs remain in a trading range between 35.94 and 36.88.
Point of control declined -0.28 to 36.52 based on the drop Friday. Value area was lower at 36.46 to 56.58.
Important points I am watching now are 35.94, 36.03, 36.56, and 37.13.
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I am looking for less activity today. Tuesday was two trading days compressed into one. Yesterday was so strong at the end, that the Qs did not establish a point of control or a value area. These should develop today. Even with all the action, yesterday was just an average range day.
The first hour of the up move beginning at 2:00pm traded about 50 million shares. Traders sold more shares on lower prices as the Qs approached the bottom of the trading range. Then they bought even more shares at higher prices. There was excellent opportunity to make money going both ways.
The bottom was very interesting. A low was established at 2:01pm at 35.992. This was above the 35.94 point I have been watching. At 2:06pm with the Qs trading about 36.025, a 100 share print occurred at 35.91. The next trade jumped back above 36.025. This could have been a manipulation trade. It looked like there was no business to do below 35.94. The rally up began in full force. It is really a mess when a reported trade like this screws up the daily, intra-day charts and the indicators based on price.
The real time data service tried to correct this data point twice in the next several hours, but it always came back. The daily charts still show the new low this morning. The intra-day charts have been corrected. I find that stuff like this often happens at critical times when a trader needs to make an important decision.
Important reference points are still 35.94, and 36.88.
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Joined: 3/2/2005
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We are in a three week trading range and the Philadelphia Semiconductor Index SOX broke below its three week trading range today. If we see a break lower out of this trading range in other major U.S. indices, it warns that we have the potential for a lot of selling pressure as traders react to the break in support. It also could bring out the longer term traders who may see a break below the 6 month trading range. Usually this group will wait for multiple closes out of the trading range and conformation in other markets.
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Yesterday saw value area forming at 36.34 to 36.42 with the consenus price at 36.40 (Point of control). The break after 1:30EDT was still going lower at the close.
We are back at the trading range low, and still looking for a change in the market. Will it start to move down or will it return back to the middle or high of the trading range? The last known direction for the Qs classified as down before it entered this trading range. As soon as it breaks the low I will classify the Qs as down. I will be watching how it trades below that point. Reaching 35.69 might give me more confidence that a real down move is underway. The market will define itself.
A move to 1163.69 on the S&P500 index would help confirm the down move.
I will be watching 35.69, 35.94, 36.40, and 36.88 today.
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Yesterday saw a consensus price established at 35.70 down 0.70 from the last one. Price was moving below it during the last half-hour. The market should continue to trade below the consensus price. The next objective is to first establish a downside extreme, and then a new consensus price.
I like to use the Jesse Livermore method for classifying the market. As of yesterday the Qs and the S&P500 are classified as down. The only time Jesse Livermore would trade is during "up" or "down" classifications. He would look for the market to move in that classification direction until a natural reaction occurred.
The only reference for today is the consensus price of 35.70.
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Vertical moves are the traders best opportunity for making money. I hope everybody has done well the last few days.
Friday saw the market searching for the extreme low. Lots of capital is leaving. The Qs established small consensus levels at 35.18, and 35.04 to 35.05. Price was moving lower during the last hour of trading on big volume.
A daily range of 2.5% to 3.5% would indicate a nervous market. A range greater than 3.5% would be a state of panic.
The strongest index of all, the Dow Utility Average setup an "Undeniable" sell pattern last week. A new weekly low would complete the pattern. The pattern best indicates a loss of momentum and only occassionally indicates a trend reversal.
The sell patterns mention in the March QQQQ Swing Trader five weeks ago have resulted in nice down swings.
The "Undeniable" buy pattern setup for the Dow Jones Industrials failed to complete when the average did not make a new weekly high by several ticks.
Important reference points I will be watching will be 35.05, and 35.18. Other consensus points formed during the day will be important as soon as they are recognized. Good luck and enjoy the opportunity to make money.
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Capital outflow stopped on Monday. The low of the day was established by 9:40EDT. The Qs traded sideways for the rest of the day. The two consensus areas formed Monday will be what I will be watching today. They are 34.85 to 34.88 and 34.77 to 34.78. Yesterday was a small range day of just 0.36. The cycle is to go from large range days to small range days and back to large range days, etc.
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The six day down move seems to have spent itself. New incentives for capital inflow or outflow are needed.
Two consensus areas formed at 34.96 to 34.97 and 35.00 to 35.03. Looking at the whole day found consensus at 34.97. The market traded at this price every half hour during the day except for one.
Yesterday's move lower then move higher established what use to be called a non-trend day. Good trades often came from these types of days. Unfortunately, lots of traders know this. The Qs had a sharp low volume rally up to 35.29 from this area at 4:15EDT. I don't trade the thin after hour markets, but they may have ruined the opportunity on the upside.
If the market is in a good uptrend, then it should not return to 34.97 for some time. The non-trend day sets up a good move normally, but it can be in either direction. I will be considering going short if the price drops below 34.97. Yesterday was again a small range day of 0.35. A big range day should be in the near future.
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Yesterday pointed out the need for swing traders to have real time data and be full time traders. The 34.97 point is a good example. Prices opened higher, plunged to one tick above 34.97, soared then plunged again, then rose. At this point 34.97 looked like a magical point.
By 12:30EDT the market had established a new consensus range at 35.11 to 35.18. Unfortunately the new areas can't be given using overnight updates. Traders need to find these points in real time. A great opportunity for a short sale occurred just after 12:30EDT. The Qs dropped for the rest of the day. Another consensus area formed at 34.90 to 34.91. Selling short on the drop through 34.97 may work out, but shorting at the higher level certainly improves the reward/risk ratio.
I called Tuesday's pattern a non-trend day, when the proper term is a neutral day. Both day types imply the same possible future i.e. big moves. They are day types that traders without real time data may use with some success.
The consensus areas have replaced these day types for the modern trader. The market establishes consensus areas in it's own time. They may be longer than a day, and often overlap across days. Consensus areas are points and ranges of market efficiency. If the market was efficient, it would trade at an area of consensus all the time. It is the move between points of consensus and the time it takes to get there that gives the trader an opportunity to make money. That is the period of inefficiency. The market moves back and forth between these two states. The consensus area is the set-up for the inefficiency.
Yesterday mapped out a large range of 0.70. The cycle calls for a return to a small range day in the near future. When the capital outflow stops the small range day results.
The Qs established a natural rally high reference of 35.29 yesterday. Both the S&P500 and the Qs confirmed the market direction as down again yesterday when they made new lows.
The market certainly moved down easier than it moved up during the last few days. The market was easy to buy going up, but hard to sell going down. Doing the hard trade is usually the right trade. Imagine you are a very large trader, and consider how you would get into and out of trades. Large traders have to use areas of consensus, they can't use stops. Huge numbers of shares exchange hands in areas of consenus.
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When things go bad for a short trade, the consensus area saved the day. The open gap higher gave no chance at making much profit on the short trade initiated Wednesday. The trader had plenty of time during for several hours to get out with a breakeven. That was certainly acceptable with the price strength that was to come the rest of the day.
A new consensus area formed at 35.06 to 35.14. The immediate breakout higher was the position to enter yesterday. There may be trapped money below yesterday's range. This might result in some follow-through higher.
Another large range day, 0.75 this time resulted. I am watching for the return of the small range day. Small range days make it hard for swing traders to make money.
Volume was above average, but not higher than the day before yesterday.
The S&P500 and QQQQ pair are now classified in uptrends. This is a classification that could not be made during the sideways move of late March and early April.
The expectation for a small range day and the lower volume kept me from taking the long position yesterday. Indicators are not right all the time.
There is the potential for a new consensus area at 35.55 to 35.56.
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A weekly review of important averages follow. The worden system only provides traditional weekly charts on the weekends. Anything longer than a day is a running combination of several days.
Dow Utilities +2.72% Utilities outperformed S&P500 since mid 2004. Setup for undeniable sell pattern completed on new weekly low. Breakout above weekly high of 270.92 voids the pattern. Looks like market correction finally got to the strongest index.
Dow Transports +1.69% Setup for undeniable buy pattern. Rise above weekly high of 3,518.44 completes the pattern.
S&P Smallcap 600 Index +1.61% Setup for undeniable buy pattern. Rise above weekly high of 313.01 completes the pattern.
Russell 2000 +1.51% Setup for undeniable buy pattern. Rise above weekly high of 599.14 completes the pattern.
Nasdaq Composite +1.26% Setup for undeniable buy pattern. Rise above weekly high of 1,962.41 completes the pattern.
Nasdaq 100 +0.90% Setup for undeniable buy pattern. Rise above weekly high of 1,448.37 completes the pattern.
S&P500 +0.83% Setup for undeniable buy pattern. Rise above weekly high of 1,159,95 completes the pattern.
Dow Industrials +0.70% Setup for undeniable buy pattern. Rise above weekly high of 10,219.34 completes the pattern.
Keep in mind that undeniable patterns show loss of momentum best and only occassionally indicate a change of trend. Looks like the down move may be losing momentum. That would be confirmed on rise above last weeks highs.
Friday was a above average range lower volume day. Following breakouts from consensus range 35.31 to 35.33 did not work. First it broke lower, then higher, and then a good move lower. Finally in the last half-hour the rally almost erased the entire down move. I am thinking about day trading or at least reducing the size of possible swing trade positions on low volume days. Close below consensus is negative.
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Consensus at 35.33, then moved to 35.34 to 35.36. Breakout higher after 1:30 EDT and then lower after 3:00EDT did not work. Low volume all day was the key to standing aside.
Yerterday's range was small being 0.31. Now looking for large range day with big volume. Yesterday may be a key day. There is a 3 day consenus at 35.31. Going long above 35.46 and short below 35.15 may be good trades. See 4-5-2005 for a similar situation. This has real good possibilities. Good Luck.
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