TTC Never Sleeps
by Dominick A.K.A. "spwaver", TradingTheCharts.com | August 18, 2008
PrintJust because we haven’t been publishing regular free updates doesn’t mean TTC has been asleep for the past few weeks. Our members have been actively trading this volatile market from both sides as it fluctuates widely day-to-day, whipsawing many while generally trending upwards off the July 15 lows. And, if you read our last few updates, even if you’re not a member, you’ve probably been making some winning trades, too!
My early July update forecast a coming bottom in stocks based on a top in oil and a bottom in financials. These major reversals materialized shortly thereafter and have characterized the stock market ever since. As we descended to a support at 1256 in the S&P, our view that penetration below this number would be a short-lived selling climax and, once having regained that level as support, have looked to higher target numbers for the trade while remaining more or less agnostic on whether a permanent bottom was in or if we were buying a bear market rally. In the Dow we expected nothing less than a retest of the previous support at 11750 which, as the chart below illustrates, was finally reached this past week.
The point of being unbiased is to make high probability trades and, in our estimation, the kissback to 11750 was such a move. The real decision about whether this is a sustainable rally will be made from these levels. In the S&P our immediate target was 1306, more than 100 points off the July low. Higher numbers are reserved for members only.
But over the past week, trading in stocks has been sloppy and looks as if the market is genuinely undecided about the next direction. If, like us, you were long for this rally off the lows, holding back for more clarity from the market instead of placing bets based on personal bias makes a lot of sense. With that strategy in mind, the trade against oil and the euro is looking overdone at least in the short term and the equity versus commodities trade next week bears some careful monitoring.
Because it hasn’t been all stocks. Obviously commodities have been a major part of the headlines recently, and TTC often managed to find better and easier trades in these markets than in the major stock indices. Take crude oil, for example. After riding short positions down to $123, we used the chart below to determine whether or not to re-enter on the short side. As you can see, this one chart alone has produced almost ten points in crude since the start of the month.
Gold has also attracted a lot of attention lately for its precipitous declines, but members know we’ve been leaning on the bearish side of precious metals for months and have had a target between $750-800 since spring. In June we said gold could be the short of the year, so it wasn’t exactly surprising to see the declines that have raised eyebrows lately. Our gold forum has become quite active and uses a variety of techniques to analyze this moving market. As this market has made dramatic overnight moves, members have discussed and traded gold and silver in our real time chatroom at all hours, proving our international membership never sleeps! The chart below from this past Wednesday shows a triangle pattern forming, which suggested a bottom was not yet in place, even after several big drops. As you probably know, gold finally did move below $800 for the first time since last year in the overnight Thursday/Friday session. For more on precious metals, read Joe’s Precious Points update.
Soybeans haven’t exactly been stealing headlines, but that doesn’t matter since it’s been trending nicely and providing profitable trades. The chart below from last weekend shows typical TTC analysis as we monitor a market and look for confirmation of our expectations.
As you can see, the chart ends with the proposition that a long trade in soybeans looked favorable with a high risk/reward profile. If you aren’t aware, soybeans even traded lock limit up since then, handsomely rewarding members who used this chart and took the easy trade. The chart below shows soybeans as of Thursday.
Copyright © 2008 Dominick A.K.A. "spwaver"
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Disclaimer: Market analysts are always welcome to contribute to the Forum or
newsletter. Email me @ Dominick@tradingthecharts.com if you have any interest.
Ideas from this update are provided as general information and are not investment recommendations. TTC accepts no
liability whatsoever for any losses resulting from action you may take based on the contents of its charts,
commentaries, or price data. Each person must do his or her own research to determine the appropriateness of
taking a position in any financial or commodity market. If you are uncertain, please check with your licensed
financial advisor or broker prior to taking any action. Securities and commodities markets inherently involve risk.
contact information
Dominick A.K.A. "spwaver" | NJ, USA | Email | Website
The opinions of FSU contributors do not necessarily reflect those of Financial Sense.
