Based on last night's analysis I thought there was a good chance that the short-term upward sloping trendlines would be broken today. They were broken but that turned out to be a head-fake. Buyers stepped right in and pushed the market almost back to the post-Fed reaction highs of yesterday afternoon. One of the best developments (if you're a bull) I saw in the charts tonight was the financials breaking their bearish trendline. The BKX is now solidly above its 50-day moving average but still has a down trending 200-day moving average to deal with at some point.
The Nasdaq has been range-bound for the last two weeks, if you erase last Tuesday & Wednesday -- which could be blamed on SocGen's debacle. It sure looks poised to breakout of the range but I don't know if it can do so if Google stays weak tomorrow.
The S&P closed above its August low for the first time in over 2 weeks.
We've got upgrades for the short term trends for the Nasdaq and S&P 500 today.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Down | Down | Down |
| Intermediate | Down | Down | Down |
| Short-term | Up(+) | Up(+) | Up |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
*** I'm simply using the indices' relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.
Mike,
Your comment this morning said you were looking for a short entry, as was I. I ended up getting in SDS then covering. I was using the opening gap (yesterday's close)and the pivot point for entry. When/how did you know the market was going to blow right thru these levels? When would you have entered a short?
Jake,
Just after 10:30 I set alerts for QQQQ under 44 and another stock that I thought was about to roll over. The QQQQ alert fired but by the time I was able to react to it it had already bounced back above 44. I watched it chop around for abut another 30 minutes, saw the Russell 200 in the green, strength in financials and figured that we weren't gonna roll over.
I couldn't have predicted the surge of buying that came shortly thereafter though.
Correct me if I'm wrong, but the only people who care if a trend line is broken are other traders who focus intently on charts. Trend lines are only a theoretical concepts. Same goes for the 10 day moving average... why should it matter any more than a 9 day or 11 day moving average? So if these concepts only dictate the actions of other chart-readers, my question is this, what percentage of traders do you think do this kind of technical chart analysis?
Joe,
I couldn't say what % of traders trade solely on TA. But I'd bet that over 50% of the "big boys" have some TA as part of their over all strategy.
What you say about people using different setting & indicators is very true. The way I see it is that you just have to use *something* and use it consistently. I just find a set of indicators that I'm comfortable with. But all they ever do is give you a probability of being right -- just like fundamental analysis.
I know noone wants to hear it, but the homebuilders ETF, XHB, also broke its downtrend that was well-defined by the 50 DMA (one great example of how trendlines and moving averages do matter!)
Given how steep, persistent, and long this downtrend was, I think this break should not be taken lightly?
Joe, trend lines ARE just a theoretical concept. Much like "earnings" under GAAP accrual accounting, or "free cash flow."
:-)
Whether it's a Technical, Fundamental, or FundaTechnical indicator, the keys are (1) finding one that is statistically predictive i.e. has an "edge," and (2) tweaking the parameters so that it is productive in your style of trading, even if your style of trading resembles Buffett's more than it does Simons'.