I had a little discussion about the trend table earlier today. Specifically, I was asked about the short-term trends still being up. The short term certainly feels sideways (lateral) to me and that's how I'd generally describe it. But to preserve my sanity I decided long ago to just base the trend table off of relationships to moving averages. I chose the 10-day moving average for the short-term trends. All three of the indices I track are still above those lines so I'm keeping them as "up" in the trend table for now. The S&P 500 and Russell 2000 would have flipped to down had they closed on their lows of the day but the late rally prevented that.
So back to the sideways action -- since the June 1st close the S&P is down 0.39%, the Russell is up 0.45% and the Nasdaq is 1.33%. But at the lows of the day all three indices were down since the 1st. So we've made very little progress in the last seven sessions. But what has been accomplished is working off the market's short-term overbought condition. The bulls should be feeling pretty good that sellers couldn't knock the market down from what should have been a vulnerable position.
If the Nasdaq breaks down from its June channel look for the May highs and/or the March trendline for support.
915 - 925 should be pretty good support for the S&P 500. The 20 and 200-day moving averages are near the bottom of that range and the March trendline and the June lows are near the top. It's hard for me to imagine this sideways range staying intact much longer. The path of least resistance seems to be up but I guess we need some catalyst to pop out of the range.
The Russell is also showing a clear sideways range over the last seven sessions. Gotta respect the range until it's broken. Depending on one's style that may mean trade the extremes, hold whatever positions you already have or just stay out.
No changes...
| Trend | Nasdaq | S&P 500 | Russell 2000 |
|---|---|---|---|
| Long-Term | Up | Lat | Up |
| Intermediate | Up | Up | Up |
| 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.
TM, when you're looking at daytrading candidates do you consider the longer term trend? Does it matter to you if the daily trend is up/down/sideways? Or are you strictly focused on the 15min chart? Thanks in advance.
It's been interesting to watch the volume drop off (can't just be lower summer trading can it?) as this rally has gone on. The only problem is I can't tell if the rally is just taking it easy for a while or setting up to give back some gains. I've already been burned trying to be contrarian in the latter parts of this rally. I know it can't keep going up forever, but like the old saying goes "the market can stay irrational longer than I can stay solvent." =/
Micheal,
I noticed a while back you were making adjustments to your trendlines... Is this your interpertation of the "corrective fan pricipal"?
Thanks!
David,
My primary focus is the intraday trend. I look at how the QQQQ is trading with respect to its 5 and 10 period EMAs on a 30 minute chart. But I do keep the higher time frames in the back of my mind. I like to know if I'm trading with or against the next higher time frame to gauge if I should be quick to snatch profits or try to let them run. I also like to know where support/resistance is on the higher time frames and may take that into account as well. For example, if the Nasdaq is about to hit resistance I'll probably hold off on initiating new longs.
Bryan,
Yes, it's very tempting to try to get short right here -- or at least is WAS before these ranges became so well defined. We had what looked like some decent selloffs starting over the last week but there was so little volume behind the selling. We'll probably need some really bad (worse than expected) news to get some motivated sellers.
Bob,
I guess you could say that but it's just the way that I learned to draw trendlines -- http://tradermike.net/2006/01/more_on_trendlines/ . Once a higher high is made a new trendline often needs to be drawn. The result is fanning.
Michael,
How long do you keep trendlines on your chart after price as crossed above or below them? When do you consider a trendline broken? How do you know a new trend has started?
Thank you.
This is off topic a bit, but does anyone have a reference or book that offers an hypothesis of how technical indicators actually work to drive decision making? How does the market's psychology often dictate, for example, a reversal at support or resistance lines? Is it mostly driven by algorithmic (compuerized) trading? Similarly, why do individual stocks and indexes often move in unison? Often it appears we all press the "execute" button all at once.