Traders' Library

Monthly Market Outlook Webinar with John Person

What: Free Exclusive Webinar

When: Wednesday, August 4, 2010 | 8:30 PM EST

Where: Click here to register!

John Person will be having his monthly market outlook - some of you already know how John’s Techniques have helped many traders identify large market moves and profit handsomely! This time will be no different John promises not to pull any punches. John will:

· Cover some of the market sectors that best perform in different economic phases.

· Cover stocks and commodities picks that perform best during specific times of the year from a seasonal perspective.

· Show you how to use ONE of his powerful price indicators available to determine whether you should be BUYING dips or SELLING rallies.

· AND as if all of these factors weren’t enough, John will introduce you to another factor and force of trading – Norman Hallett of The DISCIPLINE OF TRADING.

As part of John’s efforts to complete a session with SOLID information and training, John has asked Norman to participate on giving our subscribers some of his powerful views on this subject to help our clients put better emphasis on the way they trade.

Well… when you have a Master on Trading and a Master of Mental training the forces are with YOU!

Register now!

Summertime Rally by John Person

It’s getting hot here in the mid west, not a surprise it’s the end of July. That in itself is a scary though as it seems we just celebrated the 4^th of July. Boy has time passed by quickly.

Trading this month can bring some opportunities; however it generally is a very light volume trading month due to the fact that many traders and investors not only here in the US but globally take vacations.

According to the work in my book the commodity traders almanac 2011 the S&P 500 has shown a tendency to see strength lasting into early September it's interesting to note that in 2008 stocks actually posted a mild pain in the month of August from July's closing price. Moreover, the same situation developed in 2009 where we experienced a substantial gain in equities through the month of August. The question begs will what will 2011 bring as many investors traders economists and pundits debate whether the economy can continue to grow above the 3% level with high unemployment versus US corporations who have been announcing better-than-expected earnings with both top-line and bottom-line revenue growth.

From a technical perspective looking at the advance decline indicator we see that we are closing in closer to the April highs, if the equity markets follow suit that could bring the S&P's back to a level near 1140 sometime during the second half of August. In order for this outlook to show promise,  I would like to see in the first week of trading during the month of August a key critical support level to hold near 1075.

Without any major negative surprises in the monthly unemployment report due out August 6 we stand a strong chance to maintain a summertime rally this year as well.

To find out more about upcoming seasonal trades log into a free webinar, I will be discussing more on seasonal trade set-ups.

John Person

Founder of Nationalfutures.com

STEEL, THE MARKET LEADER

Continued reading from from Tape Reading & Market Tactics.

Click here to read Chapter 8. 

Chapter 9

Steel, The Market Leader

Watch Steel

There is a saying: “As Steel goes, so goes the market.” There is no question that X is the market leader, its bellwether. American Can, General Electric, Westinghouse, American Telephone, and a few other stocks, are also termed market leaders. They are, but the market will follow Steel when every other stock loses its leadership. This was particularly well illustrated, I think, in October, 1930, during the period of persistent liquidation. For days, American Can did not break; it held like a rock. Steel, however, led the market in the decline, or at least sagged simultaneously. I believe that if Steel had withstood the pressure, the market would have halted its drift likewise.

 

By the way, when you hear loose talk about “support-orders” in Steel, Can, and other leaders—when you are told: “They are going to support the market”—take out your pencil, add up the volume of transactions, and figure the millions “they” would need in order to support the market. Think in the same way when you hear stories to the effect that “they are going to run Steel up ten points.” I do not imply that Steel is not ever supported, or that powerful interests do not push Steel forward at times—for they do—but they do it when the market is technically set for the maneuver. There are no interests in Wall Street powerful enough to stem the tide of wholesale public liquidation (this was proved in October, 1929); nor have they enough money to run Steel up 10 points, when they know from the market’s position that thousands upon thousands of shares of Steel would be offered for sale all the way up. It is simple enough to sit around a brokerage office and glibly spin yarns about the “big fellows.” Forget it; if any of your informants knew them well enough to know what they were doing, they would not be sitting in a broker’s office talking to you and me.

 

 To return to Steel: watch Steel closely at all times. Pay the same attention to its action that you do to your own stock. Your stock will probably rally with the market, if your selection has been correct; it may follow the market, or advance ahead of it; but it should not go against the trend. (If it does, check your position quickly, because when the general list does not follow Steel it is quite likely that many stocks are being sold under cover of strength in Steel.) Steel is a particularly helpful indicator because it is always active, thousands of shares being traded daily; and it never swings wildly, its market usually moving by eighths of a point.

 

If you hold an inactive stock (which is not recommended for short-turn trading), and for some time there have been no transactions in that stock, yet in the meanwhile Steel has reacted two or three points, it is well to “quote” your stock (obtain the bid and offered prices from the floor through your orderclerk). This will give you your “market;” otherwise, you may be disappointed when you finally see a transaction some dollars away from the last sale. Of course, if Steel is advancing and you are long, you need not feel uneasy; but it is none the less a comfort to have the “quote.”

 

If you intend to watch the tape constantly, it is good practice to obtain the market on Steel, the bid and offered prices, shortly after the opening. From these you can detect whether Steel is being bid for, or whether it is offered below the bid price. Let me explain: assume that the market on Steel at five minutes after 10 o’clock is 149¼ bid and 149½ asked. If you notice 3,000 shares of Steel pass soon after at 149¼, you know at once that someone has “hit the bid,” that in this block of Steel the selling has been more urgent than the buying. If it happens the other way about, with the transaction at 149¾, you will know that someone is bidding for stock and is willing to pay more than the asked price.

Update EUR/USD Forex pair: July 24, 2010.

The EUR/USD moved out of the pitchfork channel above the 50-day moving average and has broken now the 100-day average. Indicators are oversold and we will have a short term correction now. It is hard to say if the lowest point is already behind us. We will have to see if the next down move will move past the lowest low point. It is possible that we are making an up correction wave {B} and that a last correction wave {C} will come next. We only can wait and see to be sure. That last down move would bring the Euro to the level of the previous long term correction wave [4] of the long term up move as you can see in the monthly chart, where price finds support on the 200 months' moving average. Short term we expect an extension in the {B} up wave to a level of about 1.35.

 

S&P500 Technical Analysis Update: July 24, 2010.

After a short term correction the previous week the index continued the up move.

Price broke out of the downward pitchfork and Friday the closing price broke the downtrend line. Short term we can expect resistance from the 200 and 100-days moving average and the 50% retracement level.

I think this will at least slow down the up move. There is however still some room in the indicators for a further up move. I expect a higher index the following days.

Both the manual and the SATS2 automatic long trades are open.

I am using a slightly faster SATS2 now on the daily chart. I am also working on a new SATS5 system expert. First results look good with higher and more reliable profit rates than SATS2. If all is ready we will be using this expert in the future. SATS5 works fine even in very small time frames like 1 minute on the Emini future and Forex EUR/USD. More later on...

 

Interview with Mark Larson

Sinclair Noe on KFNN 1510 Financial Radio interviewed Mark Larson, author of 12 Simple Technical Indicators That Really Work.

Take a listen!

Bernanke uncertain about recovery

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July 21st, 2010

 

Is futures trading for you? Listen to Carley Garner's latest interview : http://www.moneyshow.com/video/video.asp?wid=5842&t=3&scode=019106

 

 

The markets have been nice and choppy.  For most this means there has been more money lost than made. 

 

Fed Chair Ben Bernanke spooked the market by verbally expressing his concern over an uncertain outlook.  Investors immediately hit the sell button and with massive sell stop orders working below, the indices had little chance of avoiding the slide.  Also, rumors circulating the CME floor suggest that once of the catalysts to the move was a standing 600 lot stop order in the large S&P futures pit that, once elected, triggered an impressive down-draft.

 

Specifically, Bernanke stated that the U.S. economy faces "unusually uncertain" prospects but mentioned that the Fed hadn't used all of its resources and would be ready to take further steps to bolster growth if needed.  Overall the testimony was less than optimistic but it was also less than surprising.  There weren't any startlingly new revelations. 

 

From a technical standpoint, the market is highly mixed.  We have been noting 1066ish as the pivot in the S&P (ie. the make or break area) but it has also been acting as a magnet and this makes it tough to pick a direction.  In yesterday's newsletter we mentioned that we couldn't be bullish 30 handles from the day's lows and that playing the other side would be a better play, but we didn't expect the fall-out that occurred.  Going into tomorrow, we are uncertain of the intermediate -term direction but seasonal tendencies suggest that the markets could go lower before moving higher and the S&P failed at its down-trend line.  That said, the session closed near the lows and this usually paves the way for back and fill trade overnight.  In other words, if you want to be a bear...don't chase the market lower; selling on rallies might be the play but a "normal" bounce could see prices as high as 1075ish in the S&P.

 

Risk trade....OFF!

 

*All rights reserved.  Reproduction or distribution of this newsletter without prior consent is strictly prohibited.

 

July 21st, 2010

 

Is futures trading for you? Listen to Carley Garner's latest interview : http://www.moneyshow.com/video/video.asp?wid=5842&t=3&scode=019106

 Investors clamored to Treasuries as many of them are rethinking the "risk trade".  Money is clearly moving toward safe havens such as the U.S. dollar and the U.S. backed fixed income products...particularly short-term instruments.

 

Most of the day's buying came on the heels of testimony by Bernanke that suggests a largely uncertain economic outlook and low inflation (a bit short of deflation) and given the proposed budget cuts supply concerns have been put on the back burner.  Even if large auctions continued Bernanke reassured the markets that foreign demand for Treasuries remains strong. 

 

All in all, Bernake's statements weren't necessarily shocking nor were they new. Nonetheless, the day's events were overall bullish for bonds and notes.  Therefore we feel as though we could finally reach our upside target in the September bond futures of the mid 129's to 130ish and just over 124 in the 10-year note.  Like we said yesterday: "Nobody has a crystal ball, but the environment is ripe for a bull trap.  It seems somewhat likely that Treasuries could see some sort of spike high as buy stops are elected but we doubt that any large gains would be sustainable." 

 

If you have been patiently waiting to play this market from the downside, the mentioned areas should be a good place to start. 

VARIOUS TYPES OF TOP ACTION

Continued reading from Tape Reading & Market Tactics.

Click here to read Chapter 6.

Chapter 7

Various Types of Top Action

 

Tops More Difficult to Distinguish Than Bottoms

Top-signals of the market as a whole, or of the market averages, are not as readily discernible as bottom-signals. The reason for the difference in action is that, in making for a top, all stocks do not reach their pinnacles at the same time, because, broadly speaking, buying is always, in any market, more slowly actuated than selling; whereas, in making for a bottom, stocks gain momentum as prices decline, and the rank and file, becoming panicky, dump stocks without rhyme or reason, and thus bring on a climax.

 

We have many rounding-over tops of the general market, as differentiated from sharply defined bottoms. The best illustration of this is the broad two to three months’ top in the fall of 1929, as contrasted with the bottoms in the single days of October 29 and November 13, 1929.

 

In detecting the tops of moves, therefore, we must watch our individual stocks and not depend upon the general market for the signal to sell. However, when we notice that the market as a whole, as reflected in stock averages, slows up—becomes tired, and is apparently struggling to make higher peaks—we then are safe in assuming that the demand is not sufficient to push stocks farther without an intervening reaction. That is the time to analyze with particular concentration the action of individual stocks, because volume as a signal of the composite market is often deceiving, inasmuch as the top may consume several days and, therefore, each day will not be marked by conspicuous volume.

 

These tired-appearing markets must be carefully analyzed, as I have said, because in straightaway bull markets this action sometimes becomes nothing more than a rest-period (see page 92-93 and Plates 15 and 16), after which the advance is resumed. You will notice, however, from the following examples, that when tops are formed we do get the signal from volume—either at the top, followed by an immediate “turn-over” on greatly increased volume, or with a slowly “falling-over” top followed by the momentous volume a day or more later. Thus it may be broadly stated, that markedly increased volume following a run-up in price signifies distribution.

 

A Sharply Defined Top

In Plate 3 is shown the July, 1930, top in American and Foreign Power. It hardly needs explanation. The three-day spurt to the top was followed by a sudden turn-over on the 30th from a high of 77 to a closing price of 73, attended by heavy volume. You will notice in this illustration that the high figure of the top day exceeded that of the day previous by only $0.25 per share; yet the volume at this last drive was larger. (The curve in the chart, by the way, is formed by the high prices of each day.) The period covered is from July 14 to August 10, 1930.

 

This is a clear illustration of how a stock oftentimes rushes up accompanied by heavy volume and turns over on a big volume day.

 

A Broad Top

The action of General Electric (Plate 4) at this time in July was not so simple to interpret. There was no clear-cut indication of which was the top-day, as there was in American and Foreign Power.

 

From an analysis of a full day’s activity, you will see it was not until the 30th that we received a definite message that the supply exceeded the demand and that a top had been formed.

Update EUR/USD Forex pair: July 10, 2010.

The EUR/USD moved out of the pitchfork channel above the 50-day moving average and now coming close to the 100-day moving average. Indicators are oversold and we can expect a reaction soon. It is hard to say if the lowest point is already behind us. We will have to see if the next down move will move past the lowest low point. It is possible that we are making an up correction wave {B} and that a last correction wave {C} will come next. We only can wait and see to be sure. That last down move would bring the Euro to the level of the previous long term correction wave [4] of the long term up move as you can see in the monthly chart, where price finds support on the 200 months' moving average. Short term we have an extension in the {B} up wave to a level of about 1.30-1.35.

 

S&P500 Technical Analysis Update: July 10, 2010

What did I say last week? I expect with all indicators oversold and the hourly chart making an up move, an intermediate up correction now. And yes this is what we got in this 4-day trading week.

Tuesday was very volatile and ended with a doji with a higher closing price than Friday before. All indicators were turning up from low oversold levels. So, I decided to open a new manual long position the next day if the up trend would be confirmed. I opened a new long position in the first hour of trading at 1034. On Thursday there was also a confirmation from the SATS2 expert. So, also here I opened a new long position, now at 1070.2.

Price and all indicators are moving up. I expect a further up move, in first instance probably to the level of the 200-day average around 1110.

I am using a slightly faster SATS2 now on the daily chart. This will give some more entry and exit points, but the advantage is that it will also be faster at the main turning points. With SATS2 we will only trade long signals and we will not trade if it is obvious that we are looking at a "false" SATS2 signal.

Update EUR/USD Forex pair: July 3, 2010.

The EUR/USD moved out of the pitchfork channel above the 50-day moving average and now correcting up to the previous Fibonacci retracement level and the 100-day moving average around 1.30. It is hard to say if the lowest point is already behind us. We will have to see if the next down correction will move past the last low point. I think we are making an up correction wave (B) and that a last correction wave (C) will come next. We only can wait and see to be sure. That last down move would bring the Euro to the level of the previous long term correction wave [4] of the long term up move as you can see in the monthly chart. Price finds support on the 200 months' moving average. Short term we have an extension in the (B) up wave to a level of about 1.30-1.35. We expect this up correction to be in the order of 1000 pips.

 

S&P500 Technical Analysis Update: July 3, 2010.

As written last week, I was expecting a wave (C) down to a level below 1040. Last Tuesday the big down move found some support on the level of previous lows, but on Wednesday the index closed below the 1040 level.

I do not think we have already reached the low point for the wave (C). However, I expect an intermediate up correction now. All indicators are oversold and the hourly chart is making an up move.

With the open manual short position we made a nice profit in a very short time period. Since I expect a short term up correction I am taking that profit and I closed the position near the closing on Friday. We made a 6.7% profit.

The index finished the long term up move since the price bottom in March 2009 and is making the longer term correction wave. We could hope for a correction wave 2 of a higher degree, followed by a long term wave 3 up move. This looks like a very optimistic long term view, most probably to good to be true!

Another possibility with the wave {5} up completed is that the index finished a medium term correction wave {A} up and we expect next the medium term correction wave {B} down, with an index remaining above 650 but most probably higher, in the range 900-850.

But we should not exclude that we have finished a long term correction wave [B] up and that the index will make a long term down move for the wave [C] below the start of the [B] wave or below 650. Wait and see...

I am using a slightly faster SATS2 now on the daily chart. This will give some more entry and exit points, but the advantage is that it will also be faster at the main turning points. With SATS2 we will only trade long signals and we will not trade if it is obvious that we are looking at a "false" SATS2 signal.

Learning Video: Trading Fast Crossings Part_2

In this part 2 about fast reliable crossing averages, I will introduce the formulas for a technique called zero-lagging; to further reduce the lagging of the averages. I will make the specific required formulas available for MetaStock and for Metatrader.

Please note, this is not an invitation to trade using this technique, information given is to be used for training purposes only. Stocata.org will not accept liability for any loss or damage which may arise directly or indirectly from use of or reliance on this information.

Smoothing data with less lag or the so-called zero lag technique have been proposed in Stocks & Commodities magazine by Patrick Mulloy in the February 1994 issue and by John Ehlers in the March 2000 issue. It is a technique to compensate the lag in a moving average.

Sylvain Vervoort   http://stocata.org/

Update EUR/USD Forex pair: June 26, 2010.

A historical Fibonacci projection gives a price target at 682% for wave [C] down around $1.16. If our last pitchfork does the job, we can expect to reach this level by end of July 2010. This brings the Euro to the level of the previous long term correction wave [4] of the long term up move as you can see in the monthly chart. Price found support on the 200 months' moving average. We are waiting for the completion of waves {C} and long term wave [C] down. If this scenario is correct, then the EUR/USD has completed wave (A) and is now making a correction wave (B) up before we get the final wave(C) down. We are now getting resistance from the Bollinger bands median line and from the upper side of the pitchfork. Short term we may have an extension in this (B) up wave to a level of about 1.30-1.35. We expected an up move in the order of 500 to 1000 pips. We have about 600 pips now.

S&P500 Technical Analysis Update: June 26, 2010.

As expected last week, the Elliot (B) correction wave up turned down already on Monday against the 50 and the 100 days moving average, the upper side of the Bollinger band and the 50% retracement level.

With that move we completed the correction waves C and (B).

In the candle chart we also had a bearish engulfing pattern, confirmed on Tuesday with a big black candle down. Since we expect a price below 1040, we had enough room to open a manual short trade. We opened a trade at 1095.3.

On Thursday there was a selling signal from SATS2. We closed the SATS2 long position at 1073.7.

Unless we get another extension of the up correction, we have completed the (B) correction wave and are on the way of making the wave (C) down, that should bring the index below 1040. 

Learning Video: Trading Fast Crossings Part_1

In this part 1, I will introduce you to fast but reliable crossing averages.

We already mentioned this crossover system in video 12 about heikin ashi recalculated prices. Here we elaborate further on the subject and we will make the specific required formulas available for MetaStock and for Metatrader.

Please note, this is not an invitation to trade using this technique, information given is to be used for training purposes only. Stocata.org will not accept liability for any loss or damage which may arise directly or indirectly from use of or reliance on this information.

Sylvain Vervoort
http://stocata.org/

Update EUR/USD Forex pair: June 19, 2010.

A historical Fibonacci projection gives a price target at 682% for wave [C] down around $1.16. If our last pitchfork does the job, we can expect to reach this level by July 2010. This brings the Euro to the level of the previous long term correction wave [4] of the long term up move as you can see in the monthly chart. Price found support on the 200 months' moving average. We are waiting for the completion of waves {C} and long term wave [C] down. If this scenario is correct, then the EUR/USD has completed wave (A) and is now making a correction wave (B) up before we get the final wave(C) down. We will soon get resistance from the 20 days moving average and from the upper side of the pitchfork. Short term we still may have an extension in this (B) up wave. Last week we expected an up move in the order of 500 to 1000 pips. We are over 500 pips already, time for a reaction?

S&P500 Technical Analysis Update: June 19, 2010.

It looks like the index is making an Elliot (B) correction wave up. We are looking for the end of this correction wave. There is a lot of resistance between 1130 and 1150.

These are the Fibonacci retracement levels at 61.8% and 50% of the previous down move. Additionally at these levels, there are the resistance levels of the 200 and 100 days simple moving average and the upper side of the Bollinger bands.

There is still some room in the indicators for a further up move to complete this correction wave (B).

We have completed the first impulse wave (1) to (5) down. This concludes the first correction wave (A) down. We have a zigzag extension ABC wave to complete correction wave (B) up. After this up correction we expect correction wave (C) down.

The SATS2 expert turned green on Monday (it was already green since the middle of the week before in the hourly chart). I do not think we are in for a big move. Nevertheless we note the trade since it is based on SATS2, a mechanical system. So, we have a new long position. I did not open a new manual trade, because I should have done that earlier, but have forgotten to do so. Now I have the feeling it is a little bit late.

Quality bid fades in Treasury Futures

 

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June 14th, 2010

 

Join us for a FREE webinar hosted by PFG Best on July 29th at 3:30 pm Central to discuss "Futures Market Slang" : http://pfgbest.com/webinar/eventSummary.asp?skey=337713234

 

Investors took a small stride toward risky assets on Tuesday in the face of firm equities and despite signs of interest from foreign banks and hedge funds in holding Treasuries. 

 

Once again, we are left with little fundamental news to discuss but we are looking forward to the remainder of the week.  Once the data begins to trickle out, Treasuries might finally pick a direction.  Nonetheless, we did hear about the Empire Manufacturing index which came in at a slight miss.  Also, the net long-term TIC Flows described an inflow of $83 billion in U.S. securities.  It is far less than the previous inflow of $140 billion but given the higher dollar and lower yields, the numbers seem positive. 

 

Strength in the Euro has also played a part in the recent Treasury market reversal.  Not too long ago, and even at this weekend's Trader's Expo in Pasadena California, most vocal analysts/commentators/traders were bearish the Euro.  The term "parody" seemed to be used very casually and, accordingly, the bearish Euro trade became very crowded.  There were simply too many bears...if everyone already thinks that the market is going down, there is nobody left to sell and that is exactly what we are seeing in the Euro. 

 

There are likely several more shorts to squeeze and stops to run in the Euro.  Therefore, I expect that this move will continue to the 126 area.  If my currency analysis holds true, this should be a common factor in enabling bonds and notes to continue to slide in the near term. 

 

We are still looking for the September t-bond futures to see prices near 121 and the note to trade just under 119.