Traders' Library Blog

Trading Week Outlook: Apr. 30 - May 4

Apr. 28, 2012 (Allthingsforex.com) – With the Fed reminding the markets that the option of more bond buying is still “very much on the table”, in the week ahead traders will continue to gauge QE3 odds, while keeping an eye on the euro and the next move by the European Central Bank, as a sequence of important economic data from the Euro-zone and the U.S. culminates with the ECB interest rate announcement and the U.S. Non-Farm Payrolls report. 

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe. 

1.    EUR- Euro-zone Flash HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, Mon., Apr. 30, 5:00 am, ET. 

With inflationary pressures forecast to subside to 2.5% y/y from 2.6% y/y, policy makers at the European Central Bank should feel comfortable enough to focus on stimulating growth and to consider additional easing.

2.    USD- U.S. Personal Income and Outlays, a measure of consumer income and spending, released along with the PCE Price Index- the Fed’s preferred gauge of inflation, Mon., Apr. 30, 8:30 am, ET.

Consumer spending is forecast to increase for another month, but at a slower pace by 0.4% m/m in March from 0.8% m/m in February, while the Fed’s preferred core PCE Index inches higher by 0.2% m/m in March compared with 0.1% m/m in the previous month.   

3.    AUD- Reserve Bank of Australia Interest Rate Announcement, Tues., May 1, 12:30 am, ET.

Stocata S&P500 Technical Analysis: April 28, 2012.

The NEW chart template (April 7 2012) and trading rules are mentioned HERE. Last week I wrote: "Closing some 7 points higher, but below the 8 day exponential and 50 day simple average, basically confirming the downtrend. In the hourly chart we first bounced against the 100 and 200 average and now again against the 100 average and the R1 monthly pivot. I do expect a continuation of the move down in search of the correction wave 2".

Tuesday brought us back up to the resistance of the PP pivot point, the 50% retracement of the last move down and previous support now becoming resistance. With the index now closing below the 8 day exponential average and the 50 day average and the hourly chart bouncing against the 100 hour average, I am still expecting the continuation of the wave 2 down (more on my new 123 wave count system HERE). We complied with the STS8 rules for opening a short position two weeks ago and we still are complying now (more info about my STS8 Swing Trading System HERE).

The total closed profit trading the index is 76.5% from the start in March 2009.We have a valid 123-wave 3.4. We have to consider that it is not impossible that we are starting the long term wave down. My SVEPRExp expert system turned green, we have an open short position. Since not all conditions to close this short trade were met last week, the short position is still open.

Now available! My Band Break System DVD "Band Indicators".

Comments on weekly and Monthly chart.

Stocata FOREX Update EUR/USD: April 28, 2012.

Last week I wrote: "The down move was limited to the low on Monday finishing already the wave 3 down. The rest of the week the Euro moved up for a correction wave 2 (much more than the move up in the S&P500). Now finding resistance at the 50 day average, the upper side of the down moving pitchfork (moving in line with the 200 average) and the monthly pivot PP. Looking at resistance and the hourly chart I believe we will start the new week with a move down".

The Euro went down to the level of the low side of the up moving pitchfork on the weekly chart, but closes above the high side of the down moving pitchfork on the daily chart. We are close to a previous resistance and the down moving 200 day average. The hourly chart complies with the 8 STS8 rules for selling. The Euro may still reach the 200 day average, but I do expect lower Euro prices next week.

We have to consider the possibility that the top in May 2011 was a long term top and that we started the long term wave down since then. If that is the case there will only be limited up correction moves during the long term down move. My SVEPRExp expert is green. In view of all resistance I keep the open short position for now.

Trading Week Outlook: Apr. 23 - Apr. 27

Apr. 21, 2012 (Allthingsforex.com) – The busy week ahead could prove pivotal for the future direction of the stock market and the U.S. dollar as all eyes turn to the FOMC meeting and the U.S. Q1 2012 GDP estimate in search for clarity on the Fed’s monetary policy and on the state of the world’s largest economy.  

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe. 

1.    EUR- Euro-zone Manufacturing and Services PMI- Purchasing Managers Indexes, two leading indicators of economic conditions measuring activity in the manufacturing and services sectors, Mon., Apr. 23, 4:00 am, ET. 

Despite of the anticipated improvement, both indexes are forecast to stay below 50, in contraction territory for another month, with a manufacturing index reading of 48.2 from 47.7 and a services index reading of 49.4 from 49.2.

2.    AUD- CPI- Consumer Price Index, the main measure of inflation preferred by the Reserve Bank of Australia, Mon., Apr. 23, 9:30 pm, ET.

Inflationary pressures in Australia are forecast to rise by 0.8% q/q in the first quarter of 2012, compared with the flat 0% reading in Q4 2011. Elevated inflation could keep the Australian dollar supported on reduced odds of another rate cut by the Reserve Bank of Australia.    

Stocata S&P500 Technical Analysis: April 21, 2012.

Last week I wrote: "Hope you kept that eye on your long positions. As expected, we had a first move down to 1357, living up Wednesday and Thursday to the monthly pivot point, previous support and a 50% retracement level, but back down again on Friday closing at 1370 back below the 50 day average. I expect a further down move to first targets 1340-1320".

Closing some 7 points higher, but below the 8 day exponential and 50 day simple average, basically confirming the downtrend. In the hourly chart we first bounced against the 100 and 200 average and now again against the 100 average and the R1 monthly pivot. I do expect a continuation of the move down in search of the correction wave 2. 

The total closed profit trading the index is 76.5% from the start in March 2009. We have a valid 123-wave 3.4. More on this wave count method soon! We have to consider that it is not impossible that we are starting the long term wave down.

My SVEPRExp expert system turned green, we have an open short position. Since not all conditions to close this short trade are met, I keep the short position open.

Stocata FOREX Update EUR/USD: April 21, 2012.

Last week I wrote: "We got the correction back to the 50 day average and the upper side of the down moving pitchfork, but Friday brought us back in the down move ending the week with a lower close. I do expect a continuation of the move down to form the wave 3 down".

The down move was limited to the low on Monday finishing already the wave 3 down. The rest of the week the Euro moved up for a correction wave 2 (much more than the move up in the S&P500). Now finding resistance at the 50 day average, the upper side of the down moving pitchfork (moving in line with the 200 average) and the monthly pivot PP. Looking at resistance and the hourly chart I believe we will start the new week with a move down.

We have to consider the possibility that the top in May 2011 was a long term top and that we started the long term wave down since then. If that is the case there will only be limited up correction moves during the long term down move. My SVEPRExp expert turned green on Friday. In view of all resistance I keep the open short position for now. I will publish more information about this expert system soon.

Free Candlestick Webinar Next Week

High Profit Trades found with Candlestick Breakout Patterns

Who: Steve Bigalow
What: FREE Exclusive Webinar
When: Thursday, April 26, 2012 at 4:30 PM EST
Where: Click Here to Register

As an active trader for over 27 years, Stephen Bigalow has learned to trust the consistency of technical analysis with Candlestick Signals. In this live webinar, he will share with you the best Candlestick Signals to identify breakout patterns with the highest potential for big profits. You'll clearly 'see' when it's time to get into a trade on a dramatic price move outside of its normal trading range.

Everyone wishes they got into that fast moving stock that jumped up $25 in a month.

Candlestick Signals not only identify these potential movers -- they help you identify if there is still time to participate in the move!

In this live webinar Steve will show you:

• Which signals produce the Breakout Patterns
• How to perform a quick visual analysis for entry and exit points
• The tell-tale signals that investor sentiment may soon change
• How to stop buying at the top and selling at the bottom

Join Stephen Bigalow as he shares the ease and effectiveness of using Candlestick Signals. Both experienced, and novice investors, will appreciate how easy these are to add to current strategies, allowing for more profitable trades!

Register now!

DOM Bearish Gartley Pattern

A Bearish Gartley Pattern recently completed on Dominos Pizza & IRL Plc (DOM on LSE.) The trade setup was identified in the March 26, 2012 issue of The Geometric Trader - Global Equities Report. The report stated that the setup was complete and to sell on a stop one tick below the low of the high bar.

The next day the order was filled and then DOM quickly moved to hit our first two profit targets.

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out The Geometric Trader - Global Equities Report at www.geometrictrading.com

 

 

Data Driven Trading...

Steve Palmquist.

Author of ‘The Timely Trades Letter’.    

‘How to Take Money from the Markets’,  

and   Money-Making Candlestick Patterns.

 

Many traders use indicators to determine when to enter and exit trades. Most charting software includes dozens of different indicators that can be displayed on the charts. Popular indicators such as the Stochastic, and MACD, are frequently discussed when traders get together. I have listened to a number of these discussions, the interesting thing is that people typically explain why they use a particular indicator by citing an number of examples of when it has worked for them. When they do, another trader will typically say something like, ‘well it did not work for me, so I use the XYZ indicator which is much more reliable’. When I ask the second trader why his XYZ indicator is more reliable, the explanation usually involves a few more examples of good trades.  

 

Examples do not prove anything. It is possible to flip a coin and have it come up heads five times in a row. Few traders would observe this and then think that when you flip a coin it always comes up heads. Yet for some reason people will read an article about an indicator that shows four or five examples of good trades it produced, and then they will go and risk their money trading the technique. They typically trade the new technique until it produces several losses in a row, and then they start looking for another article, that describes a ‘better’ technique, and the process repeats itself in an endless search for a better trading system.

 

Trading should be data driven, not based on emotion, wishful thinking, or hot tips from TV hosts. To be data driven one needs to test and analyze trading tools and find out what really works, and when each tool should be used. Traders must understand which tool to use for a specific task, and have a clear understanding of how the tool works, and what can and cannot be done with it. Traders need to extensively test several trading systems, and based on the results of that testing they develop a toolbox of different trading techniques that have shown effective results. They are not trading based on hunches they are using data driven techniques to defelop effective trading tools and understand the specific market environments in which they work. Data driven traders first check the current market conditions, and then pull out the tools that have shown interesting test results in those market environments. The testing process helps traders understand how stocks usually behave after forming a specific pattern. Understanding what a stock is most likely to do forms the beginning of a trading strategy. Trading without this information is taking unknown risks. 

 

 

 

Stocata S&P500 Technical Analysis: April 14, 2012.

Last week I wrote: "The index made a last(?) move up on Monday but closed the week lower on Thursday as expected (market was closed on Friday). The S&P500 future went 20 points down on Friday. This will probably make a lower start next week. Looking at my new template trading rules STS8, all rules for closing a trade are complied with. Keep a close eye on your long positions! I do expect a lower index next week".

Hope you kept that eye on your long positions. As expected, we had a first move down to 1357, living up Wednesday and Thursday to the monthly pivot point, previous support and a 50% retracement level, but back down again on Friday closing at 1370 back below the 50 day average. I expect a further down move to first targets 1340-1320.

I opened a short position at 1371. The total closed profit trading the index is 76.5% from the start in March 2009. We have a valid 123-wave 3.4. More on this wave count method soon! We have to consider that it is not impossible that we are starting the long term wave down.

Stocata FOREX Update EUR/USD: April 14, 2012.

Last week I wrote: "With 248 pips down I hope you did take my warning last week serious. We are now reaching the median line of a downward pitchfork. All indicators are moving down. There may be some small correction, but I do expect a further move down below 1.30".

We got the correction back to the 50 day average and the upper side of the down moving pitchfork, but Friday brought us back in the down move ending the week with a lower close. I do expect a continuation of the move down to form the wave 3 down.

We have to consider the possibility that the top in May 2011 was a long term top and that we started the long term wave down since then. If that is the case there will only be limited up correction moves during the long term down move. With my SVEAtrExp expert black we have a short position. I will publish more information about this expert system soon.

Trading Event Schedule Released

Come join us in Denver this May with some the best trading minds in the business.  With 4-hour, in-depth presentations, you will be sure to walk home with new strategies and all your questions answered!

Check out our just released schedule!

SATURDAY, MAY 19, 2012

TIME	SPEAKER	SESSION
7:00 am		Registration & Complimentary Breakfast
8:00 am – 12:00 pm	PRICE HEADLEY	Ease Into Options: Essential Strategies for Any Market
12:15 pm – 12:45 pm		Lunch Break
1:00 pm – 5:00 pm	CHUCK HUGHES	Trading Weekly Options

 

SUNDAY, MAY 20, 2012

TIME	SPEAKER	SESSION
7:00 am		Complimentary Breakfast
8:00 am – 12:00 pm	ROSS JARDINE	Weekly Options
12:15 pm – 12:45 pm		Lunch Break
1:00 pm – 5:00 pm	JEA YU	Market Stalking: Optimized Methods for Profiting in Volatile Markets

 

To learn more about this event or read the session descriptions click here!

Trading Week Outlook: Apr. 9 - Apr. 13

Apr. 8, 2012 (Allthingsforex.com) – The “soft landing” in China, the Japanese central bank’s decision on future monetary policy, and economic conditions on both sides of the Atlantic will be on the agenda in the week ahead, as traders return to their desks after the Easter holiday with renewed concerns about the EU debt crisis and mull over last Friday’s weak Non-Farm Payrolls report.    

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe. 

1.    CNY- China CPI- Consumer Price Index, the main measure of inflation, Sun., Apr. 8, 9:30 pm, ET.

Inflationary pressures in China are forecast to increase by 3.4% y/y in March from 3.2% y/y in the previous month. If inflation continues to rise, the Chinese central bank may be prompted to tighten monetary policy, which could lead to further slowdown in the second largest economy in the world.   

2.    JPY- Bank of Japan Interest Rate Announcement, Mon., Apr. 9, around 11:00 pm, ET.

The recent efforts of the Bank of Japan to weaken its currency have been successful and it would not be surprising to see policy makers considering additional quantitative easing as a tool to curb the yen strength, to create inflationary pressures and to stimulate the economy. It is not very likely that the benchmark rate will be changed from the current target band between 0% and 0.10%, but we might even hear some officials calling for a 2% inflation target, which could trigger another leg lower for the yen.

Stocata S&P500 Technical Analysis: April 7, 2012.

The NEW chart template (April 7, 2012) and trading rules are mentioned HERE.

Last week I wrote: "We now have a short term negative divergence between the index with higher tops and the indicators with lower tops. Unfortunately there are no definite signs for a reversal yet. I can only make a best guess for next week and that is a start of the correction down".

The index made a last(?) move up on Monday but closed the week lower on Thursday as expected (market was closed on Friday). The S&P500 future went 20 points down on Friday. This will probably make a lower start next week. Looking at my new template trading rules STS8, all rules for closing a trade are complied with. Keep a close eye on your long positions! I do expect a lower index next week.

The total closed profit trading the index is 76.5% from the start in March 2009. We have a valid 123-wave 3.4. We have to consider that it is not impossible that we are starting the long term wave down. My SVEAtrExp expert system is green, I did not take a new long position, because I believed the turning point was too close by.

Stocata FOREX Update EUR/USD: April 7, 2012.

PLEASE NOTE I have changed the chart template and trading rules (April 7 2012) . More information HERE.

Last week I wrote: "There is not much change compared to last week. The only thing we can see is a hidden divergence between the price (lower top) and the Stochastic RSI (higher top). This is a warning for a lower Euro than the last bottom (below 1.3). With the weekly chart showing this hidden divergence in two indicators, we probably have to take it serious and be prepared for a move down".

With 248 pips down I hope you did take my warning last week serious. We are now reaching the median line of a downward pitchfork. All indicators are moving down. There may be some small correction, but I do expect a further move down below 1.30.

We have to consider the possibility that the top in May 2011 was a long term top and that we started the long term wave down since then. If that is the case there will only be limited up correction moves during the long term down move.

My SVEAtrExp expert came from green to red and black this week suggesting the closing of the long position (red) and opening of a short position (black). I will publish more information about this expert system soon.

Trading Volatility

The markets set many records for volatility in 2011. The extremes in volatility surprised even the most seasoned market veterans. Interest in trading volatility itself has grown, and as you might expect, many new products have been created and marketed to meet this demand. This has resulted in a large number of choices for the trader who wants to trade volatility itself.

Options on the VIX have been available for several years and have been growing in popularity, and we also have the VIX futures contracts. Some of the newer products include the volatility ETFs (exchange traded funds) and ETNs (exchange trade notes) that may be directly or inversely proportional to changes in volatility. But many of these products have more complex relationships, designed to magnify or leverage volatility moves; TVIX is an example of one of these leveraged volatility products. Personally, I am wary of all leveraged ETFs, whether based on volatility, commodities or market indexes. They very often do not live up to their projected leverage. Like TVIX, the internal mechanics to create the leverage are complex and can be somewhat unpredictable. 

VXX is an ETF built out of VIX futures. It consists of a mixture of the first and second months out, so there is a continual rolling of the futures contracts forward. Traders use this fund to speculate on future values of VIX. If the overall market is trending upward, each futures contract will tend to trade at a higher price as we go out in time. In a bear market, the opposite occurs, and prices decline as we move out in time.

So the trader who wishes to trade volatility has a multitude of choices; but understanding and sorting out these products can be challenging. In my opinion, if you want to trade volatility, the simplest and most secure way is to trade the VIX options (buy calls or puts, or use spreads). If you want to learn more about these volatility products, I recommend the recent book by Russell Rhoads, Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes.

Test your knowledge with Candlestick expert Steve Nison

In Steve Nison's brand-new online course, Introduction to Profiting from Candlesticks for Options, he  has carefully selected "Chart Challenges" that walk you through applying his strategies to options trades. 

Watch a full length challenge and test your knowledge now!

   

Trading Week Outlook: Apr. 2 - Apr. 6

Apr. 1, 2012 (Allthingsforex.com) – The first trading week of Q2 2012 will kick-start the new quarter with a sequence of three monetary policy meetings by major central banks and a crucial U.S. Non-Farm Payrolls and Employment Situation report that will help traders to determine QE3 odds following the recent dovish remarks by the Fed Chairman.   

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe. 

1.    JPY- Japan Tankan Index, a Bank of Japan quarterly survey of large and small businesses considered as the main indicator of economic conditions in Japan, Sun., Apr. 1, 7:50 pm, ET. 

Repatriation flows at the end of the Japanese fiscal year and higher than expected core consumer prices have helped the yen recover some of its losses in recent months. A positive Tankan survey could lend additional strength to the yen with a manufacturing index reading of 0 in Q1 2012 from -4 in Q4 2011, while the non-manufacturing index also improves with a reading of 5 in Q1 2012 from 4 in Q4 2011.   

2.    USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Apr. 2, 10:00 am, ET.

The U.S. manufacturing and services indexes have managed to stay in expansion territory above 50 since December 2009 and this trend is forecast to continue as the U.S. manufacturing sector registers another month of growth with a reading of 53.3 in March compared with 52.4 in the previous month.    

3.    AUD- Reserve Bank of Australia Interest Rate Announcement, Tues., Apr. 3, 12:30 am, ET.

Despite of the mining boom, there have been signs of weakness in the economy and the labor market “down under”, which if persistent, should raise the odds of additional rate cuts. However, the Australian central bank would be likely to keep the benchmark rate unchanged at 4.25% for the time being. Pressures on the Australian dollar could mount if the central bank signals an impending rate cut in the upcoming months.