Bulls on Fire – Midweek Chart Views

Jul 12, 2007: 7:32 PM CST

We’ve all read the headlines today – the Dow gained 280 points, a feat which hasn’t happened in four years.  The bulls mauled the bears today, and the buying pressure far outweighed the selling pressure.

All major indexes, with the exception of the Russell 2000 (Small cap) broke to new highs, the S&P 500 and Dow 30 made new all-time highs, and the Nasdaq made new six-year highs. All sectors advanced, as did all industries.  Today was an absolute rout for those who believe the market should be headed lower.

Words can’t describe the situation as well as a chart, and so without further delay:

The Intra-day Action of the DIA:

dia-intraday-j12.png

The Dow Jones itself:

dow-july-12.png

The Nasdaq (gap and run):

nas-july-12.png

The Russell (today’s “laggard”):

rus-july-12.png

The Dow had the ‘longest’ white candle, but only because the index does not record gaps like the Nasdaq and others do.  Today’s rally was driven by short-covering as well… panic covering, if I might add.

The Sector action was impressive, as well.  Materials experienced the largest gain, followed by Energy and Financials.

sectors-july-12.jpg

The large rally took many traders by surprise, myself included.  It’s extremely hard to capture a trend day, and you have to be either a very sophisticated trader to do so, or just very lucky.  As a trader, it’s so tempting to try to go countertrend, or to doubt market strength and attempt to fade it.

You can pick up subtle clues from the TICK and the TRIN, but it takes experiencing a few of these days to understand what to look for ‘in the air’ to see whether odds favor growing strength or waning strength as the day progresses.

I hope you did well today as a day-trader, or if you are a swing trader, I hope today put many of your positions in the green significantly.  Days like this have the potential to make or break an entire month for traders.  For outsiders, this business looks easy but for those of us who trade and analyze every day, we know that we ‘nickel and dime’ our way to profits and hold out for these types of days to make up for everything else.

Always know that days like this do happen, they can happen, and you can profit nicely from them.  Also realize that capturing such a day will take immense skills and study (and actual market experience/exposure).

It is also important to note that these days do not often repeat themselves exactly the next day.  In other words, you can’t watch the TV news and hear about such a day and then walk up the next day and extract magic profits.  Often, these days appear unexpectedly from low-volatility (or low attention) conditions.  In other words, what makes price continue is the fact that so many traders are thrown off balance and are scrambling either to enter or exit significant positions.

Anyway, take the time to study today’s action from as many angles as possible, document them, and use it as a reference.

5 Comments

5 Responses to “Bulls on Fire – Midweek Chart Views”

  1. reno Says:

    I had a nice day today in my swing trading. Only my single put was stopped out and my other longs did very nicely today.

  2. ArizonaChartist Says:

    I dunno, Corey. The points put up today by the indexes were sure impressive. But the internals were not what I would expect given the point gains. NYSE was 2.6 to 1 advancers to decliner and 7 to 1 up volume versus down volume with similar ratios on the Nasdaq. In addition, total volume on the NYSE was well below 2 billion shares.

    If you would have told me this morning that the Dow, Nasdaq and S&P would be up 280 points, 50 points and 29 points, respectively, to all time highs today I would have expected more like 4:1 advancers vs decliners on each exchange and 10:1 up vs down volume plus more than 2 billion shares traded.

    Bullish percentage charts remain in O’s for both the NYSE and OTC markets so I think supply still deserves the benefit of the doubt, today’s point gains notwithstanding.

  3. steph Says:

    the russell 2000, although not a huge gain from its previous high DID break its all time high, if only by .09 of a point. noteably the russell 1000 large cap index also broke a record.

  4. Corey Says:

    ArizonaChartist,

    Indeed internals were not as impressive as they could be, and that calls into question part of the action, yet the price activity – from an intraday standpoint – was quite impressive for the buyers. I might have gotten a bit excited by using the terms ‘rout’ and ‘overwhelming,’ but on the surface, this appears to be the story. Deeper behind the scenes, indeed that is not the case. Today’s action, so far, has been a bit lackluster which is often expected after a large standard deviation move.

    I would have been in absolute doubt had someone told me what was about to happen yesterday before the market opened, but seeing is believing. It’s days like this which get us excited about trading!

  5. Corey Says:

    Steph,

    The 855 level has been troublesome for the Russell 2000, as it has yet to close definitively above that level. There was an intraday spike above that level on June 4th, yet it failed to close at this level. That was the intraday all-time high. The Russell failed to reach that indraday level yesterday and is setting up (and possibly confirming) a rangebound zone. I would have liked for it to have soared to all time highs significantly above the recent consolidation zone. I was teasing when I called the Russell a “daily laggard” but from a technical pattern in relation to the other indexes, that’s what happened to it. I would like to see the small cap stocks a bit higher in price than they are right now, but we can’t get everything we want.
    Thank you for the comment!