Mirror Image

Aug 29, 2007: 8:09 PM CST

Is any daytrader feeling sea sick from the ‘ebb and bob’ of yesterday and today? Did today feel like a repeat of yesterday, but only in reverse? If so, you’re not alone.

We do live in interesting times, that’s for sure. Price in all major US Indexes closed just shy of where it opened yesterday, creating a near mirror image on the daily charts of the indexes. The intraday action, however, was not so ‘mirror image’.

Let’s take a broader view:

Nasdaq Index:

S&P 500:

Overview:

The technical downtrend still remains confirmed; price did not achieve any milestone today on the daily charts.

Price remains in the pattern of lower highs and lower lows, and remains below a trendline that is twice tested on the S&P and Nasdaq, and thrice tested on the Dow Jones.

All indexes are below their falling 50 period MA, yet above their falling 20 period MA, indicating a strange technical price zone.

All indexes are (officially) above their 200 period MA, which is the “big” dividing line some major funds use as the determinant for ‘trend.’

The S&P is behaving quite properly in terms of Fibonacci retracements. Price met resistance at the 38% retracement with today’s action. Price recently tested the 50% retracement.

We cannot get bullish on the indexes until price breaks above the trendline, above the 50 period moving averages, and ideally makes a higher swing high.

Until then, the odds favor more downside movement as the ‘wind’ of the market blows southward.

 

2 Comments

2 Responses to “Mirror Image”

  1. Glyn Says:

    Thx Corey. You use the simple as opposed to exponential mov avgs – ??? I’m sure there’s a great reason for this. From my learner perspective the days did cancel each other out illustrating more I felt the nervousness of the markets – massive over reaction in both directions on Fed news that frankly wasn’t news – rather than anything fundamental.

  2. Corey Rosenbloom Says:

    Glyn,

    On TradeStation, I use the 20 EMA, 50 EMA, and 200 Simple.
    On StockCharts, the 20 is used from the Bollinger Band (dotted line) and is – by default – simple. I prefer the EMA.

    I have tweaked my custom setting in StockCharts I use to show posts on the blog and have eliminated the middle 20 SMA from the Bollinger, and will now be showing the 20 EMA, 50 EMA, and continuing with the 200 SMA. I’m with you in that I prefer recent data to be weighted heavier – more traders seem to react to the shorter-term EMAs.

    The reason was ‘limitations from StockCharts’ that I was just now able to correct by modifying the BB settings in a new way.

    You’re right. I read an article from Dr. Steenbarger on his site that essentially boiled the motion down to traders establishing large positions in “herds” or all at once. Linda Raschke calls it “Dogpile in, Dogpile out.” It’s indicative of uncertainty, yes, but it’s essentially the big boys chasing each others’ tails I believe.

    Friday’s Fed announcement, and positioning ahead of the holiday weekend, should – could – provide a clearer signal… but until then, it should be fun.