NewsFlashr Editor Picks for Labor Day 2009

Sep 7, 2009: 1:23 PM CST

It’s time for a holiday weekend edition of the NewsFlashr Business Blog Editor’s Picks for Labor Day 2009!

(First Labor Day “parade” – New York, 1882 – source “Wikipedia Labor Day“)

1.  Dr. Steenbarger of Trader Feed published a string of posts on System/Discretionary Trading that give traders something to study:

Developing a Trading System to Support Discretionary Traders

An Intraday Look at the Transition Trading System

Automated Trading Systems and Discretionary Trading

Further Conceptual Foundation for Transitional Swing Trading System

2.  Andrew Horowitz of the Disciplined Investor released a Podcast with Harld Evensky as they discuss “Is Modern Portfolio Theory Dead?” Also, they examine current market conditions as always and discuss the “September Almanac”

3.  From a Dash of Insight, a thought-provoking post on “A Fresh Thought About September” that brings up old S.A.T test question logic, and a lengthier post “Sell in September – a Time for Reality.”

4.  From the Stock Chartist, an interesting – conflicting – chart/pattern interpretation (with targets) as to whether the S&P 500 is currently forming a very bullish Inverse Head and Shoulders Pattern or a Bearish Rising Wedge pattern.

5.  From Jeflin’s Investment, a lengthy, informative post exploring the notion that “Lessons on Financial Crisis [have been] Forgotten in Heady Speculation

6.  An interesting post from Top Foreign Stocks on stocks that benefited from the recent Stimulus Plan – showing the “Top Ten Components (stocks)”

7.  A quick post from the Zen Trader on “Surviving the Market” which draws its inspiration from the Survivor’s Handbook.

8.  From the Tischendorf Letter, a post on Strategies to Improve Your Trading in Gold Stocks which is a simple but effective post that discusses hedging, trend following, and relative strength.

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A Quick Look at SPY Elliott Fractals on Friday

Sep 5, 2009: 1:16 PM CST

Not only was Friday’s trading day active and interesting, but price gave us a neat example of the “fractal” concept of the Elliott Wave principle.  Let’s take a look to see a good educational example of the concept played out on the ultra-short 1-minute timeframe:

(Click for full-size image)

Granted, this fractal move was part of a larger fractal starting from yesterday’s trading and probably finishing into the future, but from an educational standpoint, take a close look at how each impulse wave (likely of a larger 3rd wave) subdivides into its own impulse wave as taught by RN Elliott.

Refer to the full post “Wave Labeling and Fractals” for more information, along with the “Best Trades to Take” and of course “Basic Principles and Rules” in our new free education section of Afraid to Trade.

The main lesson is to recognize the powerful “third of third” or the ‘heart’ of the move which occurred just after 11:00am CST on this chart.  You don’t have to get the labels correct, but understand the concept – based on the momentum principle – that such a large impulse is likely to lead to higher prices yet to come after future pullbacks/retracements.

It’s my perspective that you dont’ have to be an Elliott purist, but just understand the concepts of momentum and divergences – and pullbacks to support for trade set-ups.

I couldn’t pass up showing this example though – it always fascinates me how the Wave principle which was described originally around the 1920s/1930s holds up still on a 1-min ETF chart intraday in late 2009.

For those deeply interested in the Wave Principle, visit Elliott Wave International (Robert Prechter’s site) for free and premium content and information.

Corey Rosenbloom, CMT Continue Reading…


A Look at Daily Google GOOG Trend and Support Levels

Sep 4, 2009: 12:32 PM CST

A reader asked me to take a look at Google, so let’s chart Google’s (GOOG) daily course through 2009 and note key levels of support to watch going forward.

2009 began with a choppy, $100 range before breaking out to fresh highs in late April.  Price has maintained an enviable and solid uptrend since the March lows, with few interruptions along the way.

In a solid uptrend, we need to concentrate our focus on the 20 and 50 EMA, noting their orientation (direction and space between) as well as note when price ‘pulls back’ or retests the rising 20 day EMA (green).  This often sets up buying opportunities (trades) particularly when a reversal candle (such as a doji or bullish engulfing) forms at the average.

The stop would go just below the 20 EMA or – even better – just below the 50 EMA.

For now, we observe a negative volume and momentum divergence as we have journeyed to new highs for 2009 (which serves as a non-confirmation), but have supported once again on the rising 20 EMA on the recent retracement.

For support, let’s watch the $450 level as initial expected support, and then the $435/$440 level (rising 50 EMA) as intermediate potential support (both from the daily chart).

Expected weekly support comes in at the $400 / $425 level (50 and 20 week EMA respectively).  There’s also prior price support at the $400 level from the July spike lows.

Any break beneath these support levels would trigger a ’scalp’ to test lower support, and a break of $400 would likely forecast lower prices to come and a reversal in trend to the downside.

What’s good for Google is usually good for the broader stock market so keep watching this and other leading stocks closely.

Corey Rosenbloom, CMT
Afraid to

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How to Look at Morning Volume with TVOL

Sep 4, 2009: 9:44 AM CST

I wanted to highlight a particular ‘indicator’ in TradeStation and other trading platforms that allows you to compare relative volume off the opening session with prior opening sessions of the same length.

In TradeStation, the symbol is $TVOL – and here is what the current morning’s graph shows for the first hour’s volume in comparison with prior days:

(Click for full-size image – too small to read here)

The main idea is to compare the first bar of the morning – for whatever timeframe you are viewing – with prior bars of the same timeframe on prior morning opens.

I’m showing a 60-min (hourly) bar reading here as the first sixty minutes have elapsed this morning, and I want to know if we’re running at higher or lower volume than in the recent past.

As it turns out, we are much lower than we ’should’ be on the first hour’s activity.  In fact, if we draw a horizontal line, there are only two days on the chart that have lower ‘total’ volume in the first hour.

You can compare the first 30 minutes, 15 minutes, or 5 minutes to get an idea on the activity in the broad market.

One other insight is that you can see closing day volume for each day – for example, volume activity spiked to a new high on the chart for September 1st and has trailed off each day, and likely will end lower today.

Of course, we have a 3-day market weekend, and holiday volume is always suspect (lower), so that’s likely the reason we’re seeing volume trail off ahead of the nice weekend.

This type of chart is particularly helpful on gap openings.  If price forms a large gap on higher relative volume, odds are much lower that the gap will fill when compared to a smaller gap on lower relative volume.

Hopefully this is just one more tool you can add to your trading arsenal!

Corey Rosenbloom, CMT
Afraid to

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A Weekly and Daily Look at Fresh Highs in Silver

Sep 3, 2009: 10:30 PM CST

With all the attention on Gold’s recent breakout, I haven’t seen as much attention focused on the index breakout to fresh 2009 highs in silver!  Let’s take a quick look at something interesting in Silver’s (index) weekly chart, as well as the daily structure.

Silver Weekly:

As we’ll see on the daily chart, the Silver Index here broke to a marginal new 2009 high.  However, we see a significant potential overhead resistance zone coming in from prior price support in 2008 as well as the 61.8% Fibonacci price retracement level at $16.42 of the 2008 highs to the 2008 lows.

Silver is also slightly above the upper Bollinger Band on the weekly frame.  I’d prefer price to close above these levels before becoming ultra-bullish on silver here.

It’s possible we’re in the midst of forming a “Three Push” pattern, complete with triple-swing negative momentum divergence, which would be locked in place should price make any sort of down move from this level.

Let’s drop quickly to the daily frame for a closer view of 2009 so far.

We see price formed a “Measured Move” or “Bull Flag” from the February highs to the April lows – the green arrow highlights the price break and buy signal trigger long.

Silver’s daily triangle price pattern has not been as pronounced as gold’s, but price certainly broke the upper trendline this week in a very impulsive move that took price to a new high by 5 cents in the index.

The momentum oscillator is reading the same level as it did on the prior test of the $16.20 level.

If bears are going to make a stand, it’s here at the weekly resistance areas, and without that, there will be little that remains (chart-wise) to contain a bullish breakout in both silver and gold (note gold has overhead resistance at the $1,000 index level).

Let’s keep our perspectives wide to see what happens from here!

Corey Rosenbloom, CMT
Afraid to

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