May 4, 2009: 9:22 AM CST
Apple Inc (AAPL) has been a relative strength leader off the March 6th market bottom. Let’s take a look at its currently daily structure to see where it’s come from and where it might be heading.
First, observe the powerful $45 price move up (47% increase) off the March lows – actually Apple showed relative strength here, as the S&P 500 made a lower low in March 09 while Apple held above its January low. Stocks showing relative strength often outperform the market when the market is in a rally phase. Continue Reading…
May 3, 2009: 10:00 PM CST
I wanted to share an inspiring post by Mike Bellafiore of the SMB Training Blog (and co-founder of SMB Capital) entitled “10x equals x“. In the article, Mike discusses a disturbing trend in newer traders (in terms of assumptions) and shares his thoughts on the solution.
He introduces the post with a challenging statement:
“These new traders believe that if their work output is X then their reward must be X. If only that were the case. When you begin as a trader, your work output must be 10x to make x. Let’s discuss.”
Further, “Potential absent sustained effort is not rewarded by the market.” Continue Reading…
May 3, 2009: 5:26 PM CST
Let’s take a look at India’s Nifty-50 Index, which is bumping up against the falling 20 week EMA which could serve as a temporary upper-limit after the astounding 40% (1,000 point) price run-up off the March lows.
Price has rallied 1,000 points into resistance at the falling (yet flattening) 50 week exponential moving average, and a doji has formed on last week’s price action which adds to the potential price pause or beginning of a retracement down that could be expected to form off this level.
I’ve also drawn the large-scale Fibonacci price retracements, and should price manage to break above the 3,500 resistance level, then the next area of confluence resistance comes in at the 3,800 level which reflects the 38.2% Fibonacci retracement along with the 200 week simple moving average. Continue Reading…
May 2, 2009: 10:36 PM CST
Which specific sectors fared the best and worst for the month of April? Let’s take a look both at Absolute Sector returns and Relative Sector returns for the month of April 2009.
First, Absolute Returns for the 9 major sectors (and the S&P 500):
The S&P gained just over 8% for April – a relatively high return for a single month. The best performing sector – a market leader – was the Financials (up 17.5%) followed closely by the Consumer Discretionary (retail) which was up almost 16% for the month. If there is to be a bull market, it will begin with strength in these two sectors as we’re seeing now.
Part of Sector Rotation Analysis is to show us which sectors are outperforming the broader market and what that says about fund managers’ optimism and positioning going forward – for now, we must take this as an overwhelmingly bullish sign. Continue Reading…
May 2, 2009: 11:33 AM CST
Conglomerate General Electric (GE) has shown fascinating confluence via Elliott Wave and Fibonacci (as well as “Measured Move”) analysis. Let’s see what I mean and start the count from 2000 to present on the monthly chart.
First, let’s see the simple AB=CD “Measured Move” (aka large bear flag) that has just hit its target:
I’m using TradeStation’s Fibonacci Extension Tool (see my educational post “How to Project a Flag’s Measured Move“) to arrive at a final target. I start with the 2000 high, draw to the 2003 closing log and then draw up to the 2007 closing high. TradeStation (or your charting program) then “projects” key Fibonacci retracements as in the 38.2%, 61.8%, and – most importantly for projecting a ‘measured move,’ the 100% (or equality). You’re most interested in this number (roughly $5.77).
Notice how price hit this level virtually to the penny and began its current reversal to the upside, having achieved its Price Projection Target. These levels often become support as shorts cover and investors buy-in to establish a low-risk position. Continue Reading…