Weekly Market Charts – May 2

May 3, 2007: 7:47 AM CST

The market notched another record closing high for the Dow today. Such headlines inspire more yawns than cheers now. Are investors becoming complacent?

Here is a look at the swing chart of the major indexes:

Dow Jones

dow-weekly.jpg

  • New Price Highs confirmed by New Momentum Highs. This suggests higher prices are yet to come.
  • Uptrend is solid with regular and (arguably) shallow pullbacks. Odds favor continuation.

Nasdaq

nasdaq-weekly-may2.jpg

  • The Nasdaq is showing a different momentum pattern than the Dow.
  • New price highs are NOT being confirmed by New Momentum Highs. This is not comforting.
  • Market successfully ‘tested’ the rising 50 period MA
  • Red “trend” oscillator recently bounced off zero and turned up – a bullish signal
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Link: TraderFeed – Trading and the Adrenaline Rush

May 2, 2007: 9:26 PM CST

Dr. Steenbarger recently posted a comment from Dr. Bruce Hong regarding the “Fight or Flight” adrenaline response that we all feel at some point during trading.

I have experienced this many times and likely will do so in the future, and so will almost all traders, especially when situations do not go as expected.

Here are a few quotes that may be eye-opening:

“[The sudden adrenaline rush] is a response that is AUTOMATIC and not under conscious control” (example, if we are physically under attack by a ferocious animal).

Remember, it’s automatic. Now, every one is aware of the obvious physiologic responses that WE CAN FEEL. You report that this is uncomfortable – it’s not. It’s just biology.”

All our thought processes are directed to threat and elimination/avoidance of that threat. So instead of thinking things through carefully, we make abrupt, impulsive decisions.”

So, you can force yourself to wait 5 minutes, do jumping jacks to ‘burn off the adrenalin’, and, most importantly, use visualization BEFORE you enter the trade…. In that way, you don’t perceive a threat, but a contingent event – so you don’t develop a threat response.”

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May 1st Market Commentary

May 1, 2007: 9:07 PM CST

The Dow Jones made yet another all-time closing high today, while the Nasdaq failed to confirm.  Although both indexes ended higher, the day’s action was choppy at best.

dow-may-1.png

  • Notice the creeping and solid uptrend
  • Notice New Momentum Highs confirming New Price Highs, heralding higher prices are likely to come
  • Notice the solid uptrend on the red 3/10 MACD oscillator
  • It would appear we are ready for a sell-signal, yet oscillators fail in strong recent trend action

Chart of the Nasdaq:

nasdaq-may-1.png

  • In the most recent swing high, the 3/10 oscillator failed to make a new high – it’s just a warning
  • Price recently ‘tagged’ the rising 20 period moving average – a buy signal
  • Most recent support is confirmed at the rising 20 period moving average
  • The Nasdaq had a strong sell-day yesterday, rinsing out some of the excess and clearing for possible new highs
  • The trend still creeps higher, warning shorts to stay out

As a bonus, here is a recent chart of market leader Apple (AAPL):

aapl-may-1.png

  • We had a euphoric price move that gapped up higher with New Momentum and Price Highs
  •  Odds favor greater continuation to the upside after a fresh retracement
  • Support ‘held’ at the rising 50 period moving average recently
  • We appear ready to experience a corrective downswing for a possible trend entry signal
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Cotton down 50% – anatomy of a downtrend

Apr 30, 2007: 10:06 AM CST

Cotton futures recently declined more than 50% from their 2004 swing high at $110, and have declined 67% from their 1998 price swing high of $150. If you study and analyze this chart, you can experience the anatomy of a downtrend with clean price swings and consolidation patterns (I have indicated a triangle pattern in the most recent chart).

cotton.jpg

Here is the weekly price of cotton futures since 1998.

cotton-98.jpg

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Sugar’s Wild Ride

Apr 29, 2007: 2:17 AM CST

I don’t frequently review commodity futures charts, but in doing so, I couldn’t resist posting this weekly chart of Sugar.  The price doubled and then fell back to the previous price.  Talk about a wild ride!

We are seeing momentum buy divergences, meaning selling is likely drying up from a momentum standpoint.  Also, we are testing previous lows.

sugar.jpg

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