Today, the market resembled 2008

Wed. September 30, 2009; Posted: 08:53 PM

Hi everyone, “Mel” here,

Today, the market resembled 2008. The indices were all over the map, yet never traded outside of the opening hour’s range. Days like this are made for traders; today was fun! For both pivot traders and trend traders, today was that unusual day that it all seems to work.

The market opened with some mild upward pressure from the futures. The GDP number released before the open was better than anticipated. Even during this upward movement, the behind the scenes market indicators were not powerfully strong. Then, shortly after the open, the Chicago Purchasing Managers Index (PMI) blew the market away. At 9:41 the SPX was above 1062. The DOW was at 9753. Within seven minutes, the SPX fell to 1051 and the DOW dove to 9654. That’s a 100 point DOW move in seven minutes and the low of the day was put in just seven minutes later at 9609, making it a 145 point dive in 14 minutes.

The indices then began a three hour climb back into positive territory, leveling off a little after 1pm and holding steady until about 2:45 when the antics began once again. In 30 minutes from 2:45 through 3:15, the DOW dropped 100 points at which point it began to battle back, but giving back much of what it regained right at the close.

I’ve got to show the 1 minute chart of the SPX just because this is an excellent example of a dream day for an intraday trader:

Our system 2 signaled Long at 11:30am. One person in the chat room commented to me that the signal was a bit late. It did seem that way at the time… even though most of the move upward remained ahead of us. Of course, we could not know that at the time. Or could we? Let’s take a few moments and look at the charts from the proprietary software that I use for determining the intraday action:

If you look at the topmost chart above, you can see where the blue line is designated as the Long signal at 11:30. If you then look at the lower chart, you can see where the black line diverges from the red line (which is one signal I watch for.) At 11:30, the black line is going at a steep angle upward – a strong signal. Even through the brief SPX pullback leading towards noon, the black line on the second chart never wavered. The black line was powerful until about 1:15pm, at which time it curled back downward and gave an exit signal, and then continued by signaling a Short entry for aggressive traders.

At 3:30pm, in the chat room, with the DOW down more than 70 points, I mentioned that conditions were ripe for a bounce. The Dow bounced up more than 50 points before closing more 40 points above the 3:30 point. The clue I had about a possible bounce comes from the uppermost chart; observe the blue line from 3:15 to 3:30. It is an upward line, well above negative territory. An upward blue line, especially while in positive territory, will usually precede a bounce.

Now you’ve had a peek at the tools I use during my trading day. Nothing works every time; but any edge you can get can make the difference between success and failure.

From last night’s report: “For Wednesday, I’ve generate a +2 indicator, another null signal. I don’t expect a significant move tomorrow, but I lean towards a gap down, probably a gap fill, then a small red close. Volatility is expected with each economic report tomorrow.” We certainly got most of what was expected; let’s hope for many more similar trading days.

For Thursday, I’ve generated a +4 indicator. That’s a very weak bullish indicator. My hunch is that we gap down, then fill the gap and close mildly green. More economic reports and more volatility expected. The first of the month and the first of any quarter are typically bullish sessions.

But watch the 1064-1065 area; this is major resistance and could prove too difficult to hurdle. A move above 1065 that sustains is bullish; any move below 1041 is bearish. Those are the major pivots to keep an eye on.

Thursday: The weekly jobless claims report from the Labor Department is due shortly before the start of trade. Claims are expected to have risen to 535,000 from 530,000 in the previous week. Continuing claims, a measure of Americans who have been out of work for a week or more, are expected to have risen to 6.178 million from 6.138 million last week. Personal income is expected to have risen 0.1% in August after holding steady in July. Personal spending is expected to have risen 1.1% after rising 0.2% in July. This report is due shortly before the start of trading.

The Institute for Supply Management's manufacturing index for September is due out 30 minutes after the start of trading. The ISM index is expected to have risen to 54.0 from 52.9 in August. The August pending home sales index is also due around 30 minutes after the start of trading. Sales are expected to have risen 1% after rising 3.2% in July. Construction spending is expected to have fallen 0.2% in August after dipping by the same amount in July. The Commerce Department report is also due out 30 minutes after the start of trading.

Additionally, September auto and track sales will be released throughout the day. Federal Reserve Chairman Ben Bernanke will testify at the House Financial Services hearing, starting around 9 a.m. ET.

Mel’s Random Hits:

· Total tick for today was 20,700. Until 11:30, negative breadth everywhere; it was powerfully negative. Then breadth moved positive until about 3pm. Blood flowed in the Street again the last hour of the session. Net tick on the day somehow managed to be positive.

· Today’s range was 16.93 points, below the daily average for the year (19.7), but plenty of range for a hungry trader.

· Today’s volume was 101% of the average daily volume.

· Today’s high was at 9:32am; the low of the day was 25 minutes later. The rest of the day was traded between those points.

· When the SPX closes down on the final 2 days of the month, 80% of the time SPX closes higher within 3 days.

· The chart bar for this week remains inside of last week’s range. A break below last week’s low would be bearish confirmation, as a break above last week’s range would be bullish.

· 56% of the SPX closed with a two day RSI below 50. Most are in the midrange.

· 50% of stocks closed in the top half of today’s range. (50% closed in bottom half.) 50-50 in spite of the red indices.

· 10% of stocks closed in the bottom 20% of today’s range.

· 3% of stocks closed in the bottom 10% of today’s range.

· Yet another day passes without a 2% up day.

Good trading!

"Mel"

Today we closed out of: Proshares Ultrashort S&P500 (SDS) +1.36% Proshares Ultrashort QQQ (QID) +2.39% Proshares Ultrashort QQQ (QID) -0.64%

For more of Gary Dean, sign up for a Free 15-Day Trial to his MarketsPath.com Trade Journal and receive intraday trade alerts on ProShares Ultra Index ETFs.

marketspath.com

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index