Thursday reading

Thursday reading

Afraid to Trade:

Update on SP500 Intraday Triangle and Market Internals

Bespoke:

# of IPOs by Month

Volatility Check-Up

29 Stocks in the Nasdaq 100 Up More Than Gold

CXO:

How Much Can High-frequency Traders Really Make?

Dollar-Euro Exchange Rate and U.S. Stocks

The Big Picture:

War & Peace + Inflation + Secular Bull = Dow 38K ?

Global Public Debt Clock

Trading the Odds:

Permanent Open Market Operations (POMO)

Top40 - end of the day recap for week ending on September 26th

We haven’t seen much from our market last week. Out of four days we had only one decent day and that was Monday’s session with real direction. Tuesday, Wednesday and Thursday were not even worth the mention as all three days had small body with Tuesday having hardly 150 points daily range.

There is funny coincidence that out of last nine trading days only two were with some direction –both bullish and both were Mondays. Knowing that Friday was public holiday in South Africa and that US and European markets performed nice rally on Friday, there are good chances that we will have third Monday in a row with nice direction. Will the rest of the week be the same like the case of last two weeks, it is to be seen, but I hope that it is not going to be the case.

If we examine chart we can see horizontal resistance at 25800 and Top40 (J200) spent last week just bellow it. If J200 follows international markets then on Monday it should break that resistance with next possible stop around 26550 level, which is year to date high.

What we can also see on this chart is that 10 exponential moving average (green line) was acting as perfect support. From August 31st, when it was broken for first time, it was tested five times. So, if I was to short this market based on end of the day chart, I would consider waiting for 10 exponential moving average to get broken and it would be ideal for J200 to close below it. (Moving averages are, for me, the most important indicators and very often market stops exactly on them. I would highly recommend to traders with no experience to go and study moving averages, because one can trade with moving averages only and be very profitable.)

Indicators on top did not change much when compared to where they were last week. So, MACD is above signal line and above 0, RSI is still around 65 and it is not moving much, but that is expected when it deals with market with no much momentum. Stochastic is well above 80 and it is bouncing around 90 and it is not moving much, but, again, that is expected when we deal with nice trending move.

Last directional move on J200 from August 25th to September 23rd recorded 2111 points or just above 9%.

Trade with trend!

Weekend reading

Afraid to Trade:

The All Important Level to Watch on the US Dollar Index

SP500 Levels to Watch and Market Realities You Should Know

Bespoke:

No Longer A "Goldman" Market

International Revenue Exposure

Technology Rallies; Financials Falter

Charts Gone Wild:

Excellent post with some sharp old-school and new-school points!

Key Psychological Shifts Forming the Foundation for this Rally

CXO:

Turn-of-the-Month Effect Persistence and Robustness

Does the Turn-of-the-Month Effect Work for Sectors?

The Big Picture:

Job Change Post-Recessions

Property Taxes in America

US National Net Worth Plummeted 26%

Effect of Structural Deficits on USA National Debt

4 Recessions (and Recoveries)

USDZAR end of the day chart

During last few days Rand was appreciating against US dollar or, should we say, US dollar was losing value against all major currencies and commodities, so Rand was gaining against it too.

We should take a look at what end of the day chart is telling us:

Firstly, USDZAR is in clear downtrend from peak that was made in July 2008 (when risk appetite for emerging markets dried out). From almost 12.00 we came all the way down to 7.00, where it is trading now.

On downside (ZAR appreciation) we can look at 7.00 level that was breached yesterday for short period of time, but pair bounced back above. Below we have 6.80 that played massive role in the past. From 2005 all the way to 2007 – 6.80 was resistance, then support, then resistance again and then support again, and it looks this time around it will act as support again. If that level is broken we can see more downside for USDZAR with potential target in 5.70-5.90 region.

On the upside first resistance to watch is 7.20 that acted as support for more than a year (from August 2009 till few days ago). Above that we have downtrend line that currently seats around 7.35 and if that level is broken, than we again have horizontal resistance around 7.80-8.00.

For now I guess USDZAR will test 6.80, but from there on, I believe one should be very careful. Fast bounce towards 7.20 is most probable scenario after test.

Looks like RISK is ON for now and money is flowing into South Africa.

Trade with trend!

Trading course

Over the last few weeks I’ve received quite a few e-mails with questions regarding trading courses in South Africa - which one should attend and what course is the best one?

I’ve tried to answer everyone’s questions, but then I’ve realized that I can type post that is going to address that subject.

I would like to start by sharing my experience from years back, when I started with trading. At that stage there were no blogs, tweets and other modern ways of sharing information about trading - one could buy a book or attend a course. So, I started to read and buy books and as I was reading them I would go over some of them a few times. At the same time, my first course that I attended was SA Warrants and that’s when Simon and Manfred explained warrants and how they work and who makes the market. They also used all funny Greek letters. Some time later, my second course was about Technical Analysis and it was presented by the same guys. Also, some time later Larry Williams came to SA and I was attending his course as well, and I must say that I can not recall ever having spent money on as bad a thing in my life. Finally, at that stage trading blogosphere was emerging and I would read all that I found interesting.

After several years I’ve decided to go for another course, named “ALSI trading” presented by Dr. David Paul and followed the following year with another of his courses which was a two day course. Those two were good ones and really enjoyable.

So, let’s go back to the topic – Which course is the best in South Africa and which courses should one attend?

I guess my answer is going to steer a lot of unhappiness among course organisers, as my answer is: simply NONE!

Reasoning behind this opinion:

Course that you choose to attend is, probably, going to be overpriced. You will have to pay approximately R10.000 for some lousy lunch, where somebody with very little or no experience in trading will teach you two or three shady setups that you will most probably forget before you get home or maybe even earlier. They will, for sure, try to sell you the next course that will teach you all that you need to know to become ultra rich before you are 25 years old and/or they will probably try to sell you software that have all indicators which are optimised for making exactly a million a month.

So, how should one learn about trading?

There is lots of free and quality info available on various blogs related to trading – go and read them! Find ones that you enjoy the most, read them every day or week, read comments published on them, read all that you like and all that you don’t like. Then practice, practice some more and practice every day and every weekend and print daily your charts of instruments you trade, with marked entries and exits and when market is closed dedicate some time and energy to review them. I do that on early mornings of every Saturday and I would suggest you to take approach of printing your charts as you make trades, write your comments regarding entry, target, thinking behind trade, etc. Then, again when market is closed, review and find out if you have done correct thing. And do this over and over again as trading is about practice, like anything else in life. Simply, it is not about perfect indicator or set-up. The more you trade, the more experience you will gather and it is going to become easier for you to see proper set-ups. But, to reach that level you will need to analyze thousands and thousands of charts.

Finally, with all the blogs, books and trading forums - One has no need to go to trading courses, as one can teach oneself all that is needed for trading.

However, if you want to attend a course here in SA, I recommend only courses held by Dr. David Paul.

Trade with trend!

Disclaimer: I am not compensated in any manner by Dr. David Paul and this positive review was not solicited in any way and Dr. Paul was, actually, not aware of this public and positive feedback from me.

Tuesday reading

Afraid to Trade:

Unusual Recent Moves with Stocks Oil and VIX

Bespoke:

Dow 30 Trading Range Screen

Charts Gone Wild:

Intermediate-term Index Support/Resistance

CXO:

DJIA-Gold Ratio as a Stock Market Indicator

David Fry:

Bulls Giddy Up

Derek Hernquist:

Imagine Crossing the Behavior Gap

Scott Bleier:

Think all the major indices have broken out? Think again…From CreateCoin Premium…

Quantifiable Edges:

When the SPX and VIX Both Rise on a Friday

SMB:

Traders Ask- What is My One Good Budget?

Pullbacks: an example in RIMM, post-earnings 9/17/10

The Big Picture:

Who Gets What If Tax Cuts Are Extended

Its Official: Recession Ended June 2009

Trading The Odds:

September Seasonalities and OE’s Price Pattern

SPY 2 up before FOMC session

Top40 - end of the day recap for week ending on September 19th

Last few weeks didn’t bring us a lot on the end of the day front. For almost a year now Top40 (J200) is stuck in sideways channel. In October 2009 Top40 broke 22900 and in that stage such break looked like important one. However, J200 rallied quickly to 25500 in early January 2010 and following January market tried four times to break 22900 and four times to break 25500, with one failed break in April this year.

Currently we are trying for the fourth time. Market spent last few days around or just below 25500, with Friday morning which looked like breakout, but market faded away during the day.

There are massive resistance levels around 25500-26000:

First is 61.8% Fibonacci level for the drop from May to November 2008. Many technical guys consider 61.8% level as last resort for bulls or bears and break of that will be final confirmation that trend has changed.

Second resistance is down-sloping trend line that started on all time high in May 2008. It was tested three times already and it still holds tight. So, break of trend line will be another nail in the coffin for the bears.

Third resistance is horizontal line around 26000 that connects last three tops, including the one that was just a bit higher, but to prevent TA purists even Elder says that you should place lines through congestion, not through exact peaks.

J200 is above all moving averages and they paint bullish picture as well. Indicators are in the upper half, with Stochastic being above 80 for few days already. RSI still have space on top to run, but as RSI is momentum indicator it will move when market moves. Last four days J200 hardly moved on end of the day basis, so RSI is stuck around 60. MACD is pointing up and it is above signal line.

Finally, I am here not to predict what market is going to do, my goal is to follow it. If we check previous events and if market repeats what it has done already few times, I would recommend going short here with tight stop loss (break of 26000). There are not too many reasons to be too bullish here, as there were not too many reasons to be too bearish around 29900. And as law of inertia states: ”A body (market) moving on a level surface will continue in the same direction at a constant speed unless disturbed.” So, as far as I’m concerned market will stay in sideways channel between 22900-26000 levels for now. Break will happen, but nobody can tell you when and whether it will be up or down.

For people that are not used to shorting market, I would use famous words from Jesse Livermore: “After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.”

So, stop thinking, sit, relax and wait for the break. There will be enough points to be made after the breakout, so direction of the break should not be guessed, but waited to be seen.

Trade with trend!