AMGN Bounce Level

AMGN is very close to key support and if the market holds up next week it may bounce.

The 54.70 level corresponds to a gap fill and a 61.8% Fibonacci retrace. I'd consider taking this trade on a hit of this level with a confirmation stop just below it. If this level breaks, there will be secondary support at the pivot low of 53.16. This trade is somewhat higher risk due to the precipitous fall it has seen recently, but could bounce as it's very oversold.

If the level holds, look to take profits at the 200 moving average and use a trailing/breakeven stop thereafter.

AMGN may bounce if market holds

Please be advised that if the market looks to fall early next week, I will not take this trade. Always be aware of overall market conditions when taking any trade and never fight the market.

In Sickness and in Wealth

If you’ve been following this blog, you know I like to post my market updates shortly after each day’s close--and you might also have noticed that Friday conspicuously had no such update.  When you work for yourself, there is no point in making excuses--lying to the boss is lying to yourself.  But there is also no point in not analyzing yourself--to be able to trade well is to know yourself--or taking learning opportunities wherever they present themselves. My own crashing yesterday after a long week is one such opportunity.

To succeed in this business you need to know your limits, and you need to take care of your health, both physically, mentally and emotionally. On top of my regular trading, I have added the task of creating this blog that I hope will be worthwhile to readers. That coupled with some personal issues and too many nights of fast food, and I ended the week with a whimper, not a bang. I need to learn that there is a limit to how far I can push myself.

I am doing what I need to recover this weekend.  But the main thing I, and any trader, can do, is to remember that our minds are our machines, our bodies are our workforce, and if we don’t treat them well, we can’t expect to stay in this business for long.

Friday/Saturday Market Summary

Trading on Friday ended with a small push up into the close. This wasn't entirely unexpected as Friday's tend to see less trader participation later in the day and that typically favours the upside.

Readers of this blog know that I've been calling for downside since last week, even in the face of the big rally we saw that brought us nearly to daily all-time highs on the SPY. That prediction ended up being a good one as last's weeks trading has been almost exclusively to the downside. As of now, the market remains weak and in my opinion will continue to be so as long as debt issues in the United States and the European Union persist.

With that being said, it may come as a surprise to some that I'm slightly in favour of some short term upside in the market. My reasoning here is partly based on technicals and partly on market psychology.

On the technical side, the SPX is into some support at a back-test of the blue trendline. This is the same trendline that I expected to be resistance on the way up in late June. Clearly, this was not the case as we surged through it during the Independence Day/Canada Day holiday period. This level also coincides with a 50% Fibonacci retrace and the 20 daily moving average. In addition, the overall chart pattern on the SPX is a bullish wedge/flag/pullback pattern.

SPX has support within a bullish wedge pattern. Does it bounce?

On the psychology side, the average trader out there is incredibly bearish at the moment. This isn't a surprise considering the scary macro-economic issues facing the world right now. But as a contrarian trader and marketician, this tells me that the market could be due for a short term bounce as the big financial players look to shake out those who've positioned themselves too heavily on the short side.

In any case, it's important for readers to understand that I'm neither strongly bullish nor bearish at this point. I'm simply suggesting that the market may be due for a short term bounce before continuing back to the downside. However, if there are any negative developments in either the US or EU debt problems over the weekend, it's quite possible that we break through support levels and continue to correct downwards.

I'll be monitoring the news and futures over the weekend. Follow me on Twitter (@thetsxpert) and check this blog regularly for my latest thoughts and analysis.

Thursday Market Summary

Today's trading was very much reminiscent of yesterday's. The SPY opened just about flat then rallied and ultimately fell to make new lows on the day.

The take-away from this is that the market remains in an extremely weak position and will continue be this way until the US and EU debt crises get some kind of (temporary) resolution. Until that time, or until we're in a stronger technical position, it appears that every rally will be sold into.

From a daily chart perspective, today we came very close to my 20MA average target, which today is at approximately 131.63. I may regret not covering my short position there as sometimes a near hit is as good as an actual one, but I think this market remains weak so I'm not worried going forward into the next few days. Also, please note the bear flag that is potentially playing out based on the last 5 days of trading followed by today's down-move.

SPY daily bear flag breaking down?

Intraday, the SPY opened at 132.17--a huge recovery from the dump on the futures last night, which at one point was down over 10 points. From there, the SPY traded as high as 132.78 before falling all the way down to 130.68. After hitting these lows, the SPY got a big bounce back up as high as 131.70 and then all the way back down to 130.75 before chopping sideways for the rest of the day. The SPY closed the day at 130.93, down 0.69%.

Massive range on SPY 10 min chart

Something else of interest I'd like to point out here is the massive intraday ranges we're starting to see, while never closing that far away from the open. This ends up making what's known as doji candles on the daily chart and can make swing trading a position over several days somewhat frustrating. On the other hand, it makes for a fantastic day trading environment.

Tomorrow will be very telling as we'll have a better idea if this breakdown will persist or if the market will rally off of daily support levels into Friday and next week. Be sure to check back here and follow me on Twitter for my latest analysis. I expect to have some actionable levels and trade setups very soon.

Wednesday Market Summary

If you read my market summary from yesterday, I outlined a few scenarios we could expect going into today. Of those scenarios, I thought a big rally was the least likely and this is exactly what we got--initially. As I watched my screen this morning, I was a bit surprised to put it mildly.

The culprit for the rally was Ben Bernanke who today announced that IF certain economic trends persist (namely, slow growth) then further economic stimulus MIGHT be necessary. He also indicated that the Federal Reserve would be willing to step in and provide said stimulus, though he gave no firm commitment.

Be sure to read the write-up on this I posted to the blog earlier today.

In any case, I'll continue to trade the technicals and right now we're still in a middle range on the major indices. I'm still holding a couple of small short positions from last week which I'll continue to hold until we reach my target (20MA on SPY daily) or I get stopped out. But until we have a clear direction on this market, I'm very hesitant to initiate any new long or short plays. So far, the SPY has bounced off of daily support levels after the down-move of late last week and early this week. Technically, this is just a bear flag so I'll continue to maintain a downside bias.

Two slight bounces after big down days on SPY

Intraday, the SPY was all over the map. It opened the day at 132.09, up considerably from yesterday's close of 131.40. From there, the announcement from Bernanke sent it all the way up to 133.22, after which it had a steep fall back down to 131.52 before getting a small bounce into the close. The SPY ended the day closing at 131.84. This was very much a repeat performance of yesterday, just with more volatility.

Fading the QE3 announcement

Stay tuned to this blog and to my twitter feed as I keep you updated on this market. I know it's been quiet here in terms of giving out trade setups, but I have a feeling things should start to heat up once we hit key levels. I'll continue to let the charts be my guide and fill you all in as it happens.

Market Surges on QE3 Suggestion

Today Fed Chairman Ben Bernanke indicated that fiscal stimulus programs would be available in the future as needed, ala QE3. The SPY spiked sharply on this news as the US dollar dropped.

The Bernanke Effect

This should come as no surprise and is clearly the cause of yesterday's short-lived spike on the SPY at around 2pm ET. From my perspective, there is no way Ben Bernanke would ever say something the markets could interpret negatively. Fiscal stimulus comes in the form of soothing words just as often as it's monetary, and it's an area where the Fed has unlimited ammunition.

Prolonging the Fed's quantitative easing program means a weakened US dollar, and that will inflate the markets--just what we're seeing on the SPY intraday. It's unclear if this rally will hold, but a continually devalued US dollar will continue to push the markets up.

Despite all this seemingly bullish news, it's important to remember that Europe is still in trouble and those issues will not go away overnight. Any developments on this front (downgrades, defaults, etc...) will hit the Euro hard and therefore the markets.

In the event of a falling Euro and a rising US dollar, Ben Bernanke and his team at the Fed will have almost insurmountable task ahead of them in supporting this market. But until then, it's up up and away (for equities and commodities)!

Lesson: Why I Never Trade Fundamentals

Today’s 10 minute SPY chart is a great illustration of why I trade technicals, not news. When the FOMC minutes this afternoon merely hinted at QE3, lots of fundamentals based (or, at least, fundamentally influenced) traders jumped on and went long. I watched this spike from the sidelines as there was no clear technical reason to buy there.

While hopefully some were lucky enough to get out for a quick scalp, many surely did not—and were burned when the news of Ireland's downgrade by Moody's brought the markets all the way back down to make new lows on the day. And to add insult to injury, the talk of QE3 turned out to be just a rumour anyways.

Whip, meet saw.

This shows one of the fundamental problems with fundamentals. News is by its very nature unpredictable and what I strive for as a technical trader is predictability. Fundamentals and news trades are ultimately traps for amateur investors to hand over their money to the big hedge funds and banks. And without a crystal ball, at what price do you buy and sell?

That’s why I let the charts be my crystal ball.  Though obviously not perfect, with higher probability trades and good money management on your side, your odds of being successful go way up. Just be careful during earnings, options expiration, and other events that cause major moves.  And if you keep your account flexible, you should be able to weather any unexpected fundamental news that comes your way.