Where is the Dow & others heading in 2005?

[roguetrader]

Wow, very meaty responses, appreciated guys let me take time to digest and analyse and I'll respond

 

[RUDEBOY]

JMM1, nice post 4011. RB!

 

[roguetrader]

Joules, I am left rather speechless after that torrent of information and analysis, but nonetheless appreciative that you took the time to include so much detail, Very insightful..

There is essentially nothing in what you say that I can disagree with, the only cautionary note that springs to mind is that when viewing possible future events in the market one always has to take into account that what should happen is not always the way the market sees it, we need only look to the tech bubble for that. Of course you could also say that what should happen, sooner or later will happen, the same tech bubble also shows us that. The trick is to be appropriately positioned as the various acts of the pantomime unfold.

Saw your DJIA trade today, as I had gone for beers at that point, have been watching your SPX thread with some interest as I trade SPX quite a lot. Have not got a handle on your style yet, as clearly you take longer term trades, but I have noticed you also seem to take a lot of intra-day trades which is unusual for longer term traders I have known.

The SOX I use as a proxy for the Nasdaq, although in all honesty it's influence is less than what it used to be, but I have found it useful to key off on an intraday basis when other things I watch line up.

As for the inter-relationship between the Nasdaq and other indices, a lot of it is sentiment based as I see it. The Nasdaq represents the speculative market, and love it or loath it, speculation will drive markets far more quicly than anything else. When the speculative market rises it means people are willing to speculate, if enough people are willing to speculate then the more conservative are willing to buy the safer stocks, the funds that are charged with holding S&P500 stocks will fill up and so all goes up. That is why in my opinion the breakout back in March was always doomed, the Nas was miles behind, noone was willing to speculate. The funds are not going to fill up their accounts if the speculators are not prepared to step up to the plate. Human beings and their actions form the basis of the markets, human beings by and large require structure and clear leadership, without it there is indecision and confusion.

 

[RUDEBOY]

2002-03 ish, why was price so dynamic compared to '04-'05? Volume levels have gone up, but volume levels were no more erratic then as they are now. What is the reason for the difference in price action over these two periods?

 

[RUDEBOY]

As for markets influencing other markets...I'm not sure. They do influence each other, dont get me wrong, but most of the time its a simualtaneous action that cant be differentiated, at least not by us 'small boys'. For now, my outlook on the market is this, price and volume, volume as an indicator. I'm not pushing this one through, its just a thought?

 

[RUDEBOY]

Before i read your post 4023, good afternoon JMM1!

 

[RUDEBOY]

JMM1, you'll have to excuse my ignorance here? Investment cash is the big picture here( BIG BOYS), they are no fools? Mmm...O.K. are fund management resources open to the public, can funds be viewed by anybody?

 

[RUDEBOY]

JMM1, have a good one, and all the best! RB!

 

[roguetrader]

Kriesau, some fair points there, I do feel that up until October '04 there is a fair amoutn of correlation between those charts. The concept of the SOX leading the Nasdaq may be a little dated but I can assure you that the expression "As the SOX goes, so goes the Nasdaq" was a common one among traders a few years ago. Now clearly from around October last year the two charts do not correlate, though as the SOX has taken a beating the Nasdaq has not soared.
It is true the SOX is more volatile than the Nas or NDX, but I do not see that that precludes leadership. As to the SOX overshooting, that is simply a result of its volatility. The % observation I don't understand, the SOX was up 2.86%, the NDX was up 1.1% and the COMPX was up 0.66%. If you are citing that as divergence then I agree, there is a divergence here clearly, but as I said the correlation has suffered somewhat in recent months, but I think it is still familiar enough not to be ignored, people still ang on any news from the Semiconductor sector.
As I said in my reply to Joules,

inter-relationship between the Nasdaq and other indices, a lot of it is sentiment based as I see it. The Nasdaq represents the speculative market, and love it or loath it, speculation will drive markets far more quicly than anything else. When the speculative market rises it means people are willing to speculate, if enough people are willing to speculate then the more conservative are willing to buy the safer stocks, the funds that are charged with holding S&P500 stocks will fill up and so all goes up. That is why in my opinion the breakout back in March was always doomed, the Nas was miles behind, noone was willing to speculate. The funds are not going to fill up their accounts if the speculators are not prepared to step up to the plate. Human beings and their actions form the basis of the markets, human beings by and large require structure and clear leadership, without it there is indecision and confusion.

What the sudden strength in semis means in the long run, if anything, who knows, not for me to workout. As Clint Easwood would say "A man's gotta know his limitations.
As I see it now the indices are all lining up in relation to their 50 and 200 day sma's, barring any sudden moves they will all be just below a convergence of these averages in the next few days, then it will be time for the leader to step up and take it away, possibly in dramatic style.

 

[roguetrader]

Ah, London. I so miss some parts of the UK.

Passport is current and I'm due a holiday....mmmmmm

Grass greener?? Was in Australia backpacking back in 2001 I think, loved it, spent a few days in Melbourne.

 

[Pat494]

I have not got any data to back it up but I always have a look at the Dow future for possible direction. Also the size of the difference eg under 20 points difference equals not sure.

I was swinging a pickaxe 50ft underground looking for opals in Oz probably before you were born (nothing personal)

cheers

 

[counter_violent]

By the way, I am 44 and you look exceedingly well for your age ( much snickering.... :cheesy: )[/QUOTE]

I'll second that !!

 

[Pat494]

If only she were all mine !! dreams dreams
(if you look like Einstein you don't want to frighten everyone with a photo)
Not a bad guess - you were 4 yrs old then
aaah happy times

I saw a documentary on TV of Lightning Ridge a few years ago and could'nt recognize the place !! In my time it had 1 pub , 1 public tap, 1 public phone 1 shop and 50 yds of tarmac plus the miner's shacks.

Come to Cornwall Julian and start a trader's colony ??

 

[JillyB]

Afternoon Everyone,

I've been looking at the daily charts to see what the general direction might be in the week ahead. IMHO (and this is just IMHO - remember I haven't been trading for long so don't beat me up over this - be gentle with me), I can see the possibility of a bounce starting on Monday.

The DJI is currently around a level of support at 10140, with the candlestick on Friday indicating some indecision in the market. The bears did not have it all their own way and though they pushed downward for most of the day (after the early rally) they failed to close the session around its lowest point. A late rally took the index back up to a level of previous resistance/support and at a point where the index could resume it's upward trend. To add to this some after hours trading showing a continuation of the upward movment with another 10 points being added (CMC).

The level of the DJI is now is critical and from where I would expect a bounce on the long side to happen, as since the low of 10,000 on the 20th April it has resumed its upward trend making higher highs and higher lows. If it does not bounce upward from it's current level then it will break this trend and further, more definite, bearish activity will probably set in. The level of 10,140-150 also is a criticial level when looked at in conjunction with the previous lows of October 2004. (I have attached a file that should indicate this). The overall upward trend of the index could be broken if it starts to fall significantly below its current level and closes at lower levels.

With regard to the indicators, both the Stochastic and the RSI are around levels where a bounce has happened from before and this could indicate (and support) a level of resistance around 10,140-150.

I think the next week could be decisive in seeing where the DJI may be heading, not only in the short term but also long term. I also bear in mind the saying about the downward trend that happens in the summer. We saw this last year, but not the year before - so what does that tell you?

Also bear in mind that I'm long at 10,226 - so perhaps I'm just trying to convince myself that a bounce is going to happen I'm going to get out of this trade without losing too much!!

 

[Pat494]

JillyB

Hope you haven't put the housekeepings on your long bet. Even your indicators are pointing down ( nice lines though). Mine are too but the market has been oscillating recently and you may be lucky enough to recoup your stake plus a bit.
I am picking up my new all dancing software tomorrow, regretably a bit late for you. (probably a load of rubbish anyway!!)
good luck

 

[JillyB]

Hope you haven't put the housekeepings on your long bet. Even your indicators are pointing down ( nice lines though). Mine are too but the market has been oscillating recently and you may be lucky enough to recoup your stake plus a bit.
I am picking up my new all dancing software tomorrow, regretably a bit late for you. (probably a load of rubbish anyway!!)
good luck

No housekeeping on it - only £1 a point as I'm still learning. I agree the indicators are pointing downward, but the index has turned from this point before on the RSI and Stochastic to resume and upward trend.

At this stage I will just be happy to break even. I have a pending limit order placed at 10228, which will break even and be +2. I will be a very happy bunny if this is hit. :cheesy:

 

[kriesau]

Afternoon Everyone,

I've been looking at the daily charts to see what the general direction might be in the week ahead. IMHO (and this is just IMHO - remember I haven't been trading for long so don't beat me up over this - be gentle with me), I can see the possibility of a bounce starting on Monday.

The DJI is currently around a level of support at 10140, with the candlestick on Friday indicating some indecision in the market. The bears did not have it all their own way and though they pushed downward for most of the day (after the early rally) they failed to close the session around its lowest point. A late rally took the index back up to a level of previous resistance/support and at a point where the index could resume it's upward trend. To add to this some after hours trading showing a continuation of the upward movment with another 10 points being added (CMC).

The level of the DJI is now is critical and from where I would expect a bounce on the long side to happen, as since the low of 10,000 on the 20th April it has resumed its upward trend making higher highs and higher lows. If it does not bounce upward from it's current level then it will break this trend and further, more definite, bearish activity will probably set in. The level of 10,140-150 also is a criticial level when looked at in conjunction with the previous lows of October 2004. (I have attached a file that should indicate this). The overall upward trend of the index could be broken if it starts to fall significantly below its current level and closes at lower levels.

With regard to the indicators, both the Stochastic and the RSI are around levels where a bounce has happened from before and this could indicate (and support) a level of resistance around 10,140-150.

I think the next week could be decisive in seeing where the DJI may be heading, not only in the short term but also long term. I also bear in mind the saying about the downward trend that happens in the summer. We saw this last year, but not the year before - so what does that tell you?

Also bear in mind that I'm long at 10,226 - so perhaps I'm just trying to convince myself that a bounce is going to happen I'm going to get out of this trade without losing too much!!

Interesting analysis. I would agree with you that the Dow is now at a pivotal position where it could either break back up or down. Trying to interpret what is most likely to happen next depends upon what weighting you give to various technical indicators together with news that might impact sentiment. A further wild card is what is happening within the highly leveraged hedge funds since they are going to be the prime movers in the market.

Look at the following chart

http://finance.yahoo.com/q/ta?s=^DJI&t=2y&l=on&z=m&q=l&p=m200,m50,v,m20&a=r14,m26-12-9&c=

The index has now breached the 200, 50 and 20 day ma's. RSI is fairly neutral and the MACD is negative but with an upturn. However look at the volumes. Since late March these have been much higher on average than they have been since the cyclical bull rally from 9700 started in late October. This has developed since the market broke down below 10600 in March which is also where it breached the 50 day ma. On Friday, despite that late rally back up, the index closed below the 200, 50 and 20 day ma's for the first time since the begining of the Bull cycle in October on volumes that were more than 20% higher than those supporting the late October to March rally. Could this be hedge funds liquidating some of their more highly leveraged positions ?

The SPX is also now down below its 200 & 50 ma's. The COMPX and the tech indices are all below their 200 and 50 ma's althougth the latter have broke back above their 20 day ma's due a a rally over the last 3 days. We have a very strange market at the moment.

We could see a holding pattern of 100 pt volatility continue for a few more days before a signicant 250pt + break, up or down, occurs or it could break on Monday. It's a roulette wheel at the moment and nobody can be certain of the next major move other than it could be dramatic.

You are right when you point out that it has been establishing higher lows after each drop over the past 3 weeks and that is a bullish indicator but we still have a downtrend on the intraday highs which is a bearish indicator. So one tends to cancel the other out ! It would appear that the current support and resistance ranges are 10080 - 140 and 10200 - 50 at the moment and a convincing breach of either of these levels will probably determine the direction of the next major move.

No major news due tomorrow other than Treasury bond sales to foreigners, March net capital flows and some domestic manufacturing data all due before the bell. No Dow companies are reporting.

You're long, I'm short - one of us could well end the day with a smile and the other with a frown

 

[roguetrader]

Hi Jill, first up don't regard me as any sort of expert either, not only am I not an expert but the timeframe you operate in is not even my chosen one, so I will just bounce thoughts at you and maybe draw others more proficient in longer term analysis into it

The DJI is currently around a level of support at 10140

When people talk about support and resistance particularly "critical" or "key" I often wonder what they really mean, ie how much support they are really talking about, am I missing something. People often use it like a comfort blanket, if we are long it is nice to think we are at support, if we have fallen a bit. So I often ask people why they see this or that as support. Depending on how you draw your trendlines, I see a support line at about 122 and not much else, of course you are probably looking at a futures chart so there will be a little variation, so we would be in the same ball park there. Critical support to me incidently on a swing trading perspective would be 10,000

The bears did not have it all their own way and though they pushed downward for most of the day (after the early rally) they failed to close the session around its lowest point

Very true, word of caution possibly in reading too much into that as it was a Friday afternoon, markets often do odd things on Friday aft, but still something to bear in mind, probably more relevant if you were thinking of entering a position rather than managing one.

some after hours trading showing a continuation of the upward movment with another 10 points being added

Unless it's news related it can just be the usual "twilight zone" of the after hours sort of stuff. Lots of odd things happen out of hours.

The level of 10,140-150 also is a criticial level when looked at in conjunction with the previous lows of October 2004. (I have attached a file that should indicate this). The overall upward trend of the index could be broken if it starts to fall significantly below its current level and closes at lower levels.

Now that one I see where your coming from there, and fair point, and illustrates why I ask, as I hadn't registered that. Though bear inmind that is a weekly trendline at least and could be violated by quite a way on a daily basis and still be honoured.

With regard to the indicators, both the Stochastic and the RSI are around levels where a bounce has happened from before and this could indicate (and support) a level of resistance around 10,140-150.

Possibly reaching there a bit mate, If you look at RSI bounces can occur at all levels. Now I am not a great follower of indicators but my understanding of it is that as regards trying to time bounces with it only oversold and overbought are of much significance

Also bear in mind that I'm long at 10,226 - so perhaps I'm just trying to convince myself that a bounce is going to happen I'm going to get out of this trade without losing too much!!

The fact that you point that out youself stands you in good stead to try and look objectively.
Good to see you post your thoughts, hope your trade goes well.
Interestingly the Cash DOW appears to be trapped under its 50 week sma as the chart shows.

 

[JillyB]

Hi Jill, first up don't regard me as any sort of expert either, not only am I not an expert but the timeframe you operate in is not even my chosen one, so I will just bounce thoughts at you and maybe draw others more proficient in longer term analysis into it

.

I usually only trade on an intraday basis and don't hold any positions open overnight on the DJI. This is the first time I've done this and I don't like it - I much prefer closing before the day ends - I know where I stand then!

 

[roguetrader]

I usually only trade on an intraday basis and don't hold any positions open overnight on the DJI. This is the first time I've done this and I don't like it - I much prefer closing before the day ends - I know where I stand then!

LOL Jill, I can relate to that feeling, whilst I would not give up intraday trading, I do admire those with the ability to time the market on the longer term basis, a skill which has elluded me up to now, but I am seeting aside funds to explore it in the not too distant future.