InTheMoneyStocks Market Analysis

Trade lesson: Catch the intra-day gap fade

TRADE LESSON: Watch for stocks that have had a multi-day rally. It is important that they are very extended from the 60 minute 20 moving average. Look for a strong gap higher to start the day into a past resistance level or a whole round number. Then enter a short position with a tight stop. Once the trade is in the money you should cover half and move the stop into the money or break even and look to cover the rest at the next support level. This trade occurs every trading day.

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Real bull or next asset bubble?

Often most bull markets are due to a decline in the fed funds rate; the interest rate that the Federal Reserve Bank charges other large institutions for overnight lending. Obviously this has a major influence on the money supply. The lower the rate, the easier credit should be, and the more money is in the system. In 1980 and 1981 these rates fluctuated from 10%-19% respectively. This a major crimp on the economy. When the so-called bull market began in 1982 many gave most of the credit to the then President Ronald Reagan and his so-called trickle down economics policy. While tax cuts are always a stimulus for the market it is really the low Fed Funds rate set by the Federal Reserve Bank that gives the huge rise in asset prices. Throughout the Reagan era the feds funds rate went from around 19.00% at one point down below 6.00% in 1986. Yes, the bull was running as the easy credit flowed and the DJIA had advanced from 817 in April 1980 to 2596 in September 1987. This was a run for the ages; however, there was a major crash and panic in 1987.


Now lets fast forward to the roaring 1990's. The markets again faced a declining housing market in the late 1988 throughout the early 1990's. There was a recession taking place and a new President was elected. It's always about the economy when it comes to Presidents and this time a second birth of the bull began. The fed funds rate was steadily kept around 5.00-5.50 % and the market continued to climb. In 1999 the rate was decreased to less than 5.00% and the bull market advance was a run for the ages as the DJIA crossed over the 11,000 level. Then as we all know in 2000 the great bear awoke as the stock market began a 2.5 year decline as the Dow lost 4700 points from peak to trough.


In 2003, the Fed funds rate was lowered to 1.00 %, this was really uncharted waters from the Federal Reserve Bank. Again a new President was elected, taxes were cut and this gave birth to one of the greatest bubbles in American history. It has been called the great housing and credit bubble of the new millennium. Even as the former Fed Chairman Alan Greenspan increased rates by a quarter point at every FOMC meeting beginning in 2004 and continued to do this until 2006 when the fed funds rate was as high as 5.25%. As we all know in October 2007 the great collapse began as the DJIA peaked at 14,200. Since that top the fed funds rate has steadily been lowered to the current 0 - 0.25% rate.


As of now the low rate and massive global stimulus has rallied the markets over 50% from the March 2009 low. However, this has come with a cost as the U.S. Dollar is near its 2008 lows and commodity prices have soared recently. The last time the dollar was this low oil was at $147 a barrel and that certainly was a factor to the major break in the market. The big question now is going to be what does the Federal Reserve Bank do for an encore? The fed funds rate obviously cannot go any lower. Therefore, the plan they have must be simply to inflate this market back to health. One can only ask why would they want to do that? Wouldn't this just be doing exactly what was done to create the original problem? There can only be one answer, and that is to attempt to fight deflation. The recent breakout of gold is telling us that they will inflate at all costs. The only real currency that the world has ever known (gold) does not lie. When you really think about it the market has had a huge rally off it's March lows and so has gold. The only problem with this rally is that since the U.S. Dollar has fallen so much what have you really made in the market? Gold right now is the better trade over the DJIA.


Can the Fed really bail us out of the possible deflationary spiral that has plagued Japan since the late 1980's? Only time will tell. The one thing we all know is that the fed funds rates can't stay at zero forever. What are they to do for an encore? Perhaps they may buy gold to protect their own accounts. This is surely going to be a volatile decade ahead of us.

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Nicholas Santiago,
Chief Market Strategist
InTheMoneyStocks - Technical Analysis Trading | Stock Market Chat Room | Learn to Trade
 
Price, Pattern, Time = Success!

Note the two charts below. The first shows a bull flag pattern on the SPY noted earlier today when the SPY was at $108.28, while the second chart shows the success of reading chart patterns and the SPY just hit a high of $109.11. Price, Pattern and Time!

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Chart shows the monster move in the SPY as it rallies off the Bull Flag Call. $$$$$$
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it had massive volume on the sell off , and low volume on the pull back up- how is this bullish?
 
okay. it's just i thought high volume meant the big boys were interested in bringing it down.
 
Note the two charts below. The first shows a bull flag pattern on the SPY noted earlier today when the SPY was at $108.28, while the second chart shows the success of reading chart patterns and the SPY just hit a high of $109.11. Price, Pattern and Time!

Always easy in hindsight...
 
The Markets Sell Off Even Though AMZN, MSFT And Housing Data Is Strong...Why? The USD

The dollar continues to be in sole control of this market. Every move up or down is dictated by the dollar in the inverse. This is truly an amazing evenet in the markets history. Regardless of blowout numbers by AMZN or MSFT beating estimates, the markets are south. The dollar is higher on the day and could be making a turn to for an M-A pattern on the weekly chart. Keep watch of this. It may be the ultimate key to the markets future.
 
I don't trade stocks, only currencies, so I'm a complete moron when it comes to this. But perhaps you could answer a question for me. Suppose the banks think the rally in the stock market has gone far enough, and they want to get short again/offload. Would they not wait for a big figure to be breached (say 10,000/11,000) so everyone wants to buy. And then part by part offload some of their positions. They wouldn't want to dump all their stocks in one go, because then the ES and DOW would plummet. So perhaps they would do it little by little, and you would see the market hover around the level and just above, and then one day it would just head south and not look back for months. Is this how they would do it? I've never really concentrated on accumulation distribution phases.
 
Trade Lesson: Knowing When An M-A Bearish Pattern Is Going To Play Out

The key to the M-A pattern is to see the formation and recognize what makes it in play and what negates it. This M-A pattern played out for the prime reason that key rules were never broken. We will unveil this to you all so in the future you may profit off this pattern. The M-A pattern is a classic bearish pattern that signals downside. Knowing this would have told you that the markets were going to fall today. The first key comes in the form of the right side of the M pattern. Note how the left high of the M was at $110.13 on the SPY. Then please take note that the right side of the M pattern was at $110.34. The first rule to an M-A pattern is that the right side of the M should be higher than the left. This clearly is the case and tells any market technician that this could be an M-A pattern in play. Next, please note that as the rally happens and the upswing of the A forms, the high of that A cannot take out the right or left side of the M pattern. In addition, note that the upswing of the A never takes out the big red down candle on the 60 minute candle. Therefore, that entire upswing is considered inside candles do the big red down candle. This means that it is still categorized as an in spirit of bear flag. Because all these keys were in place, this M-A pattern had a high probability of working out. Sure enough, as the master level was hit, the A pattern drop occurred and the market sold hard. Learn these patterns, make the money!

#1. Note the right side of the M is higher than the left.

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#2: Note the high of the A does not take out the high of the right or left side of the M.
#3: Note the move up in the A pattern, is all inside the big down candle on the 60 minute.

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Intra-day trade lesson: Watch the time of day for intra-day pivotal moves

Often most stocks and indexes will reverse or pivot from their initial move around the pivotal time frame. The first of these major pivotal time frames is the 10:00 am or first half hour of trading. While this phenomenon occurs very often it is not 100% and does not occur every trading day. Therefore, it is always important to put it together with another resistance level or possibly a pattern to increase the odds of a short tern trend change. The next minor pivotal intraday time frames are 10:30 and 11:00 am ET. The time frames after lunch are: minor -1:00 pm, and the major afternoon time frames are 2:30 pm, 3:00 pm, and 3:30 pm. Experiment with the time frames and you see how often these are good turning points throughout the day.

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how is this "classic M-A" pattern different to a "classic Head and Shoulders" pattern?

or are you just rebranding something we already know about as your own?

EDIT: before anyone gets the idea this is just a flippant and intrusive post, I am genuinely interested how an M-A pattern is different for H&S, so I can assess ones usefulenss over the other. Especially if it helps avoid the losing H&S, or has better entries, or better exits.
 
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XOM IS STILL THE LEADER OF THE PACK

XOM is a leading stock for the energy sector as well as a leader for the overall market. Watch the intraday resistance levels for XOM at 74.40 and 74.57. Pullbacks are likely from these levels.

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The M-A pattern is very different from the head and shoulder pattern for a few reasons. (fairly well known pattern by technicians, often implemented incorrectly - we never claimed to have discovered this pattern) M-A patterns are much sharper declines in a shorter amount of time. In addition, it is extremely important to understand the Head and Shoulder pattern cannot have a right neckline that is lower than the left while in an M-A pattern that is actually fine. The neckline on a Head and Shoulder pattern should always be flat to inclined to have the target calculation achieved. The target calculations are much different as well. We will try and feature a trade lesson on a Head and Shoulder pattern soon to help show these differences and rules. But the absolute main key to profiting from these patterns is understanding the true details that make one successful over the other, which most people do not recognize. Many people see these patterns few utilize them properly and even more are fooled by failed or fake out patterns. Hope this was helpful.
Thanks everyone
 
Trade lesson: Understanding the power of opposites

Often money can be made in the market by simply understanding that what is good for one is bad for another. It is simply called opposite or pairs trading. For instance, if the U.S. Dollar is down then usually gold is higher on the session and vice versa. Another example would be interest rates verses utility stocks. Often utility stocks will be weaker when interest rates are rising. This is due to fact that utility companies borrow money. Practice the opposite trade and you will notice how often these trades take place.

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If the dollar pulls back watch this level as gold will pop.

GLD is basically flat for the day. If the dollar pulls back watch the 102.15 level as gold should get a pop. This is not bad action for the GLD today as the dollar is strong and it usually trades inverse to gold.


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Trade lesson: Watch the past to understand the future

Often when stocks or indexes fall there will be good support levels for bounces. Therefore, you want to look at multiple time frames and have a chart that goes back several months to find intraday trades and possible 1-2 day swings. In this example on MGM the stock was in virtual free fall and found support in the $8.80- $9.00 gap window area. This was identified by InTheMoneyStocks.com traders by looking back to the September 3rd date and seeing a gap window. It is also important to recognize that MGM has been down quite a bit and well off it's high. Therefore, after an extended move lower it is due for a bounce. Remember nothing declines in a straight line. Always remember to use stops and once the trade is in the money take half the trade off for a profit and move the stop into the money or break even. Then you can look to sell the rest of the position at the next strong resistance level.

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