BROADENING RISING WEDGE

The pattern in focus is the broadening rising wedge. The rally continues, but this is an intermediate-term consolidation pattern, one that may not have been clearly visible to most people.

I continue to see the lack of follow-through and so far, intra-day tests confirm it. Careful selection and money management play critical roles here.

INDEX UPDATE: NEUTRAL-BEARISH

Currently neutral-bearish. My sentiment has not changed and I believe the correction may take a while, but that's just my thoughts. What are we looking for?

SPX - The 20-day MA test continues with a possible H&S pattern developing. The criteria is that a lower high is produced on the daily which is TBD.

DJIA - Possible ascending triangle still developing.Out of all the indices, if we do continue with the rally, the DJIA should be the first to break to new highs.

COMP - Currently the most neutral out of all the indices. Between the 20/50-day MA's. Will be neutral for several days. Possible channels are drawn out.

RUT - Still the weakest of all.Broke an ascending triangle and now flagging. The 20-day MA has crossed below the 50-day MA and may be used as future resistance. Look for further consolidation.

BKX - Weakest sector is the banking index. Forming a bear flag. The market will have difficulty if the financials do not rally. Pretty obvious, right? Watch them carefully.

All of this is where the neutral-bearish stance comes. When you trade, never forget to look for the high probability setups. I am playing them daily, and winning daily. The better the intra-day and/or daily setup, the better odds you have at success. Don't just "play anything" or people like me will take your money.

Don't complain about my wins. If you aren't winning, then you're doing something wrong. Figure out what you're doing wrong, fix it, and start winning with me.

BEARISH / THE TRLG TRADE

Yesterday's big trades were in TRLG for me. It wasn't like the day before where I absolutely killed it, but nonetheless, I managed to hit TRLG twice and profit twice. The diagram of trades taken is pictured below. The green squares are short entry points and the orange squares are scaled out exit points. I "missed" two trades, but only because the volume wasn't there and also because the 2nd "miss" was right after the FOMC decision. Execution was near perfect on this, so study it.


Moving onto the general market, I am bearish as the title of the post suggests. We formed a gravestone doji on the SPX, shooting star on the DJIA, and a dark cloud cover on the RUT. All three are bearish signals. In addition, note how the indices are "churning" at their respective MA's. If you watch my shows on Stocktwits TV, you would know that I consider this move mostly bearish. The last chart is the IWM, the Russell 2000 iShares ETF. Note the massive sell off volume. The RUT did and will continue to lead the way.

WEEKEND THOUGHTS ON THE SPX, DJIA, COMP, RUT, SECTORS

All indices have formed stick sandwiches or modifications of them. I am short/intermediate-term bearish and will reflect this sentiment by incorporating my primary swing strategies with the current day trading. Day trading is great and all, but I'm looking to capture larger chunks of the moves. Also, it'll ease up my time to focus on other things. A swing trade can be a simple overnight 2-day hold or a multi-week hold and everything in between.

Charts shown are 9-mo and 5-mo.

The SPX is short-term bearish and intermediate-term neutral as it is with most of the other indices. I'm looking for a 1-day neutral/reactionary move for entry. The RUT continues to lead the way down as I have predicted. It is testing the 100-day MA. The DJIA is testing the lower ascending range as well as the 50-day MA. Finally, the COMP is in a neutral range and threatening the lower boundary. Notice how all the indices are in different stages of the correction?


The transport index is also testing the 100-day MA and is in a neutral range.


Not only are all the indices in different stages, so are the individual sectors.

Rising Wedge Divergences in the Indices (And Stocktwits Charity Poker Tournament)

What’s up, ya’ll?

I was looking at the DJIA, SPX, COMP, and RUT to assess how each index compares with each other when it comes to the development stages of the “rising wedge”.

First, the DJIA is in a perfect wedge. The apex is still developing.

The SPX is the chart that I look at with most frequency. We are close to touching the lower trend line.

Next up is the COMP. The COMP is technically out of it’s wedge and forming a possible ascending triangle. Pay close attention as the apex becomes fully developed.

Last but definitely not least, I’d like you to turn your attention to the RUT. If anything, the RUT has to be paid attention to the most. Notice how I haven’t been seriously playing the small caps for 2 months straight? This is why. Make note that the RUT IS forming an ascending triangle. The ascending triangle is textbook bullish, however, don’t forget that I mentioned several times that failed patterns can produce large profits if you are on the right side. The range here is definitely tightening. Mark the 50-day as the most important support (notice how the RUT will be the first to test the 50-day vs. the other indices?).

Finally, I will be playing in the Stocktwits Charity Poker Tournament tomorrow. This is a really great thing that Joey (a.k.a Downtowntrader) started up. There is a bounty for knocking me out: a bottle of grey goose, courtesy of Joey himself.

UPDATE: Rising Wedge Possibilities

MARKET COMMENTARY (7-22-09)

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I made a solid 1% yesterday. My multiple double-digit gains in HEB and SQNM did the job as I was about halfway through Season 5 of Lost. I've stressed the importance of careful selection many, many times. You will do well if you find stocks that move, regardless of what the general market is doing. Stocks, with minds of their own, can be your best friends as I've demonstrated time and time again.


The SPX is still testing the mid-June peak. In fact, there is so much strength that followed the continuation gap that it is just too dangerous to short. Shorting during a countertrend move is fine, but missing out on the primary trend is not. Unless you have exceptional timing skills, it's best to stick with imminent breakout or breakdown (if short) plays that make your life so much easier. On some days, I don't even bother keeping the SPY chart up because I don't need it.




The COMP is the first and only index that is trying to fill the early Oct gap. Note the boundaries in orange. We can expect significant resistance at this level, primarily because LT breakaway gap downs have a tendency to reject initial attempts.


Finally, I look to the world indices so get a feel for how the rest of the world is doing. I charted the Japanese Nikkei, Hong Kong Hang Seng, S. Korean Kospi, German Dax, French Cac, and the London FTSE. I especially like the neutral range breakout executed by the Kospi.