July 2, 2009
It’s being broadly circulated around the analysis circles, but there appears to be a distinct Head and Shoulders forming on the daily chart of the S&P 500. I’m picking up volume and momentum divergences as well, hinting that lower prices are yet to come but let’s take a look at these structures and what they might mean for traders.
With today’s 3% free-fall (Trend Day Down) in the broader stock market, it appears now that the dominant technical pattern is the developing Head and Shoulders on the S&P 500.
It’s not guaranteed, of course, but according to classical technical analysis patterns, we would expect the next move in price to be a ‘magnet trade’ down to test key support about the 885 level in the index.
This support is strongly established as the February highs along with the May lows. This level also forms the “Neckline” of the expected reversal pattern.
A break (and clean close) below 880 could trigger a flood of short-sell orders (and stop-losses from buyers) which could create a ’self-fulfilling prophecy’ as traders and investors push price lower.
The classic measuring move is the distance from the Head to the Neckline (about 75 points) which is subtracted from the neckline at 885 to give us a target from 800 to 810 for the next level of possible pattern support.
Take a look at Volume, which has been steadily trailing lower as price has creeped its way higher. That serves as a non-confirmation of higher prices and hints at an impending reversal.
Finally, look at the 3/10 Momentum Oscillator - as price has been inching higher, the 3/10 Oscillator has been making lower highs along with price, and has even set-up the dreaded “Three Push” reversal pattern (a triple negative momentum divergence, which you see if you look closely).
As a caveat, there’s no guarantee price has to break these levels, and one astute reader (Michael) even noted in the comments of the prior post, because the Head and Shoulders pattern is so obvious, it might be ‘faded’ or fail to materialize because so many people are watching it. No one said trading had to be easy!
Until we see something different, this is the current price structure of the S&P 5oo as we head into the holiday weekend.
Find more information about our new Weekly Inter-market Technical Analysis and the Daily Idealized Trades member service which have just launch at the Premium section of Afraid to Trade.
Corey Rosenbloom, CMT
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July 2, 2009
June’s monthly candle closed with a ‘doji’ at Fibonacci resistance - that’s a bearish development as we start the new month of July. Let’s take a look at the S&P 500 monthly chart to see its current structure.
We see the S&P 500 is still below levels from 1998 - in fact, price recently came into the 950 level which was prior support in late 1998 (and for the September spike-down in 2001).
Most importantly, we have come into the 38.2% Fibonacci resistance level of the May 2008 highs to the March 2009 lows - virtually to the point.
In combination with that, we have a bearish doji candle formation at overhead resistance - and as of June 2nd, we have a down-candle.
Don’t put so much emphasis on the two trading days in July as equal to the full months the other candles represent - but it’s telling.
If price continues in the direction it appears to be traveling (down), then we will have a confirmed reversal/retracement down off the 950 highs in mid-June.
The above chart shows a simplified version of the current S&P 500 structure.
For those interested, we are now offering a new weekly report entitled “Weekly Inter-market Technical Analysis” which analyzes each of the Ten-Year Note, S&P 500, Gold, Crude Oil, and the US Dollar Index on a monthly timeframe perspective, beginning with an analysis of the Monthly frame then moving down to the Weekly and Daily frames, noting key areas to watch and possible opportunities ahead.
Find more information about this and the Daily Idealized Trades service - both of which have just launched - at the Premium section of Afraid to Trade.
Corey Rosenbloom, CMT
Afraid to Trade.com
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July 1, 2009
During the Los Angeles Traders Expo in early June, I participated in an interview session with Karen Gibbs and the crew from the MoneyShow.com Studio.
These brief, 3-minute segments are now available at the MoneyShow.com website and I wanted to share the collective links to each interview.
1. Trade From the Big Picture
Karen and I discuss how to use “Broader Perspectives” to weave down the timeframe scale to maximize trading opportunities and minimize risk on the lower timeframes.
2. An Important Low?
I review the current structure of the S&P 500 and what the technical indicators I use are saying - specifically in regard to the March 2009 lows.
3. Good Time to Buy Dollar-Denominated Assets Now?
I start by describing inter-market relationships of the dollar and commodities, then move to discuss the longer term trend of the US Dollar Index, Government Spending, and possible Inflationary Pressures ahead.
4. Conquering Fear and Greed
I discuss some of the basic ‘trading psychology’ guidelines and on how traders can assess their emotions while dealing with greed and fear to boost trading consistency and performance.
5. Trading With an Edge
In what I believe to be the most important concept in trading that surpasses all trading strategies, Karen and I discuss what constitutes a “Trading Edge” and why it is so important.
Corey Rosenbloom, CMT
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July 1, 2009
Adam Hewison released on of his most descriptive video updates on the S&P 500 this morning and I wanted to share it with you to keep you in the loop as usual.
In this video - which I honestly deem to be among his best - Adam describes a two-month cycle that is peaking (I’m weak in cycle analysis), a Head and Shoulders reversal pattern possibly forming (including a price target), key Fibonacci support (target) areas beneath price to watch, the importance of the 880 level, the standard MACD Divergence, Trade Triangles, and other chart aspects - all in a free seven-minute video entitled simply “S&P 500 Update July 1st.”
Adam and I share the roughly the same analysis, only he presents it in a popular video format.
Here’s how Adam describes the video:
“Today I’m going to take another look at the S&P 500 Index. It appears that some of the rose coloring on traders’ glasses is beginning to wear thin. Many more traders now perceive this as a two way trading market as opposed to a one way street we witnessed in March and April.
I am going to be analyzing a daily S&P index chart and making some observations that I think potentially could work out if certain elements fall into place.
At the present time our “Trade Triangle” technology is indicating a neutral stance in this market. With the -55 reading our “Trade Triangles” are indicating a trading range which could possibly be an early sign of a reversal.”
As always, Market Club members receive these videos as they are released (without the delay of affiliates) as well as access to education, scans, and of course their “Trade Triangle” signals (which are a combination of technical indicators that mirror a trend following strategy).
My appreciation to Adam and staff for producing these timely updates and allowing me to share them freely with you.
Corey Rosenbloom, CMT
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July 1, 2009
Today, at 12:00pm EST / 11:00am CST, the MoneyShow.com will be hosting a free, live chat and rebroadcast of my presentation “Idealized Trades for Intraday Traders” as part of their Webcast series.
In the hour-long seminar, I discuss how to distinguish between a Range Day and a Trend Day in formation (early identification is key) and then move into discussing three high-probability, low risk trade set-ups to use as you see them developing. I also discuss “edge” and how important it is for intraday trading tactics.
Finally, I describe why keeping an “Idealized Trade” Journal in addition to your standard daily trading journal can help propel you to success quicker due to seeing repeated examples of Daily Structure and trade set-ups.
I just recently began offering this service “Daily Idealized Trades” reports - please take a look at this new in-depth subscription service which also discusses the structure and possible opportunities for the next trading day.
Here is the description and welcome page from the MoneyShow.com:
To access the free chat (I will be taking questions all through the presentation from attendees), you’ll need to register for Free at the MoneyShow.com and click “Add to Cart” on my presentation (there is no fee and no check-out). With your account and registration, you’ll be given access to the live chat and presentation.
You’ll also be given access to the many other free presentations and interviews (you’ll also find me on their interview pages as well).
The information and link is at the top right of their homepage, as well as directly linked from the image above.
I believe you’ll be able as well to download the 30 slides from the presentation - if not, feel free to email me for the slides.
I met a lot of great people at the Expo and hope to keep in touch with you all.
Thank you to the great staff at the MoneyShow.com for recording the presentation and rebroadcasting it with live chat!
I’m looking forward to it and hope you’ll join us there for the live chat this afternoon!
Corey Rosenbloom, CMT
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June 30, 2009
I was taking a look at Apple (AAPL) and Research in Motion (RIMM) and spotted something I wanted to highlight to you. Adam Hewison just released a video entitled “RIMM vs AAPL: An Update” which got me looking at both of these charts, which led me to an confusing conclusion.
If you take a solitary look at RIMM’s daily chart, you’ll probably come away thinking RIMM is about to plunge lower.
However, it you take an isolated look at RIMM’s weekly chart, you might walk away and want to put a long (buy) position on immediately.
So which is it? And why do we get such a different result? Let’s look closer.
RIMM Daily - Bearish:
Looking at the Daily Chart, we see the following technical structure - price making a new high on a negative momentum and volume divergence.
As price peaked, we formed a clear reversal candle at the highs and volume has picked up steadily as price fell, which confirms the lower prices.
With the volume surge and new momentum low, odds favor lower prices yet to come, particularly given that price pulled back into overhead resistance and can’t seem to rise above the 50 day EMA at $72.00. This would mark a great area for bears to get short and place a stop above that level, if not above the 20 EMA at $75 and perhaps play for a trend reversal.
So you would walk away aggressively short if you looked only at the daily chart… but now let’s raise our timeframe to see the weekly structure.
RIMM Weekly - Bullish:
Again, let’s approach this as if we’ve not looked at the daily timeframe.
We see price making a steady swing-up to new 2009 highs which formed on a new momentum high and price has pulled back sharply to the confluence zone of the rising 20 and 50 EMA… though the 20 is lower than the 50 and price only recently crossed above them.
With last week’s doji and the current week’s doji, one might be jumping to put on a long trade here to play for a possible bounce from these confluence levels to play for a new high yet to come. The stop would be around the $67 area with a minimum target of $85 if not beyond $90.
So which is it?!
Short off the daily chart and hold your stop above confluence EMA resistance?
Long off the weekly chart and hold your stop beneath EMA (semi) confluence support?
I’m merely highlighting why it’s innefective to do analysis on a single timeframe in total isolation. You’ll sometimes get scenarios like this that make your head spin.
It’s probably a better idea - unless you’re aggressive - to wait for a break of one of these levels and then go in that direction. Price can’t stay here forever - it has to break one of the two confluences.
Take a look at Adam Hewison’s recent update video on Apple and RIMM for more insights - but let this be a lesson that multi-timeframe analysis (similar to that of Brian Shannon of AlphaTrends.net) is superior than single timeframe analysis.
Remember - July 1st at 12:00 is when you can see my free presentation rebroadcast from the Los Angeles Trader’s Expo - “Idealized Trades for Intraday Traders” from the MoneyShow.com.
Corey Rosenbloom, CMT
Afraid to Trade.com
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June 30, 2009
I wanted to share with you something I’m paying particular attention to - the TICK, Breadth, 3-Push Momentum Divergence, and Volume Divergence we’re seeing at these intraday levels in the SPY (and other US Market ETFs). Let’s take a quick look to see what this might mean so that we can be prepared if prices start falling from these levels.
Without going into too much detail, take a look at a full, five-wave Elliott fractal move completing on a “Three Push” Negative Momentum Divergence - that’s often all it takes to trigger a ’short sell’ trade and play for a possible trend reversal with a stop placed a decent distance above the highs at $93.00 in the SPY.
We’re also seeing a slight volume divergence as price as risen in what appears to be a ‘counter-trend’ move up.
It’s possible that we’re forming the right shoulder on a daily chart Head and Shoulders reversal pattern… but let’s not get too far ahead of ourselves here intraday.
Looking beyond Volume and Momentum, let’s see what the Market Internals of Breadth and the TICK are telling us:
If you look closely at the TICK (middle panel), you’ll see that we peaked on June 25th and have been making lower highs ever since. We’ve also just made a New TICK Low at -1,000 which is not the direction bulls want the TICK to be making.
What’s even more obvious is a Negative Breadth Divergence that began on June 24th and on each subsequent higher high in price, breadth (Net Advancers minus Net Decliners) has made a lower high, locking in a non-confirmation.
Let’s put it all together:
Complete 5-wave Elliott Fractal Impulse Up
Negative Volume Divergence
Negative TICK Divergence
Negative Breadth Divergence
“Three Push” Triple Negative Momentum Divergence
I would not want to be a bull at these levels and - although there is certainly no guarantee price has to fall from these levels - odds strongly favor downside action yet to come as opposed to higher price action… bulls are going to have to overcome a lot to keep this market rising with these many divergences forming.
Corey’s Note: This analysis is a portion of today’s report of my new subscription service “Idealized Trades Daily Report” (today’s full report is six PDF pages of charts and commentary) which will officially launch July 1st. I’m allowing blog readers to head over to take a pre-launch sneak peak at the Premium Content/Subscription page and download sample reports and register/subscribe early.
Feel free to submit your email to stay informed and get bonus sample content not posted on the blog..
The subscription links are working, and a subscription also grants you access to archived daily reports dating back to April 2009.
Click on over to read about this new daily service and let me know what you think! Thank you for all your support.
Corey Rosenbloom, CMT
Afraid to Trade.com
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June 29, 2009
I had the honor of participating in a lengthy interview with Tim Bourquin of TraderInterviews.com and I wanted to provide the link that is now posted for you to click over and hear the full interview for free.
Tim is the Co-Founder of the highly popular Traders Expo - three conferences each year that bring traders together to interact with market professionals and educators - and also runs the popular TraderInterviews.com website (online since 2006) in which Tim interviews popular traders and digs into them to tell their specific strategies, background, experience, and trading style.
Please visit the site if you aren’t aware of it already - Tim conducts and posts four interviews per month that are archived in easy format. Members (click link to learn more information) receive access to all interviews as well as notification when a new interview is released.
For my interview, we discussed my background, how I got started trading, why (and how) I moved from Fundamental Analysis to Technical Analysis, and some of my core trading strategies.
The interview is officially titled “How to Trade Trend and Range Days” (direct link to interview and transcript) where we discuss specific things I look for to determine how the day’s structure is likely to unfold and thus what specific strategies and indicators I will be looking to use once I make a determination.
I think Tim was most surprised when I discussed how the day’s structure determines my position sizing and aggressiveness level, by saying “The last 10 minutes of this interview can’t be missed. That’s where Corey talks about where the real money is made in trading.”
We also discuss ETFs, 3x Leveraged ETFs (and dangers for newer traders), how I explain “Confluence Across Multiple Non-Correlated Strategies” (of which blog readers are aware of my trading and educational style), the “3/10 Oscillator,” and the CMT Program.
There’s a full transcript if you want to print and read it elsewhere, but the video is accessed for free. It’s 35 minutes in length and I’m thankful for Tim for this opportunity which was a lot of fun.
Here is Tim’s official description of the interview:
“Dedicating two years to a formal grad-school-level trading education is a big commitment. Not everyone is willing to “invest” that kind of time and energy into becoming a successful trader.
But our interviewee for this episode was so dedicated to making himself a success that he did just that and became a Chartered Market Technician (CMT).
Learning and forcing himself to memorize candlestick chart patterns and the workings of hundreds of indicators prepared him to decide for himself which ones worked best in his own trading style.
Here we talk to Corey Rosenbloom about the specific moving averages he uses and why he relies so heavily on something called the 3/10 Oscillator.
We also talk about how his major focus on “confluence across multiple non-correlated events” leads him to profits regularly.
It sounds complicated, but listen closely to his interview and you’ll realize how truly simple his strategies are.”
* * *
On a related note, my presentation “Idealized Trade Set-ups for Intraday Traders” will be rebroadcast FREE on July 1st at 12:00 noon EST at the MoneyShow.com. I’ll be participating in a live chat so you can ask questions as the presentation continues just like you were there.
You’ll need to register at the MoneyShow.com (which is free) which also grants you access to so many more interviews, free presentations, and educational content.
Corey Rosenbloom, CMT
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June 29, 2009
In a unique chart interpretation, Adam Hewison of Market Club released a video today that describes what he calls “Energy Fields” on the Gold weekly chart and what they might mean for the next move in gold. It’s a free four-minute video that is applicable to all who follow or trade gold.
From what I can tell, Adam is using the principle “Price Alternates Between Periods of Range Expansion and Contraction” to indicate that markets “build energy” during periods of contraction (highlighted in the chart above) and then release it during expansion moves (which are the beautiful trend moves we as traders are hoping to capture).
These reflect classic price breakout plays where you buy (or short) after an observed period of contraction (consolidation) in price.
Adam describes this technique and then discusses why he feels the current “Energy Field” is primed for a move “much higher” in gold prices going forward, particularly if the resistance at $1,000 is broken soon.
For those interested, take a look at the video and consider joining the Market Club if you have not done so already for additional analysis, videos, education, scans, and signals.
Corey Rosenbloom, CMT
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June 28, 2009
It’s time for the weekly Editor’s Picks from the NewsFlashr Investment/Trading Blogs!
From Mish at Global Economic Analysis, a discussion on why “Deflation is the Cure” including various links and quotes.
Dr. Steenbarger at Trader Feed shares with us a post “Gaining a Feel for Market Immersion by Historical Trading Patterns” which discusses preparation for the trading day and observing many patterns.
A Dash of Insight shares a ‘crib sheet’ for interpreting Government Data along with a readers guide and links.
World Beta takes a look at “Combining Rotation and Timing Systems” in terms of developing an investment strategy. They describe their approach and answer top questions from readers.
Want to know where the US stands in terms of inflation year over year as compared to other countries? Wall Street Nation has the answer. Venezuela has the highest rate at 27%.
Precious Metal Investment asks the question “With Gold’s Drop to $929, is this just the beginning of the Summer Doldrums?” or something worse.
The Dividend Growth Investor lists the “Largest Stock Buybacks for 2009” in a list and then explanatory post.
I try to be open to all market views - here’s the “Case Against Inflation” as presented by the News to Use Site.
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Looking for gold.
