if the Dow and the SP500 and the DAX and the FTSE are indeed about to climb back up to old highs, they are likely to do it at a painstakingly slow pace. Investors have been scared out of their wits. The SP500 is weak in Asia again and as I write this at 2am, the Nikkei is down again.
Tomorrow is another day, and my method says ( providing we are not tanking in Asia in which case the SP will suffer and play into the hands of the bears in Europe) that we will rally but the real test of the rally will come later in the day. Dont stay long if we get to new lows for the day after 2-3pm. The odds will favour a very weak close. I suspect it will be volatile again.
The oil set-up have yielded some 500 points so far.
The Market Map for the FTSE today looks like this:
The analysis from yesterday really came true in a way I had not imagined. When I wrote that the real test of the gains from Friday would come yesterday, I had even contemplated the possibility of a compelte reversal.
And now this!!!
I bought the close last night, as I often do, because the market has a strong bias for a bullish move overnight. However, this market is mad. Abu Dhabi is buying a 5% stake in CitiGroup and the Dow is up 100 pre-market??
Either way, I am obviously not going to play the short side right now. The Dax was called down 140 last night. Right now it is set to open down 40, and even that could improve, if the shorts are throwing in the towel. I guess month end is coming up, and we are oversold enough to warrent a move of 100 points higher in the DAX and the FTSE. So the theme is playing long.
Keep an eye on that oil trade I described yesterday.
26th November 2007
SP500 Daily Chart
I think that one have to be careful reading too much into the light volume trading surrounding a holiday weekend such as the Thanksgiving weekend in the US. Many traders will be off until today. On Friday I made an off-the-cuff remark to a journalist that this light holiday volume could be just what the bulls needed to resurrect their case. As it happened, they did use the thin market to push the market higher and probably also run some stops along the way. It probably didn’t hurt that the first reports from the big shopping malls of the US were bullish, with people queuing up for bargains. They call it “black Friday”, because if the retailers make it into the black this day, they will make it for the rest of the year.
The chart below shows that despite the current rally, we are still firmly stuck in a downward trend within a well defined channel.
However, if you look at the chart below with the numbers highlighting the extent of the counter-trend advances, you get a sense of the strength of the current rally.
I think the real test of the current rally which started on Friday morning will come Monday or Tuesday. Those 37 SP500 points were easily gained, and we might have to see some proper two-way trading before the gains are solidified.
Monday morning’s trading action stopped short of the 50% level of the latest swing. The latest swing stretches from 1496 to 1417. The half way mark is 1456. The high so far is 1455. With these facts in mind you will be trading against the trend if you bet on the long side. The rest is up to you.
Gold Weekly chart
The last rally of significance in the gold market lasted 6 months. This came on the back of an extended sideways move. The sideways move after the last rally was similar in nature and length as the previous one. Gold is now at the top of the range again. I have no doubt that a number of traders would have been shaken out by the move last week. In a perverse matter we are ready to move even higher. Some potential targets are 873, but I really do believe that this is a matter of time rather than price. We have rally for 3 months and it has paid off to buy the dips, even if the dips are terrifying.
Oil Weekly chart
Oil is charging ahead and by all accounts we will see oil hit $100 a barrel. When you look at the chart below, you wonder who will bet against oil hitting the magic 3 digits. The weekly chart is showing a very strong clear uptrend, but I wonder how much the speculation is due to traders betting on hitting $100, and how much is down to true demand for oil. I have poured over the charts for oil over the last 20-30 years and I don’t see that the “winter” season is so bullish for oil, as some analysts are pointing out.
My real concern for being long oil in the very near term is due to the blue line on the chart. This is the XMA for oil, a 20 period exponential moving average. The chart below the oil chart is a price to XMA differential chart. It shows what happens when the XMA gets out of line with the oil price itself.
Right now there is a staggering $15 differential.
This is the furthest it has ever been. However, given the inflationary aspect that is not telling us a lot. Therefore I have converted it into percentage of the current price instead. That is what you are seeing on the 3 chart. Whenever we hit 20% differential, we have been within one week of a correction. The correction has been a minimum 13% and once case was 27%.
I should re-emphasize that this does not change, or has to change the over primary trend. It simply highlights the potential for the market correct from these overbought levels.
Happy Trading
Tom Hougaard
TraderTom
22nd November 2007
Good morning, happy Thanksgiving US. I am placing myself on the long side and have been since last night, for a rally on Friday/Monday.
I will post some more Friday. Today I am a buyer of the FTSE and DAX and holding.....
Happy Trading
Tom
21st November 2007
Good morning,
My strategy worked well yesterday....if you had balls of steel :). That was one volatile session, and I suspect today will serve more of the same dish. The DAX is being called down 100 points and the FTSE is called down 75. The Market Map sums up my view for today: we will have an early drop. The Market Makers must be keen to lower the prices this morning, fishing for stops, but I suspect we will see a decent bounce later in the morning. I have posted the FTSE 100 index Market Map below. I will attempt to buy a decent low near 6060, if we get there. I somehow doubt it. I actually believe the low in the SP500 yesterday was a buying opportunity, and that we will begin a slow rally from here onwards. I am looking to position myself for more upside.
Good luck today
Tom Hougaard
TraderTom
20th November 2007
Good morning,
my strategy today in the FTSE and in particular in the DAX will be to be buy the dips. I suspect that many will be thinking "dead cat bounce" and you can't rule it out, but the Asian indices saw a big intra-day reversal, which is always a good sign. I have no doubt it will be a volatile day with some healthy swings, but I suspect that after 13 days of lower prices in the FTSE 100 and a 10% decline, there could be some short covering taking place as well as some bargain hunting.
The Market Map for the DAX today looks promising the bulls. The real test comes tonight once the cash market in the UK and Germany has closed. That is when we will see the Dow add to its gains or completely sell off again. .
Have a safe and prosperous trading day
Tom Hougaard
TraderTom
13th November 2007
Good morning,
The SP500 futures are surging higher this morning, erasing a lot of the damage done late last night. I am playing the long side for the time being, even though we are in a clearly defined downtrend. The SP500 chart below is an hourly chart, which shows the corrections over the last 5 days. You will note that all the corrections against the downtrend have been contained within a limit of 24-31 SP500 points. I have put 1461 as a potential resistance for this rally. At that point it is up to the bulls to show what they are made of.
I am not sure I trust the sell-off in the Dow last night. I think it could have been a last minute flurry of selling. I suspect they are ready to take the indices up today. The Dow is already being called up 60 points. I am buying the FTSE and the DAX at the current levels offered here. The FTSE is being called down 20 points. I am not sure I believe in that.
Have a safe and prosperous trading day
Tom Hougaard
TraderTom
12th November 2007
I am suffering from a very poor internet connection at my home office. For example I posted a number of charts that unfortunately made it to the public. Here we go again:
I am short oil for the reason you see below. At least here the market has only fallen a dollar.
Update Sunday night: I have been told by a friend that my Bloomberg Interview is not airing. I have no idea why, but I know we had some technical difficulties ahead and during the interview.
ANALYSIS
