Tonight's Conference Topics

Lots more volatility ahead...

Here are a few topic ideas for tonights calls:

- Review of the major indices (do we have a downtrend?)

- Report: Investools High Probability Class

- Strategies in a volatile market

- Q&A Session on topics of your choice

RUT Doji

The closed up today with a doji and it's forming a wedge on the Daily. Price action is looking weak.

RUT Daily Chart

NDX Showing Some Strength

The NDX rose quickly today in the morning session, but lost some of it's steam to close with a topping tail candle. The NDX is currently sitting right at the 61.8% retracement level. A close above the 61.8% would raise the probabilities off of completing a 100% retracement back to the highs.

Notice today that it hit resistance and "kissed" the bottom of the green uptrend line before falling back down.

Keep your eye on the consolidation in the 1900 to 2000 range and watch for a breakout in either direction.

NDX 3 Monday / Daily Chart

SPX Looking for a Direction

The SPX closed today in the middle of the recent move down on the daily charts. It's sitting right at the 50% fib retracement line, it's sandwiched between the 200MA and 30MA and it's also between the uptrend and downtrend lines.

Keep your eye on the 200MA as another break below may send us lower for a while.

RUT 3 Month / Daily Chart

DOW Trading Under the Downtrend Line

Looking at the daily chart on the DOW we can see that the downtrend is still in place despite some nice rallies this week. Let's keep an eye on the close tomorrow to see if we hold to the downside or pop over the top.

DOW 4 Month / Daily Chart

RUT Holding Sideways

The RUT has continued to move sideways in a 25 point channel now for 7 days. This price action is consistent with it's normal behavior, but it also has us wondering which way it's going to move next. We're equally prepared for a move up or down as the chart supports both at this time.

RUT 1 Year / Daily Chart

Sorry for no chart, having issues with Cox Cable today, hopefully they'll get their act together tomorrow.

RUT Breaks Short Term Downtrend

With relative strength on Friday, the RUT was the first major index to break the downtrend on the daily chart. Monday will be an important day to see if it can hold or not.

RUT Daily Chart

Tonight's Conference Call Topics

And I thought the summer markets would just chop sideways...

There's no doubt that all of us that traded this week had a busy one and most of us would agree our necks are a bit sore from having them spun around so frequently. Tonight we'll try to make some sense of it all and talk about what the next week/month might hold.

Here are a few topic ideas for tonights calls:

- Review of the major indices and specifically what today's price action might mean.
- The importance of the 100MA and 200MA in this volatility
- Using Fibonacci retracements to help with targets

- Trend: Why following the trend (in this case down) is still the single most important success factor in this volatility.

- Planning: A short discussion on the importance of pre-market prep and trading your plan.
- Why patience is so important.

- Strategies for high volatility in the indices:
- Sit in Cash: Staying on the sidelines with this volatility can be a GREAT strategy
- Taking advantage of volatility spikes by selling spreads WAY out of the money (Sept)
- The caveats

- Q&A Session on topics of your choice

RUT Focus

Looking at the RUT objectively, although we finished up the day strong, there has been some very strong selling in the last few days. The downward trend is still intact on the daily and today we put in a lower low. Since today's low was lower then the last, I don't think we can count it yet as any type of double bottom as those would need to be even or the 2nd one a little higher.

With the extreme volatility (the $RTV reached an ALL TIME high of 42.60% today) it may pop through the downward trendline, but watch carefully as we must respect the fact that it had a lower low and be aware that we could get a move even lower at any time.

RUT 1 Yr / Daily Chart

SPX Fib Levels

The SPX (S&P 500) spent another day under the 200MA and like the RUT has a confirmed downtrend started with both a lower high and lower low. Below are some charts with fibonacci lines to give us an idea of targets above and below the current price.

SPX Daily with Fibs Indicating Targets to the Downside



SPX Daily with Fibs Indicating Targets to the Upside

DOW Dragonfly

The DOW had a spectaculer freefall and rebound to close the day with a Dragonfly Doji candle. At the bottom of a trend this is a bullish signal which is enhanced by the long length of the tail. We'll watch tomorrows price action to see if there is upward follow through. After several days of severe selling action the probabilities exist for a relief rally of some kind. (Do you realize that the DOW has a 7 day range of 1178 points? It does, from a high of 13695 7 days ago till today's low of 12517)

A short term upward target area would be the neckline and the bottom of the green channel line. Don't be surprised if we blast right through those areas -- volatility works in both directions.

DOW 1 Yr / Daily Chart

DOW and It's Text Book Breakdown

It's be a real pleasure watching this Head and Shoulders develop on the DOW chart and even more interesting to note the progression and key levels over the past few days that gave us a very good idea what was probable to happen next.

Click on the chart below and take a few minutes to look at the price action and closing levels of the past 5 days. Note where the trend levels were and the moving averages.

If you have the time, this is really good example to study because the story as it played out was pretty predictable
when broken down on the daily price action. No real surprises at all as this Head and Shoulders set up.

Here's a breakdown of what I noted over the past few weeks:

- July 26th: Head formed
- Aug 1st: Pierced the 100MA to the downside, first time since April (bearish)
- Aug 3rd: Closed BELOW the 100MA, first time since early April (bearish)
- Aug 10th: Upward Channel Trendline breached intraday, Neckline breached intraday, Closed BELOW 100MA (BEARISH!)

... The charts at this point are sending you some REALLY STRONG SIGNALS HERE

- Aug 13th: Doji (no strength), Close BELOW 100MA (can't get up), Close directly on the trendline (hanging by a thread)
- Aug 14th: Neckline convincingly broken, H&S confirmed (a signal to the world that a trend reversal is probable)
Closed between the 100MA and 200MA (with downward momentum the 200MA likely to act as a magnet)
- Aug 15th: Earlier in the session it moved up to kiss the backside of the neckline resistance and then fell hard all the way to the 200MA before getting a little bounce before the close.

All in all, from the time the head was formed until yesterday we had over a 500 point move.

Of course it's always easy in hindsight, but as traders it's important for us to see the building blocks of these patterns so that we can take action when low risk entry points become available to us. There were plenty of low risk entry points on this move and by watching the charts each day the probablities of the moves became more apparent.

Tomorrow is another day. There "should" be some horizontal support at 12800 area, but we'll see what the market has in store for us on this wacky expiry Thursday.

DOW 6 Month / Daily

RUT 6 Day Uptrend Broken

The RUT decided to participate in the jubilant gap up this morning with all the other indices, but the buyers left the RUT party after the first 15minutes and never came back.

The second 5m bar hit 800 and faded (our resistance level) and it never even attempted to go any higher than 797.50 after that second 5m candle.

If you look at the chart below you'll see that the RUT gapped up above the downtrend, but then faded all the way through the wedge to put in a close below the uptrend. This technically ends the 6 day uptrend. My new bias is sideways to down in the near term.

The RUT continues to show lots of volatility moving from strength to weakness seemingly more so then the other indices. I guess it really depends on what day it is, because they're all very out-of-sync lately.

If RUT shows weakness tomorrow, the first support area might be at 770 and then some horizontal and fib support at 760.

It's sure to be another exciting day on the RUT tomorrow.

RUT 20 Day / 15 Minute Chart

NDX Sideways But Had the Strength Today

The NDX gapped up, opened big and held onto those gains most of the day, but finished the day near the intraday lows. There's a wedge-like pattern forming on the 30 minute chart, and so far it's holding the uptrend.

Keep your eyes on that trendline as a break may send it testing the lows again.

NDX 20 day / 30 Minute Chart

SPX Glued to 200MA

The SPX closed the day with a gravestone doji candle very much like the DOW. At the bottom of a trend (if you consider Thursday's red bar a downtrend) then this can actually be considered bullish since it shows that some buyers stepped in today. On the other side of that arguement, there was a good bit of selling at the close which could be considered bearish.

The SPX is still finding support at the 200MA (2 days in a row now), but keep you eyes open tomorrow, as a close below the 200MA may create some more panic selling. The 1425 area has held as support over the past week, keep your eye on that area as well.

SPX 6 Month / Daily Chart

DOW Daily Chart for Monday's Close

Whew, what an ugly day today. The DOW gained about 86 points the first 15 minutes of the day and then limped sideways and ended up closing at the lows. The DOW formed a gravestone doji which at the top of trend would be considered bearish, but at the bottom of a trend it can actually be construde as bullish. In this volatility I would say it's 50/50 on what we'll see tomorrow (it always is), but important to note that the DOW closed SMACK on the upward trendline that we've been watching and is just below the 100MA. "IF" it breaks the upward trend it might send some panic into the ring. The DOW has also started to form a Head and Shoulder Pattern on the daily and we're one bad down day away from closing a candle beneath the neckline (at least the way I have the neckline drawn). If the neckline is broken it could give some extra momentum to the bears.

In summary, the DOW is barely holding on to the uptrend, but it's still intact for today. We'll see what happens tomorrow as some bearish patterns are starting to emerge.

DOW 6 Month / Daily Chart

DOW Chart

The DOW posted a 9th inning surge to close just a hair above the channel trendline we've been following on the daily chart. So far it's holding and as long as it does the charts are still telling us we're slowing moving up. A break of that trendline to the downside and I'm going to treat it as a red flag and watch with caution. When the RUT had a simple break of it's trendline we ended up with a 12% avalanche. The charts are great at giving us clues as to what's really going on and it's often that the clues are there, we just have to really look for them and then trade them if we have set ups and rules to take advantage of them.

DOW 6 Month / Daily Chart

SPX Chart

The SPX found support on Friday just above the recent 1425 lows and closed smack on the 200MA at 1453. This left us with large doji on the daily charts that could also almost be seen as a bottoming tail should we get a strong bullish candle on Monday. I view the candle more bullish then bearish in the context of the chart and having it close at the 200MA, but I think it's clear that the market is still going to take a week or two give us any real clues as to where the broad market is heading.

A break below the 1425 could produce some panic selling, so keep your eyes on that area if we start heading lower.

On the top side look for upward targets of 1457.50 and (23.8%) and 1476 (38.2%).

SPX 6 Month / Daily Chart

NDX Charts

The NDX was the last of the major indices to test it's 100MA, but on Friday morning it was tested and held. It then put in a nice 2 hour rally that covered 48 points top to bottom. For those looking for a low risk directional trade, buying a call at 1905 and putting in a stop at 1903 would have been a profitable one. Once in a first target would be the 23.6 1935 area which under normal conditions may take a day or two, but in Friday the target was reached in 2 hours. Moving average bounces both as support and resistance can offer some good low risk entries.

NDX 20 Day / 30 Minute Chart

Keep your eye on the wedge-like pattern forming. A break of either trend may produce a nice move.



NDX 1 Year / Daily Chart

Besides a bounce off it's 100MA, the NDX will likely be a wild cat again this week with some large erratic swings. A break below the 1896 area could signify some panic selling. There should be some fib support at 1885 should that occur.

RUT Showing Some Relative Strength

On Friday morning the markets opened lower on Thursday's down momentum, but RUT found some Fib support at 770 and made a mad dash to 800 (the 50% fib area), before settling at 788 for the day. This area is just above the 38.2% fib (785).

At the time of this post RUT futures were up $5.00 so the next upward target would be that 800 area again. Above that, the 200MA is sitting at 805 which under normal circumstances shoud act as resistance as well. Should we have an uber bullish day tomorrow where caution is thrown to the wind the next stop might be 812 (61.8% fib) and last but not least, above that the 100MA at 823. If we make up that far it will be 35 point day. Keep in mind we had no problem putting in a 30 point range on Friday, so ANYTHING is possible in this market.

If we fall on Monday our first support is a the 10MA at 778 and then we have fib support at 770 and then fib support from the 15m charts at 755. A break below 755 might suggest a retest of the low at 742. That would be a big day down so we'll leave it at that for now.

Volatility is still here, so prepare for anything again.

RUT 1 Year / Daily



RUT 5 Day / 15 Minute Chart

One last chart to look at on the 15m - Despite some potential good news of the Fed stepping in with some cash, the chart here is still showing that on Thursday we broke the 3 1/2 day uptrend and then on Friday the backside of the uptrend was penetrated, but the 15m candle still closed below the uptrend -- the uptrend acted as resistance. It may be insignificant, but I'm going to be watching this trendline again tomorrow for signs of strength or weakness. This chart really shows the lack of support if the RUT were to break below 770. I bring this up, because this is the type of environment were some more bad news (economic or otherwise) can quickly send us back down just as quick as we went up on Friday. Many will have their guard down now expecting that the Fed is stepping in to save the day, but as they're doing this, in the bigger picture it is more of a confirmation that the overall economy is showing weakness which in the longer term may mean weaker earnings and lower prices.

RUT Doji

The RUT put in a good day of noise and settled into the middle of today's range to form a doji. It showed lots of relative strength and did not participate in the late afternoon selloff as seen in the other indicies.

Support levels to watch tomorrow are at the 10MA daily of 777 and some fib support at 770.

The RUT was only off 10.78 points (-1.38%) today, and the doji gives us absolutely no clue about the direction we may see tomorrow.

RUT 1 Year / Daily Chart

NDX Dizziness

The NDX gave us another wild ride today and another 50+ point daily range!

The NDX is now the only major index that hasn't yet tested it's 100MA daily. DOW is testing it's 100MA and SPX is testing it's 200MA. IF the DOW breaks the 100MA adn SPX breaks the 200MA it will be creating a market environment for the NDX to possilby test it's 100MA. The daily candle we printed today sure looks like it's eager to jump down to the 100MA, it's just a quick 32 points away. I wouldn't be surprised to see it touch 1904 tomorrow even if it's just a tap and bounce. (That's not a prediction, but only what I see as technically possible based on the chart and candle pattern). I am always keen to find levels of support and resistance as it helps me on my targets, entries and exits.

If we open lower tomorrow I'm first going to look for support on the backside of the red trendline, and if that breaks we'll see if it can hold the 1912 area that's already held 3 times for us in the last 2 weeks. Be aware that the forth knock on that door may open it.

Nothing would surprise me with this index tomorrow -- BE PREPARED FOR ANYTHING including large moves in one direction OR intraday reversals that don't make any sense. There MAY be a lot of fear out there to hold over the weekend so prepare too for a late afternoon sell off. That being said, be prepared also for the exact opposite to occur with buying being the predominate action tomorrow.

In summary, don't have any preconcieved ideas of what the movement will be tomorrow - just be prepared for anything and go with the flow.

NDX 20 Day / 30 Minute Chart



NDX 6 Month / Daily Chart (Note the ugly bearish topping tail candle we made today)

Can SPX Hold the 200MA?

The SPX closed right on the 200MA today at 1453. Tomorrow the key area to hold will be the recent lows at 1425. A break below that area my signal some panic selling. In this volatility be alert to quick swings in either direction and especially to "fake out" moves.

Use good money management in this environment.

Futures are down at the righting of this post, but anything can happen including a gap up and an extremely bullish day tomorow... or the complete opposite, so be prepared for anything including reverals intraday.

SPX Daily Chart

Can DOW hold the 100MA?

The ups and downs of the market are getting dizzying, but with these huge moves come opportuniities.

These are times when risk and money management should take front seat in your trading.

Today the DOW lost 387.17 points to close at 13,270.68 right on the 100MA on the daily chart. This is an important area to hold as the 100MA hasn't been breached since the Feb 27th downturn (and briefly last Friday) and it shares the same area as the current uptrend line. There are recent lows at 13,145 which may get tested in tomorrow's session. A break below may open the flood gates so watch that area carefully. If it holds that are then it's a temporary feather for the bulls.

A close below 13,145 would technically start to print a lower low on the daily charts and we already have a lower high. This would not confirm a downtrend, but it would certainly put a temporary end to the uptrend.

DOW Daily Chart

NDX Would Like to Thank CISCO

The NDX saw some nice gains after Cisco's earnings were deemed positive by the markets. Notice that the NDX tested and successfully held at the 1912 level after 3 trys. On Tuesday it broke the downtrend on the 30 minute chart, but later fell below the uptrend line that afternoon before finding some later afternoon buzz to make it back up to the uptrend line.

Today (Wednesday) the NDX gapped up and closed the afternoon right at the trendline again.

Earlier today the NDX bumped into some horizontal resistance at the 1995 area. The next Fib target to the upside will be just over 2000.

The NDX is making some lofty swings in both directions so there is a lot of oppotunity, but proceed with caution as the reversals can be quick and violent.

NDX 20 Day / 30 Minute Chart

DOW Powering Up Yet Again

As of today, It certainly appeared that everyone had forgotten about all the doom and gloom of the economy and subprime issues as the DOW tacked on 153 points to close near the 61.8% at 13,657.

The DOW has put on 521 points in 3 days.

Looking at the Daily Chart at this point just makes it look like a minor pull back and now it's back to business and shooting higher. If the DOW closes above the 61.8% level on the daily there will be a higher probability to retrace 100%, but in this volatility be prepared for a sizable move in either direction.

One might think that a 521 point uncontested move up would be screaming for a pull back pretty soon.

DOW 6 Month / Daily Chart

RUT Question Answered

Yesterday we saw the beginning of a trend break on the 15m charts and today it followed through with some incredibly bullish price action. The RUT blew right through 38.2% level of 786 and went right up through the 50% 800 level before finally settling at 795 for a 21 point gain for the day (2.58%).

Tomorrow's another day and it will be interesting to see if we can follow through to the upside, break through the 200MA at the 805 area and shoot for the 61.8% 813 level. Historically, after a drop below the 200MA there is usually some resistance and a retest of the lows before getting some more strength to break it through to the upside. HOWEVER, in this volatility anything is possible so don't be surprised if he shoot higher tomorrow OR take a turn and fall back to test the lows.

With this volatility any is possible and trend can change very, very quickly so stay alert!

RUT 5 Month / Daily Chart

RUT Going Up?

The Russell 2000 inched out another gain today and more importantly is trying to break the downtrend on the daily chart. It's sitting right on the line, so tomorrow's close will give us our answer as to whether our not the RUT is ready to breakout to the upside again. There's plenty of resistance overhead so the battle to up again may be quite a fight. The RUT is still under it's 200MA on the daily which should continue to be construde as bearish until we are able to break above and HOLD it.

RUT 2 Month / Daily Chart

NDX Update

With today's Fed Announcement came the ususal whipsaws and the NDX took the lead to new intraday highs after the Semiconductor index found some fib line support and rallied. There was a whipsaw or two thrown in there, but in the end the bulls won the battle today. Notice though that we are still in a bit of a limbo land just sitting on the upward trendline that started on Monday. Last time we got stuck in an area like this we fell the following day, We'll see what tomorrow holds for the NDX.

Watch tomorrow to see if it can hold the uptrend line as that would be key for a bullish follow through. Look to go sideways if it gets stuck between the Green uptend and Red downtrend line, and start feeling bearish if we fall below the Red downtrend line again.

If up tomorrow then a 38.2% Fib target would be 1988 (the 200MA on the 30m is in the same area for additional resistance)
If down then first level of support might be the 23.6% fib at 1947

RUT 20 Day / 30m Chart

NDX Trying to Break the Downtrend

The NDX is trying to break the recent downtrend, keep on eye on this as a break in either direction will likely make a decent move.

NDX 20 Day / 30m Chart

RUT Fib Bounce on the 1 Yr Chart

Today we bounced on the 61.8% Fib Line of the RUT 1 YR Chart. Three days ago we bounced off the 50% Line but later failed and took another leg down. All ears will be waiting to hear Bernanke's words tomorrow at 11:15 Pacific Time so expect some wild movement as this market tries to pick a direction.

Some Fib level targets to keep an on eye this week:

If construde as Good News = 790 area
If construde as Bad News = 713 area

A break below the 61.8% Fib 744 area would be really bearish as there would then be a better probability that we eventually retrace 100% back to the 675 level. It may take months, but the probabilities would be there.

RUT Weekly Trendline Break (Bearish)

For anyone that held out hope that our little Russell 2000 might still have the strength to hold the uptrend... it's over! Last week we broke the uptrend that had held for over 4 years and now our charts are telling us that the probablilities are to move sideways to down in the intermediate time frame. The next support level we see on the RUT will be the 38.2% 730 level. Although a little bounce or a relief rally would be nice, the weekly candles, MACD and Stochastics still point to some lower price action in the near term. We may get some support at the 100MA Weekly at 750, but since it's seemed to bust through every other support level, don't be surprised if the fall continues to the 730 level. The RUT has now fallen 101.06 points (11.8%) on this down draft which has now surpassed the percentage drop we had in May 06 of 88 points (11.%).

The key thing to remember is that "It can go as low as it wants, sometimes support doesn't hold"

During this lengthy uptrend we've been able to enjoy, the support and resistant areas generally seem to work very well. However, in a market with high volatility and lots of fear these support levels seem to be forgotten sometimes.

Trade safe and be careful about counting on "support" to hold up as the weight of a broken long term trend as we've just had may crush those support levels. I don't want to sound too overly bearish as I really have no idea which way the market will go, but if we're just going off what the charts are telling us then we have to give up on the uptrend for now and keep a sideways to down bias on the RUT for now.

RUT Weekly Chart

NDX Weekly Channel

A few weeks ago we broke out of the top of a weekly channel that had previously held for 2 1/2 years. The bearish action over the past 2 weeks has placed the NDX back in the weekly channel again with the last weekly candlle being a topping tail. There's some horizontal support in the 1900 area and a 20MA in that same area. Looking at the chart though I see more support at the 1850 level on the short term. After that huge red candle 2 weeks ago I don't think it's a stretch in this bearish environment to see it reach that 1850 level in the next few weeks if the bearish sentiment remains the same after the Fed announment on Tuesday.

NDX Weekly Chart

RUT Fibs

Below you can see that as we try to rally to the upside we'll have some resistance at the 800 level where we have both a 38.2% Fib level and 800 horizontal resistance.

Tonight's Call Topics

Here are some ideas for tonights topics:

- Big Drop! What next? We'll take a look at daily charts on all the indices (you can view them from the post below this one) and we'll talk about possible scenarios based on historic movement and current technical analysis

- What to do when your spreads get attacked. What are your exit strategies?

- Volatility and the opportunities it presents

- Volatility and the challenges it presents

- Some more on Gamma

- Any other topics you'd like to discuss

Index Daily Charts: Where's the Strength?

This has been a volatile week of trading and I wanted to take a look at our indices to see where the strength is right now on the price charts and possible scenarios of patterns moving forward.

Although all of the indices fell these last 2 weeks, it was the NDX (Nasdaq 100) that found support well above the 100MA (Moving Average), while the laggard was the RUT (Russell 2000) that fell right through it's 200MA and is still trying to get some footing. Next was the DOW which also found support above the 100MA and then the SPX (S&P 500) which found support on it's 200MA.

Below are the Daily Charts, Click the chart thumbnail to get a full screen view.

NDX 1 Year Daily Chart



DOW 1 Year Daily Chart



SPX 1 Year Daily Chart



RUT 1 Year Daily Chart