AheadoftheNews Blog

NQ (NDX futures) shows the most promise for bulls. It out of the downward channel, but still struggling at 20 dma (1586.50). Support is now 1578.50 and 1575. Bulls need a close above 1586.50 tomorrow. Everyone betting on a classic pre-holiday rally. It will depend on oil, see my previous post.

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Crude oil dropped a buck or so and equity bulls decided all our troubles are over. Meanwhile, we are right at channel S/R, so the jury is still out. QM/CL (October crude) still has a gap to fill at 67.25, but the picture remains bullish, so don't count oil out quite yet. Any strong economic news will have the perverse effect of driving oil up above 70 and clobbering equities. Reverse holds true, of course. ISM due tomorrow.

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Triple bottom DOW with the last hit a higher low and bulls took it for a nice rally. Oil pulled back a little and that was taken as an excuse to buy into an oversold market. However, looking at ES chart (SPX futures), we can see that we are right at convergence of 20 and 50 dma's, pretty tough resistance. Bulls need follow-through to prove their point.

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As I thought, DOW retested yesterday's lows, but it was a slightly higher low, which is a positive. Oil bounced off support at 68.90 and needs to hold that, or risk testing 67.25, yesterday's gap close. DOW needs to hold 10350. NQ has support at 1564, YM at 10410.

Crude oil is holding a bid and trading after-hours above 70. Ex-channel resistance is now support at 68.80. Upside risk is 72.50. Inventories due tomorrow and will be market moving as usual.
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Atlantic Tropical Weather Outlook

Bearish divergence as well for NDX.

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Perfect double bottom for DOW at 10350, which is also right above 50% 2004 low/2005 high. Unfortunately, it was done with a bearish RSI divergence, meaning it could be tested again.

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COMP did exactly as told, closed the July gap at 2112 and bounced up to the 50 day moving average. The DOW closed right at the 200 day ema. Oversold bounce or the start of a new rally, still not clear.

COMP has a gap to close at 2112. I will elaborate over the weekend, but this leg might still have a little more downside. I definitely plan on re-entering short any DOW rally to 200 dma that fails.

Exited YM short at 10406 for +310 points ($1550 per contract) and NQ short at 1558 for +34 ($680 per contract) Looks like we have a temporary bottom and I will patiently wait for a new set-up.

Some Fed talk on tap tomorrow, more of the usual, Greenspan will say growth is still there, he can't afford to have bonds rally and yields plummet.
QQQQ still needs to close the July gap at 38.40. DOW failed to close above 200 day ema at 10464. NQ (NDX futures) can't get back above 50 dma. We are deeply oversold on the daily, so be careful to protect profits, but at the same time, don't jump in long quite yet. Weekly cyle actually has more downside. Overall, the picture remains bearish and any rally should be viewed as an opportunity to find a new short position. The media remains bullish overall and complacent even though the DOW and SPX lost 200 dma and 50 dma respectively. Not usually a very good sign.

NQ (NDX e-mini futures) chart. We can see that the downward channel support is around 1555 and 61.8% July rally is 1547. If we can't get back above 1564 on volume (50%), that target is almost a given. QQQQ lost the neckline profiled yesterday at 38.61 and is currently sitting right in the gap. SPX lost neckline support at 1210 and that one is headed for 1200. The DOW is the worst offender, dropping 200 day moving average and 200 day exponential moving average. Not a pretty picture. When the media finally wakes up and becomes bearish, I might think long. Right now, we still have a bit of cleaning up to do. Open positions: short YM (DOW futures) at 10716 (+273 points unrealized, $1375 per contract) and short NQ at 1592 (+18 unrealized, $360 per contract)

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Lowered stop on NQ short to 1582, locking in +10.

Short NQ (NDX futures) at 1592, stop 1594. Shorting trendline resistance. Trade was profiled live in the Futures Monitor (as with most of my swing trades).

More on QQQQ. Today we tested neckline of inverse head and shoulder and since it coincides with the top of July gap, it was critical. These lows must hold (38.61), or the gap close at 38.40 might not be enough to hold us up. It's all set up for bulls to take it from here, they better not fumble. Oil inventories coming tomorrow and will be market moving either way.

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Since some of you trade QQQQ, here is a useful chart. As you can see, we are still in the downward channel but have managed to close above 38.2% retrace at 38.77 five days in a row. We are due for a bounce, but notice the July gap at 38.40 which we still haven't closed. It's not far below the 50 dma at 38.50. Unfilled gaps are magnets when you get this close, so keep an eye on it. Watch resistance at 39.19, 76.4% of 2004/2005 and a little further up, channel resistance at 39.29 and 23.6% July rally. NQ futures and COMP hit 50 dma and bounced, giving bulls a reason to step up to the plate at the close. Let's see how much they have in the tank.

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Closing out the QM September crude contract long at 65.80 for 3.4 points profit, or $1750 per contract. Trading is now on October contract. What a ride oil is giving us.

NDX weekly chart. Many expecting a repeat of last year when we rallied into September all the way to the end of the year. One quick look at weekly oscillators is telling a different story this time. We have not put in a bottom like we did in August 2004, far from it. My guess is we continue drifting lower through October, when we will find a climactic bottom of sorts. Short the rallies is still the game plan.

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The QM long (September crude) from 62.40 is now almost +3 in one day (300 DOW futures equivalent). That's $1500 per contract. Never ceases to amaze me how everyone keeps calling for a major drop in crude as it keeps on climbing. It's like trading a tech stock in 1999. Target is 65.95.

Raising stop on QM (Sep crude) 62.40 long to 62.80, locking in +.40.

Ever since a famous financial web site proclaimed "summer fun is here" in early August, we have been steadily selling. Fun indeed, but only for those of us who took that statement as a cue to go short. All that excessive bullish sentiment I warned about for weeks is now contributing to a decline that will not end until bulls throw in the towel. With 22.5% bearish advisors and 57.3% bullish advisors, it could take a while. Optimism in the face of deteriorating technicals is not a recipe for putting in bottoms. Expect more selling.

Long QM (September crude) at 62.40, stop 62.20. Buying the 20 dma.

TNX (ten year yield) did a perfect bounce off 200 dma, thereby mitigating any bullishness the drop in oil could have accelerated in equitites. This is primarily why the rally in stocks was limited, although energy components in SPX took a hit. Look for the selling in equities to resume should the ten year keep climbing.

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Lowering stop on YM short to 10716, break-even. Weekly R1 is 10714, trendline resistance is 10680 and June high is 10694. That entire zone must hold as resistance for bears.
NDX hit 38.2% retrace (1572) of July rally yesterday and that level is key for bulls to hold.

All major stock indices closed the week below their respective 20 day moving averages, and that includes the SOX (semi-conductor index). Technically, there really isn't much to say other than bulls better get back above those key levels soon or the lower B-bands on the daily will get hit. As for our YM short trade, it is doing fine. The 20 DMA is at 10640 and we closed at 10598. Weekly pivot will be at 10620, making the zone between 10620 and 10652 (61.8%) a must for bulls to get back on a closing basis. Monthly pivot is 10500 and weekly S1 is 10504 and that looks to be hit on the downside very soon. That is our minimum target for the short from 10716. Stop stays at 10765 for now. If you went short lower, you can adjust the stop to just above 10694, June highs.

Picture perfect bear trap. I knew it was going to get nasty soon, and it looks like today is the day bulls dropped the ball. We stay short from YM 10716, stop 10765. This is a long term play that should yield sizeable profits.

What can I say. The DOW, SPX, COMP and NDX all closed below their respective 20 day moving averages. Bearish cross of 10 ema and 20 sma for the DOW. Bears are smelling blood and the next rally will find sellers. We stay short from YM 10716, initial target is 10500, monthly pivot.

The relationship between the DOW and the Ten year note since July 21st has been quite obvious and one of the reasons to stay short YM (DOW futures). That trade is now +141. Support was found at 50 day moving average. Note also that the 10 day ema is about to do a bearish cross of the 20 day sma. Bulls need to avoid that scenario. Feds on tap next week.

YM (DOW futures) closed below trendline support and the bull pennant is history. It was nice while it lasted but with a close below 20 dma, YM looks to visit 10553, 50 dma, in the near future. Things are getting precarious for bulls. Yields won't drop and oil is that pesky little party crasher that just won't go away. If you were managing five billion, what would you be doing now? Chasing stocks higher, or cozying up to those safer yields? In any case, the time has come to book some profits. The SOX dropped 11.75 points and did away with an important Fibonacci level it had just conquered the day before (61.8%, 480.54). NQ (NDX futures) barely survived an attack on the 10 day ema and that one is a must hold on a closing basis in the next trading day (1614.50). ES (SPX futures) is worse off, closing below that important momentum average, which is now resistance (1239). Bulls need to watch their back. We just stay short and hopefully get to enjoy the ride.

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Cancelling the QM long trigger at 60.45. Oil caught another bid and the trade entry will have to be re-adjusted.

Overnight signal: long QM (September crude) at 60.45, stop 60.05.
The gap was closed today (60.60), but we might get an overnight stop run down to 61.8% at 60.40, so I'm setting a trigger.

Nice rally for techs but also oil and YM (DOW futures) still lagging. The short at 10716 is not seriously challenged unless YM can manage a close above 10694, June highs. Chart shows a bullish continuation pattern (bull pennant), and I am watching this very closely, however July 21st zone of resistance is still solid even for ES, keeping me in the trade for now.

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Exiting QM (September crude) long now at 61.625 for +5. ($2500 per contract).
We got a good one and as Baruch would say, sell too soon. That is the equivalent of 500 YM (DOW) points or 50 ES (SPX) points. Had to book profits on that one, even though I think it is going higher eventually. Got in at 56.625 on 7/21 and it never looked back. Waiting for a pullback now, possibly at gap (60.60). I would not chase it on a break below 59.65.