By Nicholas Santiago on August 9th, 2010 3:03pm Eastern Time
Today the major market indexes followed their usual pattern. The SPDR S&P 500 ETF NYSE:SPY) dipped lower during the first half hour of the day only to rally higher on light volume for the rest of the session so far. There were a couple of factors in the market that were telling us that the markets would trade this way. The first was the light trading volume ahead of tomorrow's highly anticipated FOMC meeting. Light volume always favor the upside action. Hence the old market adage, “never short a dull market”. It can't get more dull than this. The second and more important factor was the action in Exxon Mobil Corp (NYSE:XOM).
Exxon Mobil Corp (NYSE:XOM is the largest stock in the market with a market capitalization of $318 billion. Therefore, when the largest stock is strong it is a safe bet that the stock market will be strong as well. The stock is also a major Dow Jones Industrial Average component. While the Dow Jones Industrial Average is a price cap weighted index and not a market cap weighted index Exxon Mobil Corp still carries a lot of weight when trading above $60.00 a share.
The important point to remember here is that when Exxon Mobil Corp trades higher on the session rarely will the stock market trade lower. This stock is a very good stock market barometer and should be watched and followed even if it is not traded. When Exxon Mobil Corp trades lower on the session watch how the market remains under pressure.
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By ITMS Education on August 9th, 2010 5:12pm Eastern Time
Over the years I have found myself being gradually refined, on my way from being an amateur to a pro trader. As time passes and I trade amongst beginners, I find more and more differences that stand out. This is the normal progression showing itself in any trader over the course of their trading career. From amateur to pro, each of us will learn a vast amount of rules and lessons. In fact, as a trader you will never cease to refine your technique and learn new lessons. I wish to convey one of the biggest differences and rules I have learned. It is quite possibly the most notable difference I see when discussing a trade with those less seasoned than I.
Throughout the day, I search literally hundreds of charts to try and isolate the best/optimal patterns and setups for a profitable trade. When I glance at a chart my mind is racing through hundreds of pattern, price and time setups to see if one fits a possible trade. The amateur will isolate a chart and the first thing they are thinking about is the profit. This is the key difference with seasoned trader. When I look at a possible trade, my eye is scouting the chart for how much I could lose. I look at the pattern, moving averages, time of day along with many other possible issues. I am looking at my max loss before I even think about the profit. Once I have isolated my max loss and risk of the trade, then I move on to the profitable side to see if the risk reward fits. This is extremely important to do as a pro trader is concerned not what they will make at first, but what they will not lose. Think about it like a parent. A parents eye is scouting a park for possible things their child could hurt themselves on before they let their child go play. Often times an amateur trader is too caught up in the emotion of making money that they will forget to examine the downside risk and focus purely on the upside. This is disastrous.
When I find a trade that looks promising, I do my best to convince myself NOT to buy it. I make myself give 3 reasons NOT to buy this chart. If I cannot come up with any, I may take the position. This mentality is opposite of an amateur. I know this, I used to be one.
Gareth Soloway,
Chief Market Strategist
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In the neverending saga of new disclosure of gold price manipulation, here is the most recent pearl, courtesy of Jesse’s Cafe Americain:”In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said “We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have...................http://www.goldnewswire.net/did-gordon-brown-sell-uks-gold-to-keep-aig-and-rothschild-solvent-more-disclosures-on-how-the-ny-fed-manipulates-gold-pricesRead more…
By Nicholas Santiago on August 9th, 2010 9:45am Eastern Time
Tomorrow the Federal Reserve Bank is expected to make an announcement on the condition of the economy and the fed funds rate (overnight lending rate to the large major banks). Often many traders and investors will trade very lightly until that decision is made by the Federal Reserve Bank. At this time there is not much expectation of a change in the fed funds rate which is currently zero – quarter percent. This major overnight bank lending rate has been at this historic low since December 2008.
This morning the S&P 500 e-mini futures contract (ES U0) are trading higher by 4.00 to $1123.50. Generally, Monday's are a much lighter volume trading day and often a positive one at that. Therefore, today the major stock market indexes could just float sideways to higher for most of the day. The bulk of the action could come in the first two hours of the trading day.
Some leading stocks that are trading higher this morning are Freeport McMoran Copper & Gold (NYSE:FCX), McDonalds Corp (NYSE:MCD), International Business Machines Corp (NYSE:IBM), Baidu Inc (NYSE:BIDU). Should the market indexes catch a bid higher these stocks could run higher as they are starting the session strong. However, it is important to remember that the major indexes are going to likely be on pause after the first couple of hours and the rest of the day could be sideways.
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What passes as normal? Well, today, that is an interesting question.Just reading the newspapers from the past few days, does More Workers Face Pay Cuts, Not Furloughs (New York Times) get you all hot and heavy over a new cyclical bull market? How about Tech Gadgets Steal Sales From Appliances, Clothing (Wall Street Journal) — hey, who cares if the spin cycle on the washer-dryer don’t work no more, I got me an iPad! Amazing.Meanwhile, there is excitement in the air over the view that all we have on our hands is a pause that refreshes. Interesting, however, as to how the bond market isn’t buying it, and why should it when MasterCard processed transactions are flat from where they were a year ago........http://www.investmentpostcards.com/2010/08/09/rosenberg-what-passes-as-normal/Read more…
The U.S. Dollar Index has had a water fall decline since June 7th when it tagged a major descending trend line resistance level at $88.70. Since that high the U.S. Dollar Index has declined by nearly 10.0 percent. This is the same percentage that the major stock indexes such as the S&P 500 Index and the Nasdaq 100 are higher by. Remember when the dollar declines the major stock market indexes seem to inflate higher. If you look at a chart of the U.S. Dollar Index compared to the S&P 500 Index you will notice that the two indexes trade inverse to each other. Therefore, should the dollar bounce it is very likely that the major stock indexes pullback or come under some pressure and deflate. The U.S. Dollar Index will have strong support around the $80.00 - $79.00 area. The U.S. Dollar Index can be traded by using the Powershares DB U.S. Dollar Index Bullish (NYSE:UUP). For traders that want to play the downside action in the dollar they can trade the Powershares DB U.S. Dollar Index Bearish (NYSE:UDN).
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By InTheMoneyStocks on August 8th, 2010 2:20pm Eastern Time
The SPDR S&P 500 ETF (NYSE:SPY) gained nearly 2.00 points for the week closing on Friday August 6th. This leading ETF has now gained over 11.00 percent since early July. It is important to realize that the Dow Jones Industrial Average is a price cap weighted index as opposed to the S&P 500 Index which is market cap weighted. Therefore, if a higher priced stock increases more than a lower priced stock in the DJIA index despite the size of the market cap the index will increase. The current pattern on the weekly chart could go either way at this moment. This popular ETF has been trading higher for six weeks now and often a pullback will occur after such a large point move and percentage gain. The DIA will have some weekly chart resistance around the current level at $106.70 and more around $108.50 area. Utilizing these levels along with the following levels and analysis and you will remain on the right side of the market.
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