Tame Trading an easier way to trade

Here’s the Deal:

Thursday was painfully slow unless you are trading JRJC. While there was tremendous action in a number of China related stocks and the like, overall that was about the only action as the rest of the market was remarkably dull. The money runners continue to hold their collective breath waiting for the end of the quarter on Friday. We have reached the official, don’t screw it up point.

The further we move into October the more consistent seasonality moves in favor of the bearish crowd but near-term seasonality remains on the bull’s side.  The Dow continued higher Thursday but the move looked labored on a very slow trading day. It did just enough work to remain above a sharply rising uptrend line. Friday the Dow needs to start out strong to remain above the sharply rising trend line.
Note: Futures traded higher right after the bell in reaction to some earnings reports.  

The Dow’s trading range was only 52 points, the narrowest since May 3. Most of the action was spent on the plus side of neutral, but suddenly the Dow is acting much the same as it has at a number of recent highs, like it can’t get out of its own way. A serious break of 13,870 is the first near-term warning signal to watch for.

Personal Income, Spending, and the PCE for August come out Friday before the open. Chicago PMI for September at 9:45 and then August construction spending at 10 will set the tone for the day. With the housing numbers I don’t think anyone is expecting much from the August construction numbers. The big one is the most current, the Chicago PMI. It will be interesting to see what the number is and how folks react.

Enjoy the end of the week, month, and Quarter

Jim Patterson

Here’re the Details:

The Dow was down 10 and up just 42 at its high of 13,920. It did climb above last week’s high of 13,870. Thursday was slow as molasses but the Dow stayed above 13,870 and it finished with some strength at 13,913 up 35 and just 7 off the day’s high.
IBM added 8 while GM subtracted about 9, and 17 of the 30 were up.

The top of the Dow’s 21-day 3.5% exponential trading band is now 14,053. That leaves the Dow with only about 125 points of reasonable upside potential at this time. It is extremely rare for the Dow to push above the top of this band so for now a new high is possible, but if reached will be challenging to sustain.

Over the course of the week we have seen some remarkable stock price movement, especially in China related shares. The most impressive is JRJC (China Finance Online.) The stock traded above $40 on Thursday, up from $15 only seven trading days ago.
I am not making any sort of recommendation on this other than to say JRJC is due for some backing and filling on a near-term basis. Support levels: there is a gap at ~30, and two days of consolidation support around 22.5.

S&P 500 hasn’t broken out yet: 1531.65 is the Fibonacci 72% retracement of the entire pullback from last week’s high and the SPX closed right on it. Seeing the SPX measurably above 1532 should confirm our expectation of reaching 1540 and likely making a run for the 1550 area. Bottom line, the 1530 – 1532 area has been an effective resistance zone, but the overall uptrend remains in tact.
The Friday morning news will set the tone, but for now our upside expectations remain on track. Watch for a possible quick test of 1521 – 1523 before pushing higher just to aggravate the short-term trend traders.
We are still looking for a push higher with a turn lower starting between Friday and the middle to late next week.

The Russell 2000 looked a little better: A little better yes, really good, no. The RUT closed in on upside resistance that runs from 820 to 825. It still needs to clear 830 to give the all clear signal. One major concern remains breadth, see the chart below.

All most there, all most there; the NASD is closing in on that July high. Near-term support is now about 2685.

The rest of the daily trends shifted to buy signals and the “space” produced by the FOMC jump remains in tact. At this point the expectation remains for the upward move to continue as long as we don’t see the Daily trends shift back to daily sell signals, which are a healthy distance away for now.
All the 3-day trends can turn down on Friday with a break of Thursday’s lows. The Dow’s 3-day has been pointing up for two weeks, a moderately long period for a 3-day trend cycle.  

The Detailed Trend report, CLX Charts, Weekly Trend Signal Count Charts, have been moved to a new location at this link. This link now has a Chart of NYSE 8-day Buying and Selling pressure, plus a few others.

Total breadth was +1596. That is much healthier relative to the index gains. The catch is total volume was non-existent, below 2 billion shares. That puts Thursday in the “one of the slowest days of the year” category.
Volume was weighted to the upside, but despite solid breadth numbers daily buying pressure was below the 8-day metrics.

The 5-day RSI metrics are near or above 80, a very overbought level. The NASD Trin-5 is very low, well below the extreme overbought reading of 4.

New highs continue to out pace new lows, which is much more constructive than earlier in the week. And, NYSE cumulative breadth set a new 30-day high. It is still well off its summer high, but at least it is moving in the right direction. The NYSE Composite also bettered last week’s high.

The NYSE reading is encouraging, but the chart below shows cumulative breadth on the Russell 2000 through Thursday and it is less constructive. Note that breadth did not make a higher relative high last week and remain weak while prices are higher. For now this is the most troubling negative divergence.

Watch the 9:45 September Chicago PMI numbers. For now the indices remain in high and tight consolidations that should see a measurable push higher before any real weakness comes in.  

Jim Patterson

Most Obvious chart resistance levels: (no changes)
Dow  13,490, 13,580, 13,630, 13700, 13,875, 14,021. 14,037, 14,125, 14,250
SPX 1467, 1478, 1489, 1496, 1504, 1517, 1525, 1532, 1537, 1549, 1570
NASD 2558, 2575, 2595, 2600, 2622, 2649, 2664, 2685, 2700, 2735, 2756
NDX  1945, 1954, 1969, 1991, 2000, 2018, 2030, 2061, 2100, 2117
NYSE 9470, 9550, 9646, 9730, 9860, 9970, 10,000, 10,050, 10,272, 10,750
RUT-2K 765, 778, 787, 794, 800, 812, 824, 835, 842, 848, 854-856, 861, 876

Most obvious Chart Support levels:
Dow 13,820, 13,750, 13,620, 13500, 13,356, 13,225, 13,050, 12,985
SPX  1525, 1519, 1507, 1489, 1475, 1451, 1444, 1428, 1418, 1400, 1363
NASD 2690, 2655, 2621, 2600, 2592, 2577, 2558, 2531, 2516, 2491, 2450, 2400
NDX  2090, 2050, 2025, 2000, 1989, 1976, 1954, 1923, 1896, 1860, 1838, 1810
NYSE 10,000, 9920, 9865, 9720, 9600, 9525, 9456, 9385, 9220, 9186, 9025, 8925, 8800
RUT-2K 834, 828, 820, 805, 800, 795, 787-8, 782, 777, 775, 765, 760, 746, 736

Here’s where we are now:

NASD 100 Index (NDX) Trading System, trade the QQQQ:

The NDX made another new high. With its 5-day RSI at 86.6, the NDX probably doesn’t have much more upside oomph in it. If the NDX thrusts sharply higher and then gives it all back, the look to go short on a break of 2100 looking for a near-term pullback. Keep in mind that this is a reversal trade. Drifting a little here and there is not the kind of action we are looking to capitalize upon.   

S&P 500 (SPX) Trading

Wow! That was weak, but we are still looking additional upside.  

Long SSO as of 9/24 @ 94.61, closed at 96.10

For Friday we are again looking for an up day. The catch is we might see an early spike higher that fails. Such an outcome would provide an excellent opportunity.
Use 1524 as a stop price. That locks in a small gain. If the SPX pushes above 1535 – 36 then move it on up to 1530. If the SPX reaches 1545 then look to book the gain once the run higher peters out.

Tactical Stock Trading Powered by the PRS Stock report

Return of the Hop & Pop Portfolio:

BBD reached a high of 29.50, bettering its July high.

BBD rec long 5/31 @ 25.39, stop 26, Target 29.5 or higher, closed at 29.44
WFR rec Long 8/22 @ 58.95, stop 56 closing, closed at 60.75
NVTL rec Long 9/5 @ 23.81, stop 23, closed at 23.48
HURN rec Long 9/24 @ 71.08, stop 71.23, closed at 72.21

Long-term Buy and Hold:
AMD rec @ 12.94 closed at 13.28
NEW: SMSI rec @ 16.10, closed at 15.49

Stocks to watch:

SPW, breakout level is about $90.

PRSC snapped a near-term down trend line on healthy volume closing up 1.47 at 30.11. It has four quarters of strong revenue growth but EPS growth is spotty.

Jim Patterson
Editor
Tactical Trading Outlook

Here’s the Deal:

Did I mention that the rally needs to broaden out or else? Ok, I just wanted to make sure because the market isn’t listening.

Seasonality is setting up to follow the historical trend and based on the conviction telegraphed via the internals, the market may be ready to follow the historical cycle a bit faster than average.

The historical average points towards October 5^th through the 9^th for a seasonal peak in stock prices. And, per the seasonal chart, shown again tonight, if there has ever been a time to watch out for “the big one,” well, now is the time.

Coincidentally, though there is no reason to believe there is a correlation other than the terminology I am using, NASCAR will be racing at Talladega Superspeedway on Sunday October 7^th. In the August 30 TTO Daily Update I discussed NASCAR, Talladega, and The Big One, which is the term used to describe the expected big crash that always seems to happen at Talladega. Coincidence or not, the timing of the race seems appropriate.

The historical window of danger is from about October 5 through October 20. Near-term seasonality is positive past the end of the quarter.

Based on the price action, it is starting to look like a lot of money runners are holding their collective breath waiting for the end of the week, month, and Quarter on Friday. However, over the past two days the market has managed to shake off a lot of bad news.

Jim Patterson

Here’re the Details:

The Dow gapped higher running 137 points higher to 13,915.78. It closed at 13,878 up 99.5 on the day. That is just 37 off the day’s high.
GM added 26 points to the Dow with AA kicking in another 12. That is a third of the advance from just two stocks. Those were the only big movers, and only four Dow stocks were down on the day.

The top of the Dow’s 21-day 3.5% exponential trading band rose another 34 points to 14,019. This upside containment band has risen over 160 points in the past week. The good news is the higher Fibonacci target zones are now within the top of the trading band.

From a pattern stand point, that could be it. From a seasonal stand point, we should see additional strength over the next few days. The truth is the market is being driven by singular stock events that bring in small short lived waves of general buying. Overall, this sort of action should make the bulls very nervous.

The Dow cleared 13,810 out of the gate opening the way to higher prices. Despite an alarmingly large mid-day program sell, the Dow managed to post new highs for this move. We are still looking for the Fibonacci upside extension zone from 14,000 to 14,050, but the quality of the trading action is remarkably poor.

With Wednesday’s thrust higher we can focus on 13,815 as support. Seeing the Dow below 13,815 is the first real warning signal. A sustained move below 13,775 is highly detrimental to the bullish case.

The Put/Call ratio on the Dow was 14 on Wednesday. The volume of options on the Dow is not very large, but the ratio was remarkably high. The total index only put/call ratio was 1.3, so the Dow’s numbers leave us with a remarkably anomaly.

The HUI pulled back sharply on Wednesday: While at first glance the move looks serious, once it is put into context relative to the recent rally the HUI remains well above normal support for a pullback at 360-365. A portion of the move was due to a report from NEM indicating higher costs.
Pullback support is from 362 to 370. It is important to note that while the HUI is pulling back, GLD is holding within a relatively high and tight trading range between 71.5 and 73.

S&P 500 is making a run for it, sort of: The SPX manage to work its way above the near-term down trend line. It wasn’t a powerful upside breakout, but at the end of the day the SPX is above the uptrend line and the near-term down trend line. Overall the expectation remains for the 1550 area and a close above now solid chart resistance at 1530 will help confirm such a move is under way. 1525 is the immediate pivot area to watch, about where the SPX closed. Seeing the SPX back below 1516 is a no no for the near-term bulls

The Russell 2000 is not leading the way higher: It moved higher Wednesday, but the rally isn’t broadening out. A big surge over the next few days can still “save the day” but from the current perspective, it is feels like we need an emotional change of character within the market to solidify a big picture bullish expectation. Near-term, the handle like consolidation argument still holds.

The NASD reached 2700 and has its sights set on a new high at 2725. 2650 remains the key support level to watch and that is likely at least two days away, a healthy cushion for the bulls.
Looking out a few weeks, I am looking for prices to stall around or just above 2725 and then consolidate for a couple of seeks while holding above 2600.

A couple of the 3-day trends had a chance to turn down and did not turn down. That is constructive action. Friday all the 3-day trends will have a chance to turn down.
With a lot of strength, all the daily trends are back up, but the S&P and NYSE have not managed daily buy signals. Taking out the B @ levels will add confidence to the current rally.

The Detailed Trend report, CLX Charts, Weekly Trend Signal Count Charts, have been moved to a new location at this link. This link now has a Chart of NYSE 8-day Buying and Selling pressure, plus a few others.

Total breadth was +2550 at the open and +1524 at the close. Yes, the indices closed higher, but we saw a lot of waning upside energy over the course of the day. Note that we saw very late day selling.
Total volume was about even with Tuesday and weighted to the upside.

However, with several indices making new highs, we are starting to see some minor internal divergences. The Dow made a new high while 5-day advancing volume contracted from its recent high. The same goes for 10-day volume. Similar trends are present in all the volume metrics I follow. This leaves us with a mixed situation.

NYSE New 52-week highs = 157. New 52-week lows = 58. Even with a general market opening gap higher the number of new lows is still higher than desired. But, at least we have more new highs than new lows.

For now we remain in the narrow rally = potentially difficult October mode. The strength is concentrated in a small number of stocks, many of which have gone parabolic. The good news is that over the past two days we have seen the market shake off some really bad news. Failure to react significantly to negative news tells us most of the news has been discounted. In short, the market has discounted the decline in home sales.

Thursday we get final Q2 GDP numbers and the big one at 10:00 AM, New Home Sales for August. We know the number will be bad, the question is how bad? Again, if the market can shake off the bad news it will look very constructive on a near-term basis.

Jim Patterson

Most Obvious chart resistance levels: (no changes)
Dow  13,490, 13,580, 13,630, 13700, 13,875, 14,021. 14,037, 14,125, 14,250
SPX 1467, 1478, 1489, 1496, 1504, 1517, 1525, 1530, 1535, 1549, 1570
NASD 2558, 2575, 2595, 2600, 2622, 2649, 2664, 2685, 2700, 2735, 2756
NDX  1945, 1954, 1969, 1991, 2000, 2018, 2030, 2061, 2100, 2117
NYSE 9470, 9550, 9646, 9730, 9860, 9970, 10,000, 10,050, 10,256
RUT-2K 765, 778, 787, 794, 800, 812, 824, 835, 842, 848, 854-856, 861, 876

Most obvious Chart Support levels:
Dow 13,820, 13,750, 13,620, 13500, 13,356, 13,225, 13,050, 12,985
SPX  1518, 1507, 1489, 1475, 1451, 1444, 1428, 1418, 1400, 1363
NASD 2680, 2655, 2621, 2600, 2592, 2577, 2558, 2531, 2516, 2491, 2450, 2400
NDX  2070, 2050, 2025, 2000, 1989, 1976, 1954, 1923, 1896, 1860, 1838, 1810
NYSE 9920, 9865, 9720, 9600, 9525, 9456, 9385, 9220, 9186, 9025, 8925, 8800
RUT-2K 834, 828, 820, 805, 800, 794, 787-8, 782, 777, 775, 765, 760, 746, 736

Here’s where we are now:

NASD 100 Index (NDX) Trading System, trade the QQQQ:

The NDX remains an upside leader despite several popular OTC names pulling back, like BIDU, SNDA, and others.  

S&P 500 (SPX) Trading

We were looking for higher prices and we are getting them, but it doesn’t seem very solid at this point. We are looking for continued upside action over the balance of the quarter.

Long SSO as of 9/24 @ 94.61, closed at 94.95

For Thursday we are expecting a generally up day. Use 1515 as a stop price and if the SPX takes out 1535 then move the stop up to 1522. Keep the stop at 1496. If the SPX reaches 1535 then move it up to 1522. We are looking for a couple of days of strength.
If you want to be more aggressive then use 1520 as a near-term stop price.

Tactical Stock Trading Powered by the PRS Stock report

Return of the Hop & Pop Portfolio:

BBD rec long 5/31 @ 25.39, stop 26, Target 29.5 or higher, closed at 28.68
WFR rec Long 8/22 @ 58.95, stop 56 closing, closed at 60.23
NVTL rec Long 9/5 @ 23.81, stop 23, closed at 24.30
HURN rec Long 9/24 @ 71.08, stop 67, closed at 71.24

Long-term Buy and Hold:
AMD rec @ 12.94 closed at 13.75
NEW: SMSI rec @ 16.10, closed at 15.66

** PRS Open Actives making noise:

PRXL is in a shallow down trend. After the close they revised their guidance a little higher, which could help the stock. Thrusting above 41 targets $44 to 45, this is a short-term trading idea.

Jim Patterson
Editor
Tactical Trading Outlook