Where is the Dow & others heading in 2005?

[roguetrader]

Interesting to see volume on NYSE is coming in roughly in line wiith yesterday, not really what I would have expected from a 100+ point rally to new multi year highs

 

[wellshot]

wheres the dow headed?

a longer term view..my own musings

 

[peterpr]

Interesting to watch volume on the YM continuous futures contract following the main index close.

Index closed at 10940.6. The futures contract has moved up to 10968 as I write (45 minutes later), the last 10 points on almost non-existent volume. Trying to scare shorts into covering before the weekend I guess.

The YM currently showing a 142 point rise on the day (10825 to 10968) - 1.3%
The index just 107 points - 1%.

I've never really studied this type of anomaly before on the US indices. Will be interesting to note the early action on Monday. 11000 is clearly calling, but does it have the wind to do it in just one more session?

 

[tradesmart]

Ed Downs tonite:-
The upside break from the consolidation at 10,870 indicates movement toward a target at about 11,020, per consolidation theory..

I think he’s being a bit conservative – I’ve gone for 11300 as mentioned last Monday…..

One thing is for sure imho – barring sudden financial or geopolitical shocks; it’s going up…….

 

[wellshot]

tatgets for the dow mentioned on this thread,

and more besides

 

[peterpr]

from Richard Russell:
(goldilocks) Mar 04, 17:25

Well, it happened. Both the Dow and the Transports rose to simultaneous new highs today.Both the Dow and the Transports closed today above their December 28 lows. (That's a major DOW Theory non-confirmation finally resolved - or is it? Peterpr) Today's action ended the trading range that has been in force since last November. You may love it, you may hate it, you may distrust it, you may ignore it -- but this is the market talking, and it's saying that "the odds favor higher prices." It's up to you to decide whether to ACT on today's action or not.

Why did it happen? It doesn't matter why -- the market has spoken, and you either accept the verdict of the market or you don't. But you certainly don't go against it, for instance, by shorting the move.

Nevertheless, I'll give you the "why." Two words -- MASSIVE LIQUIDITY. The markets of the world are floating on liquidity. Oil going up, housing going up, basic materials going up, stocks going up, bonds going up, base metals going up, precious metals going up, commodities going up, agriculturals going up, collectibles (particularly art) going up, diamonds and high-grade jewelry going up. Let me put it this way -- if it can move, it's going up.

He might have added that it is endemic, easy borrowing against all these appreciating assets that is the engine - a self-fulfilling one-way bet . The bulls have it for now, so why not go along for the ride? Why not indeed?

 

[User]

Thats interesting to note rogue trader regarding the volume.

Also I was thinking as traders are probably taking 11,000 for granted could we see a decline from here? Just as it was mentioned earliar that this 'definate breakout' shouldn't be taken for granted as it is such a blatent breakout. Crowd normally wrong etc.

Nevertheless interesting charts guys.

Nice one.

 

[wellshot]

personal view

dow

 

[mpjordan]

I'm with the crowd , went long friday mar futures at 10954, surely if the market can close above 11000 any bears left are really going to get squeezed. If the market goes any where near 10900 I shall be buying more. Wow , Ive sprouted horns.
Mj

 

[FetteredChinos]

sorry User, i did mean 11,110 ie another 150 points up from where we currently stand.

most likely to hit on tuesday (possibly pre market though).

tuesday is also a delta turning day..

it is looking like being setup for a short-sell week. with the early high tuesday being sold off into thursday. weak recovery (perhaps around 10900 on thursday) into monday, and then down into tuesday/wednesday for a buy week. may even hit 10700 next week? (crumbs, now that would get the bulls scared!!)

this is a preliminary plan, and of course things could change


incidentally last week notched up +145 again on the mechanical strat, and a whopping -95 on discretionary.

that is 2 weeks running.. you thought i would have learnt by now......

 

[peterpr]

..... surely if the market can close above 11000 any bears left are really going to get squeezed. Mj

A good case for an approaching market top me thinks.

When there are no bears left - all forced to cover and licking their wounds, that's when markets tank - and not before.

Think about it - you don't get a rush up JUST because there are a queue of buyers scrambling to jump on board - its the forced covering that really gives it legs.

So - I agree, 11,000 + here we come. But don't be greedy with those longs because when it does reverse it will do so with a vengeance. Getting caught long is always more traumatic than short - everything happens so much faster! - and of course it is pretty well always the euphoric punters that get burned the worst.

Just look at all the sentiment readings - never been higher. Everyman and his dog are climbing on board against a background of steadily deteriorating fundamentals. On top of that you'd be hard pressed to find a layman's media outlet counselling caution, in fact just the opposite - more than a whiff of deja vue about it all if you ask me. But then maybe I'm just a grumpy old sod (www.grumpyoldsod.com).

Might dabble intra day both ways. But multi-day/week stock index positioning in both US and UK limited to cash until the top is clearly in. Might miss out on 2-4% or so but better that than get burned for a quick 20% ! - ALL in my ever so HO of course

 

[mpjordan]

Take your point peter, will the short covering and the rally over reisistance prompt new money to come in that had been waiting on the sidelines? I geuss when that runs out there is only one way to go.
My new found horns are retractable. on recent form I will bail out of my long too early.
Are you still long preacher man?
Mj

 

[User]

Interesting post peterpr.

Anyway if you think where we were on the 24/1/05, the lows of the year. Now whats changed from then?

Nothing much. I believe down moves can occur alot faster and well longs should be taken carefully at this stage. Might be a bull trap. Where we see 11,000 taken out which is also major resistance then if we see 11,100 all would want to jump on board to go higher. It may just be that we could see a turning at that stage. However, nevertheless we have seen a breakout so a longs should be entered but I am feeling rather sceptical at this stage.

Good Luck with trading this week.

 

[roguetrader]

Thats interesting to note rogue trader regarding the volume.

Also I was thinking as traders are probably taking 11,000 for granted could we see a decline from here? Just as it was mentioned earliar that this 'definate breakout' shouldn't be taken for granted as it is such a blatent breakout. Crowd normally wrong etc.

Predicting the market would do my head in ie (is up too obvious?, and if it is so obvious then could it be obvious that it is obvious and therefore not so obvious........I need a beer.Hats off to you guys. Thats why I stick intraday, less hassles, just let her show me the way today, worry about tomorrow, tomorrow Nasdaq was the anchor Friday imho, weak biotech sector, indifferent internet sector and most improtantly the SOX relatively weak on the day. SOX never moved real far from that trendline and the 20 day sma.Early morning pop to 440. Last week she broke out over the 200 wk sma currently at about 440 and achieved a weekly close above it. Has tried a couple of times over the last 3 yrs. This week brought her back below that level. Interesting to watch next week.
As for total market volume on Friday Naz declined while NYSE squeaked a higher total, but nothing remarkable as you can see on the charts.

 

[starspacer]

Good post Peterpr.

Bulls seem in control now, and maybe for a bit longer. Just look at those puts still in place. People are still trying to call a top - before the market calls it. This is just a recipe for more short covering next week.

Personally, I'll be selectively shorting intra-day, hopefully after the shorts have already covered - I don't want to be part of the Friday-type rocket fuel that propels the market higher.

All sorts of negative divergences are beginning to appear, so suggests that a top may form over the next few months. Having said that, as always, I'll let the market decide, fade some, but mainly stick with trend.
Good luck guys.

 

[User]

Rogue trader I just find medium to longer term interesting, as I love to see what the markets may do. I'm young and enthusiastic but I believe something should be learnt everyday. (Good or bad day)

I was reading wallstreet courier and these guys are putting in a good 'technical' argument for a bull trap. They say:

Here are some more reasons why we believe that this breakout was most likely a short squeeze and not the beginning of a long and substantial up move:

The volume at the breakout was not very heavy

The bulls have now wiped out the short sellers as we predicted and this will probably take a lot of steam out of the market

Oil is not far from its all-time high of $55,67 per barrel it reached in late October and it could rise further

Investors Intelligence and Market Vane shows market newsletter writers to be more bullish today than they were at the giddy heights five years ago

The Vix is still at historically low levels, indicating complacency among investors

The Dow reached a 3-1/2 year high but the number of new highs is lagging badly compared to the Dow's previous high in January and February 2004 (Charts of Interest)

Public short sales (dumb money) fell to very low levels recently

Short selling by NYSE members and NYSE specialists (smart money) is rising rapidly


They seem like good arguments. Lets see how the situation develops. Friday’s movement is obviously telling us to BUY, buy, buy and then buy a little bit more. The funny thing is the volume isn't supporting this notion. Normally you would have to agree and think that when this type of activity occurs we normally would be approaching market tops.

I also know a lot of members trade intra-day and therefore your positions and stances on the market change much more frequently then medium to longer-term investors. This breakout is showing on medium to longer term charts and now basically everyone is being told to buy no matter what term you trade on. Intraday traders catch daily moves therefore they change directions rapidly. The medium and longer term traders who bought on Friday in terms of a breakout should be aware of what could happen as they hold positions longer and can get burnt more then intraday traders.

If you look at other charts or indicators such as Smart Money Flow Index, Investors Intelligence and Market Vane, Public short sales (dumb money), VIX, NYSE members action and NYSE specialists (smart money) they are all showing a bearish view.

I believe greatly that my money or even your money does not control markets. It is controlled by institutional money, big money. This post is just some ‘friendly’ advice to members as most of us are very small compared to institutional power. Oh and while the small guy might be buying they are now selling.

Also I urge members to listen to Tim Wood on:

http://www.netcastdaily.com/broadcast/fsn2005-0305-1.ram

or

http://www.netcastdaily.com/broadcast/fsn2005-0305-1.asx


Thank you.

 

[Preacher-Man]

Take your point peter, will the short covering and the rally over reisistance prompt new money to come in that had been waiting on the sidelines? I geuss when that runs out there is only one way to go.
My new found horns are retractable. on recent form I will bail out of my long too early.
Are you still long preacher man?
Mj

Hey MJ how you doing? In answer to your question, I'm still long (short-term) in spirit, if not in body. [you what...?] I was a bit too keen with my stop on Friday and was picked off at 10865 after which the market waved goodbye and never looked back. Still, came away with 26pts per contract so can't whinge too much.

Looking at the price action overnight, I'm going long again today (so far (subject to change)) but looking for a pull-back to 10935 to enter. I'm expecting to see us in the region of 11000 today, but I'm cautious because of:
1 - Oil is threatening
2 - Friday's breakout was not accompanied by high volume

Having said that, I'm still going long because:
1 - I strongly believe in momentum carrying a move on
2 - The breakout was strong and the close was close to the day's high
3 - Other markets have reacted in a similar fashion. eg, the Nikkei closed overnight at 11925.36 which is its 8th straigh gain and a 10-month high. A lot of this is due to Sony's gains, but a lot more is a reaction to the strength of the US economy which is the same sentiment that's driving the DOW.

Good luck Bulls, but watch out for those traps...!
Good luck Bears - over the medium-term you're gonna be rubbing your paws together...!

 

[mpjordan]

Good points pm.
After the lack lustre european opening, i dont feel so bullish now.
Shame about your stop being triggered, that must have been close. I admire your stoicism in the face of a missed 90 points.
Mj

 

[peterpr]

Good points pm.
After the lack lustre european opening, i dont feel so bullish now.

The YM futures are also drifting down - 10954 as I write - still above Friday's index close of 10940 though.

 

[Preacher-Man]

Good points pm.
After the lack lustre european opening, i dont feel so bullish now.
Shame about your stop being triggered, that must have been close. I admire your stoicism in the face of a missed 90 points.
Mj

Cheers MJ... Have to admit - wasn't quite so stoic on Friday night, but as my wife keeps telling me, "look at the profit you've MADE - in the bank - NOT the potential you've missed". She's right of course: looking at potential (missed) profit will drive you insane eventually!