Where is the Dow & others heading in 2005?

[justyn]

Hey guys,

it was a fairly safe bet we were heading down.

Just before the announcement we were looking overbought on both RSI and CCI on the 1 min chart ..... not enough room for a move up.

Never a guarantee that we aren't going up, but would you go long when it looks like this?

Given the recent bearish market anything less than fantastically good news seems to fuel the bears' fire.

 

[affirmer]

Read that totally wrong then!! Went long not long after the announcement and currently down 127 points. Its a June contract so I'm debating whether to cut my losses now or ride out the downtrend and wait for a bounce to at least breakeven. Any thoughts?

I assumed that as the statement was not too hawkish and they retained the word 'measured' that the market would be temperarily confident that there would not be a more agressive stance with rate rises. I thought this would be more important the the inflation waffle - I was wrong!! It's nice to be humbled at £5 a point - it normally happens at £20!

So where do we go the rest of this week any bulls think we will retake 10700 by Friday if oil continues to back off?

 

[roguetrader]

Well an early hint of bovine soon faded and the bear flexed his musclesagain.

SPX closed below a multi-month trendline from March03. Swing low possible support at 1163 from late Jan then the 200 day sma beckons at 1150.

DOW about 95 points above its 200 day sma which sits close to swing low from Jan also at 10368. Multi-month trendline still a ways off at 10290ish.

Naz Comp has already taken out multi-month trendline, that swing low and has now managed a close below the 200 day sma.

Who's afraid of the big bad bull?

 

[tradesmart]

Read that totally wrong then!! Went long not long after the announcement and currently down 127 points. Its a June contract so I'm debating whether to cut my losses now or ride out the downtrend and wait for a bounce to at least breakeven. Any thoughts?

To be quite honest Affirmer, the first move after the Fed announcement usually shows the way - it's almost a tradition that the market invariably follows....

In general terms, I think that you'd be far better off trading with a 20point stop max and re-entering if it gets taken out.....the first cut is generally the cheapest, and preferable to carrying a deeply underwater position and waiting for the market to give you your money back (or not)

After the severe falls of late the market has to find a supportive bottom and there may be more declines before this happens.....

I am sure that the market will retrace over your entry point sometime, but would hesitate to suggest when....

btw, it was "pressures on inflation have picked up in recent months and pricing power is more evident" from the Fed that did the damage apparently.......

Good Luck

 

[roguetrader]

Read that totally wrong then!! Went long not long after the announcement and currently down 127 points. Its a June contract so I'm debating whether to cut my losses now or ride out the downtrend and wait for a bounce to at least breakeven. Any thoughts?

I assumed that as the statement was not too hawkish and they retained the word 'measured' that the market would be temperarily confident that there would not be a more agressive stance with rate rises. I thought this would be more important the the inflation waffle - I was wrong!! It's nice to be humbled at £5 a point - it normally happens at £20!

So where do we go the rest of this week any bulls think we will retake 10700 by Friday if oil continues to back off?

Ouch mate, feel for ya, 10700 is a long ways away, lot of overhead supply, not to mention technical resistance. I don't do long term predictions I'm afraid, and would be even less likely to attempt one in relation to managing an open position, all I can say mate is honor your stops, there's more to support the downside than up I would say, though for people who follow overbought / oversold, we must be pretty oversold here. With the NAZ at its 200 sma now would be a good time for the bulls to try something. The question really is how much of a bounce can we get. Sorry I can't be more help to you.

 

[User]

I would not want you to act on my advice; but suppose I had your position open in my account then I would put my stop loss at around 10380-400. I'll just point out my analysis:

If we see the charts now we have had a steep decline and many indicators are suggesting that the market is oversold. We could have a bounce.

As the situation stands if the lows of the year are taken out then we are in trouble. However if we make a higher low then we still have a chance to visit the highs. Assuming you've held the position up until now then hold a little longer, as technically it would make sense.

However even if you held that position on a longer term basis then your stop-loss could have been near 10580-10600.

As we know 10600 'was' support and normally putting the stop 20 points or so below that level then gives the chance for intra-day swings. On Friday however we went lower and then still ended above support, Obviously that support has faltered and you would have been stopped out on Friday. Anyway you haven't placed a stop at 10600 so not to panic.

Assume you went long now at say 10450 as realistically you have to see the chart in terms of where it may travel using your analysis you can't really look at your entry too much as 200points can be brought back in a day or two as a reaction rally is possible.

Lets not forget the fact that sometimes you see strange reactions on the day of the announcement and then it can always swing the other way. So 10380-10400.

If we don't test the lows then 10600 on the upside can be easily be seen in the coming days as a lower high would be in place.

Good Luck let me know how you get on and remember its not the end of the world so don't stress yourself about it too much. If it don't work out then assess how you could have done things better and move on. Dwelling on a bad trade too long will shatter your confidence and could possibly result in you not taking the next possible 'winning trade'.

 

[affirmer]

Read that totally wrong then!! Went long not long after the announcement and currently down 127 points. Its a June contract so I'm debating whether to cut my losses now or ride out the downtrend and wait for a bounce to at least breakeven. Any thoughts?

I assumed that as the statement was not too hawkish and they retained the word 'measured' that the market would be temperarily confident that there would not be a more agressive stance with rate rises. I thought this would be more important the the inflation waffle - I was wrong!! It's nice to be humbled at £5 a point - it normally happens at £20!

So where do we go the rest of this week any bulls think we will retake 10700 by Friday if oil continues to back off?

Thanks for all your replies - what makes this business so interesting is all the different interpretations of the same events. I guess I went for a more fundemental approach and ignored the basic technicals that were set up....... and I interpreted the fundementals wrongly!

I also would have assumed that although there was an increase in rates, as this was already factored in in recent dollar rallys, that the dollar would have dropped due the lack of aggressiveness in future rate rises that everyone expected. Luckily I didn't take a position on this on the basis of my conclusions!! I already had a EURO/USD short position open and watched as I gained as many points here as I did losing on the DOW.... funny old world!

Just to keep you updated - I have decided to keep my position open - I am still a bull at these prices. To think only last week we were discussing the chances of 11000!! I think we might be in a downtrend but a bit oversold at the moment. So I am sure (ha!) of a bounce back to levels that I can break even at. (I need a rise of about 120 points from where we are at time of writing) I will keep you posted

Good luck to you all - and thanks for your responses

 

[peterpr]

I guess I went for a more fundemental approach and ignored the basic technicals that were set up....... and I interpreted the fundementals wrongly!

One thing I learned rather quickly in the short-term trading business is that the 'technicals' are simply a historical record of the market's interpretation of 'fundamentals'. You can find patterns etc in those records that tend to repeat and are therefore good predictors. Fundamentals are probably necessary as a trading backdrop but are next to useless as timing tools.

I'm a pretty keen follower of 'fundamentals' myself (is there anybody who isn't in this bgusiness?). BUT - I've learned not to trade the broad markets from them - or rather my interpretation of them on anything other than a 6-12 month view or longer. The reason? No matter how expert you are, you cannot know the sum total of information that will dictate short-term movement - much less its timing.

Technicals (price, indicators, price patterns, s/r etc) OTOH are an accurate records - the 'footprints of money'. It is unarguable that, whilst tick movement is essentially random, price/time patterns do repeat and various indicator combinations can forcast price direction fairly reliably.

 

[twiggytwo]

Hi Affermer,
Have just read the posts on your position on the Dow and I hope that the following will help you.
First, I have in the past been in your present position .
sitting and hoping that the market will retrace back up and cut my loss. I can tell you that this sometimes will happen but I have found that the odds are against you.
The next step down from my Indicator to a consolidation / support area is at 10,375
IF the Dow stops on the way down to this area it may stop at 10,430 as the indicator shows a small range from 10,430 to 10540 you will find that the 10,600 that was support may now become a strong resistance area .
If you look at my post on e.o.d.close pattern on this thread you will see that yesterday was a Lower Low and for the market to show a change of direction it must close above this day (10,470 ) look at the post it may help you see the way forward .
I now only trade on signals and never try to predict the direction and I am at present holding a short position on the Dow. I do hope you have a stop on this , as in the past I have been here without one and have lost all past gains. Hope this is of help to you, but it is not trading advice to you or anyone.
Be lucky
regards

 

[rrtech]

I guess the best thing to do is to find out what the market did the last time interest rates were raised AND further increases were likely AND the market fell.

What happened the next few days? Does anyone know of a site that has free historical intraday Dow charts?

 

[User]

Generally speaking higher interest rates always put pressure on markets and normally weigh on the markets which then equates to a negative effect.

A low interest rate environment helps markets to rise.

However effects of interest rates are not instant and therefore the impact of rises and decreases in rates can only be seen in the future. For e.g. if the interest rates are impacting the housing market negatively then we will not find out straight away but if a decline was to occur then in the future we can arrive to the conclusion that the rises in interest rates that started a while ago have suddenly caught up with the market.

On the other hand the Dow trys to react into future impact so to speak.

Nevertheless rising interest rates along with other predicaments mentioned on this thread are bearish for the Dow and co. Short term we could see a bounce which could still see us playing with the highs. However lets not forget all the serious issues which will result in the start of a new bear market but who’s to say its not start of the bear market already?

Next Five years in my opinion are of economic mayhem on most fronts which will also result in China being the super power of the globe and troublesome times will be seen for global economies.

 

[peterpr]

I guess the best thing to do is to find out what the market did the last time interest rates were raised AND further increases were likely AND the market fell.

Certainly would add to the sum of knowledge BUT - there are quite a few other variables that would need to coincide before drawing too firm a conclusion. For example the size and trajectory of budget and CA deficits. The market already factors the lot in - by definition. so I prefer to rely on pure TA for short-term forecasting/trading purposes.

 

[User]

Agreed peterpr.

 

[roguetrader]

CPI worse than estimated, should make for an excitable start to the day

 

[peterpr]

CPI worse than estimated, should make for an excitable start to the day

YM futures took a 50 point immediate hit but are clawing back a bit just now. The figures can be seen simply as confirmation of what AG said yesterday - but but but etc ... Expect considerable volatility still before any short term bounce IMHO - MACD says there is likely more downside first but most everything else is looking way oversold.

 

[roguetrader]

Expect considerable volatility still before any short term bounce IMHO - MACD says there is likely more downside first but most everything else is looking way oversold.

Sounds reasonable peterpr, the Naz raelly needs to bounce here at the 200sma, another close any further below that would be quite bearish, on the other hand, the DOW and S&P still have some roon for downside. Always difficult when the markets get out of whack like this imho.

 

[pietro]

the dow!!!!!

just jumped in on the dow shorting it hoping for it to hit 10400. fingers crossed.


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edited out feel grim made 5 pts hardly worth the stress

still pts win prizes

 

[justyn]

S/R switch on RSi so we're heading down IMO....

 

[User]

We should be able to test 10500 today. Closing above it would be good but the market doesn't seem too healthy at the moment although indicators are stating the Dow to be oversold.

I suppose when everyone thinks its going down greatly it is probably just about to turn. We have seen a large decline from the highs and this decline is even bigger then the January decline. However if it starts to go down below 10400 then investors would be panicked which could lead us down to 2004 lows. I don't think this will happen yet as this could start to shock the markets.

However I think the market will prop up and then we should be in a position to say either: are we testing the highs? or are we testing 10400? In this moment in time I feel we will not visit 10400, as it is solid support. Having said that who knows what is going to happen by 9.00 UK time.

A visit towards 10600-700 region is likely. We are however trading on very thin ice as the market is only 70 points away 10400 at the time of writing. So investors are not wrong in suggesting that 10400 could occur. Although I feel it won't…

 

[justyn]

Looks like reluctance to get above 480 (500 on futs) and a possible expanding triangle?

The S/R switch didn't deliver much so far, 30/40 points if you got in on the pullback to the S/R line and timed the exit just right.

However we now have another pullback to this line and a possible double top at 480 so I think we will see another push down to lower than the day's low so far.

All IMO of course, trade what you see