Price, Pattern, Momentum, Ka-Ching!
A trader’s job is to fit together pieces of the market puzzle to identify
an edge, define the risk, and then execute. Today, the price, pattern and
momentum pieces of the puzzle came together nicely for traders shorting
stock index futures.
Dow futures
(
DJU1 |
Quote |
Chart |
News |
PowerRating) and S&P 500 futures
(
SPU1 |
Quote |
Chart |
News |
PowerRating) broke
key price support yesterday, as both index futures contracts closed at new
four-month lows. Volume in Dow futures was the fourth highest of the
September contract and eighth highest for the SPU1. Both contracts had long
been working on head-and-shoulders tops. An additional bearish sign was the
right shoulder’s etchings of a daily descending triangle. And both markets
closed below the triangle yesterday.
Add last night’s inclusion of the pair to the Implosion-5 List,
and you had several pieces in place, raising the likelihood of a decline.
For traders who regularly scan the Market
Bias Indicators Page, you would have noticed that the previous two days of
declines had been suggested by multiple negative readings from the page, a
factor that continued to exert a corrosive impact on stock index futures
today.
DJU1 closed down 188.0 at 9923.2, SPU1 sank 23.10 to 1129.30, and
Nasdaq 100 futures
(
NDU1 |
Quote |
Chart |
News |
PowerRating) dipped 54.00 to 1455.50.
From the Momentum-5
List, T-bonds
(
USU1 |
Quote |
Chart |
News |
PowerRating) and
10-year notes
(
TYU1 |
Quote |
Chart |
News |
PowerRating) rallied early to make good on Off The Blocks
entries for a quarter-point gain each early in the session. Trading at or near contract highs, both
markets formed intraday topping patterns and backed off from highs to close
down 5/32 and 2/32, respectively.
Currencies continued their recent bullish run after the European
Central Bank lowered interest rates .25%. From the Momentum-5
List,
euro FX futures
(
ECU1 |
Quote |
Chart |
News |
PowerRating) gyrated early to form what is now a
constructive setup on their daily chart; an outside day at a high. The ECU1
also closed above the previous 10 days’ closes, a very positive sign.
Also from the Momentum-5
List, the
British pound
(
BPU1 |
Quote |
Chart |
News |
PowerRating) scored a new multi-month high and left a
constructive outside day at high.
The
Japanese yen
(
JYU1 |
Quote |
Chart |
News |
PowerRating) also looks poised for continuation. It has a cup-and-handle/bullish-flag pattern on the daily chart and traced a similar set
of patterns on the intraday chart. The yen closed up .0054 at .8393.