Factor This In With Your Technicals
The markets got off to a good start yesterday
as the major averages rocketed higher off the opening, paused, and then
continued the advance on the heels of the better than expected
ISM report. As I mentioned in
my column yesterday, both from a technical standpoint and also just a “gut
feel” from staring at the screens for so many years, the magnitude of the rally
was not surprising.
I hope that you all went long on the release of the
ISM number and held in there. It was a great way to start the new
year, as buyers and the OPM (Other People’s
Money) crowd fell all over themselves to buy stocks. You must factor in the herd
mentality/market psychology, in addition to your technical work. For me, once
that number was released, it was just one last, and incredibly important, piece
of information that gave me tremendous conviction on the trade(s).Â
The same stocks I mentioned yesterday, TYC,
AOL, as well as
XOM, all offered 20-40 cent moves in the space of 10-15 minutes. A
few thousand shares on each one of these stocks and you put yourself on a nice
cushion. Given that volatility has decreased (See
Tony Saliba’s piece from Thursday), you need to be ready to attack and go
for the throat when the opportunities arise. You will notice that the remainder
of the morning session, at least by my observations, offered no clear,
high-probability setups.
Gold stocks, as expected and mentioned yesterday, rolled over right from the
opening. Again, given the magnitude that they had risen on the heels of all the
bad news of the last few weeks, you absolutely had to consider shorting these
based on the ISM number. Again, a weak technical picture combined with the
contra trading nature of this sector and you had some more winning trades to add
in for yesterday.
However, as the day progressed and the indices marched higher, the gold
stocks started moving higher. Naturally this was a little odd, but given the
nature of the markets in recent months, nothing comes as a complete surprise
anymore.
Today will obviously be key. Can the bulls hang on to their gains, or will
this be another short-lived rally? If the S&Ps (futures) manage a close above
either 911 or 921, it would be safe to say that this rally will have some legs
for a few more days.
| Intraday Setups | |
| Â | |
Stock |
Action |
| ZMH | Long |
GENZ |
Short |
| PBG | Long |
Â
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 921 | 1069 |
| 914-16 | 1058.66 |
| **911** | 1048.31 |
| 900-01 | 1041.80 |
| 892 | 1032 |
| 881-82 | 1013-14 |
| **869-71** | 997-99 |
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