How To Take A Look At The Fuel Gauge
Both major markets will
enter next week’s post-holiday trade week with continuing uptrend momentum
as ES closed the week up 16 and near the
upper end of its recent weekly range, while NQ added 36 and continues to
effectively perform the role of pace car for the rest of the field. In fact the
Nasdaq closes August on quite a roll as size=2>14 of the last 15 daily closes have
been above its opening price, undoubtedly a show of strength even during the dog
days of summer.
Despite a week of less-than-stellar volume and continued
summer pace, continuation triggers on the long side have remained fairly
effective throughout the recent climbs, with “1 continues 3”, “3 continues 13”,
“13 continues 60” and “60 continues daily” setups all taking their turns in
providing traders of a variety of timeframes effective guides. All in all,
there were more setups than I would have expected over the past week, which
hopefully rewarded those traders patient enough to sit through the deathly slow
times.
As we head into September, which traditionally brings us better
pace, rhythm and volatility — although perhaps not until midweek as three-day
weekends can easily become four — traders will want to keep their eyes peeled
for any price vs. momentum divergences as a heads-up to potential stalls. It
only takes a quick scan of the stochastic levels in all of the key timeframes in both
markets shown below (all above the 70 band, many over 80) to see that the fuel
gauge may be running low on further runs.
color=#ff0000 size=2>Yet (let me rephrase
that … “YET”face=Arial size=2>) as
course students should know, momentum indicators remain
completely meaningless unless combined with trend and range counterparts, for one leg of the
three-legged stool simply doesn’t cut it. Both weekly charts do provide coil
potential for another run, should price tip its hand, yet keeping the exit button
handy or remaining on the sidelines of any further extensions may prove
worthwhile.
S&P 500
src=”https://tradingmarkets.com/media/2003/Don/dm082903-01.gif” width=”574″ height=”617″ />
Nasdaq
src=”https://tradingmarkets.com/media/2003/Don/dm082903-02.gif” width=”574″ height=”617″ />
Moving Avg
Legend: 15MA
Larger Timeframe 15MA
See https://www.donmillertrading.com
for Setups and Methodologies
Charts © 2003 Tradestation
I thought I’d close this
week’s column by first giving the monthly index (cash) markets a peek. While
irrelevant for intraday traders, it may help balance any bullish press you come
across over the weekend. Pondering the risk vs. reward ratio of new long
entries, along with asking yourself “where’s the net?” as we discussed
last week,
may prove helpful, should the climbs tire. And while none of us can predict the
future — heck, I don’t even know what’s for dinner tonight — it will be
“interesting” to see how the Nasdaq responds to a 367 point gap (20%) between
current price and support, which of course can happen via price retracement,
consolidation, or some combination of the two, which is typically the likely
scenario. Yet a break of current weekly support is likely required as
confirmation to avoid becoming unnecessarily impaled by the current
mini-rocket.
src=”https://tradingmarkets.com/media/2003/Don/dm082903-03.gif” width=”395″ height=”332″ />
Be sure to check out the Labor Day sale if
you haven’t already, as both the E-Mini trading
video course and
simulation
courses are on sale.
Good Trading and Have a Great
Weekend!