Real-Time Reinforcement

September 5, 2002
Don Miller

Daily and hourly downtrends
continue on both the Qs and SPYs — despite
yesterday’s price probes on the hourly chart (more on that below) — with the
morning downdraft fueled in part by trader response to weaker than expected ISM
data. At this rate, economic forecasters can align themselves with Dow 36K
and Super Bowl spread prognosticators — Go Pats — but I digress. In any
event, the hourly and 13-minute downtrend supports are being tested as we
approach midday as the result of a late-morning three-minute turn, although the
Qs are lagging the broader market, and resolution of the current three- and
13-minute conflicts should guide the next move. Continue to keep an eye on the
hourly trend angle which has begun to flatten a bit.

Yesterday afternoon provided yet another excellent real-time reinforcement of
why I continue to harp on multiple time frames and moving average angles to
guide trades. Video
and school students
know that there was an excellent combined three- and 13-minute turn midday
yesterday which guided afternoon longs for the shorter-term players. Yet a key
point for both intraday traders on the lesser time frames AND swings (defined
here as hourly trend traders and above) was the significant angle of the hourly
downtrend, which — despite the late afternoon price probe — coupled with the
approach to daily short support was screaming intraday long exits and/or heads
up for hourly downtrend continuation triggers. The latter required at least a
three-minute turn which didn’t occur until right before the close. When the
three-minute balloon was finally pricked, the eventual cliff drop on the three
occurred.

While I don’t normally post three-minute charts in the column because they grow
stale as soon as the virtual ink dries, I’ve included yesterday’s three-minute
SPY chart below which shows the sharply angled 15MA which along with the 5MA
provided outstanding guides for both three-minute longs and hourly shorts
looking for triggers which didn’t materialize until very late.

QQQ
Thursday
September 5, 2002 11:15 A.M. ET
SPY