Why This Week Should Prove Telling
Now that the holiday-shortened week is behind us, and all the retail sales numbers are in,
the market should have enough info to decide what its next move is. Will the
grind higher continue, or is a pull-back imminent? In all honesty, my recent
focus on the mining stocks has taken a little away from my overall feel of the
market in general. In recent weeks, my focus has been the price of gold, the
dollar index (DXC) and other currencies as a way to gauge entry and exit points
for trades in the underlying mining stocks. So while the obvious technical
points remain valid in the S&P’s (1064-75) the bank stocks have not made new
highs, while the bloated tech sector continues on a tear. This week should
prove telling.
The other observation that I am continually
making is that despite the so-called market leaders staying in tandem with the
market for the most part, their underlying action as a traders continues to be
more of a coin toss. Sectors like the housing stocks, not your usual
HVT stocks, are exhibiting fantastic intra-day
range, albeit perhaps better approached on a 5-minute chart versus a 1-minute.
Nonetheless, intra-day range is a traders best friend. Yes these stocks are a
bit erratic, however, like any rewarding trade, it will take time to learn the
personality of how they are traded. Successful traders hunker down and develop
that “sixth” sense, while dabblers do just that, dabble, and never realize any
rewards.
The action continue to be very favorable over in
FX as well. The continuing decline in the DXC
has thrown many FX pairs into some fantastic ranges. So, while these
trades last several hours to several days, the risk/reward is quite favorable.
On Wednesday as the DXC broke down yet again, myself and the subscribers in my
Trading Room went long the EUR
(1.1845) and CHF
(1.2992). Both have played out very nicely. The weak DXC also put a
solid bid in the mining stocks which were ideal for some quick “scalps” in the
opening 90-minutes. Meanwhile a potential short in the
EUR/GBP is setting up, a break below 69.25 (50% retracement of the
November 5 low and November 19 high, will bring me into the trade. The fact
that England has a more robust economy than Euroland and a positive interest
rate differential, adds a nice story to a solid technical set-up.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me your comments and questions.