Well, Q2 earning seasons started off with a tepid spinning top day. Alcoa’s earnings didn’t quite elicit paroxysms of joy, but did impress enough to inspire some to employ nautical metaphors. And, as goes the universal law governing this kind of thing, any market event that can produce poetic flights evocative of lighthouses, rocky shoals and Thomas Kinkade paintings is enough to produce a finish in the black. Which is what we’ve got here.
How about it, then? Occasionally I like to march out the forks and let them have their say. I’m by no means an expert practitioner of Pitchfork analysis (unlike some of the elitist schleps I’ve seen around) but find them very insightful and like to think I’m basically competent in their use.
Looking in on the S&P, there are a few things at work here, all turning on this 893-ish level.
- The 38.2% retracement from high atop the shoulder to yesterday’s ~870 low clocks right at 893.
- The modified Schiff Fork Median Line (ML: middle diagonal black line) cuts in at exactly this level. Often price will approach this feature of the PF on a throwback before proceeding. Inability to attain a touch at the ML would further bolster the bearish case
- 893 was/is the H&S neckline, to which I’ve expected/expect a return move before pivoting lower.
My guess (which I think is probable) is this move up proves very shallow, belying continuation of the Mar-May rally. So as not give the appearance of direction bias…there’s some support-type stuff too.
- The ML of the standard pitchfork acted as resistance for yesterday’s close, but put the floor in under the lower wick on today’s spinning top at 878.
- The 200 day SMA comes in about 882 either provide support or resistance…we’ll see support for today. Truthfully, I find round number MAs banal and get damn sick of hearing about them from pseudo-technicians who’ve had their net portfolio value sliced to a fraction of former size. But getting sick of hearing about them means there’s a great reason to listen.
- Oh yeah, and 880ish formerly functioning as significant resistance until the market flipped it over to support.
The overlays in green and black are Pitchforks: green is a standard PF, while black is the modified Schiff PF. In these cases, the early June high at 956 (Head) is chosen as P1, the subsequent swing low to 889 (trough) serves as P2 and the following swing high at 930 (right shoulder) is P3. A normal PF runs lines in parallel embarking from those points. The modified Schiff (I’ll let you do the legwork on how this is “modified” and “Schiff”) uses the same reference points, but relocates P1 by plotting it at the nexus of a vertical line drawn from P1 and horizontal line draw from P3. I find modified Schiff to be the most reliable of the three major ML variants.
Try PFs out: MT4 and a number of other charting programs have an automated PF tool. It’s one of the few things Oanda does not have that I really miss. The single best resource regarding PFs is Patrick Mikula’s The Best Trendline Methods of Alan Andrews and Five New Trendline Techniques, info. about which can be found elsewhere online.
Meanwhile, GBP/JPY and GBP/USD developed morning star patterns over that last few hours, but are showing little follow-through during the pre-Euro doldrums. GBP/CHF likewise looks attractive if it can muster the strength to move above 176.80. Rare affliction here called “GBP concentration syndrome”.
I thought you’re never coming back!! LOL! So good to see you posting again, Andrew
Comment by Jules — July 10, 2009 @ 9:12 pm
Jules…of course I’ve come back – I still own you an email from about 6 months ago that I haven’t forgotten about! That really is terrible that I remember that but haven’t acted on it, yet – hopefully you’ll forgive me. Thanks for the warm greeting! Any thoughts on market direction (US equities) for the coming week?
Comment by andrewunknown — July 11, 2009 @ 10:36 pm
I’m just glad that you weren’t abducted by aliens!
FORGIVEN!! LOL!
Comment by Jules — July 12, 2009 @ 12:50 am
Re market: yes, I think it’s going to go either up, down or sideways. LOL! The market stumps me now. It’s going down but if you’re in the market minute by minute you can feel a lot of support…so, maybe there’s intervention to keep it at a level long enough for sellers to bail…next week would be another interesting/challenging week. I’m definitely tempted to do some analysis now (something I’ve not done for sometime)
Comment by Jules — July 12, 2009 @ 1:04 am
No aliens; but there were some little human offspring that played a part. Not malicious intent on their part, though: I hear that starts only after they turn 11 or 12 (yikes!)
Comment by andrewunknown — July 12, 2009 @ 9:24 am
That’s what I always say: “The market promises to fluctuate.” Never a satisfactory answer. Really, I always have an idea, but I’m usually discussing it with non-traders who have no clue what a moving average is. It stumps me, too: maybe that’s why we’re shorter-term traders: does “the big picture” really matter if your trade lasts one hour, except where it gives some insight on direction?
Thanks for sharing your thoughts: I’d agree that with those three spinning tops around ~880 on the S&P in the second half of last week, the cliff dive that started at 930 has run into significant support. I expected that, but the questions becomes whether it will follow through or pivot off? Earnings releases promise to complicate an already murky technical picture. In other words, “next week would be another interesting/challenging week.”
You should do some analysis: you love charts, so spend some time with them. Don’t forget why you love trading. Someone asked you recently if you were “in this to have fun or make money?” Why not both? Almost without exceptions those pursuits about which you are most serious in life concern what you love and love doing. Or they ought to be.
It’s great to chat again!
Comment by andrewunknown — July 12, 2009 @ 9:40 am
Oh, no, not you too, Andrew! You read those emails! Now I’ll have to kill you too!!
Sometimes ideas come to mind, sometimes I see different patterns and wonder why I do, and then I start forming hypothesis… Doesn’t really help in my scalping, but sure helps sharpen my mind.
Well, I still do my analysis everyday, not in a serious way though. Yup, I do them for fun. I don’t want to have any bias going into the market, yet I LOVE my charts, and I LOVE drawing on them, so I’ll draw and delete everything, then re-draw.
Yes, earnings plus all the econ data (FOMC mins!!!) will make this week a pain to trade LOL!
You are so fortunate, my sister’s started when they were 2. They are now coming to 6, and they are learning to trade. They drew on my charts. I’m still figuring out what to make out of what they drew…
Comment by Jules — July 13, 2009 @ 3:48 am
Well, I read your posts and was concerned about you, but kept it to a minimum out of respect for your privacy. But I didn’t see any sensitive info; just got the gist of it. Maybe it’s a linguistic barrier coming into play, but I can certainly see where offense would’ve been taken as much by the manner of writing as the content of what was written. Supercilious, self-important, narcissistic traders seeking to “educate” doesn’t usually go over well with the intended student.
Wow: age 6 and learning to trade. Maybe they have some tips for us? My daughter is almost 3 and is fascinated by charts. Haven’t gotten to the bottom of whether it’s just the colors and lines or something else. Whatever the case, it’s caught her interest. I plan to teach her trade after she understand what money is, has respect for its uses and learned about personal fiscal responsibility to some degree. If there’s one thing you can give your child, it’s the tools to stand on their own two feet and make a way for themselves, whether you are there or not: I feel like trading is one such tool. But for now, she’s 3! No need to grow up for quite a while yet.
Comment by andrewunknown — July 13, 2009 @ 7:50 am