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 September 22, 2004 Commentary (mid-week
edition)-
Today's commentary is going to be very simple
and straightforward. I want to point out something that I am watching on the
daily charts of the indices. I feel that we are at a critical juncture in the
market. Before I go on, though, let me point out it has been my observation
that in the 'post-bubble' era, I have noticed that many times when the market
is at a critical juncture, it opts to just chop around like crazy instead of
making a decision.
I'll start with a chart of the INDU.
I've drawn a trendline across the peaks since
the INDU 'topped'. The INDU has been leading in this 'rollover'. Let's move on
to the S&P.
I've drawn in a similar trendline. The
S&P is now starting to fail near the line. Understand that everyone on the
planet has these lines on their charts and are watching them closely. I am
watching them because everyone else is. I'm trying to figure out a way
to use the information when the big players do whatever they intend to do to
trap the most small players and traders.
Let's now move on to the NDX, where
I'll do something different.
The techs are so much weaker they aren't even
close to a trendline off the peaks. But I did try a median line and parallels,
and found something interesting. Starting to see the pattern I'm seeing?
Lastly, let's try this with the SOX index.
I had to adjust the points I keyed off of to
get a median line and parallels that told me something, but I found a very
obvious one. We have all the big indices and a key sector all rolling over at
key lines. It is very important for me to take notice of this. This is
so obvious I strongly suspect it is a 'trap'. If not, then I suspect it
will be a temporary trap. It seems like everyone on earth is selling short off
these lines.
My bias surely has to be on the short side, but I'm very 'jumpy' in
here. I feel like the insect that's walking around and I just got a hint that
that faint circular line in the dirt I'm approaching is a trap-door spider,
just waiting. Given that, I'm still playing the short side, but I'm being extra
cautious. I'm also looking to play long if I see a trap unwinding, and then
I'll evaluate if the long side looks 'real', or if it is acting like the run up
is done for now.
I'll be watching price action, volume, sectors, futures,
currencies, and anything that I can if I think it will help me read the market.
If all these lines break to the upside, I think that could potentially be very
significant. Remember, we are nearing the election. This hardly seems like the
time for a big move down to start. It does seem like a time for me to be very
wary of traps, though.
Let me cover a few things here before we quit. The GOOG
play has triggered some more scale outs, and the play is now whittled down to a
small amount, still riding in case there is another thrust starting in here.
All in all this one has been a home run so far, regardless of what it does from
here.
Take a look at crude oil, basis November. It hit a new contract
high today, and my personal opinion is that unless something key changes, $50
per is going to be a distant memory from past times. I'm still one of those
rare skeptics who think these constant high oil prices are going to seriously
derail this fragile economy. Call me crazy. And take a look at the XOI.
Remember the call I made on that when it was sitting right under the all-time
highs?
And lastly, if my usually accurate e-mail indicator is any
indication, traders must be getting very discouraged with the market. With all
the hype about how great trading was going to be right after everyone got back
from their summer vacations, my inbox was stuffed. Lately, once everyone
realized it's just as difficult, or even more difficult, than before Labor Day,
the e-mails have dried up to almost zero. I was getting more e-mail during the
deadest days of summer.
Now, don't get me wrong, I'm extremely busy trying to
work on Trade Management, the
website, and keeping up with my trading, so the rest is nice. But it is
noteworthy, and I do think it means something. And this happens right as the
market hits these key lines. I think something is going to happen soon.
The next
commentary will be the weekend edition, posted by Sunday.
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