Focus List 10/6 - Where Are We Now?

Geoff Bysshe | October 6, 2011

Today's commentary comes from Mish. I'm not on vacation, I just read how she described the our process of breaking down the inputs to determining a tradable perspective of market conditions and realized I couldn't have said it better! From a day traders perspective the OR, pivots and other key reference points are really important because as you'll read, we are really sitting on an inflection point in the daily and weekly time frames.

From the desk of Mish....

My list of finding tops/bottoms not in order of importance per se: Price, candle patterns, channel formations, volume, alignment and slope of moving averages (phase and strength/weakness of phase) and a bit of fundamentals (although living in a technical bubble seems to be ok). Intraday, I use floor trader reference and pivot points, their stack and opening ranges. Simplified of course, but a good checklist to determine where the indexes and ETFs are right now.

So, where are they (the market watch 4 - SPY, DIA, IWM, QQQ) right now?

  • None have changed phase or slope of moving averages.
  • Some had bullish engulfing candle patterns, others not.
  • All took out previous day high and after good volume (Accumulation) days yesterday, followed with less than average today.
  • All are back over August lows.
  • All but SPY back over the 200 weekly moving average.
  • QQQ back above channel low.
  • Fundamentally, some positive news with jobless claims, manufacturing, still gloomy picture overseas.

Is this a bottom?

Conclusion: Temporary bottom at best. We have earnings season upon us, and unemployment numbers on Friday. No real change yet in phase or volume and an August low in place. Lots of room to go lower and looks like digestion above recent lows, with lots of room to go higher and test longer term resistance. Sound hard? Great opportunities for day and miniswing traders, some low risk possibilities for swing traders (today was a good entry day), but real dicey for buy and hold folks right now. In short, you better have a set of rules and discipline to follow.

Focus Longs

KMB
CAT
ROK
OXY
TIF
CTXS
ORLY
RAI

PANL
AMZN
UA

Good for reversals

CL
CELG
IBM
DECK
DLTR

Focus Shorts

Must break S1

WAG
CRM
GS