Nasdaq Breakdown

Over the last week or two, it seemed as though everyone in the stock blogging community, including myself, had posted about the symmetrical triangle forming in the Naz and other stock indexes.

After today, we'll all have to find something else to write about because the Naz broke out of its triangle pattern and appears ready to retest the lows at 2,250 and possibly 2,200.

Beware the Ides of March, Caesar didn't and we all know what happened to him!

Day Trade: QID

Bought 500 shares @ $50.32

Sold 500 shares @ $50.83

Profit of .51 per share or $255 (1.01 percent)

Time in trade: 16 minutes

The Naz rolled over and crossed below the EMA 4, 8 & 21 at 13:30 p.m. I entered the trade as the Naz consolidated the move lower. My entry point is the bottom of the 13:45 bar on the QID chart (bottom chart).

I exited the trade when the Naz hit the day's pivot point at 2338.

While I'm always happy with a profitable trade, I did miss a golden opportunity for additional profits at 1 p.m. The Naz was sitting just under the R1 pivot point when the TICK hit +900.

Normally, such a high TICK reading will move the NQ futures contract a point or two, but the price didn't budge even though a new daily high was within easy reach. I told myself at the time to go short because that was it, but I ignored the little voice in my head and waited. The wait left an easy .50 on the table.

I'm finding more and more that if I listen to the voices, I will usually come out ahead in the end. Now, where did I put those meds?

Day Trade: NQ

Bought 2 contracts @ 1781

Sold 2 contracts @ 1785.25

Gain of 4.25 points x 2 contracts = 8.5 total points x $20 per point = $170 profit

Time in trade: 7 minutes

I entered the trade at the open on a 15 point gap down. The market churned for about five minutes then started heading higher. I'm jittery this morning, just like everyone else, so I took my profits as soon as the NQ climbed back up to its EMA(21). Left some money on the table, but that's okay. 

Bottom line: grab a quick profit then get to the sidelines before Uncle Ben begins talking at 10 a.m.

Interesting Day Ahead?

Oil is up. The dollar is down. And the NQ is rolling over now down 8 14 16 plus points.

Oh, and Uncle Ben talks at 10 a.m.

Let's hear it for some volatility today!

A Century of Work....Gone

As my handful of long-time readers know, the scientific fraud that is man-made global warming is a huge pet peeve of mine, so I can't help but link to this article that points out an interesting development.

It appears that global cooling has wiped out an entire century's worth of global warming, and done so in only one short year.

Yeah, yeah, one year does not a climate trend make, but given the recent drop in solar output, which scientists believe could last a decade or more, I believe we'll be seeing a lot more articles like this one in the not so distant future.

While our economy seems to move from one bubble to another, the environmental community tends to go through similar cycles of hysteria, whether it is DDT, Alar, or Global Warming.

Junk science, plus extensive media coverage from scientifically-illiterate reporters, produces very successful fund raising campaigns for environmental organizations, billions of dollars in federal grants to agenda-driven "scientists", and politically popular EPA regulations banning harmless but useful chemicals.

Maybe I should start a pool to guess what new man-made disaster the environmental community will grasp onto and promote next with their usual hysterics.

The Death Pool

Bullish Jim is seeking entries for a death pool....Wall Street style.

Color me intrigued.

Futures Dropping on PPI Data

The NQ is down more than nine points before the open courtesy of the inflation numbers. Trying to decide if I want to try a gap fade here or not.

Day Trade: NQ

Sold 1 contract @ 1788.75

Bought 1 contract @ 1790.50

Loss of 1.75 points x $20 per point = $35 loss

I tried shorting the rally to the R2 pivot point but got in too early. The trade went against me 6 points and then dropped back toward my entry point. Instead of sticking with the trade, I got jumpy and exited with a small loss.

When in doubt, get out.

Trend Following System Pick: STLD

STLD is the only long position I have on at the moment, it is a trend following system pick from December. I entered in the $54 range and it has been doing quite well recently, hitting a new 52-week high today.

No idea how long this one will be in the portfolio, but I'm thinking about putting in a trailing stop somewhere to preserve some profits in case of a nasty reversal.

Update: Forgot to mention that Woodshedder has a post reviewing the technicals on steel stocks here. Be sure to check it out.

Day Trade: NQ

Sold 1 contract @ 1788.50

Bought 1 contract @ 1785.25

Gain of 3.25 points x $20 per point = 65 profit

Time in trade: 7 minutes

The Naz rallied to the R1 pivot point then ran out of gas, so I shorted another contract. I exited the trade as the market pulled back toward the EMA(4). The market seems to be digesting its move on fairly mild TICK readings, so we might be heading higher yet.

I'll stick around to see if another shorting opportunity presents itself, but I'm up $230 for the day and I'm fighting off a head and chest cold, so I may just call it a day. Just not feeling it today.

Day Trade: NQ

Sold 1 contract @ 1778.25
Bought 1 contract @ 1770

Gain of 8.25 points x $20 per point = $165 profit

Time in trade: 8 minutes

The Naz opened at 2303, or about 11 points above its pivot point, and then climbed to 2307 where the RSI(2) hit 99.5. Since it was overbought at the open, I shorted 1 contract and then exited the trade when the NQ hit its pivot point at 1769. 

I wasn't completely comfortable with the trade, and I'm not entirely comfortable shorting NQ, so I traded one contract instead of two.

Self-Inflicted Wound?

Dealbreaker posts an interesting chart from Societe Generale's report on rogue trader Jerome Kerviel.

It appears that Mr. Kerviel's huge futures positions were actually $1 billion in the black at the time his unauthorized trades were discovered, and it was the panicked selling by management over the course of two days that created the nearly $5 billion loss.

Oopsie.

Somethings Gotta Give

The Naz trading triangle is getting pretty tight, support or resistance have to give way soon I think.

Day Trade: QID

Bought 500 shares @ $49.98

Sold 500 shares @ $50.72

Profit of .74 per share or $370.

Time in trade: 1 hour, 21 minutes

The Naz gapped up at the open so I went short via QID. This was the third gap fade trade of the week and the first one I actually stayed in until the gap filled.

I probably left some money on the table since the market appears to be rolling over hard, but I'm following the gap fade rules, i.e. close the trade when the gap is closed.

I'm done for the day.

Day Trade: NQ

Bought 2 contracts @ 1792.50

Sold 2 contracts @ 1797.75

Gain of 5.25 points x 2 contracts = 10.5 total points X $20 per point = $210 profit.

I entered the trade at the bottom of the 11 a.m. bar as the Naz came back to the EMA(21) and the RSI(2) hit .3. I exited the trade after the Naz crossed above the R1 pivot point at the end of the 12 p.m. bar.

Day Trade: QID

Bought 500 shares @ $49.75

Sold 500 shares @ $50.38

Profit of .63 per share or $315

Time in trade: 29 minutes

The market gapped higher at the open by about 25 points, sending the Naz just shy of the R3 pivot point, so I shorted the gap on the opening bar. I exited the trade after the Naz pulled back to the R1 pivot and EMA(4), and the TICK hit negative 500.

Day Trade: NQ

Bought 2 contracts @ 1778.75
Sold 2 contracts @ 1783.75

Gain of 5 points per contract x 2 contracts = 10 points x $20 per point = $200 profit.

Time in trade: 28 minutes

I entered the trade at the 3:15 p.m. bar while the market consolidated its move above the S1 pivot point. I exited the trade after higher TICK readings pushed the price higher in the 3:45 p.m. bar. Not having a lot of confidence in this holiday weekend rally, I set my eye on a 5-point profit and then took it when the opportunity arose.

Day Trade: NQ

Bought 2 contracts @ 1781.50
Sold 2 contracts @ 1785.25

Gain of 3.75 points per contract x 2 contracts = 7.5 total points x $20 per point = $150 profit.

Time in trade: 44 minutes

I entered the trade when the Naz gapped down to the S1 pivot, then sold on a return to EMA(8).

I messed up the exit on this trade. After entering at 9:30 a.m., the market returned to the EMA(4) on the next bar and the futures rose to 1788.50, giving me a potential profit of $250. 

Unfortunately, I held because I thought the bounce off the oversold condition was going further. Instead, the market reversed and returned to the S1 pivot while taking me $160 into the red for good measure. The market was still oversold and due for a bounce, so I didn't exit the trade with a loss, instead I held on for whatever bounce was left and then exited at the next point of resistance.

Day Trade: NQ

Bought 2 contracts @ 1803.75

Sold 2 contracts @ 1806

Gain of 2.25 points per contract x 2 contracts = 4.5 points x $20 per point = $90 profit.

Time in trade: 54 minutes

I entered the trade after the Naz broke below the S1 pivot point, then exited the trade as the Naz returned to the EMA(8).

Day Trade: NQ

Bought 2 contracts @ 1813.50

Sold 2 contracts @ 1820.50

Gain of 7 points per contract x 2 contracts = 14 total points x $20 per point = $280 profit

Time in trade: 23 minutes

I entered the trade when the Naz pulled back to the pivot point and EMA(21) at 2361.

I exited the trade as the market pulled back from the top of the 9:45 a.m. bar.

I was hoping for 10 points per contract, but the TICK reading was very weak, indicating there were not a lot of buyers stepping in this morning, so I took the easy 7 points.

Pre-Market Futures Gapping Up

The NQ is up 12 points pre-market, setting up a possible gap fade at the open.

Day Trade: NQ

Bought 1 contract @ 1727

Sold 1 contract @ 1738.50

Gain of 11.5 points x $20 per point = $225 profit.

Time in trade: 6 minutes

Today's opening gap was about 25 points, which took the Naz down to the S1 pivot point, so I entered the trade at market open and then sold when the RSI(2) hit 99.8 on the NQ 15-minute chart.

What's 18.6 Billion Between Friends?

Microsoft's decision to acquire Yahoo! has vaporized $18.6 billion of Mr. Softies' market cap as of today's market close.

So how is Steve Balmer taking the news?

Not well.

It appears that after the company's business plan failed to increase the stock price, the powers that be then resorted to more creative methods to encourage an upward trend in the stock.

Unfortunately, the new method appears to be just as ineffective as the business plan.

How sad.

Maybe they should hire Steve Jobs and save Balmer the embarrassment.

Day Trade: NQ

Bought 2 contracts @ 1793.25
Sold 2 contracts @ 1791

Loss of 2.25 points x 2 contracts = 4.5 points x $20 per point = $90 loss.

The Naz hit the S4 pivot point and I went long looking for a bounce.

There was a tiny bounce, but then the ticks went higher and the Naz fell below the pivot point, so I pulled the plug on the trade rather than waiting for my stop to get hit.

The market was very oversold when I entered the trade. RSI(2) on the Naz was .2, and it was .1 on the futures, so I had some confidence in the trade. And as I write, NQ just dropped to 1786.

Ouch.

Day Trade: NQ

Bought 2 contracts @ 1802.75
Sold 2 contracts @ 1810.375

Gain of 7.625 points x 2 contracts = 15.25 total points x $20 per point = $305 profit.

Time in trade: 24 minutes

The Nasadq futures gapped down about 26 points at the open and I immediately went long 2 contracts. NQ opened just above the S2 pivot point and I exited the trade when price hit the S1 pivot at 1810. 

Normally, I would wait for a gap fill, but I believe the poor ISM numbers will prevent that from happening today, but who knows, the bulls may pull it together.

ISM Tanks

And so do the futures. 

Nasdaq futures are down 23 points, setting up a possible gap fade at the open.

Courtesy of MarketWatch:

Growth in the nonmanufacturing side of the U.S. economy contracted sharply, the Institute for Supply Management reported Friday. The ISM nonmanufacturing index fell to 41.9% in January from 54.4% in December. The reading was well below the 53.0% expected by economists. Readings below 50% indicate most firms are contracting. The ISM services index was released early. ISM gave no explanation for the early release.

New Highs Climbed on Down Day

Overall, Monday was a down day for the markets, but the internal picture was better than the indexes would have us believe.

New 20-day highs jumped to 424 from Friday's 280, while new lows dropped to 19 from 67.

The last time new highs hit 400+ was on December 11, 2007.

Day Trades: NQ

I'm going to skip the usual trade by trade recap since today was not a normal day.

Long story short, I dug a hole for myself this morning on a discretionary trade I had no business taking, and then spent the rest of the day scalping my way back to break even. 

Overall, I traded 12 contracts in six trades and managed to gross $110 with a net of $52 after commissions. It could have been worse, since I was down $200 mid-morning, so I'm happy I kept my cool and crawled my way back. 

However, if it were not for my bias toward the long side, I could have made $400 in a short trade starting at 11:30 a.m. and ending at 1 p.m. I saw the trade setup, but I didn't pull the trigger because I was so focused on going long at some point in the day.

Direction bias is a problem I will be trying to fix this year.

The Super Bowl....

....has been renamed the Manning Bowl.

Developing.

Update on Market Internals

Market internals improved quite a bit last week, which has everyone and their grandmother debating whether the bottom is in or if this is just a bear market rally setting up another leg down.

I'm not nearly smart enough to settle the debate, which is why I'm sticking exclusively to day trades for now even though my trend following system issued a handful of buy signals last week. 

And while I can't settle the bottom vs. bear rally debate, I did read something over at Minyanville that gave the bull in me great pause. For a good scare, go read Mike Mish Shedlock's article on negative bank reserves. Scary stuff indeed.

Now, back to the charts.

New 20-day lows finished Friday at 21, while new 20-day highs hit 280. To put that in perspective, we have to go all the way back to December 12, 2007, to find a higher number (391) of new highs. Yeah, the market has sucked for a long time!

Raw Data

The 10-day averages are reversing strongly with new lows now at 332 and new highs at 104.

SMA(10)

The number of stocks trading above their SMA(200) now stands at 28 percent, the highest percentage since January 14, when the average stood at 29 percent.

Percent Trading Above SMA(200)

As I mentioned earlier, I'm not smart enough to settle the bottom vs. bear rally debate, but then no one else is either. If you choose to play stocks to the long side, please make sure you do so with appropriate risk management. In other words, use hard stops!

The market is jittery. 

Traders are twitchy. 

It won't take much to put this market into a spiral of death, so tread carefully.

Day Trades: QID & NQ

Trade 1: QID

Bought 500 shares @ $47.17

Sold 500 shares @ $47.65

Per share profit of .48 or $240.

Time in trade: 15 minutes

Pre-market, my plan was to fade the gap with the NQ futures contract pointing to a 25-point gap up. Unfortunately, the jobs number took the starch out of the NQ and the opening gap was just under 10 points or so, not large enough to fade.

Plan B was to fade the market's first major move to a pivot point, up or down. The moment came at 10 a.m. as the Naz rose to the R1 pivot point. I bought 500 shares of QID and waited for the reversal.

Unfortunately, a few minutes after entering the trade, I began experiencing hardware or software problems in the form of a scrambled video display.

Long story short, I managed to restore a semblance of stability just long enough to exit the trade, thus cutting short what would have been a $2 move. Better safe than sorry but missing a $1,000 profit due to computer issues hurts!

I rebooted the machine, launched my charting and trading software, and I was back in business just in time to see the trade reach its full potential. Sigh.

Trade 2: QID

Bough 500 shares @ $47.46

Sold 500 shares @ $47.40

Per share loss of .06 or $30

Time in trade: 18 minutes

I waited patiently throughout the day for the Naz to do something I could fade. After spending most of the day doing nothing, the Naz began to head for the R1 pivot again. Once the market looked overextended and the RSI(2) hit 99.5, I went short at the top of the 14:30 p.m. bar. 

This trade was initially profitable, but the Naz simply consolidated with a move back to the EMA(4) then began inching its way north, so I pulled the plug on the trade early rather than let it hit my .30 stoploss.

Trade 3: NQ

Sold 2 contracts @ 1865.25

Bought 2 contracts @ 1860.50

Gain of 4.75 points per contract x 2 contracts = 9.5 total points x $20 per point = $190 profit

Time in trade: 9 minutes

Twenty-five minutes after exiting Trade 2, I went short again, this time with the NQ futures contract. The market rolled quickly down toward the EMA(8) and I scalped a quick profit on the way down. 

Today's Gross Profit: $400

Today's Net Profit: $390

Jobs Number Making Futures A Bit Jumpy

Bummer, I was all set to fade a 23-point gap up in the Nasdaq futures this morning when whammo, the jobs numbers are released and the futures dive 15 points.

Maybe I'll end up fading a gap down.

Now they are starting to recover.

Jumpy market this morning!