Tuesday, July 31, 2007

Retracing the Trading Range: Ideas and Links

* Ranges and Retracements - Click on the above chart of the ES futures and you can see relevant ranges, breakouts, and retracements. When working with a new trader, I start with Market Profile theory and the understanding that ranges represent consensus regarding value and that breakouts from ranges represent repricings of value. The key is seeing when breakout can be sustained and when they cannot--and also seeing ranges across differing time frames. Tuesday's move was a retracement of the Friday/Monday range, as we could not sustain a move above the Friday highs. I'll be using my Twitter comments to help highlight ranges as they unfold.

* Dangers of Illiquid Assets - Excellent article from David Merkel and Seeking Alpha regarding the problems of hedging illiquid assets with liquid ones. See also the link re: the dangers of financing illiquid assets with debt, especially when debt covenants are threatened.

* More Fine Reading from Kirk - The Kirk Report covers a range of worthwhile articles, including 20 things that could go wrong in this market and 5 reasons not to panic.

* Charts Worth Watching - Trader Mike notes critical support levels for indices and the carnage in hedge fund stocks. See also Mike's updated links re: housing and tougher lending conditions for hedge funds.

* Check Out Abnormal Returns - Excellent perspectives on who's winning from the recent market meltdown and money waiting to pounce on the losers. Especially take a look at their roundup of academic finance research, much of which is relevant to the current market.

* Want Trading Systems, Free and With a Track Record of Success? - The StockPickr systems are laid out for active traders, with specific system trades of the day. Truly a unique offering on the Web. My other favorite free resource for stock picking is the MSN StockScouter.

More on Housing and Credit Woes - The Big Picture lays out how hard we've fallen. Mish tracks liquidity crunch at mortgage firms and an avalanche of leveraged loan supply.