Tuesday, February 26, 2008

Views for a Market Tuesday

* Divergences - We're seeing 10-day price highs for the ES futures as noted by Kirk, but so far we're not getting confirmations from either the NQ or ER2 futures. (See Trader Mike's chart perspective as well). On Monday we had 860 new 20-day highs against 629 new lows. That's weaker than the 900 new highs and 370 new lows registered on the 13th of this month. Looking a bit further out, we had 279 fresh 65-day highs on Monday against 251 lows. On 2/12, we had 291 new 65 day highs and 264 new lows, and back on 2/1 we had 444 new 65-day highs and 158 new lows. I will be watching closely to see if we get follow-through strength expanding new highs beyond these levels. If not, I'll be expecting a return to the heart of the multi-day trading range.

* Momentum - My Demand indicator for Monday ended the day at 162; Supply was 33. That means that five times as many stocks were displaying significant upside momentum as downside momentum. It's not at all unusual to get short-term follow-through strength after such a bullish momentum move. A failure to get that follow-through, especially in light of the above comments re: new highs/lows, would be meaningful.

* Very Perceptive - I've had the recent pleasure of corresponding with Pierre from the popular German daytrading site. He explains in his recent post (my poor translation, sorry):

The interesting thing [at seminars] is that I learned how to categorize my interlocutors extremely fast. If only 1 or 2 questions are placed to me, I can say security with 95% whether I am dealing with a beginner, progressing trader, or an expert. In addition I have the following filter system: 1.) beginners are interested in the entry 2.) progressing traders are interested in the exit 3.) experts are interested in position size (Money management) and Portfolio risk (Risk management). Thus, which interests you in most? Then you know approximately how far in trading you have already progressed (independent of your past performance).

* Market Anomalies - Great post from CXO Advisory on where the most significant market anomalies can be found.

* Bubble Cycle?
The Big Picture notes that the business cycle has been replaced by the "bubble cycle", leading to the question of where the next bubble might be. Perhaps we need look no further than commodities; shout out to Kirk's observation that the agriculture ETF (DBA) has hit yet another 52-week high.

* Questioning Pundits - Some wise words from fellow Naperville resident Jeff Miller on maintaining perspective on economic matters.