Tuesday, October 28, 2008

A Stock Market Breakout and Other Tuesday Observations

* Upside Breakout - The chart above shows the 2 hour moving average of NYSE TICK (pink line) versus the ES futures for the last four trading sessions. When we corrected back toward the ES 860 level during the 1-2 PM CT hour, the TICK moving average stayed positive, showing underlying buying interest. This accelerated through the afternoon, as buyers lifted offers--keeping the broad list of stocks trading on upticks--creating a powerful breakout move to multiday highs. The persistent, strong TICK readings were an excellent tell for those who might have been tempted to fade the move.

* Some Good Readings Suggested By Alert Readers:

-- Trader perspectives (incl. yours truly) on trading in tumultuous markets;

-- Fed. working paper: Much of what we hear about the credit crisis is based on myth;

-- An inside look at the credit market collapse;

-- Prospects for quantitative easing in the U.S.

* Some Good Blog Readings:

-- AlphaTrends video: flexibility of opinion the key to daytrading these markets.

-- Thoughts from GlobeTrader about creating an investment plan in the current beaten-down market.

-- Treasury's unprecedented financing needs, the capitulation myth, and much more from Kirk.

-- Fibs and the holy grail, crazy options market, and more updates from Trader Mike.