Monday, November 9, 2009

After the Open Review

Price action at the open came very close to touching the Green MA and a Vertical steep climb followed. Only one opportunity to enter Long as the market never got close to the RED MA

There was one famous character in Twitter that sold 1085 at 1:23pm ( BAD Entry ! ) against the Trend and even added another at 1087 ! lol

Then he posted to his followers to "stay long" after he was stoped out for a loss ! what a ....

The break-out above Friday’s high began with a “gap” above Friday’s settlement. Acceleration in the direction of the “gap” was apparent at the open; with the potential of price re-test resistance at the overnight high.

After trading above 1080 during the first hour of the session [A-B period] the price action took on the characteristic of a short covering rally, i.e. price continued to grind higher without a pull-back. The up move consisted of previous sellers being squeezed out of their prior positions. The lack of pull-back made for difficult intraday trading for many inexperienced and overconfident traders.

However, as today profile illustrates if you were set to buy the high or the MA and hold the positions for hours, there were occasionally opportunities where price did not auction back to its starting point and managed to grind higher.

The continued up-side movement, with slow momentum was fueled by a decline in the U.S. dollar, which lost ground against a basket of major currencies.Will not be surprise if the market gives back half of this rally tomorrow.

The characteristic short covering is further confirmed by the below average volume traded on the NYSE as 3,597 million shares were traded on the S&P 500 today. This volume output is 13% below the index's average daily volume generated over the past three months.

As there was no pull-back during the session, there is no strong indication of micro intraday support, i.e. initiated buying confirmed by responsive buying on the pull-back resulting in a higher high. Micro support during the session, if you’re willing to consider FLAT lining no action as support developed at 1082 / 1983.

In the absence of economic data and key earnings releases, market participants focused predominantly on the once again slumping US dollar and the stimulating effect its weakness continues to have on equity and commodity markets. The greenback pulled back significantly today based on news from the Group of 20 ('G-20') meeting. The G-20 have unanimously decided to continue the pattern of keeping stimulus measures in place and interest rates low. It was US Treasury Secretary Geithner's view that economic stimulus should remain in place for the time being; this drove the US Dollar Index back toward its 2009 lows.

The strength that the equity market has shown over the past six sessions may be confounding for some investors, particularly the surge we have seen since last Friday's announcement that the US had now hit an unemployment rate of over 10%. Rather than being troubled by such data, it actually encouraged the recent, very strong rally on the major indexes. Some market observers claim however that this strong rise may in fact be at least in part 'artificial' ( i.e., not supported by the current economic fundamentals). The reason is that the decision to keep interest rates low around the world will ensure that a lot of 'cheap money' will continue to be pumped into the markets, boosting assets such as commodities, stocks, and currencies, particularly when the US dollar is falling. In fact, the US dollar is now being used as a carry trade vehicle.

Skeptics warn that the current rally has outrun the current improving economic fundamentals and that it could collapse once the US dollar recovers. One analyst spoke of the market rallying 'on fumes'. In a sense, the actual economic rebound taking place is being obscured by the 'artificial', dollar-driven rally in stocks and commodities.

In corporate news, Dow component Kraft was the only Dow stock that failed to rise today based on the news that its planned takeover of Cadbury Schweppes (for roughly 9.8 million British pounds) had failed. In earnings news, Electronic Arts announced a net loss of $391 million for its second fiscal quarter and said it would reduce its workforce by 17%. Adding further to the dire job loss picture, Sprint Nextel announced today it will axe 2000 to 2500 jobs in an effort to cut labor costs.

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