Simpler Summary 11/10/17

2017-11-10 | Danielle Shay

Simpler Summary: When Will This Trend End?

“The markets have been cruising along, although there is an overall feeling that they have come too far, too fast. Case in point here is the Nikkei, which was trading at 19,000 six weeks ago and tagged 23445 this week before having a 1000 point one-day pullback. At these levels, we just have to be aware of the fact that markets always revert back to the mean, and currently, the NQ is 100 points away, while the ES tested it yesterday and is revisiting those levels today. Is this enough of a test to satisfy the trading gods? Or do we need to get the Nasdaq down to that level too before a potential next leg higher can develop? In an environment like this, I think there is a lot of validity in being a coward. Focus on higher probability spread trades, looking to bring in some premium while the market works off its overbought status.” – JC

The S&P, Nasdaq and Dow futures have just about gone straight up since August 30th, 2017. This rally has been clean, and has exhibited a beautiful chart pattern, throughout the extended prices. We all want to know the answer to the same question: When will it end? I can’t tell you the answer to that question, but I can tell you that after the S&P Futures hit yet another all-time high during the Globex session on Wednesday evening, they fell throughout the night, gapping lower at Thursday’s open. The fall in price and the pierce of the wick through the 21 EMA was short-lived, and once support was found, the S&P futures continued to trade higher for the rest of the session. The 21-EMA is our tried and true level of support. This is where we look for bullish charts to hold on a pullback – which is exactly what the S&P chart did. So, what does this tell us? That as of right now, the trend is continuing – higher.

S&P Futures – Daily Chart – November 11th, 2017

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On this chart, you can see perfectly stacked moving averages (8, 21, 34, 50, 200 moving averages), and price respect of the 8 EMA, signaling a very bullish trend. The few pullbacks we have experienced into the 21 EMA have hit and held, while the trend continues higher.

Intraday Hints

During the trading day on Thursday, our Fibqueen, Carolyn was updating levels like a madwoman, giving us many tradable setups. The S&P’s broke through many levels of support, before finally hitting the $2558.75-2562.50 level, which hit, held, and triggered for a long. What did that mean for us?

Fibonacci Queen – S&P Futures 120 Minute Chart

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Carolyn’s ES 120-minute chart, demonstrating the support zone that hit and held during Thursday’s cash session, and provided us with both a tradeable long and some calm surrounding our long positions. Even if you don’t trade futures, being aware of the support and resistance zones that come into play intraday are pivotal in making decisions in the rest of your portfolio.

S&P Futures Intraday Chart – 15-minute, 5-minute and 377 tick charts

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This intraday chart shows several different buy triggers that occurred after the ES hit Carolyn’s 120-minute support levels. There was a 377-tick chart trigger, that was an 8 and 34 exponential moving average cross, plus taking out a prior swing high. Additionally, there was an oversold Ready, Aim, Fire trigger on both the 5 and 15-minute charts that came in at roughly the same time. This amounted to a solid buy trigger. For those who were in the trade in our trading room, it amounted to solid cash. For those just following along, it definitely gave us less to worry about according to our long positions.

By the cash close on Thursday, they were able to reclaim the losses that occurred during the intraday cash session, but still closing ten points from the Globex high of $2494.50. As for today, the markets have been soft and slow, and as of this writing the S&P is only down 2.25 points. We will see where we close today, and how it affects our traders’ market sentiments going into next week.

Simpler Sentiment

Henry – If there was ever an example of a “pit bull low” I think last Thursday was it. Of course, in hindsight I wish I would’ve had some exposure to the downside, but I think that’s more difficult to argue when you look at the trend we’ve been in. Sure, that one day was a volatile drop, but the past 2 months if you would have had a hedge on, you’re burning cash. I think there is reason to day trade futures short, I just don’t like buying puts when volatility spikes. Year to date, that has not been a winning strategy. As far as Thursday’s low actually standing up to the name…I’ll have to see how Monday and Tuesday of next week go. If we can open with a bid and trade even modestly higher, I think we’ll continue to chop higher into Friday. If we do trade lower in the indexes, I’ll look to my favorite names to see if we’re holding support (RHT BA GOOGL NVDA AAPL). BA has fallen the past few days but I’m really focused on $260 offering support. RHT has been a solid performer and looks imminent for a breakout. NVDA has been pretty good to us today. Into the close, I’ll see if it actually gets to make our Friday with a print near $220. The unbalanced flys have been a great way to trade through earnings. Today I closed out DIS SQ and WTW for gains with this strategy, if NVDA closes at $220 it would be a perfect range bound pin on this setup. I’ll know a lot more by 3 PM CST….

Bruce – Mine is short and sweet. Earnings season is coming to an end, the Tax reform that the rally has been built on is not happening as fast or in the form everyone thought. FED meeting on tap for DEC… what could possibly go wrong? I think the trend is absolutely higher and we continue to climb the wall of worry, however we need to realize that we could pull back / consolidate at any time. We are so overdue for consolidation, it would not surprise me to see it at any time or on any negative news. So how am I playing it? To the upside of course… buy the dip until it quits working with tight stops and also with a back stop of hedges on the downside.

Danielle – Waking up Thursday morning, I thought this may finally be the pullback we have all been waiting for. However, when support held midday and the S&P traded higher, and continued to hold the trend Friday, it proved to be nothing more than another midday ‘scare’ that shook people out. Was it the Pitbull low? I suppose we could say that. Either way, the trend remains long. I am going into the weekend long FIVE, GWRE, MU, BABA and HD. Earnings season is wrapping itself up, and it’s been good to me. For now, I’m going to focus on the setups at hand that are moving in the direction of the market – and that direction is up.

David – Warning signs abound for the stock market suggesting that it could be working its way into an intermediate-term top. However, short-term wave patterns don’t yet show any sign that it is here quite yet. However, those signs might easily be missed so this is a spot to be vigilant, with the possibility that we could be on the cusp of a roughly 10% pullback. But until it actually arrives, the trend remains up. Nevertheless, this seems like a wise time to proactively manage risk by lightening up on position sizing, be very selective about which names to trade (and/or focus on the broad market), and take partial profits quickly to lock them in. I continue to like the short side in U. S. Treasury Bond trade.

Carolyn – I’m sick of saying it…….This is still a bullish chart on the SPX however we could experience a very healthy pullback of 70-100 points and STILL be within a healthy uptrend. I’m NOT saying that will happen though!! So, what does this mean?? I have continued to set up my pullbacks on the S&P on the buy side every chance I get. I may back OFF from doing this if the 5 ema crosses below the 13 ema on the daily chart…but until then, it’s been working. I will continue to suggest using relatively tight stops as the market remains vulnerable to a pullback….it just has not given us one!!

Raghee – The tax reform tantrum could have made my week or maybe my month, but that remains to be seen. I will take Dow, S&P, Nasdaq, copper, USD/JPY, and EUR/JPY entries into the weekend. I am trailing entries long in heating oil and unleaded with a daily price movement range cushion…which was exactly how I got my fills in the indexes Thursday. I know we are all waiting for the shoe to drop as it seems the markets may be getting “noisy” up here. I don’t have enough evidence (yet) to stop BTFD. Will there finally be that “one last swing trade”? There always is but I won’t stay on the sidelines fearing that. I’ll just wait until the noise runs me out.

Jared -Another week, another all-time high for Bitcoin. Bitcoin’s recent rally started in the middle of September finding the bottom at 2980. Since that low, Bitcoin has basically gone straight up without taking a breath. That’s 164% increase in less than two months! As I’m writing this, Bitcoin and the entire crypto market is taking a relatively healthy pullback, currently down over 9%…but is that all that’s left before the next rip higher? In short, I have no clue…BUT, I did want to point out something I noticed today, looking at some of the previous ‘pullbacks’ in Bitcoin.

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I’ve highlighted four of the major pullbacks this year. As you can see, each one of them was more than 30%, averaging at around 37%.
If we take a closer look at the current action, we have some decent support come in right around 6000 with a .382 and 100% of the previous high to low swing overlapping. Check out this short video as I go through the analysis:

Trade of the Week Follow Up

Expert: Raghee Horner
Trade: Long setup in Copper, via both futures and options
Update from Raghee:
“The TOW was part scan, part play on copper and I also wanted to show just how much I like longer-term time frames in this environment. And by longer-term, I mean daily weekly charts. I have been active on the daily chart of copper. This week presented a buy. However, mid-week the trend turned to transition and the long position became an oversold fade of the support level. Still a buy but a marked shift in the trend. SCCO continues to be a solid compliment to my bullishness on copper, in fact, it’s behaving better. Once a symbol or theme starts to cooperate, I will look to see where else it is playing out and that’s where I will watch EPU (MISCI iShares Peru) next week. SCCO has nearly 13% weighting there.
As for the other symbols and themes. FXB and EWU, the play on the UK story, is still on track and I am already starting to build another position in EWU in the oversold support zone just above 34.55.

PM has formed a very nice and narrow Darvas 2.0 range and I will wait for a squeeze or buy the bottom of the range at 102.10.”

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HG – Daily Chart

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See y’all next week in the room!