market commentary: that’s all folks - thestreet.com commentary: that’s all folks as i pointed...

Tuesday, August 16, 2005

Market Commentary:

That’s All Folks

As I pointed out in the commentary for Aug. 8, the three-day chart turned down on that day as the S&P 500 made three consecutive lower lows. Also, as we subsequently pointed out, the weekly chart on the S&P 500 had at that time traced out a potentially bullish Plus-One Minus-Two Pattern (the three-week chart was up while the weekly chart had pulled back, leaving two consecutive lower lows). We went on to state that any ensuing rally of two consecutive higher highs on the daily chart would leave a Minus-One, Plus-Two Bearish Sell Setup on the daily chart. We stated that such a setup would offer a good reward-to-risk short setup on the S&P. In fact, that Minus-One, Plus-Two Sell Setup occurred over the very next two sessions. Moreover, as you know, we have been targeting the 1239 S&P level as a key level to watch for failure. That is because 1239 is 270 degrees up on the Gann Square of Nine chart from the 1136 S&P April low. Many times failures come from a 270-degree move, as the market is unable to do a complete 360-degree move. Monday, we showed the importance of the S&P 1225 level. In the short run, a break of 1225 triggers a Rule of Four Breakdown on the 10-minute chart. In the bigger picture, a break of 1225 signifies a break back below the prior closing high in March 2005. Tuesday's convincing break of 1225 with a low-tick close at 1219.35 appears to confirm the significance of the late July/early August high at the 1239 square. Tuesday's break appears to confirm what my work has been telling me for a few months: ● It would not pay to chase strength in July. ● If my work were correct, the market top would be in by the end of July, and the market would begin to roll over in earnest by the end of the first week in August.

PLEASE SEE IMPORTANT LEGAL DISCLAIMER ON LAST PAGE

Market Commentary: That’s All Folks Page 5 Pivot Points Page 8 The DayTrading Report: KWK and HANS Page 10 The Swing Report: GTRC, SPY, Observations and Trailing Stops Page 13 Notes and Guidelines

(Continued on the next page)


© 1996-2005 TheStreet.com, Inc. All rights reserved.

2

Tuesday's break should come as no surprise. The break back below the Aug. 8 low of 1222 destroyed the potentially bullish weekly Plus-One, Minus-Two Setup. But it should come as no surprise as we stated that the outside-down week from the week ending Aug. 5 (from a fresh 52-week new high) just above 1239 spoke to the idea of, at the very least, a multiweek pullback. Additionally, Tuesday's convincing large-range pivot back below the 20-day moving average on the S&P led to a decline that held just above the 50-day moving average, and indicates the idea of the Cascade Setup to the downside we spoke of recently. A move below the 50-day moving average on the S&P that holds could trigger this Cascade, by leading to a turn down in the monthly chart. That would occur on trade below the July 7 low of 1183.55. Such trade would coincide with a break of the rising 200-day moving average now at 1192. Although a reflex bounce from the 200-day moving average may occur if in fact it is tagged, keep in mind that any turn-down in the quarterly chart from this point would be very bearish. Currently, the quarterly low is the April low of 1136.20. A break of that low in this the third quarter would carve out a very bearish outside-down quarter. Of course, it may be that if a bear trend is to become entrenched, that the important quarterly Wheel of Time may not actually turn down until the fourth quarter of this year. In that case, the quarterly chart would turn down on trade below whatever the low is in the third quarter. Conclusion: I would not be surprised to see the bulls try to defend the 50-day moving average and the 1220 strike on the S&P here. However, the near-term trend is down, and surprises happen in the direction of the trend. So I would not be surprised as well to see a gap to the downside on Wednesday morning. If a first-hour low is made and the market begins to creep higher, keep your powder dry for a potential test of 1225. However, if any first-hour low is subsequently broken to the downside, I would not look to buy any dips, as the S&P could easily head to 1200 for expiration. In my upcoming seminar, http://www.tlforum.com , with my partner Dave Reif (at MutualMoneyFlow.com) the above principles will be explained in easy to understand, practical terms. Additionally, we will demystify the Gann Square of Nine Chart and the Wheels of Time and Price. We will explain how to use multiple time frame analysis. We will we follow these methods on the markets from 1928 to the present on the yearly, quarterly and monthly True Swing Charts so that you will walk away with an ability to interpret the market’s behavior on all time frames. Allowing you to determine the trend will enable you to profit from anticipating rather than reacting to the market’s price action.


http://www.tlforum.com



3

S&P 500

In the chart above: (A) the three-day chart turns down; there is a Minus-One, Plus-Two Sell Setup (B) at the 1239 square. After oscillating around its 20-day moving average, the S&P stabbed down to its 50-day moving average (C) on Tuesday.)




4

S&P 500



5

Pivot Points

S&P 500 -- 10-Minute Pattern: Power Surge (3rd higher low).



6

S&P 500 -- 10-Minute

Pattern: Power Surge (3rd higher low).



7

EOG Resources (EOG:NYSE)




8

Chart 1

THE DAYTRADING REPORT

Quicksilver (KWK:NYSE)

Short

Entry: 40.30 Stop: 41.30 Pattern: Expansion Pivot / Power Surge

(Third lower high)




9

Chart 2

Hansen Natural (HANS:Nasdaq)

Short

Entry: 42.40 or Opening Range Breakdown (ORB) Stop: 43.40 or 1 point from entry Pattern: Cooper 1-2-3 Pullback



10

Chart 1

ay’s Close: 24.00 [Up .86]

THE SWING REPORT

Guitar Center

(GTRC:Nasdaq) Short

Entry: 57.60 Stop: 59.60 Initial Target: 55.60 (trade toward) Pattern: Expansion Breakdown / 180



11

Chart 2

S&P Depositary Receipts (SPY:Amex)

Short

Entry: 121.90 Stop: 123.90 Initial Target: 119.90 Pattern: *Expansion Pivot / 180



12

OBSERVATIONS AND TRAILING STOPS

-- Wednesday is day three in Omnicare (OCR:NYSE) (long). We are long from 48.25. Maintain the stop at 47.25 and maintain the initial target at trade toward 49.95. As of Tuesday's close, we are down 29 cents. -- Wednesday is day four in United Therapeutics (UTHR:Nasdaq) (long). We are long from 67.55. On Tuesday we sold our first piece, locking in a gain of 2.00. Raise the stop to 68.75 and look to sell your second piece on trade toward 74.40. As of Tuesday's close, we are up 2.25 on the second piece. -- Wednesday is day four in Apple Computer (AAPL:Nasdaq) (long). We are long from 44.45. We sold our first piece on trade toward 45.75 for a 1.30 gain. Raise the stop to 46.00 for the second piece and look to sell on trade toward 49.00. As of Tuesday's close, we are up 1.80 on the second piece. -- Wednesday is day five in Abercrombie & Fitch (ANF:NYSE) (short). We are short from 64.15. ANF gapped open to the downside at 61.63 and consequently you should have covered your first piece around 61.75, locking in a gain of 2.40. Lower the stop to 62.00 and look to cover the second piece on trade toward 57.50. As of Tuesday's close, we are up 2.92. -- On Tuesday, we were stopped out our second piece of TXU (TXU:NYSE) (long) for a gain of 3.00, after locking in a gain of 2.00 on the first piece. -- Wednesday is day eight in FactSet Research Systems (FDS:NYSE) (short). We are short from 35.45. Last Tuesday we covered our first piece, locking in a gain of 1.70. Maintain the adjusted stop at 35.10 and look to cover your second piece on trade toward 33.30. As of Tuesday's close, we are up 1.22 on the second piece. -- On Tuesday, we were stopped out of Amedisys (AMED:Nasdaq) (long) for a loss of 2.25. -- Wednesday is day 10 in ASA Limited (ASA:NYSE) (long). We are long from 39.40. Raise the stop to 39.40 and maintain the initial target on trade toward 41.40. As of Tuesday's close, we are up 1.35.



13

Notes and Guidelines

DayTrading Report: Trades marked ▲ indicate stocks that are considered small-cap, trading 500K shares or less. As you know, thin stocks are generally more volatile and trade with a wider spread. Trades marked * indicate patterns that don’t conform to the original rules of the pattern but are defined as “in the spirit of” their namesakes. The 1-Point Gap Rule: Any stock recommendation that opens 1 or more points above the listed entry price (for longs) or 1 or more points below the listed entry price (for shorts) should be ignored for the day. Please note that history suggests that entering a stock on a gap open increases your potential for a loss. Reminders: A signal is not valid unless the stock trades at or above the listed entry price for longs and at or below the listed entry price for shorts. If a position moves 1 point in your favor in this choppy environment, it is a good idea to sell half the position and move your stop on the remaining position to break even. Charts: The green line is a simple 10-day moving average, the blue line is a simple 20-day moving average, and the red line is a simple 50-day moving average. The Swing Report: Trades marked ▲ indicate stocks that are considered small-cap, trading 500K shares or less. As you know, thin stocks are generally more volatile and trade with a wider spread. Trades marked * indicate patterns that don’t conform to the original rules of the pattern but are defined as “in the spirit of” their namesakes. The 2-Point Gap Rule: Any stock recommendation that opens 2 or more points above the listed entry price (for longs) or 2 or more points below the listed entry price (for shorts) should be ignored for the day. Please note that history suggests that entering a stock on a gap open increases your potential for a loss. Initial Target: Target price at which you should look to sell/cover half your position. Reminders: A signal is not valid unless the stock trades at or above the listed entry price for longs and at or below the listed entry price for shorts. If a position moves 2 points or more in your favor in this choppy environment, it is a good idea to sell half the position and move your stop on the remaining position to break even. Charts: The green line is a simple 10-day moving average, the blue line is a simple 20-day moving average, and the red line is a simple 50-day moving average.



14

Legal Information

This information is confidential and is intended only for the authorized Subscriber. Please notify us if you have received this document in error by telephoning 1-866-321-TSCM (8726). Jeff Cooper, writer of The Trading Reports, is a principal at Mutual MoneyFlow Management, a money management firm (“MMM”), and a financial markets author and trader who contributes regularly to TheStreet.com’s RealMoney premium subscription web site. MMM, a registered investment adviser, and its affiliates may, from time to time, have long or short positions in, buy or sell the securities or derivatives thereof, of companies mentioned in The Trading Reports, and may take positions inconsistent with the views expressed by Mr. Cooper in The Trading Reports. In the event that, at the time of publication, MMM has a position in a security mentioned in The Trading Reports, appropriate disclosure will be made. Mr. Cooper will be restricted from transacting for his own benefit in securities discussed in The Trading Reports. Specifically, at the time of publication of The Trading Reports, Mr. Cooper may not hold for his own account any security that he discusses in that issue. However, Mr. Cooper may enter orders to purchase or sell securities mentioned in The Trading Reports after 10:30 a.m. on the trading day that begins after the publication of the issue of The Trading Reports in which the security is mentioned. IF YOU ENTER ORDERS TO BUY OR SELL SECURITIES AFTER 10:30 A.M., IT IS POSSIBLE THAT MR. COOPER MAY HAVE PURCHASED OR SOLD THE SECURITY AT A PRICE MORE ADVANTAGEOUS THAN THE PRICE YOU WILL OBTAIN. The Trading Reports contains Mr. Cooper’s own opinions, and none of the information contained therein constitutes a recommendation by Mr. Cooper or TheStreet.com that any particular security, portfolio of securities, transaction or investment or trading strategy is suitable for any specific person. You further understand that Mr. Cooper will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Contact Info

Customer Service: Please email [email protected], or call 1-866-321-TSCM (8726) Mon.– Fri. 8 a.m. to 6 p.m. ET; or outside the U.S. and in Canada, call 1-212-321-5200

Reader Feedback and Questions: Please send an email directly to Jeff. Again, please direct all account-related inquiries to customer service.

market commentary: that’s all folks - thestreet.com commentary: that’s all folks as i pointed...

Documents