Thursday, September 29, 2011

Stock pick for 09/29/2011
Ivica at

My mentor from 12 years ago, and friend, Toni Hansen, is BACK, after taking time off to have a child, knowing her I was REALLY surprised that she wasn't using the stirrups for support for her lap top as she continued to trade all the way through it, hahahaha! She puts out a daily column that you can get in your email box for FREE, just go to to sign up, or check out her daily columns at the site. ANYWAY, here's a couple of her comments regarding the recent action:

"The 50-day moving averages served as strong resistance for the S&P 500 and Dow Jones Ind. Average on Tuesday. This was another contributing factor to Tuesday's late-day reversal, but it was also a warning sign for short-term traders. The market had collapsed in early August and upside on the daily time frame since that point had been limited to moves off the lower end of a gradual uptrend channel on the weekly time frame. 


Last week was an attempt from the market to break the lower end of that trend channel, but the fall off the upper end of the channel lent support to prior lows and a total breakdown failed. It is more ideal for the market to hug the lower end of the trading channel before breaking down further in order to establish strong continuation patterns for shorts. Alternately, when a low-level base does reverse and break higher, the market will begin to shift its momentum with slower downside within the range and even moves that hug the upper end of that larger channel. Neither of these things has yet to happen, which leaves the market still stuck within that larger daily channel that has been in play since early August and it means ongoing favor for a continuation of the channel on the 60 minute charts as we move into the end of the week."

Now, what she means is, she's "bearish", some what. Despite being a futures Day Trader, Toni is VERY good at longer term outlooks, just like another student of her's, Ivica, and what she's talking about is that this pattern we've been stuck in since the initial dump in August is a "low level continuation" pattern, which I've mentioned in my ramblings, and we, SHOULD, grind around inside here and THEN, "CONTINUE", to the down side.
That chart is the current December contract for the SP 500 futures, we are UP again this morning, again, on "hopes" of a EURO Zone solution, sigh, wad ever, DOW has been up about 130 points, any way, her, "IDEAL", pattern is the little squiggly lines on the right side, where we come down and "HUG" the bottom end of the channel around 1100, or the $112 number on the SPY, and then break down. My thought on this, is that Da Boyz have been "training" us to BUY the support "area", around $112, and then sell at the resistance "area", which is that upper down trend line. So, we get a more gradual move down into the lower number, and bull's interpret this as a sign of slowing momentum by the Bear's, they BUY the farm, and then those sly Boyz, kindly gap us down a few hundred points one morning, effectively springing a "Bull Trap", trapping every one who brought the support level, and causing panic as every one tries to get out the ONE fire door at the same time!
What I'm saying, is I'd be very careful about trying to bottom fish this thing at the lower end, a better course of action, if you are interested in "Buying" the markets, would be to wait for the opposite action to happen, where we go up to the UPPER end of the consolidation, and wallow around at that trend line, and give the Bear's some hopes that we are going to head back down again, and then Da Boyz spring a "Bear Trap", where they gap us higher one morning, and never look back, with the short covering adding fuel to the fire.

Until that happens though, the "MAIN" pattern will continue to be the low level consolidation, and the "MAIN" "MAIN" pattern inside that, is the "Equal Move" scenario, which gives a target down to $98-100 on the SPY. I also notice that we have a pretty clear Head and Shoulder's pattern inside the "MAIN" pattern, which is kind of a minor thing in comparison to the over all pattern, but it also reinforces the power of a break through the lower trend line, or the neck line in this case, which is that $112 number. The target on an H and S pattern is to take the length of the Head down to the Neck Line, and subtract that from the Neck Line, which gives us a target of "about" $100-102 on the SPY, which fits right in with the Equal Move target. 


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