Analysis: The Plan and the Markets

//Analysis: The Plan and the Markets

Hawk’s Scan Sentry Report January 7, 2013

Welcome to a new year and lots of new trading opportunities, I look forward to sharing the  journey with you. This year I am more excited than ever about the possibilities that lie in wait within the markets. In preparation for the new year I have been setting my goals (daily, weekly, and monthly) , reviewing my trading rules, going over my trading log, and committing myself to improving my physical habits as well as my trading habits. All of these are important parts of a successful trading plan.   For most of us, trading is a solo business. That is why it is so important to have clear rules in your trading plan, and to develop the discipline to follow them. The rules in your trading plan are there to protect your account and to help you execute your business. I once heard a successful trader state that he considers the parameters of his trading plan to be his ‘employees’; and you must allow them to do their job in order for the business to run profitably. I find a lot of truth in that.

And now for a little bit of market analysis… As many of you may know, I like to compare the S&P futures contract to that of the NASDAQ. At this point we see a lot of the same technical indications on both charts, with one big difference. Both have risen close to 10% since the November 16 lows; however,  the S&P is already testing the mid-September highs whereas the NASDAQ is still 5% away from that threshold. This is because the NASDAQ fell quite a bit further than the S&P in the autumn 2012 correction. As I look at the current technical analysis, I don’t see the buyers stepping up in either market with enough conviction to spark a significant rally at this point. I use the Radar1 Fear/Greed indicator, which is still red and pointing down in both of these markets, to draw this conclusion. As a consequence I expect  the S&P to be rejected at this test of 1461 and to trade downward until we see a bit more parity between that contract and the NASDAQ. As I have noted earlier, at some point this year I expect the S&P to be making significant new highs, but this week I don’t expect to see much more than perhaps a bit of “stop running” above the previous highs.

Index Futures:

S&P Index

(Here we see the price testing September 14th highs. Although the Trenders and Radar3 Trend Strength are bullish, note that the Radar1 Fear/Greed indicator does not show buying strength, and Radar2 Price Leader is overbought.)

NASDAQ Index

(Although the technical indicators are about the same as the chart above, this market has more upside potential than the S&P. Nonetheless, there are still several levels of resistance to get through before this contract can test the September highs. Note the bearish pivot divergence in Radar1 Fear/Greed. )

As we enter into this new year, I want to show you how I am looking at several of my favorite markets. On the examples below I explain my analysis for some of the most commonly traded symbols using some of the most highly regarded technical indicators available. These tools are used by both institutional and private traders across the globe and are built into many of today’s most popular trading platforms. However, if you are not familiar with these indicators please follow this link to a legend describing these tools.

Other Charts and Analysis

Equities Setups:

(Buy) IRM– Iron Mountain Inc.

(Notice the strengthening Radar1 Fear/Greed after the bullish pivot divergence. Also note that Radar3 Trend Strength is beginning to show trend strength.  However, the Radar2 Price Leader is currently overbought; I would look for a pullback into the Triple Trender before entering long.  )

Commodities:

GOLD

(Our Triple Trender and Radar3 Trend Strength indicator are both bearish, and the Radar2 Price Leader shows a bearish pullback divergence. This indicates the bears control this market right now. However, if the Radar1 Fear/Greed indicator starts to turn more bullish at this point we would see a bullish pivot divergence which could enable this market to potentially trade through resistance at $1681 and test the next resistance level around $1707.)

CRUDE OIL

(This is a market which is showing bullish indications. The Triple Trender, the Radar3 Trend Strength indicator and Radar1 Fear/Greed indicator are all bullish. Note the new highs in Radar1. However, we have an overbought Radar2 Price Leader and we are coming up against a resistance level created by the highs of the October consolidation around  $94.43 )

Forex:

GBPUSD

(After testing the mid September highs of 1.6300 in the middle of December, and again a few days ago, this market shows bearish pivot divergences in the Radar1 Fear/Greed  and Radar2 Price Leader. Furthermore, the Triple Trender is bearish. All we need for downside confirmation is for the Radar3 Trend Strength indicator to turn pink… the color of a bearish trend. )

May the trend be with you,

Hawk

Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor .

2018-01-08T07:10:28+00:00January 6th, 2013|Hawk's Picks|