Teach Talk Trade Day Trading & Technical Analysis

E-minis 11-28-07 (Wednesday):  A Daily Technical Analytical View of Eminis for online and day traders.

Emini S&P 500 (ESZ):  Volatility rules:  Eminis continue to rock and roll.

The ESZ closed up +19.75 and the S&P 500 closed up +21.01 points on Tuesday.  Price smacked the T8 and moved down after the contact on Monday and then couldn’t gather enough strength to touch it on Tuesday.      We always see retracements to the T8 as opportunities to buy or sell.  Wednesday should offer an opportunity to sell against the T8.  The StoRSI, our momentum oscillator, has swung positive again with the last six sessions changing directions of the indicator.  This is an uncommon supply and demand occurance.

The direction of the T8, our exponential moving average and trend definer, continues to point down and continues to act as resistance to price (most recently on Monday).  The trend has continued down for the past 29 trading days.   Rallies back to the T8, as we saw on Monday and Tuesday, are opportunities to sell the market once again.  The steeper the decline of the T8, the further this market can fall.  We continue to doubt if the market can rally for any length of time above the T8. 

Tuesday’s white candle is a “harami”.  The body of Tuesday’s candle is inside the body of Monday’s candle.  This supply and demand pattern can suggest a change in direction.  We have a classic battle of “trend vs. candle formation”…usually, trend wins.    

***Volatility Alert:
During the third week in July, volatility returned to the major stock indices.  For approximately four years, the markets have had low to very low volatility.  This significant change has ushered in swings of 100, 200 & 300+ points in the DJIA (DOW), sometimes on a day-to-day basis.  Stock indices tend to be either volatile, or not, for three to five years at a time.  Expect continued volatility.  This volatility cycle is in its early stages and we continue to believe it is here to stay. (***9/15/07).

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