Post by Savant on Jul 28, 2004 6:37:16 GMT -5
Rebound From Major Stock Market Support Levels - Published 07:37 EDT July 28 2004
Even though we came into Monday morning on a weak enough note, it became quite apparent to us late morning, that the market was quietly probing for a bottom right around the major stock market support levels we alluded to in our preview report for the week entitled: Approaching Major Stock Market Support Levels and as the day labored on the market, held well although it was making fairly heavy weather, but the selling was light and we surmised that following a classic late new low to clean out weak hands and suck in more shorts, that the market began a refreshed move to the upside with new vigor from a beautifully formed low at around 2:45 PM EDT, as a 1 - 2 Punch buy rating on our indicators came into play, the market seemed to come together very nicely with the Dow going green on the day after being down half a hundred or so, closing more or less unchanged by the end of the session. By 4.00 PM EDT we had gone to positive trend with a triple-dynamic buy signal suggesting the strong likelihood of a continuation to the upside going into Tuesday and increased prospects of an upside surprise. The power of Tuesday's upmove was gratifying to say the least, but the fact that Monday's low was made on lighter selling volume of only 1.4 Billion shares and only 91 new lows, versus 1.9 Billion and 900 new lows back in mid-May, so this helped to explain the energy with which we came off Monday lows and in general the indices appear to be setting themselves up for a significant rebound in the near to intermediate future although the market remains vulnerable to at least another pullback of significance and thereafter a stronger and more sustainable rally should eventuate.
As we also suggested, Bonds have been in somewhat of a nosedive as they are detecting increasing economic strength and helpful consumer sentiment numbers. They have dragged the foreign currencies down sharply along with them and the Dollar has soared.
U.S. Treasury Bonds appear to have formed a significant interim top and now appear poised for a prolonged downtrend that potentially could carry them to as low as 96 almost a 14 point drop. We will be watching carefully to see how and if this new trend begins to unfold.
Trading Ideas and Updates
We said we felt the case for a significant low to be established in grains could genuinely eventuate any time as we reached down to extreme support levels that could precipitate a rally or series of rallies of consequence. Well shiver me timbers if that didn't happen out of the gate Monday morning. As we reported, we got a 1-2 Punch buy signal in the late evening Thursday and this was confirmed by a trend buy not long after. The consequences of this action surprised us with a sharply higher opening Friday across the entire grain complex, before some profit taking kicked in just after mid-day, and what turned out out to be a 1-2 knockout kicked in going into the close. We did not appreciate the dire consequences of this stealthy maneuver that was not only screaming to take profits, but was evidently also yelling sell short in the same moment.
Sunday night, we found out why:
Soybeans opened extremely sharply lower, down 21 cents per bushel and plunged through the night into early morning, dragging the rest of the complex down with it. This resulted the down-move becoming overextended creating the scenario for a powerful reversal to unfold and that is exactly what happened just around Noon, when the grains began to soar and beans moved up about 35 points. Such large moves have been symptomatic of late that years ago would have been major news in more quiet times, but we are in a very dynamic Grain market these days, the moves have been dramatic and spectacular and potential profits huge.
Coffee is trying to find a low or at least some support. That could be today. Aggressive traders should buy 1 Sep Coffee at the market and if they so choose could buy additional contracts at 69 stop, 70 stop etc or buy September or December 70 calls in the same way. This is a bit of a crap shoot, but we consider it worth risking profits from already successful trades to build a position in Coffer.
We should have shorted Orange Juice as opposed to Cocoa and it wasn't not for the want of wanting to, it was just that Orange Juice was still making new highs and ordinarily it defies conventional wisdom to go out and blindly sell such a strong market in the hope that you might be right. As it turned out, Orange Juice opened sharply higher and then went into one of its most spectacular plunges in its entire history giving back a stunning 12 plus points or almost 80% of its recent 6 week gains in just two days! Cover CCU4 1620 stop.
The Energy Sector is still exhibiting strength with Crude at new contract highs past $42.30.
Lumber continues very firm near its highest levels in history, indicating a still strong housing market could be creating shortages..
Have a great Wednesday
Trade Well
Savant
Even though we came into Monday morning on a weak enough note, it became quite apparent to us late morning, that the market was quietly probing for a bottom right around the major stock market support levels we alluded to in our preview report for the week entitled: Approaching Major Stock Market Support Levels and as the day labored on the market, held well although it was making fairly heavy weather, but the selling was light and we surmised that following a classic late new low to clean out weak hands and suck in more shorts, that the market began a refreshed move to the upside with new vigor from a beautifully formed low at around 2:45 PM EDT, as a 1 - 2 Punch buy rating on our indicators came into play, the market seemed to come together very nicely with the Dow going green on the day after being down half a hundred or so, closing more or less unchanged by the end of the session. By 4.00 PM EDT we had gone to positive trend with a triple-dynamic buy signal suggesting the strong likelihood of a continuation to the upside going into Tuesday and increased prospects of an upside surprise. The power of Tuesday's upmove was gratifying to say the least, but the fact that Monday's low was made on lighter selling volume of only 1.4 Billion shares and only 91 new lows, versus 1.9 Billion and 900 new lows back in mid-May, so this helped to explain the energy with which we came off Monday lows and in general the indices appear to be setting themselves up for a significant rebound in the near to intermediate future although the market remains vulnerable to at least another pullback of significance and thereafter a stronger and more sustainable rally should eventuate.
As we also suggested, Bonds have been in somewhat of a nosedive as they are detecting increasing economic strength and helpful consumer sentiment numbers. They have dragged the foreign currencies down sharply along with them and the Dollar has soared.
U.S. Treasury Bonds appear to have formed a significant interim top and now appear poised for a prolonged downtrend that potentially could carry them to as low as 96 almost a 14 point drop. We will be watching carefully to see how and if this new trend begins to unfold.
Trading Ideas and Updates
We said we felt the case for a significant low to be established in grains could genuinely eventuate any time as we reached down to extreme support levels that could precipitate a rally or series of rallies of consequence. Well shiver me timbers if that didn't happen out of the gate Monday morning. As we reported, we got a 1-2 Punch buy signal in the late evening Thursday and this was confirmed by a trend buy not long after. The consequences of this action surprised us with a sharply higher opening Friday across the entire grain complex, before some profit taking kicked in just after mid-day, and what turned out out to be a 1-2 knockout kicked in going into the close. We did not appreciate the dire consequences of this stealthy maneuver that was not only screaming to take profits, but was evidently also yelling sell short in the same moment.
Sunday night, we found out why:
Soybeans opened extremely sharply lower, down 21 cents per bushel and plunged through the night into early morning, dragging the rest of the complex down with it. This resulted the down-move becoming overextended creating the scenario for a powerful reversal to unfold and that is exactly what happened just around Noon, when the grains began to soar and beans moved up about 35 points. Such large moves have been symptomatic of late that years ago would have been major news in more quiet times, but we are in a very dynamic Grain market these days, the moves have been dramatic and spectacular and potential profits huge.
Coffee is trying to find a low or at least some support. That could be today. Aggressive traders should buy 1 Sep Coffee at the market and if they so choose could buy additional contracts at 69 stop, 70 stop etc or buy September or December 70 calls in the same way. This is a bit of a crap shoot, but we consider it worth risking profits from already successful trades to build a position in Coffer.
We should have shorted Orange Juice as opposed to Cocoa and it wasn't not for the want of wanting to, it was just that Orange Juice was still making new highs and ordinarily it defies conventional wisdom to go out and blindly sell such a strong market in the hope that you might be right. As it turned out, Orange Juice opened sharply higher and then went into one of its most spectacular plunges in its entire history giving back a stunning 12 plus points or almost 80% of its recent 6 week gains in just two days! Cover CCU4 1620 stop.
The Energy Sector is still exhibiting strength with Crude at new contract highs past $42.30.
Lumber continues very firm near its highest levels in history, indicating a still strong housing market could be creating shortages..
Have a great Wednesday
Trade Well
Savant
