Market Report: Quiet Week

By: Nouf | Mon, Jul 11, 2011
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DOW

It was a quiet week that never really got going till right at the end, and it needed a "hot" print from the NFP figures to get the markets energized and awake from their slumber.

I think the rally over the past 2 weeks has surprised many with its speed and strength, and yet I still read many trying to top tick the rally, to the extend they still don't believe in the rally.

It makes no difference how or why the rally happened, just that it happened, and trying to time a high or low in strong trend is suicide, unless you have at least some evidence of a top or bottom.

Traders who got short just before the NFP, simply had a 50-50 odds that the report was going to go in the direction of their choice, that's a poor odds trade in the authors opinion, and that's not the sort of trade I would suggest anyone taking, I ask the question what if the NFP put on another 10 handles to the upside? Is that really a sound trade? as that's simply gambling, although we were looking for a reversal based off out projections, the rally continued far far higher, than my original projections, so it was a case of sitting on the sidelines as the risk to jump back in on the long side without even seeing a 10 handle pullback was too risky.

At times "no trade" is a trade, what that simply means that sometimes doing nothing is a great position to be in, there are times that the risk in involved is simply way out of the criteria I set myself, and chasing the markets, generally tends to get traders in trouble.

The example was those that bought into a very extended rally on Thursday and based off the ADP report, all sorts of figs were being suggested for the NFP report. Well the NFP report was a huge miss, and those that bought into the hype got hurt off the gap down on Friday, although we had patterns that were calling for a reversal. We needed evidence 1st and not prepared to take a "lucky" guess on the direction of the NFP.

With the current moves pointing towards a correction we tend to still like the bullish side on equity markets and still looking for that new yearly high. Most US markets support the same ideas we are working with and based on any pullback will confirm which of the 2 working ideas is in progress.

As long as our key support areas lower down are not violated, I consider the trend still strong and the bulls still own the market, unless this market wants to show me some evidence of a bearish reversal, I still think those yearly highs that my work is suggesting is the target for the markets.

Already the NDX and FTSE came very close to those highs and the SPX and DOW has cam near to those highs, but I don't have a completed pattern in place, so I can't yet consider getting aggressive on the short side, although I am expecting a brief pullback that will help confirm/negate some ideas I am working with.

DJIA
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EUR/USD

This pair is suggesting some sort of triangle setup, but the direction is a what traders are trying to work out, but we do know that the buildup on this pattern, should see an explosive move in the confirmed direction, and one that should be good for a move.

Bulls need above 14515 as use it as support; bears need to keep this under 143-14320, and get under 142, so it should be an interesting few days ahead for this pair and generally the markets.

EUR/USD
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Oil

We went into last week with 2 ideas either bull or bear, it made no difference, but the idea was if the bears still owned the market, we would see a bounce that that failed in our resistance band as we had a 1x1 measured target, as well as fibbo resistance at the 618 and structural resistance.

Oil
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Before

We tend to now think that the market wants to push back under $90, we like the idea of selling weak corrective rallies under $98, only an aggressive move above $98, would suggesting holding back from the short side and adjust, and see what price is doing.

After rejecting out mid-week target, this was a great reversal, and one that suggests now the rally from the $90 lows was a corrective 3 wave move, getting back under $95.70 then $93.40 will help the bear case, and eventually seeing sub $90.

Before
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After

If you look at a weekly charts that's a nasty reversal right our resistance cluster and failure to get back above that area, suggests prices to push back under $90 from here and potentially see the $70 area, only an aggressive move back above $98, would the bears need to hold back from selling and respect a strong move above $98.

After
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Conclusion

Equity markets really did not do much in the shortened holiday week, and it was only until Friday that we got some price action to wake up the markets from the grind that continued from previous week, the real action came in other markets, i.e. oil, and some of the FX pairs.

Although we are still looking for a pullback in stocks and depending on how deep, will help confirm one of 3 patterns I am working (2 bullish and 1 bearish).

When equity markets move the way they have over the past few days, and risk becomes ever increasing dangerous, the better trade is to look to other markets, that's what some of us did at WPT, we went looking for better lower risk trades that provided us with clear and confident ideas, with summer trading, we will take anything we can get, as I am expecting this sort of whipsaw in stocks for a few more weeks, possibly until the "boyz" come back from the Hamptons.

Give yourselves a chance, when markets are in a coma, go and look to other better setups, that's how you improve your chances are staying in "da zone".

Until next time.

Have a profitable week ahead.

 


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Nouf

Author: Nouf

Nouf
www.Wavepatterntraders.com

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