Wednesday, November 14, 2007

Daily Equity Market Comment

The action today was pretty much along the lines of what you would expect after such a sharply higher day that we had on Tuesday. It remained 50/50 which way the market would break going into the last 1/2 hour, but we were tipped off not only by the triangle on the 5 minute chart, but also by the breaking of the trading range of the day to the downside. I have attached the 5 minute chart as well as the 5 minute chart to illustrate my points of today.
The probability model for tomorrow is calling for a resumption of the rally tomorrow.
As a matter of fact it is calling for a flat to higher open, with the open being the low for the day
so we very well could be in for another good upside day. I don't really expect anything as powerful as the rally on Tuesday, but there is strong probability of a good rally day.
We will know withing the first hour as to what type of day to expect, either trending or consolidation. As I had written in the intra-day postings today, the fading of the gap in the first hour of trading gave us a strong clue that today was going to be a consolidation day. This put us in the position to sell rallies and buy weakness and it was very profitable. On a consolidation day it is also very important to watch far a break out of the trading zone for a potential mini trend to jump aboard. We got that in the last half hour of trading as the days lows were taken out and further weakness set in.
The probability model continues to signal that we should buy weakness and that a potential intermediate term low has been put in place. However, I continue to see very little evidence that this is the ultimate low for any type of strong assault to the upside. While I was glad to see the fairly strong put buying during yesterdays strong rally, the put/call ratio went back to its recent trend of being way to complacent about current levels of the market and this is NOT a healthy sign on the intermediate term front.
Until we see more evidence either way, we will continue to follow the advice of the probability model and buy weakness.
I will be posting more day trading modules to show some very simple strategies to use during the day to not only scalp the S&P, but also to find strong moves of 10 points or more with a short amount of trade holding time.

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