Making Sense of the Chop

When the market acts in a seemingly random manner, with intraday whipsaws and an overall lack of high probability entries, looking at multiple timeframes can often help to clear the picture up. You may recall that during last summer’s chop, we had a competing head and shoulders topping pattern possibility on the weekly chart, versus what ultimately proved to be a true head and shoulders bottoming formation on the daily.

Shrinking our timeframes in this current market, we can see a clear head and shoulders bottom candidate on the 5 minute SPY chart, versus a head and should top possibility on the 30 minute chart. Until one of these scenarios proves true, expect more whippy market action.

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Finding “pin action” plays as a trader can often be a rushed, stressful, and inefficient process. You may see a battery technology firm beat earnings and trade up over 13% to next day, as RaginCajun noted in a post yesterday. When you see this happening in real-time, most traders immediately want to find names trading in sympathy with the big mover, preferably before they are off the races. Of course, if this happens during the trading session, you might think you know where to look, but every second that you furiously click through financial sites for related firms you know that you are falling behind the curve.

Enter: The PPT keyword search function. In literally less than thirty seconds, you can begin your research in The PPT Tools first and foremost with a keyword, and then filter all of the other parameters that the algorithm offers through only those firms who match that keyword. As part of our mission statement inside 12631, a Trading Group only available to existing members of The PPT, RaginCajun and I are committed to continuing education about all aspects of The PPT service, so as to make sure you are reaping the full benefit of your subscription. Below, you will find a two-part video series about this keyword search function that I made for members of 12631 last evening, serving as an example of the type of regular continuing education that we provide.

To learn more about The PPT, please click here for details.

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[youtube:http://www.youtube.com/watch?v=UL1CvEHN9OY] __________
[youtube:http://www.youtube.com/watch?v=rRk1RIUPuR8]

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Plenty of excellent sites out there include more macro commentary in their links, namely Downtown Josh Brown and Abnormal Returns. I thought I’d share a “Traders Only” collection. Here are the traders that I am reading today (click on links):

• “The Goat,” @gtotoy, with his trademark SPY read of the day
• @ZMoose12 with an excellent case study
• @DerekHernquist on knowing your stock “type”
• @ChicagoSean on finding your edge as a trader
• Mark Minervini’s latest market commentary
• @daytrend, Vic’s intraday market stats
• @vjland looking at GS on multiple levels

There are plenty of other key sources that I check everyday, so be sure to look on the right hand side of your screen for my Blogroll.

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MARKET WRAP UP 02/08/11

The resilience of this market cannot be denied. Below, I have outlined what I believe to be the three best bullish arguments for continued strength, versus the three best bearish charts that would support the thesis that an intermediate-term top is imminent.

BULLISH

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BEARISH

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Plenty of excellent sites out there include more macro commentary in their links, namely Downtown Josh Brown and Abnormal Returns. I thought I’d share a “Traders Only” collection. Here are the traders that I am reading today (click on links):

• “The Goat,” @gtotoy, describing one of the REITs as entering into a “vacuum”
• @zortrades with his money stock of the day
• The @HCPG crew with a great piece on the state of the current market
• @DerekHernquist with another great piece on trading strategy
• @DownTownTrader developing his thesis on weakness in the auto parts space
• @daytrend, Vic’s intraday market stats
• @vjland on the AIG setup

There are plenty of other key sources that I check everyday, so be sure to look on the right hand side of your screen for my Blogroll.

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Even before AOL announced its purchase of The Huffington Post, the stock already seemed destined to retest the major support area that buyers had established since the firm went public for a second time. For those who believe that, despite the $315 million price paid for the “new media” Huffington Post, this is a strategically sound long-term play for an aging brand like AOL, then this area below $20 is crucial for establishing a major double bottom.

Another interesting aspect about the weekly chart below is that AOL was breaking down last week, prior to the announcement of the deal. To be sure, some large holders could have easily had that information and acted on it. However, even for idealists who presuppose no one acted on inside information, the chart goes to show that news flow can often speed up and exacerbate a technical trend in the prevailing direction.

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