I couldn’t pass up posting on the almost perfect short-term rising parallel trendline channel that has formed on the intraday chart of Crude Oil futures. It allows us to observe a key channeling formation and learn an important lesson - that divergences can persist and give false signals while price remains in a powerful trend, and that it is more important to watch what price is doing in order to generate trading signals - an important lesson on all timeframes. Let’s take a look: Using TradeStation, we see the pure price of @CL Crude Oil (continuous) futures on the 5-min chart.
It’s common to ask the question when price breaks a key resistance level, “Is this a real breakout that will last, or is this just a short-squeeze situation that won’t?” That’s the operative question now - let’s take a look at the price breakout in the S&P 500 and try to make a determination with the information we have so far. The 1,111 area was key resistance (a key inflection point), being the 61.8% Retracement, a descending trendline, and prior price resistance (late February high of 1,111).
I wanted to invite you to a special webinar event I will be conducting Wednesday, February 24, 2010 just after market close at 4:30 EST / 3:30 CST entitled “ Trading Intraday Momentum and Market Internal Divergences ,” sponsored by Trader Kingdom and Mirus Futures.
The S&P 500 cracked the key 1,100 resistance level, and it was met as expected with a surge of “popped stops” as bears threw in the towel - which serves as another example of “what happens when key resistance is broken?” However, we’re not seeing the classic signs of strength that accompany strong price breakouts… but does that need to be the case in the current altered financial landscape? Do old rules still apply? Let’s take a look.
It’s hard to come up with a good title that gets you to read a post about “Fibonacci Confluence,” but it’s an important and useful tool you can learn - if you haven’t already - that can help you uncover possible targets for intraday traders to play for, and also areas of hidden resistance (or support) that sets up a reversal trade when combined with other indicators.
I always like to point out simple trendline formations whenever possible, and it would appear we have one of those situations currently in the intraday S&P 500 and SPY charts. Let’s take a quick look to see where price is likely to travel next if the trendline structure holds. First, the SPY 30min chart (for the larger perspective): Price is moving in a contained range as drawn above, between the lower trendline (blue) and 50 period EMA (and upper trendline - also blue).
For the moment, things are looking brighter for the buyers/bulls, at least according to the intraday SPY 5-min chart when a bullish trendline break accompanies a strengthening in key market internals. Let’s take a look at the recent potential bullish developments. (Click for full-size post) What we’re seeing is a continuation of the “ Update on Market Internals ” post I wrote yesterday.
The morning session of January 5th gave us a great chance to see two principles/trade set-ups in motion, which both serve as great educational examples of the “TICK Flush” and “Dual Divergence” situations. Let’s see them and then define them for reference. (Click for full-size image) We’re seeing the SPY 1-min intraday chart (could just as easily be the $SPX Index or the @ES futures contract) with the 20 and 50 period EMAs shown. Under that, we see the 3/10 Momentum Oscillator , and in the lower panel, the NYSE TICK (chart created in TradeStation).
The morning session of January 5th gave us a great chance to see two principles/trade set-ups in motion, which both serve as great educational examples of the “TICK Flush” and “Dual Divergence” situations. Let’s see them and then define them for reference. (Click for full-size image) We’re seeing the SPY 1-min intraday chart (could just as easily be the $SPX Index or the @ES futures contract) with the 20 and 50 period EMAs shown. Under that, we see the 3/10 Momentum Oscillator , and in the lower panel, the NYSE TICK (chart created in TradeStation)
Following-up from my prior post “ Knock, Knock, Knocking on Fibonacci’s Door ,” I wanted to post a quick update on the current intraday S&P 500 Index chart to see just how important this level is and how buyers and sellers are playing ‘chicken’ at this level.
Tuesday, March 2, 2010
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