Thursday 11 January 2007

Double Trend Line Resistance

The Emini closed up 6.50 points at 1,431.00 on Thursday. My bullish read of the market has paid off this week - over the last 2 days the Emini low to high range has been almost 24 points. New high closes on the NASDAQ and Dow, but once again my analysis of the market is not as bullish as the media and market commentaries. Check out the Emini trend line chart below - haven't seen a double cross pattern like this in a long time.

Emini Trend Line Image

Double trend line cross

The Emini met resistance right where the two trend lines cross at 1,436. The trend lines are automatically plotted using TradeStation EasyLanguage - so no 20/20 hindsight. Up trend lines are colored green with green pivot points. Down trend lines are colored red with red pivot points.

I use an automatic algorithm to color the bar red for uptrend and green for downtrend. When the market is undecided and between rising and falling trend lines (triangle pattern) the bars are painted white. Interesting to note that the current trend is down using this method.

Uncertain rally

Here are the factors that don't give me confidence in the current rally:

  • Profit taking during the afternoon saw the market drop almost 6 points
  • Stopping pattern - new high but with higher volume, smaller range than yesterday
  • Weak adjusted Trading Index (TRIN) reading of only +13
  • Approaching cycle high on 135 minute (3 bars per day) time frame
  • Semiconductor index closed down - usually a market leader
  • High volume churn on Google and Apple, market leading NASDAQ stocks (Google pattern was a "Get Out" gap up high churn pattern)

Decided to take profits and stay out of the market until after the long weekend.

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