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How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K
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Home Page > Finance > Day Trading > How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K
How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K
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Posted: Jan 11, 2011 |Comments: 0
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It was a great first week in the market for 2011. Volume picked up as traders slowly return from holidays focusing on the markets again. Looking forward volume should continue to expand because there will be more traders in front of their terminals excited to see what type of money they can make in 2011.
Let’s jump into what happened last week. On Friday the market generated a short term trading signals to go long SP500, Dow, Nasdaq or Russell 2k. This trade seemed to fall on a perfect day because if we look back over last year’s weird trading characteristics typically if you were to buy on a Friday and hold a position until Monday it would have netted you a profit. Well on Friday the market had a very nice intraday pullback to a level which there was strong support so we bought in with a small position.
Let’s jump into the charts for a visual of what I am talking about…
SPY – Daily Chart & Moving Averages
This chart shows the big picture. Currently we are in a strong uptrend and looking to buy significant pullbacks to key levels of support, and that is exactly what we had last week.
The market pulled back to a level which has support:
1. It pulled back to the 14 day moving average
2. It pulled back to the previous weeks high
3. It pulled back to a support trend line
Each of these levels happen are at the same level and each type of support will attract a different type of trader, meaning there should be a lot of individuals covering their shorts and or buying at that point.
Friday’s 1 Minute Madness Chart
This is a 1 minute chart of just last Friday scrunched together so I can fit everything into the chart. What I want to show here is how the short term time frame can help you spot a bottom as it is forming. This actually is a little more complicated that im showing here but I hope you get the point.
Every day there is either a short term top or bottom which forms usually between 10am – 2pm ET. When the daily chart is in an uptrend you should focus on only trying play bottoms as the bias is up and even if your timing is off a little the overall larger trend typically will save your butt.
The chart below shows how a morning support level was broken and the market started to fall. That is the first time in the day which stops get triggered and the start of a new trend was born. The jump in volume was from traders who were long and used the morning support as a level to exit the position if it was broken in order to cut their losses. Bearish traders on the other hand would have been shorting on the breakdown anticipating lower prices.
Usually after a break there is a test of the breakdown level and we got that a few minutes later as which point more traders took short positions hoping for a continues selling. That wave of selling led to a sharp drop and then the first real bounce.
My general rule is you can trade the first pullback after a breakout or price surge. Now this can be taken two ways. You can trade the first test of a breakout which in my opinion carries the lowest risk and then you can still trade the first real bounce which comes after strong and steep price movement.
When looking for the bottom I like to see multiple new lows with price spikes as it means stops are being triggered, and more traders keep shorting the new lows. Once the herd is heavily weighted on the short side and the chart forms an ABC retrace then I know a bottom is near and all those shorts will be covering sooner than later.
Market Sentiment Trading Indicators – 10 Minute Charts
Top Chart: SPY etf shows a possible ABC correction on the 10 minute chart along with panic selling as there we 3 sell orders to every 1 buy order. Everyone was running for the door.
Middle Chart: NYSE Advance Decline line was showing stocks were oversold on the short term basis and it’s just a matter of time before the price stabilizes or bounces.
Bottom Chart: Put/call ratio was telling me even the options traders were buying leverage to the down side. All of this tells me the majority of traders are selling and I like to do the opposite which you will learn over time.
SP500 Futures – 5 Minute Chart of Friday
This shows where our entry point was using all the above indicators and trading analysis. Because the broad market has been rising for so long and showing signs of correcting any day now, a trader must be very picky/timely with their entry point and the amount of money put to work in these trades. But just because the market feels like it’s ready to roll over it does not mean we should be looking to go short. I strongly believe we buy the dips but keep our position sizes much smaller than normal. For all we know this uptrend could go on into May…
During an overbought/overextended market condition which I think most of us agree we are in, I am not willing to risk much capital in new positions and also the reason why I am really zooming in on the charts to get us the best possible price to reduce risk.
Weekend Broad Market Trading Conclusion:
Last week’s entry point required us to be very timely, but keep in mind this is not the norm. During a new trend we sometimes have 2-3 days to enter a position before the market starts to really move and it is those larger swing trades which make some decent money and last weeks at a time.
Anyways, thought I would share this info with a little more detail. As you can see there is a lot of information and timing that must come together for a trade setup and entry point.
If you would like to get more of my daily analysis to join my newsletter at www.GoldAndOilGuy.com
Chris Vermeulen
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How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K
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Home Page > Finance > Day Trading > How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K
How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K
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Posted: Jan 10, 2011 |Comments: 0
|
It was a great first week in the market for 2011. Volume picked up as traders slowly return from holidays focusing on the markets again. Looking forward volume should continue to expand because there will be more traders in front of their terminals excited to see what type of money they can make in 2011.
Let’s jump into what happened last week. On Friday the market generated a short term trading signals to go long SP500, Dow, Nasdaq or Russell 2k. This trade seemed to fall on a perfect day because if we look back over last year’s weird trading characteristics typically if you were to buy on a Friday and hold a position until Monday it would have netted you a profit. Well on Friday the market had a very nice intraday pullback to a level which there was strong support so we bought in with a small position.
Let’s jump into the charts for a visual of what I am talking about…
SPY – Daily Chart & Moving Averages
This chart shows the big picture. Currently we are in a strong uptrend and looking to buy significant pullbacks to key levels of support, and that is exactly what we had last week.
The market pulled back to a level which has support:
1. It pulled back to the 14 day moving average
2. It pulled back to the previous weeks high
3. It pulled back to a support trend line
Each of these levels happen are at the same level and each type of support will attract a different type of trader, meaning there should be a lot of individuals covering their shorts and or buying at that point.
Read Full Article Here:
==> How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K
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Smaller U.S. companies are rallying the most since 2003 relative to the Standard & Poor’s 500 Index, a sign to BlackRock Inc. and JPMorgan Funds that the economy will strengthen and spur a third year of gains for investors.
BusinessWeek.com — Finance
Thispost is for educational purposes only. Elliott Wave Technical Analysis of S&P 500, Dow Jones, and Russell 2000 Futures and Market Breadth Analysis Entire publication © Smart Trades Inc. 2010 All rights reserved. All Charts & Quote Pages in this publication made with Omega Trade Station (r) 8 This post is for educational purposes only. TRADE AT YOUR OWN RISK! NOTICE: Traders can and do lose money. No claims are made that the information provided here will insure gains or prevent loses. TRADE AT YOUR OWN RISK. All support, education and training services and materials in this post are for informational and educational purposes only. No type of trading or investment recommendation, advice or strategy is being made, given or in any manner provided by Smart Trades Inc. or its affiliates. NOTICE: Neither the information, the systems, nor any opinion expressed herein constitutes a representation by Smart Trades Inc., or a solicitation for the purchase or sale of any commodity futures, other securities, or options of any kind. Those using the information and systems herein for trading purposes are responsible for their own actions and no claim is made that the recommendations or systems will be profitable or that they will not result in losses. Smart Trades owners, employees, or members of their families may have a position in the markets contrary to the information or systems contained herein. TRADE AT YOUR OWN RISK. PLEASE NOTE THAT THERE IS AN INHERENT RISK OF LOSS …
The Dow Jones industrial average ended at its lowest level in more than six years.(Feb. 19)
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Financial Futures Contracts — NASDAQ 100 and Russell 2000
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Financial Futures Contracts — NASDAQ 100 and Russell 2000
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Financial Futures Contracts — NASDAQ 100 and Russell 2000
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Financial Futures Contracts — NASDAQ 100 and Russell 2000
By: Richard Stooker
About the Author
You can accumulate a large portfolio of income-producing investments. Discover how investing for income can help you retire with financial security. Learn more about investing for income and Feldman Mall Properties
.
(ArticlesBase SC #3019000)
Article Source: http://www.articlesbase.com/ – Financial Futures Contracts — NASDAQ 100 and Russell 2000
Many day traders like to work with NASDAQ stocks, because they tend to be more high tech, sexy and popular. Although the big bubble of the 1990s burst, they are still highly volatile.
The regular NASDAQ 100 contract is 0 X the index value. It’s quoted in dollars. One tick is per .25 points.
The e-mini NASDAQ 100 contract is one-fifth the above. The contract is X the index value, and one tick is per .25 points.
The NASDAQ 100 is an index of the 100 largest stocks listed on the NASDAQ exchange, by market capitalization (though with certain rules capping the percentage of some of the largest component companies).
Margin is high. The contract sizes are relatively large, and the index is volatile. It can swing fast, quickly. You can lose a lot of money quickly, so it’s probably just as well it’s most popular with day traders. It’s dangerous for anyone working a day job. The index can swing 50 to 60 points in one day. At 0 per point, that’s a -6K profit or loss just in one day.
They are traded electronically twenty-four hours a day on The CME Group, on the CME Globex Exchange. These contracts began trading in 1997. Because this is a contract based on the value of the index, not on actual stocks held, you don’t receive any dividends (and most NASDAQ exchange listed stocks don’t pay dividends anyway).
CME margin guidelines for the NASDAQ 100 e-mini contract are from 5-20% of the position size.
The NASDAQ 100 index does not financial stocks. It does include companies incorporated outside the United States. The index itself began January 31, 1985 The base price was initially set at 250, but on December 31, 1993, with the initial index at close to 800, it was reset to 125 as of January 1, 1994. Its all-time high is 4,700 reached during the heighth of the dot com/hi tech boom.
The regular size NASDAQ futures use the Reuters Instrument Code ND and the e-mini version uses the code NQ.
Russell 2000 futures contracts are 0 X index value. One tick is , for .10 of a point.
The Russell 2000 index includes small cap stocks, so this index is considered representative of how small companies are doing in the economy. It’s the recognized benchmark for fund managers in that area.
Small cap stocks can be volatile, because they are small. They are pushed up a lot by good news, and pushed down a lot by bad news. Plus, it’s believed they are the first to benefit from an economy that’s recovering following a recession, and the first to go down when an economy is slowing down following a boom period.
There is a Russell 1000 index futures contract, but it’s thinly traded, so stock with the Russell 2000.
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Richard Stooker -
You can accumulate a large portfolio of income-producing investments. Discover how investing for income can help you retire with financial security. Learn more about investing for income and Feldman Mall Properties
.
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financial futures contracts, financial futures, nasdaq 100, nasdaq 100 e mini, russell 2000, russell 2000 futures contracts
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