Trader Mike

Today it certainly felt like a holiday week. Volume was on the light side and the market just drifted around. I think that the aftermath of Friday's Russell rebalancing had some effect as well. There were a lot of wacky moves in Russell stocks at the end of the day on Friday and many of those were unwound today. That's probably why the Russell 2000 was down today while the other indices were up a decent amount.

There's the possibility of month-end (and quarter-end) marking up (window dressing) tomorrow. That could make for an interesting session given the holiday-like volume we'll probably have.

no changes

How things can and do change in a flash. Yesterday I thought the S&P 500 was in danger of a nasty technical situation by diving under both its 50 and 200-day moving averages. Today it's looking like it simply went through a normal retest. Perhaps the thing I'm most surprised about today though is the trend table (below). I think this is the first time since December 2007 that all nine trends have been up at the same time. It's been so long that I'm having a hard time believing it. Like I discussed a couple of weeks ago, I could have flipped the S&P and Russell's long-term trends to up at the beginning of June. I decided to wait until they pulled a little farther away from their 200-day moving averages. (Remember, for consistency's sake I chose to use the 200 DMA to define the long-term trend.) I just can't justify keeping them at 'lateral' any more. Despite what the trend table says it's tough for me to get too excited about the market when I pull up a monthly chart going back to 1996.

It's been a long time since I posted any index charts with Guppy Multiple Moving Averages (MMAs). The MMAs on the indices show bullish long-term groups (investors) providing support to a selloff attempt by the short term groups (traders). Here's the S&P 500's MMA chart.

The MMAs on the Russell 2000 and Nasdaq look even stronger than the S&P's. Those charts make it easier for me to believe that the market has some hope of holding up.

Here are the S&P and Nasdaq with the more typical 50 and 200-day moving averages.

Everything is up for the first time since December 2007 (I think).

We often have to wait a day or two after a Fed meeting to see the market's true response to their decision. I think that will be the case this time because I'm not sure how much of the mildly negative reaction was due to what the Fed actually said and how much was due to the budding Bernanke / Bank of America controversy. What I see in most charts though is a weak bounce from Monday's slide. So despite the market being close to short-term oversold I'm expecting more weakness. I like the short setup that the S&P 500 is presenting right here. If (and only if!) it can break today's low I want to short it with a stop just above its 50-day moving average. There are a lot of stocks with similar setups tonight -- a weak bounce that created a bearish candlestick near a major moving average. I've got my eye on the likes of FWLT, JEC, FCX, SLB, KBH... even GOOG is in danger of breaking its 50-day moving average.

No changes.

Well so much for my guess about the bears disappearing ahead of the Fed meeting. Today's selloff did a lot of technical damage to the charts, especially with respect to moving average breaks. Probably the most-watched breaks were the S&P 500 breaking both its 50 and 200-day averages. But I also saw tons of individual stocks slicing below one or both of those averages. T2108 (% of NYSE stocks above their 40 DMAs) gives us a good idea of how stocks are breaking down with its 42% drop today.

Back in April I linked to Dr. Duru's post about the rare technical sighting of T2108 above 90. I pointed out then (as I always do) that I don't like to use T2108 for tops. In the past I've found it to work much better at bottoms than tops (it worked well at the January top though). I guess it takes longer for people to snap out of a greed phase and to allow a top to form. The S&P 500 rose another 10% since it first cracked 90 and even now is still up about 4%. So I'm not sure what's the best use of T2108 at tops. Perhaps it could be implemented as some kind of early warning of froth.

What's of interest to me now is how close T2108 is getting to 20, which has been an important bottom signal. That signal worked like a charm for years but fell apart, like so many other indicators did, in last years market massacre. I'll be keeping a close eye on it over the next week or so.

Here are the index charts.

Some downgrades today.

Strictly based on technicals I'd say that we're set up for a bounce. My short-term stochastic readings show the indices the most oversold they've been in about five weeks. They're also just starting to lift off of support levels. However, tomorrow is a quadruple witching expiration day so there's no telling how that will impact the action. Looking out to next week I don't expect to see much activity ahead of Wednesday's Fed decision -- not that I think they will actually do anything. My guess is that, absent any major news, the bears will go into a mini hibernation and the market could just float higher early next week ahead of the Fed. Hopefully we'll get some volume back into the market after the meeting and get some clarity on short-term direction other than sideways.

Research In Motion Limited (RIMM) is all over the news tonight after reporting earnings. It traded down near its 50-day moving average immediately after the report buy bounced back during the conference call. Technically, I like the bear case on it since it broke that April trendline. But I wouldn't want to initiate a short position with it being so short-term oversold. A weak bounce back near that broken trendline could be a gift for the bears.

No changes.

We got a little more technical damage today. I saw an increasing number of stocks slipping below important moving averages, especially the 50-day. The S&P 500 made a clean break below its June range and is just a few points above its 200-day moving average. The index is approaching a 20 point zone which should be tough to break through. There's potential support from the round number of 900 plus the 200 (at 908) and 50-day (at 892) moving averages.

Yesterday the S&P 500 broke its March trendline and today the Nasdaq followed suit. Other than that it still looks in pretty good shape. It's got room to pullback without threatening its 50 & 200-day moving averages.

I was asked about First Solar, Inc. (FSLR) earlier today. It looks like it just broke down from a descending triangle. I think it's in serious danger of filling that late April gap.

No changes.

We had some significant price drops today with more than 2% losses on the indices today. But all that did was bring those indices back to the bottom of their June ranges. Volume remained below average, as is so typical of Mondays. Because those ranges haven't broken it's too early for the bears to claim victory. The timing of this selloff was interesting though. The Dow finally joined the other indices by turning positive for 2009 on Friday. Today it got smacked back into negative territory and back below its 200-day moving average. The S&P is now within reach of its 200-day moving average too. If the bulls can't defend that line things could get ugly real quick.

I'm finally flipping the short-term trends to down since the indices all closed below their 10 DMAs. Despite that, in the short term I still see this market as sideways until the indices break the June lows.

There's a good discussion about trader capitalization needs over on Dr. Brett's TraderFeed blog. (The discussion now spans these three posts: Capitalization and the Economics of Trading Success, The Capitalization of Traders: Why It Is Crucial to Success, and The Psychology of Leverage ) That topic is probably the one I get the most email about. It's one of those classic questions that deserves an "it depends" answer. At the very least you need to know how much the person needs to live off of and their system's expectancy. The type of trading and whether the trader holds positions overnight will probably also come into play.

As a general rule I used to tell people that they'd need an absolute minimum of $50,000 but $100,000 is probably more realistic. But years ago, after reading Dr. Brett's thoughts on the matter (which he's based on working with so many traders) I modified my response to add that "Dr. Brett recommends over $200K". You'll see comments by Michelle B (remember her?) on Dr. Brett's posts. Her comments match my thoughts on the matter almost exactly for a very specific situation -- a true daytrader, who doesn't take overnight risk and is willing to max out on 4x leverage. (If you're trading with a prop firm you may get 10x leverage, so the numbers could be adjusted accordingly.) If you're holding overnight you just can't be as aggressive with leverage and thus your capital requirements will need to increase.

Obviously people will have to analyze their own situations and come up with a number for themselves. Dr. Brett provided some links to some Monte Carlo simulation tools which are invaluable for doing that kind of analysis. As with so many things, one's own mileage will vary. One's risk of ruin should decrease with more capital and it will also be easier to make the amount of money necessary to make a living.

I had a little discussion about the trend table earlier today. Specifically, I was asked about the short-term trends still being up. The short term certainly feels sideways (lateral) to me and that's how I'd generally describe it. But to preserve my sanity I decided long ago to just base the trend table off of relationships to moving averages. I chose the 10-day moving average for the short-term trends. All three of the indices I track are still above those lines so I'm keeping them as "up" in the trend table for now. The S&P 500 and Russell 2000 would have flipped to down had they closed on their lows of the day but the late rally prevented that.

So back to the sideways action -- since the June 1st close the S&P is down 0.39%, the Russell is up 0.45% and the Nasdaq is 1.33%. But at the lows of the day all three indices were down since the 1st. So we've made very little progress in the last seven sessions. But what has been accomplished is working off the market's short-term overbought condition. The bulls should be feeling pretty good that sellers couldn't knock the market down from what should have been a vulnerable position.

If the Nasdaq breaks down from its June channel look for the May highs and/or the March trendline for support.

915 - 925 should be pretty good support for the S&P 500. The 20 and 200-day moving averages are near the bottom of that range and the March trendline and the June lows are near the top. It's hard for me to imagine this sideways range staying intact much longer. The path of least resistance seems to be up but I guess we need some catalyst to pop out of the range.

The Russell is also showing a clear sideways range over the last seven sessions. Gotta respect the range until it's broken. Depending on one's style that may mean trade the extremes, hold whatever positions you already have or just stay out.

No changes...

It was another good week for the bulls. Despite the various overbought indicators the sellers just can't seem to do any serious damage. Many people, myself included, thought that Friday's jobs report would provide the fuel for a significant move in either direction but that wasn't the case.

The S&P 500 actually lost a little ground since Monday's close but it's still holding on to the bulk of Monday's gains. Volume was below average all week, which makes me a little skeptical about the index's ability to stay above the May highs. For now it seems to be trapped between the May high and the January intraday high of 944. Sellers are trying hard to defend that January high and a strong move through 944 could create a nice squeeze.

The Nasdaq was able to build on Monday's rally and walked the upper Bollinger band to higher highs throughout the week.

The small caps were also able to make higher highs later in the week. It's short-term overbought so I wouldn't be looking to initiate positions here but instead at one of the support lines in the chart.

I'm still hesitant to flip the S&P's long-term trend to up. If it can move another 1% above the 200 DMA I'll do it.

Today it certainly felt like a holiday week. Volume was on the light side and the market just drifted around. I think that the aftermath of Friday's Russell rebalancing had some effect as well. There were a lot of wacky moves in Russell stocks at the end of the day on Friday and many of those were unwound today. That's probably why the Russell 2000 was down today while the other indices were up a decent amount.

There's the possibility of month-end (and quarter-end) marking up (window dressing) tomorrow. That could make for an interesting session given the holiday-like volume we'll probably have.

no changes

How things can and do change in a flash. Yesterday I thought the S&P 500 was in danger of a nasty technical situation by diving under both its 50 and 200-day moving averages. Today it's looking like it simply went through a normal retest. Perhaps the thing I'm most surprised about today though is the trend table (below). I think this is the first time since December 2007 that all nine trends have been up at the same time. It's been so long that I'm having a hard time believing it. Like I discussed a couple of weeks ago, I could have flipped the S&P and Russell's long-term trends to up at the beginning of June. I decided to wait until they pulled a little farther away from their 200-day moving averages. (Remember, for consistency's sake I chose to use the 200 DMA to define the long-term trend.) I just can't justify keeping them at 'lateral' any more. Despite what the trend table says it's tough for me to get too excited about the market when I pull up a monthly chart going back to 1996.

It's been a long time since I posted any index charts with Guppy Multiple Moving Averages (MMAs). The MMAs on the indices show bullish long-term groups (investors) providing support to a selloff attempt by the short term groups (traders). Here's the S&P 500's MMA chart.

The MMAs on the Russell 2000 and Nasdaq look even stronger than the S&P's. Those charts make it easier for me to believe that the market has some hope of holding up.

Here are the S&P and Nasdaq with the more typical 50 and 200-day moving averages.

Everything is up for the first time since December 2007 (I think).

We often have to wait a day or two after a Fed meeting to see the market's true response to their decision. I think that will be the case this time because I'm not sure how much of the mildly negative reaction was due to what the Fed actually said and how much was due to the budding Bernanke / Bank of America controversy. What I see in most charts though is a weak bounce from Monday's slide. So despite the market being close to short-term oversold I'm expecting more weakness. I like the short setup that the S&P 500 is presenting right here. If (and only if!) it can break today's low I want to short it with a stop just above its 50-day moving average. There are a lot of stocks with similar setups tonight -- a weak bounce that created a bearish candlestick near a major moving average. I've got my eye on the likes of FWLT, JEC, FCX, SLB, KBH... even GOOG is in danger of breaking its 50-day moving average.

No changes.

Well so much for my guess about the bears disappearing ahead of the Fed meeting. Today's selloff did a lot of technical damage to the charts, especially with respect to moving average breaks. Probably the most-watched breaks were the S&P 500 breaking both its 50 and 200-day averages. But I also saw tons of individual stocks slicing below one or both of those averages. T2108 (% of NYSE stocks above their 40 DMAs) gives us a good idea of how stocks are breaking down with its 42% drop today.

Back in April I linked to Dr. Duru's post about the rare technical sighting of T2108 above 90. I pointed out then (as I always do) that I don't like to use T2108 for tops. In the past I've found it to work much better at bottoms than tops (it worked well at the January top though). I guess it takes longer for people to snap out of a greed phase and to allow a top to form. The S&P 500 rose another 10% since it first cracked 90 and even now is still up about 4%. So I'm not sure what's the best use of T2108 at tops. Perhaps it could be implemented as some kind of early warning of froth.

What's of interest to me now is how close T2108 is getting to 20, which has been an important bottom signal. That signal worked like a charm for years but fell apart, like so many other indicators did, in last years market massacre. I'll be keeping a close eye on it over the next week or so.

Here are the index charts.

Some downgrades today.

Strictly based on technicals I'd say that we're set up for a bounce. My short-term stochastic readings show the indices the most oversold they've been in about five weeks. They're also just starting to lift off of support levels. However, tomorrow is a quadruple witching expiration day so there's no telling how that will impact the action. Looking out to next week I don't expect to see much activity ahead of Wednesday's Fed decision -- not that I think they will actually do anything. My guess is that, absent any major news, the bears will go into a mini hibernation and the market could just float higher early next week ahead of the Fed. Hopefully we'll get some volume back into the market after the meeting and get some clarity on short-term direction other than sideways.

Research In Motion Limited (RIMM) is all over the news tonight after reporting earnings. It traded down near its 50-day moving average immediately after the report buy bounced back during the conference call. Technically, I like the bear case on it since it broke that April trendline. But I wouldn't want to initiate a short position with it being so short-term oversold. A weak bounce back near that broken trendline could be a gift for the bears.

No changes.

We got a little more technical damage today. I saw an increasing number of stocks slipping below important moving averages, especially the 50-day. The S&P 500 made a clean break below its June range and is just a few points above its 200-day moving average. The index is approaching a 20 point zone which should be tough to break through. There's potential support from the round number of 900 plus the 200 (at 908) and 50-day (at 892) moving averages.

Yesterday the S&P 500 broke its March trendline and today the Nasdaq followed suit. Other than that it still looks in pretty good shape. It's got room to pullback without threatening its 50 & 200-day moving averages.

I was asked about First Solar, Inc. (FSLR) earlier today. It looks like it just broke down from a descending triangle. I think it's in serious danger of filling that late April gap.

No changes.

We had some significant price drops today with more than 2% losses on the indices today. But all that did was bring those indices back to the bottom of their June ranges. Volume remained below average, as is so typical of Mondays. Because those ranges haven't broken it's too early for the bears to claim victory. The timing of this selloff was interesting though. The Dow finally joined the other indices by turning positive for 2009 on Friday. Today it got smacked back into negative territory and back below its 200-day moving average. The S&P is now within reach of its 200-day moving average too. If the bulls can't defend that line things could get ugly real quick.

I'm finally flipping the short-term trends to down since the indices all closed below their 10 DMAs. Despite that, in the short term I still see this market as sideways until the indices break the June lows.

There's a good discussion about trader capitalization needs over on Dr. Brett's TraderFeed blog. (The discussion now spans these three posts: Capitalization and the Economics of Trading Success, The Capitalization of Traders: Why It Is Crucial to Success, and The Psychology of Leverage ) That topic is probably the one I get the most email about. It's one of those classic questions that deserves an "it depends" answer. At the very least you need to know how much the person needs to live off of and their system's expectancy. The type of trading and whether the trader holds positions overnight will probably also come into play.

As a general rule I used to tell people that they'd need an absolute minimum of $50,000 but $100,000 is probably more realistic. But years ago, after reading Dr. Brett's thoughts on the matter (which he's based on working with so many traders) I modified my response to add that "Dr. Brett recommends over $200K". You'll see comments by Michelle B (remember her?) on Dr. Brett's posts. Her comments match my thoughts on the matter almost exactly for a very specific situation -- a true daytrader, who doesn't take overnight risk and is willing to max out on 4x leverage. (If you're trading with a prop firm you may get 10x leverage, so the numbers could be adjusted accordingly.) If you're holding overnight you just can't be as aggressive with leverage and thus your capital requirements will need to increase.

Obviously people will have to analyze their own situations and come up with a number for themselves. Dr. Brett provided some links to some Monte Carlo simulation tools which are invaluable for doing that kind of analysis. As with so many things, one's own mileage will vary. One's risk of ruin should decrease with more capital and it will also be easier to make the amount of money necessary to make a living.

I had a little discussion about the trend table earlier today. Specifically, I was asked about the short-term trends still being up. The short term certainly feels sideways (lateral) to me and that's how I'd generally describe it. But to preserve my sanity I decided long ago to just base the trend table off of relationships to moving averages. I chose the 10-day moving average for the short-term trends. All three of the indices I track are still above those lines so I'm keeping them as "up" in the trend table for now. The S&P 500 and Russell 2000 would have flipped to down had they closed on their lows of the day but the late rally prevented that.

So back to the sideways action -- since the June 1st close the S&P is down 0.39%, the Russell is up 0.45% and the Nasdaq is 1.33%. But at the lows of the day all three indices were down since the 1st. So we've made very little progress in the last seven sessions. But what has been accomplished is working off the market's short-term overbought condition. The bulls should be feeling pretty good that sellers couldn't knock the market down from what should have been a vulnerable position.

If the Nasdaq breaks down from its June channel look for the May highs and/or the March trendline for support.

915 - 925 should be pretty good support for the S&P 500. The 20 and 200-day moving averages are near the bottom of that range and the March trendline and the June lows are near the top. It's hard for me to imagine this sideways range staying intact much longer. The path of least resistance seems to be up but I guess we need some catalyst to pop out of the range.

The Russell is also showing a clear sideways range over the last seven sessions. Gotta respect the range until it's broken. Depending on one's style that may mean trade the extremes, hold whatever positions you already have or just stay out.

No changes...

It was another good week for the bulls. Despite the various overbought indicators the sellers just can't seem to do any serious damage. Many people, myself included, thought that Friday's jobs report would provide the fuel for a significant move in either direction but that wasn't the case.

The S&P 500 actually lost a little ground since Monday's close but it's still holding on to the bulk of Monday's gains. Volume was below average all week, which makes me a little skeptical about the index's ability to stay above the May highs. For now it seems to be trapped between the May high and the January intraday high of 944. Sellers are trying hard to defend that January high and a strong move through 944 could create a nice squeeze.

The Nasdaq was able to build on Monday's rally and walked the upper Bollinger band to higher highs throughout the week.

The small caps were also able to make higher highs later in the week. It's short-term overbought so I wouldn't be looking to initiate positions here but instead at one of the support lines in the chart.

I'm still hesitant to flip the S&P's long-term trend to up. If it can move another 1% above the 200 DMA I'll do it.

Today it certainly felt like a holiday week. Volume was on the light side and the market just drifted around. I think that the aftermath of Friday's Russell rebalancing had some effect as well. There were a lot of wacky moves in Russell stocks at the end of the day on Friday and many of those were unwound today. That's probably why the Russell 2000 was down today while the other indices were up a decent amount.

There's the possibility of month-end (and quarter-end) marking up (window dressing) tomorrow. That could make for an interesting session given the holiday-like volume we'll probably have.

no changes

How things can and do change in a flash. Yesterday I thought the S&P 500 was in danger of a nasty technical situation by diving under both its 50 and 200-day moving averages. Today it's looking like it simply went through a normal retest. Perhaps the thing I'm most surprised about today though is the trend table (below). I think this is the first time since December 2007 that all nine trends have been up at the same time. It's been so long that I'm having a hard time believing it. Like I discussed a couple of weeks ago, I could have flipped the S&P and Russell's long-term trends to up at the beginning of June. I decided to wait until they pulled a little farther away from their 200-day moving averages. (Remember, for consistency's sake I chose to use the 200 DMA to define the long-term trend.) I just can't justify keeping them at 'lateral' any more. Despite what the trend table says it's tough for me to get too excited about the market when I pull up a monthly chart going back to 1996.

It's been a long time since I posted any index charts with Guppy Multiple Moving Averages (MMAs). The MMAs on the indices show bullish long-term groups (investors) providing support to a selloff attempt by the short term groups (traders). Here's the S&P 500's MMA chart.

The MMAs on the Russell 2000 and Nasdaq look even stronger than the S&P's. Those charts make it easier for me to believe that the market has some hope of holding up.

Here are the S&P and Nasdaq with the more typical 50 and 200-day moving averages.

Everything is up for the first time since December 2007 (I think).

We often have to wait a day or two after a Fed meeting to see the market's true response to their decision. I think that will be the case this time because I'm not sure how much of the mildly negative reaction was due to what the Fed actually said and how much was due to the budding Bernanke / Bank of America controversy. What I see in most charts though is a weak bounce from Monday's slide. So despite the market being close to short-term oversold I'm expecting more weakness. I like the short setup that the S&P 500 is presenting right here. If (and only if!) it can break today's low I want to short it with a stop just above its 50-day moving average. There are a lot of stocks with similar setups tonight -- a weak bounce that created a bearish candlestick near a major moving average. I've got my eye on the likes of FWLT, JEC, FCX, SLB, KBH... even GOOG is in danger of breaking its 50-day moving average.

No changes.

Well so much for my guess about the bears disappearing ahead of the Fed meeting. Today's selloff did a lot of technical damage to the charts, especially with respect to moving average breaks. Probably the most-watched breaks were the S&P 500 breaking both its 50 and 200-day averages. But I also saw tons of individual stocks slicing below one or both of those averages. T2108 (% of NYSE stocks above their 40 DMAs) gives us a good idea of how stocks are breaking down with its 42% drop today.

Back in April I linked to Dr. Duru's post about the rare technical sighting of T2108 above 90. I pointed out then (as I always do) that I don't like to use T2108 for tops. In the past I've found it to work much better at bottoms than tops (it worked well at the January top though). I guess it takes longer for people to snap out of a greed phase and to allow a top to form. The S&P 500 rose another 10% since it first cracked 90 and even now is still up about 4%. So I'm not sure what's the best use of T2108 at tops. Perhaps it could be implemented as some kind of early warning of froth.

What's of interest to me now is how close T2108 is getting to 20, which has been an important bottom signal. That signal worked like a charm for years but fell apart, like so many other indicators did, in last years market massacre. I'll be keeping a close eye on it over the next week or so.

Here are the index charts.

Some downgrades today.

Strictly based on technicals I'd say that we're set up for a bounce. My short-term stochastic readings show the indices the most oversold they've been in about five weeks. They're also just starting to lift off of support levels. However, tomorrow is a quadruple witching expiration day so there's no telling how that will impact the action. Looking out to next week I don't expect to see much activity ahead of Wednesday's Fed decision -- not that I think they will actually do anything. My guess is that, absent any major news, the bears will go into a mini hibernation and the market could just float higher early next week ahead of the Fed. Hopefully we'll get some volume back into the market after the meeting and get some clarity on short-term direction other than sideways.

Research In Motion Limited (RIMM) is all over the news tonight after reporting earnings. It traded down near its 50-day moving average immediately after the report buy bounced back during the conference call. Technically, I like the bear case on it since it broke that April trendline. But I wouldn't want to initiate a short position with it being so short-term oversold. A weak bounce back near that broken trendline could be a gift for the bears.

No changes.

We got a little more technical damage today. I saw an increasing number of stocks slipping below important moving averages, especially the 50-day. The S&P 500 made a clean break below its June range and is just a few points above its 200-day moving average. The index is approaching a 20 point zone which should be tough to break through. There's potential support from the round number of 900 plus the 200 (at 908) and 50-day (at 892) moving averages.

Yesterday the S&P 500 broke its March trendline and today the Nasdaq followed suit. Other than that it still looks in pretty good shape. It's got room to pullback without threatening its 50 & 200-day moving averages.

I was asked about First Solar, Inc. (FSLR) earlier today. It looks like it just broke down from a descending triangle. I think it's in serious danger of filling that late April gap.

No changes.

We had some significant price drops today with more than 2% losses on the indices today. But all that did was bring those indices back to the bottom of their June ranges. Volume remained below average, as is so typical of Mondays. Because those ranges haven't broken it's too early for the bears to claim victory. The timing of this selloff was interesting though. The Dow finally joined the other indices by turning positive for 2009 on Friday. Today it got smacked back into negative territory and back below its 200-day moving average. The S&P is now within reach of its 200-day moving average too. If the bulls can't defend that line things could get ugly real quick.

I'm finally flipping the short-term trends to down since the indices all closed below their 10 DMAs. Despite that, in the short term I still see this market as sideways until the indices break the June lows.

There's a good discussion about trader capitalization needs over on Dr. Brett's TraderFeed blog. (The discussion now spans these three posts: Capitalization and the Economics of Trading Success, The Capitalization of Traders: Why It Is Crucial to Success, and The Psychology of Leverage ) That topic is probably the one I get the most email about. It's one of those classic questions that deserves an "it depends" answer. At the very least you need to know how much the person needs to live off of and their system's expectancy. The type of trading and whether the trader holds positions overnight will probably also come into play.

As a general rule I used to tell people that they'd need an absolute minimum of $50,000 but $100,000 is probably more realistic. But years ago, after reading Dr. Brett's thoughts on the matter (which he's based on working with so many traders) I modified my response to add that "Dr. Brett recommends over $200K". You'll see comments by Michelle B (remember her?) on Dr. Brett's posts. Her comments match my thoughts on the matter almost exactly for a very specific situation -- a true daytrader, who doesn't take overnight risk and is willing to max out on 4x leverage. (If you're trading with a prop firm you may get 10x leverage, so the numbers could be adjusted accordingly.) If you're holding overnight you just can't be as aggressive with leverage and thus your capital requirements will need to increase.

Obviously people will have to analyze their own situations and come up with a number for themselves. Dr. Brett provided some links to some Monte Carlo simulation tools which are invaluable for doing that kind of analysis. As with so many things, one's own mileage will vary. One's risk of ruin should decrease with more capital and it will also be easier to make the amount of money necessary to make a living.

I had a little discussion about the trend table earlier today. Specifically, I was asked about the short-term trends still being up. The short term certainly feels sideways (lateral) to me and that's how I'd generally describe it. But to preserve my sanity I decided long ago to just base the trend table off of relationships to moving averages. I chose the 10-day moving average for the short-term trends. All three of the indices I track are still above those lines so I'm keeping them as "up" in the trend table for now. The S&P 500 and Russell 2000 would have flipped to down had they closed on their lows of the day but the late rally prevented that.

So back to the sideways action -- since the June 1st close the S&P is down 0.39%, the Russell is up 0.45% and the Nasdaq is 1.33%. But at the lows of the day all three indices were down since the 1st. So we've made very little progress in the last seven sessions. But what has been accomplished is working off the market's short-term overbought condition. The bulls should be feeling pretty good that sellers couldn't knock the market down from what should have been a vulnerable position.

If the Nasdaq breaks down from its June channel look for the May highs and/or the March trendline for support.

915 - 925 should be pretty good support for the S&P 500. The 20 and 200-day moving averages are near the bottom of that range and the March trendline and the June lows are near the top. It's hard for me to imagine this sideways range staying intact much longer. The path of least resistance seems to be up but I guess we need some catalyst to pop out of the range.

The Russell is also showing a clear sideways range over the last seven sessions. Gotta respect the range until it's broken. Depending on one's style that may mean trade the extremes, hold whatever positions you already have or just stay out.

No changes...

It was another good week for the bulls. Despite the various overbought indicators the sellers just can't seem to do any serious damage. Many people, myself included, thought that Friday's jobs report would provide the fuel for a significant move in either direction but that wasn't the case.

The S&P 500 actually lost a little ground since Monday's close but it's still holding on to the bulk of Monday's gains. Volume was below average all week, which makes me a little skeptical about the index's ability to stay above the May highs. For now it seems to be trapped between the May high and the January intraday high of 944. Sellers are trying hard to defend that January high and a strong move through 944 could create a nice squeeze.

The Nasdaq was able to build on Monday's rally and walked the upper Bollinger band to higher highs throughout the week.

The small caps were also able to make higher highs later in the week. It's short-term overbought so I wouldn't be looking to initiate positions here but instead at one of the support lines in the chart.

I'm still hesitant to flip the S&P's long-term trend to up. If it can move another 1% above the 200 DMA I'll do it.

Today it certainly felt like a holiday week. Volume was on the light side and the market just drifted around. I think that the aftermath of Friday's Russell rebalancing had some effect as well. There were a lot of wacky moves in Russell stocks at the end of the day on Friday and many of those were unwound today. That's probably why the Russell 2000 was down today while the other indices were up a decent amount.

There's the possibility of month-end (and quarter-end) marking up (window dressing) tomorrow. That could make for an interesting session given the holiday-like volume we'll probably have.

no changes

How things can and do change in a flash. Yesterday I thought the S&P 500 was in danger of a nasty technical situation by diving under both its 50 and 200-day moving averages. Today it's looking like it simply went through a normal retest. Perhaps the thing I'm most surprised about today though is the trend table (below). I think this is the first time since December 2007 that all nine trends have been up at the same time. It's been so long that I'm having a hard time believing it. Like I discussed a couple of weeks ago, I could have flipped the S&P and Russell's long-term trends to up at the beginning of June. I decided to wait until they pulled a little farther away from their 200-day moving averages. (Remember, for consistency's sake I chose to use the 200 DMA to define the long-term trend.) I just can't justify keeping them at 'lateral' any more. Despite what the trend table says it's tough for me to get too excited about the market when I pull up a monthly chart going back to 1996.

It's been a long time since I posted any index charts with Guppy Multiple Moving Averages (MMAs). The MMAs on the indices show bullish long-term groups (investors) providing support to a selloff attempt by the short term groups (traders). Here's the S&P 500's MMA chart.

The MMAs on the Russell 2000 and Nasdaq look even stronger than the S&P's. Those charts make it easier for me to believe that the market has some hope of holding up.

Here are the S&P and Nasdaq with the more typical 50 and 200-day moving averages.

Everything is up for the first time since December 2007 (I think).

We often have to wait a day or two after a Fed meeting to see the market's true response to their decision. I think that will be the case this time because I'm not sure how much of the mildly negative reaction was due to what the Fed actually said and how much was due to the budding Bernanke / Bank of America controversy. What I see in most charts though is a weak bounce from Monday's slide. So despite the market being close to short-term oversold I'm expecting more weakness. I like the short setup that the S&P 500 is presenting right here. If (and only if!) it can break today's low I want to short it with a stop just above its 50-day moving average. There are a lot of stocks with similar setups tonight -- a weak bounce that created a bearish candlestick near a major moving average. I've got my eye on the likes of FWLT, JEC, FCX, SLB, KBH... even GOOG is in danger of breaking its 50-day moving average.

No changes.

Well so much for my guess about the bears disappearing ahead of the Fed meeting. Today's selloff did a lot of technical damage to the charts, especially with respect to moving average breaks. Probably the most-watched breaks were the S&P 500 breaking both its 50 and 200-day averages. But I also saw tons of individual stocks slicing below one or both of those averages. T2108 (% of NYSE stocks above their 40 DMAs) gives us a good idea of how stocks are breaking down with its 42% drop today.

Back in April I linked to Dr. Duru's post about the rare technical sighting of T2108 above 90. I pointed out then (as I always do) that I don't like to use T2108 for tops. In the past I've found it to work much better at bottoms than tops (it worked well at the January top though). I guess it takes longer for people to snap out of a greed phase and to allow a top to form. The S&P 500 rose another 10% since it first cracked 90 and even now is still up about 4%. So I'm not sure what's the best use of T2108 at tops. Perhaps it could be implemented as some kind of early warning of froth.

What's of interest to me now is how close T2108 is getting to 20, which has been an important bottom signal. That signal worked like a charm for years but fell apart, like so many other indicators did, in last years market massacre. I'll be keeping a close eye on it over the next week or so.

Here are the index charts.

Some downgrades today.

Strictly based on technicals I'd say that we're set up for a bounce. My short-term stochastic readings show the indices the most oversold they've been in about five weeks. They're also just starting to lift off of support levels. However, tomorrow is a quadruple witching expiration day so there's no telling how that will impact the action. Looking out to next week I don't expect to see much activity ahead of Wednesday's Fed decision -- not that I think they will actually do anything. My guess is that, absent any major news, the bears will go into a mini hibernation and the market could just float higher early next week ahead of the Fed. Hopefully we'll get some volume back into the market after the meeting and get some clarity on short-term direction other than sideways.

Research In Motion Limited (RIMM) is all over the news tonight after reporting earnings. It traded down near its 50-day moving average immediately after the report buy bounced back during the conference call. Technically, I like the bear case on it since it broke that April trendline. But I wouldn't want to initiate a short position with it being so short-term oversold. A weak bounce back near that broken trendline could be a gift for the bears.

No changes.

We got a little more technical damage today. I saw an increasing number of stocks slipping below important moving averages, especially the 50-day. The S&P 500 made a clean break below its June range and is just a few points above its 200-day moving average. The index is approaching a 20 point zone which should be tough to break through. There's potential support from the round number of 900 plus the 200 (at 908) and 50-day (at 892) moving averages.

Yesterday the S&P 500 broke its March trendline and today the Nasdaq followed suit. Other than that it still looks in pretty good shape. It's got room to pullback without threatening its 50 & 200-day moving averages.

I was asked about First Solar, Inc. (FSLR) earlier today. It looks like it just broke down from a descending triangle. I think it's in serious danger of filling that late April gap.

No changes.

We had some significant price drops today with more than 2% losses on the indices today. But all that did was bring those indices back to the bottom of their June ranges. Volume remained below average, as is so typical of Mondays. Because those ranges haven't broken it's too early for the bears to claim victory. The timing of this selloff was interesting though. The Dow finally joined the other indices by turning positive for 2009 on Friday. Today it got smacked back into negative territory and back below its 200-day moving average. The S&P is now within reach of its 200-day moving average too. If the bulls can't defend that line things could get ugly real quick.

I'm finally flipping the short-term trends to down since the indices all closed below their 10 DMAs. Despite that, in the short term I still see this market as sideways until the indices break the June lows.

There's a good discussion about trader capitalization needs over on Dr. Brett's TraderFeed blog. (The discussion now spans these three posts: Capitalization and the Economics of Trading Success, The Capitalization of Traders: Why It Is Crucial to Success, and The Psychology of Leverage ) That topic is probably the one I get the most email about. It's one of those classic questions that deserves an "it depends" answer. At the very least you need to know how much the person needs to live off of and their system's expectancy. The type of trading and whether the trader holds positions overnight will probably also come into play.

As a general rule I used to tell people that they'd need an absolute minimum of $50,000 but $100,000 is probably more realistic. But years ago, after reading Dr. Brett's thoughts on the matter (which he's based on working with so many traders) I modified my response to add that "Dr. Brett recommends over $200K". You'll see comments by Michelle B (remember her?) on Dr. Brett's posts. Her comments match my thoughts on the matter almost exactly for a very specific situation -- a true daytrader, who doesn't take overnight risk and is willing to max out on 4x leverage. (If you're trading with a prop firm you may get 10x leverage, so the numbers could be adjusted accordingly.) If you're holding overnight you just can't be as aggressive with leverage and thus your capital requirements will need to increase.

Obviously people will have to analyze their own situations and come up with a number for themselves. Dr. Brett provided some links to some Monte Carlo simulation tools which are invaluable for doing that kind of analysis. As with so many things, one's own mileage will vary. One's risk of ruin should decrease with more capital and it will also be easier to make the amount of money necessary to make a living.

I had a little discussion about the trend table earlier today. Specifically, I was asked about the short-term trends still being up. The short term certainly feels sideways (lateral) to me and that's how I'd generally describe it. But to preserve my sanity I decided long ago to just base the trend table off of relationships to moving averages. I chose the 10-day moving average for the short-term trends. All three of the indices I track are still above those lines so I'm keeping them as "up" in the trend table for now. The S&P 500 and Russell 2000 would have flipped to down had they closed on their lows of the day but the late rally prevented that.

So back to the sideways action -- since the June 1st close the S&P is down 0.39%, the Russell is up 0.45% and the Nasdaq is 1.33%. But at the lows of the day all three indices were down since the 1st. So we've made very little progress in the last seven sessions. But what has been accomplished is working off the market's short-term overbought condition. The bulls should be feeling pretty good that sellers couldn't knock the market down from what should have been a vulnerable position.

If the Nasdaq breaks down from its June channel look for the May highs and/or the March trendline for support.

915 - 925 should be pretty good support for the S&P 500. The 20 and 200-day moving averages are near the botto