Credit Card ’s Talk

Most stock traders know that momentum trading can be a very profitable activity. You can make big amounts of cash in a short period of time. The problem is, that if you don’t know what stocks to look for and how to approach them and leave everyting to chance, you could end up wasting money instead of making your profits grow.

That’s why the most important aspect of momentum trading is the knowledge FILTER you employ to make your buy and sell decisions. There are many fantastic stock systems and trading strategies outhere, but you need to test them in order to discover which ones help you the most. That’s part of your homework as a stocktrader. Test, test and test again.

Complicated online trading strategies that rely on a boat load of technical analysis indicators can make you slow, and being slow when trading hot momentum stocks can be as dangerous as not knowing what to do in the first place.

The worst thing that can happen to a beginner momentum trader is to get information overload. It’s better to go step by step, and test a simple stock trading strategy that can show you how to focus on concrete ways to make money and pick better hot stock trading opportunities once at a time.

Fortunatly there are great sites on the web today that can show you how to trade in a sharp and effective way. One of those sites is Sharp Trades http://www.sharptrades.com

In the end, momentum trading is all about buying and selling stocks according to your knowledge FILTER. Once you master and follow your proven filter parameters like a clock, you can expect to start making serious amounts of cash on a consistent basis.

Find out how to do it with ease and simplicity at Sharp Trades.

Dan Sheldon is a UK based momentum day trader focusing on US markets since 1986. He helps people become confident and practical momentum traders, showing them how to choose stocks with ease and simplicity every day at http://www.SharpTrades.com

The first chart shows the daily SPX (black line and right scale) and the NYSE Oscillator (NYMO) 50-day MA (blue line and left scale). Previous patterns indicate when the NYMO 50-day MA falls below negative 20, then a bottom will be in place and SPX will be in position for a sustainable rally. Currently, the NYMO 50-day MA is negative 15 1/2 and the daily NYMO is negative 15. So, the daily NYMO will have to stay below negative 15 1/2 for sufficient time and levels to bring the NYMO 50-day MA below negative 20.

The vertical line in the first chart shows April 2005 technical indicators are in somewhat similiar positions compared to current indicators. In March and April 2005, SPX fell from the high at 1,229 to the low at 1,136, from early-March to late-April, before starting the uptrend. Over the current downtrend, SPX fell from the high at 1,326 in early-May to a low at 1,235 last week. The similarities indicate SPX could trade between 1,230 and 1,260 for one to three weeks and then the NYMO 50-day MA may be in position for a SPX bottom. Also, the NYSI (below price chart) may fall into position for a SPX rally.

The second chart is an SPX monthly chart that shows the monthly middle Bollinger Band, currently 1,228 1/2, has held throughout the recent cyclical bull market. Consequently, a fall below that level may indicate a greater fall and the start of a cyclical bear market. Below the price chart is the monthly MACD, which gave a bearish crossover last week. However, the crossover is valid only if it closes the month bearish. Above the price chart is the monthly Money Flow, which remains positive, although has deteriorated, which may indicate the tail-end of the cyclical bull market.

It seems most likely SPX will hold the monthly middle Bollinger Band and begin a summer rally in June. Currently, SPX is in the second longest period in history without at least a 9% correction (1,206 is a 9% decline from 1,326). Also, the current cyclical bull market, within the structural bear market that began in 2000, is of above average length. However, it seems, a 9% or more correction and the end of the cyclical bull market will more likely take place at another time, perhaps this fall or in the first half of 2007.

Free charts available at PeakTrader.com Forum Index Market Forecast section.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

Previously, I’ve noted similarities between the recent SPX and the 1994 SPX, which suggested a bottom at 1,197, and the April 2005 SPX, which suggested a bottom at 1,228. Last week, SPX fell to 1,219 and rallied strongly to close at 1,252 Friday. Currently, intermediate-term technical indicators suggest SPX may have reached or is close to an intermediate-term bottom and may begin a rally soon.

Below is a two-year daily chart of SPX (black line and right scale) and NYSI (blue line and left scale) with 50-day MAs of VIX NYMO and CPC above and below the price chart. The gray arrow indicates similarities between the current SPX and the Apr 2005 SPX. The indicators suggest there may be a final wash-out below 1,200 or a continuation of the volatile trading range e.g. between 1,220 and 1,260 next week. SPX may then begin an uptrend for at least several weeks.

However, fundamentally, SPX may be in a volatile range throughout the summer, rather than rally to new highs, because the general price level is high enough to carry on uncertainty about monetary policy. Consequently, SPX upside may be limited, e.g. 1,280 or 1,290, although all the intermediate-term technical indicators should turn bullish in June or July. Currently, the NYMO 50-day MA and daily NYSI have not turned bullish, although the CPC 50-day MA is at an all-time bullish high.

Free charts available at PeakTrader.com Forum Index Market Forecast section.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

On Wednesday, SPX opened sharply higher on the better than expected CPI report, although the core rate was in-line. SPX reached about 1,373 before pulling-back sharply. The strong open may have been a blow-off top, and a bearish head & shoulders (on 15-minute chart) may have been created with the right shoulder at roughly 1,370 and the neckline at 1,357. Several weeks ago, SPX created a bullish inverse head & shoulders (on 15-minute chart) with the neckline at 1,338.

Over the past three days, SPX has traded entirely above the monthly upper Bollinger Band, currently 1,361. The 10-day MA, currently 1,362, has generally held for a month and the 20-day MA, currently 1,351, has generally held for three months. Both MAs have risen sharply. Consequently, SPX is being compressed between 1,370 and the rising 10-day MA. Given some short-term technical indicators are severely overbought, it’s likely the compression will result in a move to the downside.

There are three possible scenerios. If the rally continues, there’s a multi-year resistance level about 1,400. However, SPX will need to trade well above the monthly upper Bollinger Band, at levels not reached in 10-years, since the middle of the bubble boom. If there’s a consolidation, SPX will fall below the 10-day MA, perhaps bounce initially off the 20-day MA, with further significant support levels at 1,338 and 1,326. Initial resistance is 1,370. SPX will then either rally, e.g. about 1,400, or fall, e.g. below 1,300. If there’s a correction, support levels will turn into resistance levels through steep falls and volatile downtrends. First major support is 1,290.

Economic data and oil prices will largely determine SPX direction. Last week, the PPI core rate was reported much higher than expected, although the CPI core rate was in-line. Consequently, SPX may discount, over the next few weeks, higher PPI and CPI core rates in next month’s report. Oil closed at 56.82 Friday. If oil falls and stabilizes around 50, that may be market bullish, or if oil rises and stabilizes around 60, that may be market bearish. I suspect, a consolidation will take place through the first week of November and then a correction will take place, since intermediate-term technical indicators are overbought. Nonetheless, I wouldn’t rule out a rise to about 1,400 in early-November and a fall below 1,300 in late-November.

Free chart available at PeakTrader.com Forum Index Market Forecast category.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

The first chart shows SPX and the NYSE Oscillator (NYMO) 50-day MA. Previous patterns indicate when the NYMO 50-day MA falls below negative 20, then SPX will begin an uptrend. However, the NYMO 50-day MA hasn’t fallen below negative 20, which indicates either volatility, a test of the recent low, or a further pullback.

Above the first chart is the daily NYSE Summation Index (NYSI) and daily NYMO with its 20-day MA. The NYSI is not low enough to indicate a sustainable SPX rally. Also, the daily NYMO indicates SPX is currently near severely overbought. Moreover, previous patterns indicate the NYMO 20-day MA needs to fall below negative 30 for SPX to begin a sustainable rally.

Below the first chart are the SPX MACD and CBOE Put/Call (CPC) 10-day MA. The SPX MACD created a bullish crossover late last week, while the CPC 10-day MA is at an extreme enough level to indicate the SPX rally is sustainable. However, the gray arrow shows similar extreme levels of these indicators can still allow one more SPX pullback after a bounce.

The second chart shows SPX is near resistance at 1,295, i.e. the 50-day MA, the two day pause of the steep fall, and a Fibonacci level. If SPX rises above and holds 1,295, it may test the high at 1,326. However, resistance may hold after rising from the low over a week ago. If the correction is over, which is unlikely, SPX will often bounce off the 10-day MA.

The third chart is a monthly SPX chart. The zigzag line shows that the previous three times SPX pulled-back, it fell roughly 75 points in two or three months. However, this time, SPX fell roughly 75 points in just over two weeks. The middle monthly Bollinger Band, currently 1,230, is the cyclical bull market support line.

Above the third chart is Money Flow, which shows money is flowing into SPX at a lower rate. Also, below the third chart is the monthly MACD, which is converging towards a bearish crossover. Consequently, it seems, the cyclical bull market, which began in late 2002 may end in 2006 or early 2007.

SPX may trade in a volatile range, e.g. between 1,250 and 1,300, until the FOMC announcement June 29th. If the NYMO 50-day MA falls below negative 20 and the NYMO 20-day MA falls below negative 30, which will likely take place in June or July, then SPX will be in position to begin a sustainable rally.

Free charts available at http://www.PeakTrader.com Forum Index Market Forecast section.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.