Fed Day

Posted by downtowntrader | 3/20/2007 08:51:00 PM | 5 comments »

Tomorrow is fed day and while the last fed release days have been anti climactic, tomorrow may prove to be pivotal. Not so much because of any bombs the fed may drop, but because the indices are in a spot where the bounce could easily fail, yet they could conceivably move much higher. The reason they are in such pivotal spots is that after a steep decline, most have now retraced 50% of the decline and are near the declining 20sma with the 50sma not too far above. You can argue that shorting such rallies to declining sma's would make a fairly profitable and reliable trading system. The bullish argument is that most are near small double bottom breakouts which would point to a more significant bounce.

Here is a chart of the Q's showing the possible double bottom breakout.

NASDAQ 100 Trust Shares (ETF) (Public, NASDAQ:QQQQ)


iShares Russell 2000 Index (ETF) (Public, NYSE:IWM)

Here is a similar chart of the IWM also showing how it tagged the 50% retrace of the decline.

In another wrinkle, it looks like the Nasdaq will be gapping higher tomorrow morning off of strong moves in ORCL and ADBE after hours. While tomorrow may end up being anti-climactic again, the ingredients are there for a pivotal day.


Good Luck,


Joey

5 comments

  1. Woodshedder // 9:46 PM  

    My thoughts exactly. Well said on how tomorrow could turn out. I was really suprised at the action today. Still, volume has been slack. When the volume returns, the trend will be readily discernable.

  2. Rahul // 2:49 AM  

    My take is that we are seeing is a fair amount of overhead short term resistance on the indices, with low volume gains which have brought them to overbought situation with 5 continuous up trading sessions - I would say time is right for a pullback. Of course it can shoot up tomorrow and slap me the face but i am still betting on a short term downturn soon from here.

    People are talking about a double bottom. Double-bottom of what? Its supposed to be a bottom of a trend. But there is no downward trend in place at this time. We had a sudden fall but no trend established yet. Although the price formation is like a double bottom but we have to take it in context which is not there imo.

    Thoughts?

    Rahul
    http://www.tradernirvana.com

  3. downtowntrader // 9:17 AM  

    Thanks for the comments Wood. I agree, the real move (likely lower) will reveal itself up when volume arrives.

    Rahul, thx for taking the time post your views. I am in total agreement that there is a really good chance that this pullback up is over. However, I have to disagree on the double bottom. You are right in the strictest sense, that this isn't a double bottom for an intermediate or primary trend. However, for a short term or sub intermediate trend, this could qualify as a trend down, and a double bottom. This is quite apparent on a 60 minute chart and while this may just be a floor for a 61.8% retrace back up, technically, the indices could attempt to test the previous highs. There are so many possibilities right now, such as this only being the left shoulder of a head and shoulders top, to just a lateral consolidation before rolling over as soon as today. So maybe they are not traditional double bottoms, but I wouldn't disregard them for my timeframe.


    Thanks again guys,



    Joey

  4. Rahul // 12:02 AM  

    Joey,

    What timeframe do you primarily trade?

    Rahul
    http://www.tradernirvana.com

  5. downtowntrader // 7:01 AM  

    Rahul,
    I primarily trade for 2-5 day swings. I use 15 and 60 minute charts to fine tune my entries.


    Joey