Guideline For Tuesday

Slow short-covering rally continued on Monday, but the uptrend is starting to look really tired and could go into a 2 to 3 days pullback decline.

Key Support Level For Tuesday is 2970 area.

-- As long as pullback down does not clearly violates key support level, short-covering rally should continue, next resistance is 2995-3000.

-- However, a clear and sustained break below 2970 could trigger algo selling, with first support at 2952.

Trade Guidelien For monday (NQ)

Uptrend continued on Friday. For NQ as long as pullback down does not clearly violates 2965 key support, the uptrend should continue.

Trade Guideline For Friday in NQ

On Thursday, the uptrend continued, again making higher high and then pulling back down right to support, 2955.25 before bouncing up on end of day profit-taking.

For Friday, support is 2952.50, resistance is 2965.

-- A break below 2952.50 could trigger selling, tanking it down to next support 2935.

-- Above 2952.50 could trigger buy program, pushing it up to Thursday high.

Trade Guideline For Thursday (NQ)

Another narrow-range up-day for NQ on Wednesday, closing neat the high of the day. NQ is in an uptrend on all time frame. Although it is currently clearly in an overbought conditionl, a continual push higher is going to cause more short-covering.

First Support on Thursday is 2952.

-- Above 2952 on Thursday is bullish, short-covering up trending market should continue.

-- A clear break below 2952 could trigger algo selling programs that can tank it quickly down to the next support 2942. Strong support lies at around 2937. 

Trade Guideline For Wednesday

Another sideways consolidation day for NQ on Tuesday, trading above key support 2936. 

For Wednesday, 2936 is still key support level.

-- Trading above 2936 is bullish, implies more consolidation or a trend up day.

-- A clear and sustained break below 2936 could trigger selling algorithm, potentially crushing NQ down to the next support level at 2910, a strong support zone. It would need a very strong momentum move down to break below 2910 area. 

Trade Guideline For Tuesday

Nasdaq traded sideways in a very narrow trading range on Monday. At the end of the day it looks ready for a pullback down to supports on Tuesday.

Key Support/Resistance Level For Tuesday is 2950.

-- Below 2950 is an indication that NQ is in a pullback down mode with first support at 2935. A clear and sustained break below 2936 implies it is going down to the next support at 2910.

-- Above 2950 implies the sideways consolidation is a setup for the next upleg.

Sell In May And Go Away

Nice post from the Gold and Silver Guy, reposting it here.

Stock Preparing for Pullback, Buy Bad News, Sell the Good
May 3rd, 2013 at 10:43 am

The SP500 remains in a strong uptrend, but the index has posted a sizable gains for 2013 thus far so it’s only logical that a pullback within this bull market takes place sooner than later.

With May now upon us and historically prices fall more times than not I feel a 3-4 weeks correction is on the verge of starting. This Friday we just had very strong economic numbers confirming the economy is recovering. This news has sent stocks sharply higher as shorts cover their positions and investors who are not yet long get into position to profit from higher prices. But the herd psychology and their trades are typically incorrect as they invest based on fear and greed. The old saying is buy on negative news and sell on positive news will typically get you on the correct side of the market more times than not if used with price, volume and cycles.

The Technical Traders – SP500 Index Weekly Chart

If we look at the price of the SP500 we need it to breakdown below the recent pivot low before I become bearish.

Volume which is not shown on this chart is below average as price moves higher and this is a bearish sign also.

Looking at a basic cycle using the stochastics indicator we can see that the current cycle is starting to turn down. Cycles tend to lead price during an uptrend so we could still have stocks move higher for another week or so but be aware that when price starts to drop its likely a market top. But until then you must respect the uptrend. Stocks can remain overbought and toppy looking for months… so done be gambling and trying to pick a top until we see breakdown start.

SP500 Stocks Trading Above 200 Moving Average – The Technical Traders View

Stocks trading above the 200 day moving average is a great indicator for helping spot broad market underlying strength/weakness. It does lag the market but is still very powerful. The chart below shows this info and my thinking of what is likely to unfold sooner than later though price may still rise for several days yet.

I also use a similar chart for timing swing trades and market tops which are based on stocks trading above the 20 day moving average. This chart is not shown here but is now trading at a level which generally triggers selling/market top.

Stock Market and SP500 Trading and Investing Conclusion:

In short, I am still bullish on the market as I focus on trading with the trend. I do not pick market tops and I do not pick market bottoms. Knowing that stocks make their biggest moves at the end of their uptrend and at the end of a down trend it’s only common sense that risk is extremely high if you are betting against the current trend.

The best thing to do is wait for a technical breakdown and reversal which puts the odds more in your favor with much less risk and typically a clear line in the sand to exit the position if you are incorrect.

The last major stock market top which formed in September of last year had a series of strong news and strong price action persuading the herd to buy stocks.  Instead it was the last impulse wave up just before a strong correction took place. That is much like what we see now with the economic news.

Trade Guideline For NQ on Monday

Pension Funds looking for both Yield and Safety continues to stampede into high-dividend paying blue chip stocks (especially the component companies of the DJIA), pushing Dow into record territory on Friday. 

With the bond market showing some sign of weakening, the flow of funds into blue chip stocks may continue to accelerate, keeping the market on the bullish side. 

But the party must end one day in the not too distance future, as it is just a matter of time. The key trigger will be an uncontrollable rise in interest rate, which will also come soon.

As a trader I will continue to watch the technicals, and for now the technicals are still in the ullish camp on the Daily, Weekly and Monthly time-frame, pointing to a blow-off top. 

However, on the short-term 5-minute time-frame the Key Level for Nasdaq on Monday is Friday's swing high 2947.50 area.

-- NQ closed down below the high on Friday on end of day profit-taking activities. A break above Friday swing high is likely to trigger another round of short-covering rally, with the next upside target at 2980 area. If market internals can get really bullish it may blow through all the way to 3000.

-- Failure to break and stay above Friday's swing high will cause the market to consolidate and pullback down to supports.

Trade Guideline For Friday

On Thursday, as expected, with the opening price action above 2870 key equilibrium level, NQ rallied immediately, fueled by short-covering, and it trend up all day on Thursday, with the usual end of day profit-taking decline. Whether or not the end of day decline will continue on Friday will depends on where it trades in relation to its equilibrium level.

For Friday key level to watch is 2905.

-- More bullishness above with more short-covering rally above 2905.

-- Below 2905 implies pullback decline is going to continue, with first support at 2894.50 area (FT Pivot). Below that the next support level is 2883 area.

Trade Guideline For NQ on Thursday

On Wednesday, after making a higher high above Tuesday swing high near the open, NQ reversed and slowly trend down in a choppy way all day.

For Thursday morning  as long as NQ is below its previous support now resistance 2870 area, the morning trend should be down.

Above 2870 is an indication that Wednesday's pullback has ended rally continues.