Break of the High of the Low Day...

DJIA + 379.44, +5.80% SP500 + 43.07, +6.37% NASDAQ Comp. + 89.64, +7.07% Russell 2000 + 24.49, +7.13% Exchange NYSE NASD Advancing 3,459 2,356 Declining 398 465 Oil $45.71 -$1.36 Gold $895.90 -$22.10 SOX 205.84 +15.37 VIX 44.37 -5.31 The VIX moved down confirming the move up in the SPX on Tuesday. Strongest Sectors: XLF +14.86%...XLI +7.55%...XLY +6.15% Weakest Sectors: XLU +1.32%..XLP +1.85%...XLV +3.61% Sector Watch Up Trending: Sideways: XLE, XLY, XLV, XLK Down Trending: XLF, XLP, XLI, XLB, XLU Technically today was the break of the high of the low day for many stocks and represents a short term entry opportunity. Stock already in an uptrend may also be presenting intermediate term entry opportunities. The strength of Tuesday's move suggests that it is more probable to continue in the short term, so watch the short term support and resistance levels. Everyone has known this market was oversold. What no one knew was; where was the bottom of irrational selling? Selling has been driven been by uncertainty in the banking system. The news that C was profitable for the first two months of 2009 was enough to drive C up 38%. The Financial Sector XLF rose14.86% as financial stocks BAC, MS, PNC, JPM, MET, PRU, WFC, STT, IVZ, SPG, TROW, GS and AFL all rose more than 15%. All of these stocks are in down trends except STT and IVZ which sideways and MS and GS which are in up trends. Support bounce in a down trend is a counter trend move and in an up trend is a bull flag support bounce. A sideways trend is a horizontal support bounce. Gold and oil were down today. Gold stocks many of which broke the low of the high day yesterday were down again on Tuesday as financials moved up. Dave’s Insight: Trend is the most important factor in every trade. Know the short term and intermediate term trend in each stock you trade. Know if you are trading the short or intermediate term trend in each trade. If you are trading up in a down trend make sure you are aware that this is a counter trend move. AMZN gapped up on the open and closed above its 200 DMA, a hold above the 200 DMA is long term bullish. PCLN formed a bullish harami at its 20 DMA in a bull flag, confirmation of the harami would be short term bullish. Trading just below its 200 DMA BIDU gapped up and closed above recent resistance…is nearing the 169 chart price target we calculated in last week’s Advanced Technical Workshop. Index Commentary The SPX and DJIA confirmed Monday’s inside days and Friday’s bullish harami while breaking the high of the low day which was Friday. The Nasdaq gapped up and formed a large white candle that confirmed Monday’s inverted hammer and Friday’s hammer and closed above the high of the low day which was Monday. The RUT gapped up and formed a large white candle that confirmed Friday’s bullish harami and closed above the high of the low day which was Monday. Great Questions, Great Answers (Email us at chartsignals@yahoo.com with your technical question.) Bruce G asks… Last night I asked the question about "swing" vs. "trend" and I understood your clarification, and need for precision that will lead to better rules, and ultimately, trading / profits. After thinking about it though, I still am unclear on the fundamental issue of when or how do you decide whether to trade the short term or intermediate term trend? As I am formulating a better set of rules, I see both entries very often being the same, but the exits will be different. Does selecting the appropriate time frame depend upon overall market conditions? What tools do you use to determine this? Thanks again, Answer… The entry for a short term and an intermediate term trade can indeed be the same and the exits are almost always different. I have covered this exact point by walking through the difference in the reasoning process that a trader uses in a short term trade versus an intermediate term trade in my live Technical Analysis Workshops. Let’s clarify that in my view a short term trend on the daily chart is two days to four weeks. An intermediate term trend is four weeks or longer. The choice of which to trade is entirely personal to the trader. One trader may choose only to trade short term, a second only intermediate term, while a third trader may choose to have both a short term and intermediate term trading system. Certain traders may choose to trade both short and intermediate term on the same stock at the same time; exiting the short term trade for a short term profit while continuing to hold the intermediate term trade in expectation of a larger profit. In all circumstances it is important to predetermine which trend is being traded and then to manage that trade based on the selected trend. A short term strategy should be usable at all times. A trader that chooses to trade intermediate term would generally do so when they expect a trend to last longer than four weeks. When the broad market is trending up or down there will be more individual stocks trending in the same direction on which a trader can trade the intermediate term trend. At the Open on Wednesday Counter Trend SPY – confirmed inverted hammer, rose 5.26% NSC – confirmed Friday’s bullish harami, rose 4.68% SCHN – confirmed Monday’s inverted hammer, rose 14.45% Up Trend HANS – broke out of horizontal resistance and pulled back to close just above, rose 1.37% SGP – rose another 4.72% following MRK recent buyout offer CF – support bounce in bull flag, rose 4.37% Sideways Trend OSIP – confirmed Monday’s inside day, rose 3.51% RE – continued to rise from Friday’s bullish engulfing, rose 3.28% FWLT – rose to 20 DMA and pulled back, rose 6.99% Down Trend SYNA – rallied through 20 DMA resistance, rose 5.71% ISRG – did not confirm Monday’s shooting rose through 20 DMA in bear flag pattern, rose 4.39% LZ – did not confirm Monday’s shooting star/bearish harami in bear flag pattern, rose 6.34% Learn the Discipline As we posted on Saturday our Model Portfolio was all in cash. We entered eight positions during the first hour on Tuesday following our pre-stated guidelines of approximately $2,000 per trade in stock: 1,200 shares UYG 1.75 600 shares FAS 3.32 62 shares ICE 62.20 25 shares PCLN 81.19 41 shares WMT 48.27 38 shares MCD 53.25 55 shares HANS 36.47 50 shares NFLX 39.39 We entered six additional positions during the last 30 minutes of the trading day: 66 shares DLB 30.20 85 shares VPRT 23.63 25 shares MYGN 81.49 100 shares PWR 20.58 52 shares JEC 38.15 30 shares AMZN 65.39 Approximately $28,000 of the Model Portfolio is now invested. Stocks to Watch on Wednesday Leading Stocks: Holding Above 30 DMA BIDU, CLB, PCLN, BKC, NFLX, DLTR, HANS, ICE, ALGT, MOS Moving Above 30 DMA = 8 DLB, JEC, MYGN, PWR, VPRT, AMZN, MON, WMT Moving Below 30 DMA = 0 Staying Below 30 DMA GMCR, GME, JCOM, SLGN, WRC, FLS, ICE, CPLA, ESRX, GES, PSYS, CHL, DECK, GIL, MHS, TDG, SPWRA, AMED, APEI, BIIB, GPRO, GXDX, PCP, RBN, AAPL, CTSH, DV, ESI, VAR, SYNA, WCG, ATW, BLUD, JW.A, MUR, ORCL, RCI, SWN, GR, FSLR, HLF, EBAY, AMX, STRA, PCR, RIMM, BDX, BYI, CAM, PPD, ACN, NIHD, SNHY, JOYG, K, JOSB, PETS, NTLS, BAP, HDB, CBST, SNA, AFAM, EZPW, WAB, AXYS Tuesday’s Action (=> +0.70 or -0.70) Moving Up: BIDU, FSLR, GS, MA, POT, NUE, MON, MS, SOHU, STRA, MOS, SCHN, V, NDAQ, X, AGU, CF, PNRA, CNX, ESRX, KRE, PCLN, SINA, INFY, IPI, COH, BRCM, KMT, NIHD, BTU, ANR, KBE, GRMN, FWLT, CLF, ADM, AFAM, EBAY, ZION, LAMR, MEE Moving Down: GOLD, NEM, GLC, AEM, GDX, GG Intermediate Term Market Trend: Neutral – Nasdaq; Down – DJIA, SPX, RUT Short Term Market Trend: Up