The stock indexes rallied sharply beginning in the after hours session yesterday, with the day session today gapping up and ending about where it started, leaving small range doji bars on the QQQQ and SPY. Volume was light, as would be expected on the day before Labor Day, however, there were many intra-day swings, making it a great day for day traders. The daily chart of the Nasdaq 100 QQQQ ETF is shown above with the standard error bands, with three day pivot, and the double stochastic below. You can see a blue line drawn from a pivot, or swing point, nearly a month ago. The high today tested that pivot. Also there was the rounding over regression curve at the same spot. The lower blue line is a minor pivot drawn on the high of last Friday. The structure of the market is up, with momentum up, at least at the moment. The doji bar at a point of resistance on the regression curve and pivot is cause for caution. If the market should fail and go back under that lower blue line, as well as the bottom error band, the Q’s could retest lower level. However, with momentum up it wouldn’t take much to overcome the resistance just ahead. Being a three day weekend it is probably a good idea for swing trading to be flat and wait to see which way it breaks early in the week. I’ve had better signals on the 60-minute chart lately. I had an example on the daily update on the 29th. The daily charts have been very difficult to navigate this summer. Going out to the weekly QQQQ chart paints a better picture.
Above is the same market and set-up, but on a weekly time-frame. You can see how the low of the sell-off held, almost to the tick, on the up-trending regression curve. Also notice the oversold and up-turned 5 and 10 period double stochastic, and prices for two weeks are above the averaged weekly pivot (yellow dots). This chart looks more promising for a continued up-move.
I continue to believe the daily charts in most of these markets are too noisy to trade at the moment. The longer, and shorter time frames have more clearly defined trends currently. I’m sure this will change shortly and the daily charts will be tradable again.
Gold has been frustrating to try to define a trend. As of Thursday it looked like momentum was turning down, and the sideways trend indicators were beginning to tilt slightly south. Of course today the day session gold gapped up and closed, like the stock indexes, about where it started leaving a very small range doji candle. It is still in the middle of a larger trading range, but it did gap up above the trend channels. The 24 hour gold chart didn’t show the doji and gap and looks a little more convincing to the bull case, but still most of the move was last night, with little progress in today’s day session. I still think it is coiling like a spring and will break out one way or the other with some conviction. There is not enough evidence for me to assume the action today was the start of anything. I’ll stand aside a bit longer.