The Price Action Lab Report – Monday, July 28, 2014 [Premium]

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Market Recap - July 25, 2014

Stock indexes opened lower mainly due to unexpected negative earnings reports by Visa and Amazon and moved little throughout the day. The S&P 500 fell 0.48%, NASDAQ lost 0.50% and the Russell 2000 shed % 1%. For the week, the S&P 500 was flat, NASDAQ was up 0.4% and the Russell 2000 dropped 0.6%. NASDAQ also completed 395 days above its 200-day moving average, the longest such period since its inception and an event that is getting close to being an outlier.

Bonds yields fell with the 10-Year Note losing 4 basis points to 2.47%. As a result, TLT rose 1.16% to its highest close in 294 days. Crude oil prices fell but after bouncing off their intraday lows, with the leveraged UCO dropping -0.32%. Precious metals rebounded after Thursday's fall with GLD gaining 1.16%. Copper prices stalled near resistance with JJC falling -0.55%. The U.S. dollar was strong as it pierced through resistance at $1.3450 with the Euro to close at $1.3430.

ETF Highlights 

      • SPY fell 0.47% from its all-time high
      • QQQ lost 0.39% but was off its intraday lows
      • IWM dropped -0.91% but managed to close above the 200-DMA 
      • TLT gained 1.18% to a 294-day high
      • UCO shed 0.32% along with falling crude oil prices
      • UNG plunged -1.65%, unable to hold on to its gains from Thursday
      • GLD rallied 1.16% to close Thursday's down gap
      • IBB fell 0.54% while profit taking in biotech sector continued
      • SOCL lost -0.72%, breaking a 5-day winning streak

Selected overbought ETFs: -
Selected oversold ETFs: CORN, UNG, FXE

Short-term Technical Analysis

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High Probability of a Short-term Correction in Record Breaking NASDAQ

The NASDAQ index has stayed 395 days above its 200-day moving average, the longest period on record this has occurred since its inception in February of 1971. What is interesting here is that after about a week this will no longer be a normal event.

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A Few Practical Principles of Quantitative Trading

Many equity, futures and forex traders would like to transition to quantitative trading but think it is overwhelmingly complicated.  However, there are many levels of quantitative trading and if the right tools are used, the complexity level decreases significantly to the point that any trader who knows simple arithmetic can do it.

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Short-Term Correction Targets for Major U.S. Indexes

In case the correction continues, the short-term target for S&P 500 is about 2.6% lower at horizontal support, NASDAQ has formed a double top with a potential target of -5% and the weak technically Russell 2000 may test its May lows, about 6% lower.

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Overnight Effect Update – July 25, 2014 [Premium]

This is an update on the overnight effect manifested  in several ETFs and high cap stocks where there is a significant trading edge when buying the security at the close of a day and exiting the position at the next open.

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The Price Action Lab Report – Friday, July 25, 2014 [Premium]

Premium report delivered daily before the market open that includes price action analysis of proxy ETFs and S&P 500 stocks with focus on short-term high probability setups. Click here for an example of a daily premium report.

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Return and Volatility of a Few Proxy ETFs

The IShares US Real Estate ETF (IYR) has the highest YTD return at mid-range volatility while the Global X Social Media Index ETF (SOCL) has a negative return at high volatility. The SPDR S&P 500 (SPY) and the PowerShares QQQ are competing for lowest volatility amongst the 8 proxies considered.

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