The Price Action Lab Report – Tuesday, September 30, 2014 [Premium]

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

Market Recap – September 29, 2014

U.S. stocks opened lower on Monday but dip buyers showed up and by the close major indexes were well off their lows. The S&P 500 fell 0.25%, NASDAQ lost 0.14%, the Russell 2000 was down 0.13% and the Dow shed 0.25%.

Bond prices rallied due to a flight to safety with the 10-Year Note yield falling 5 basis points to 2.49%. Crude oil prices also rallied with spot light crude gaining 1.03%. Precious metals were weak with spot gold losing 0.35% and oversold silver down 1.08%. The U.S. dollar was steady versus the Euro to close in New York at $1.2688.

Comment: Geopolitical unrest caused nervousness and a gap at the open but passive index funds continue to buy shares due to stable demand by retail investors who are now convinced that the Dow will rise to 20,000 by next year and they will make enough money to retire comfortably. I certainly hope so but one must be careful with the stock markets. It took many years for investors to recover losses from the 2000-2003 and 2007-2009 bear markets and some were forced to sell at a big loss. If the investment horizon is 10 years or more and assuming that the stock market will maintain its upward structural bias, then passive index funds for those who cannot manage their portfolios is a viable choice. But those with a short investment horizon may find themselves in the unfortunate position to have to sell at a loss in the future because everything that goes up at some point must come down some; it's a law of nature.

Short-term Technical and Quantitative Analysis

The table below shows 2 open positions and 6 pending setups:

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Major ETF Performance Update

At the top of YTD performance we have biotech, semiconductors, solar energy and bonds. In the middle are real estate, utilities, tech and high caps. At the bottom lurk financials, gold and emerging markets. Small caps and social media are in negative territory.

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The Price Action Lab Report – Monday, September 29, 2014 [Premium]

Daily Market Recap and Premium report delivered before the market open. The premium report includes analysis of 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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Another V-Bottom in S&P 500?

After a 61.8% Fibonacci retracement of Thursday’s high-low range on Friday, the S&P 500 may be preparing for another V-bottom and new all-time highs. This year we had 3 major V-bottoms in the index and last year there were 4 more. Fundamentals are split 50/50 now but confirmation bias may prevail.

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Price Action Lab Software

This post offers a brief introduction to the features and capabilities of Price Action Lab (PAL) software. PAL is a tool systematic and discretionary quant traders can use to discover trading systems, scan markets for high probability setups and determine the probability of directional moves.  A number of validation methods are available to assist the software user in determining the significance of the results.

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The Cause of Small Daily Corrections is Often Irrelevant

Yesterday a well-known trader was wondering about the cause of the selloff, as reported in the financial media. Do we really have to look for a cause each time the S&P 500 falls 1.62%? Unless there is a large one-day drop, causes are irrelevant because changes of this magnitude are expected to occur at least once a month.

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The Price Action Lab Report – Friday, September 26, 2014 [Premium]

Daily Market Recap and Premium report delivered before the market open. The premium report includes analysis of 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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