Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Find Bottoms for the SP500, Dow, Nasdaq and Russell 2K

Stock-Markets / Stock Markets 2011 Jan 10, 2011 - 02:43 AM GMT

By: Chris_Vermeulen

Stock-Markets Best Financial Markets Analysis ArticleIt was a great first week in the market for 2011. Volume picked up as traders slowly return from holidays focusing on the markets again. Looking forward volume should continue to expand because there will be more traders in front of their terminals excited to see what type of money they can make in 2011.


Let’s jump into what happened last week. On Friday the market generated a short term trading signals to go long SP500, Dow, Nasdaq or Russell 2k. This trade seemed to fall on a perfect day because if we look back over last year’s weird trading characteristics typically if you were to buy on a Friday and hold a position until Monday it would have netted you a profit. Well on Friday the market had a very nice intraday pullback to a level which there was strong support so we bought in with a small position.

Let’s jump into the charts for a visual of what I am talking about…

 SPY – Daily Chart & Moving Averages

This chart shows the big picture. Currently we are in a strong uptrend and looking to buy significant pullbacks to key levels of support, and that is exactly what we had last week.

The market pulled back to a level which has support:
  1. It pulled back to the 14 day moving average
  2. It pulled back to the previous weeks high
  3. It pulled back to a support trend line

Each of these levels happen are at the same level and each type of support will attract a different type of trader, meaning there should be a lot of individuals covering their shorts and or buying at that point.

Friday’s 1 Minute Madness Chart

This is a 1 minute chart of just last Friday scrunched together so I can fit everything into the chart. What I want to show here is how the short term time frame can help you spot a bottom as it is forming. This actually is a little more complicated that im showing here but I hope you get the point.

Every day there is either a short term top or bottom which forms usually between 10am – 2pm ET. When the daily chart is in an uptrend you should focus on only trying play bottoms as the bias is up and even if your timing is off a little the overall larger trend typically will save your butt.

The chart below shows how a morning support level was broken and the market started to fall. That is the first time in the day which stops get triggered and the start of a new trend was born. The jump in volume was from traders who were long and used the morning support as a level to exit the position if it was broken in order to cut their losses. Bearish traders on the other hand would have been shorting on the breakdown anticipating lower prices. 

Usually after a break there is a test of the breakdown level and we got that a few minutes later as which point more traders took short positions hoping for a continues selling. That wave of selling led to a sharp drop and then the first real bounce.

My general rule is you can trade the first pullback after a breakout or price surge. Now this can be taken two ways. You can trade the first test of a breakout which in my opinion carries the lowest risk and then you can still trade the first real bounce which comes after strong and steep price movement.

When looking for the bottom I like to see multiple new lows with price spikes as it means stops are being triggered, and more traders keep shorting the new lows. Once the herd is heavily weighted on the short side and the chart forms an ABC retrace then I know a bottom is near and all those shorts will be covering sooner than later

Market Sentiment Trading Indicators – 10 Minute Charts

Top Chart: SPY etf shows a possible ABC correction on the 10 minute chart along with panic selling as there we 3 sell orders to every 1 buy order. Everyone was running for the door.

Middle Chart: NYSE Advance Decline line was showing stocks were oversold on the short term basis and it’s just a matter of time before the price stabilizes or bounces.

Bottom Chart: Put/call ratio was telling me even the options traders were buying leverage to the down side. All of this tells me the majority of traders are selling and I like to do the opposite which you will learn over time.

SP500 Futures – 5 Minute Chart of Friday

This shows where our entry point was using all the above indicators and trading analysis. Because the broad market has been rising for so long and showing signs of correcting any day now, a trader must be very picky/timely with their entry point and the amount of money put to work in these trades. But just because the market feels like it’s ready to roll over it does not mean we should be looking to go short. I strongly believe we  buy the dips but keep our position sizes much smaller than normal. For all we know this uptrend could go on into May…

During an overbought/overextended market condition which I think most of us agree we are in, I am not willing to risk much capital in new positions and also the reason why I am really zooming in on the charts to get us the best possible price to reduce risk.

Weekend Broad Market Trading Conclusion:

Last week’s entry point required us to be very timely, but keep in mind this is not the norm. During a new trend we sometimes have 2-3 days to enter a position before the market starts to really move and it is those larger swing trades which make some decent money and last weeks at a time.

Anyways, thought I would share this info with a little more detail. As you can see there is a lot of information and timing that must come together for a trade setup and entry point.

If you would like to get more of my daily analysis to join my newsletter at www.GoldAndOilGuy.com

By Chris Vermeulen

Chris@TheGoldAndOilGuy.com

Please visit my website for more information. http://www.TheGoldAndOilGuy.com

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com.  There he shares his highly successful, low-risk trading method.  For 6 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.  Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.  

Chris Vermeulen Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in