In particular, the USD/JPY and the EUR/CHF pairs. In the case of the former, the dollar has sold off against the yen to the tune of 160 pips since the Nikkei opened overnight, and in with regards to the latter, the Euro sold off below 1.30 support overnight, currently trading at 1.2938 against the Swiss Franc. No time right now to post charts, but if you want to track these and other currency pairs yourself, go to [forex-markets] and you can pull up the charts yourself.
I bring this up, as big moves in the currency markets have lately been a precursor to big moves in the equities markets....especially the USD/JPY....and the moves made overnight would imply a negative move for stocks today, unless we see some central bank intervention.
On the optimistic side, today marks the last day of the month, which is usually bullish, and we should typically see a lot of buying by the fund managers in stocks that have been performing well this month so when they publish their August report, it will at least appear like they've been positioned correctly. A little slight of hand called end of month window dressing....
Good luck trading.
Tuesday, August 31, 2010
Still marking time
So far, absolutely no follow through from the Bulls off of Friday's rally. As mentioned on Sunday evening, first upside resistance is the gap fill at 1067, and all the Bulls were able to manage yesterday was a brief trip to Friday's close before selling off for the remainder of the day.
So for the last 5 trading days we've been stuck in range between 1040 and 1065, and at some point soon we will resolve in one direction or the other. As previously posted, I've been hoping for a bounce so I can short into resistance, as aside for a modest insurance position against another flash crash scenario (out of the money Oct/Nov puts), I'm in all cash right now.
At 5:30 AM, Futures are down a bit, but it's still too early to make any calls for today. Later this morning we have the following econ reports, with consensus expectations shown. Surprise results in either direction are likely to give us a tradeable move....for day trades at any rate.
Tuesday 9:00am, Case-Shiller 20-City Index, 3.5%
Tuesday 9:45am, Chicago PMI 57.5
Tuesday 10:00am, Consumer Confidence, 50
Let's see how the morning develops. I may post again later, but my day job will likely keep me out of the markets again today.
Good luck trading.
So for the last 5 trading days we've been stuck in range between 1040 and 1065, and at some point soon we will resolve in one direction or the other. As previously posted, I've been hoping for a bounce so I can short into resistance, as aside for a modest insurance position against another flash crash scenario (out of the money Oct/Nov puts), I'm in all cash right now.
At 5:30 AM, Futures are down a bit, but it's still too early to make any calls for today. Later this morning we have the following econ reports, with consensus expectations shown. Surprise results in either direction are likely to give us a tradeable move....for day trades at any rate.
Tuesday 9:00am, Case-Shiller 20-City Index, 3.5%
Tuesday 9:45am, Chicago PMI 57.5
Tuesday 10:00am, Consumer Confidence, 50
Let's see how the morning develops. I may post again later, but my day job will likely keep me out of the markets again today.
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Sunday, August 29, 2010
S&P 500 - update
Last week [click here] I wrote about the H&S pattern on the S&P 500 chart, that we are back on the neckline, and if we don't see a bounce soon, things could get ugly quickly. Well Friday did turn out to be a green day on the charts, after bouncing in the early morning right at the neckline again....see below
So why was I looking for a bounce? Well because the H&S shown above isn't the only pattern we can highlight on this chart. We also have a horizontal consolidation pattern, where we can see that the S&P has essentially been range bound between 1040 and 1130, and price typically bounces off the top or bottom of a range at least once before coming back and breaking through, or price will hit the top/bottom of the range and simply reverse, headed back up/down to retest the other end of the range. I discussed the implications of a consolidation pattern [here] last week, in relationship to Amazon. The implication is the same...a bigger move is imminent.
Finally, we have a symmetrical triangle pattern, which is also a type of consolidation pattern. Unlike a horizontal range pattern, that can churn back and forth for great lengths of time, the symmetrical triangle has a definite end point (the apex of the triangle), assuming the pattern remains valid.
So the question is, what happens next? Short term, I'm not quite sure. We'll need to see how things play out next week. Longer term, I still think the direction of the market will be down, as the Bulls have not been able to break the June high at 1131. For next week, I'll be watching the gap fill at 1067, and the 50% fib retracement level at 1084 as initial resistance for any moves the Bulls make. I've blown the picture up a bit to illustrate these levels below.
So that's it for my thoughts on the big picture. Ultimately lower, but short term, we're in wait and see mode to see if the Bulls can get any momentum in this bounce.
Good luck trading.
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Finally, we have a symmetrical triangle pattern, which is also a type of consolidation pattern. Unlike a horizontal range pattern, that can churn back and forth for great lengths of time, the symmetrical triangle has a definite end point (the apex of the triangle), assuming the pattern remains valid.
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So the question is, what happens next? Short term, I'm not quite sure. We'll need to see how things play out next week. Longer term, I still think the direction of the market will be down, as the Bulls have not been able to break the June high at 1131. For next week, I'll be watching the gap fill at 1067, and the 50% fib retracement level at 1084 as initial resistance for any moves the Bulls make. I've blown the picture up a bit to illustrate these levels below.
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So that's it for my thoughts on the big picture. Ultimately lower, but short term, we're in wait and see mode to see if the Bulls can get any momentum in this bounce.
Good luck trading.
What's the deal with Intel, and are they just the first "chip" to fall?
What really prompted this post is the Q3 warning that Intel released Friday morning shortly after the market opened, cutting guidance on revenue and gross margins, and I'll get to that shortly, but first, let's go back a bit further in the year to their first quarter earnings. Now before proceeding any further, I'll tell you right now that I am not a forensic account, nor do I spend all of my free time delving into company balance sheets. When it comes to trading, I'm a technical analyst, and in my 9 - 5 job, my background is engineering and technical product P&L's, so when it comes to company fundamentals, I guess you can say that I'm a top line/bottom line kind of guy. In other words, those of you who do dissect balance sheets for a living (or for fun?) will likely be disappointed with the lack of fundamental data/analysis here, but I think you'll still get the point.
So, back to Q1 earnings for Intel - announced after the bell on April 13th, and by all accounts, they were excellent. Revenue was up, margins were up, the sun was shining and the birds were singing. On April 14th,
the stock had gapped up a dollar, and analysts were all coming out with bullish calls on the stock. Here's an interview with Jim Cramer [Cramer Interview] from The Street.com where Jim is calling for higher prices. Well, gotta give him credit...Intel did trade higher for one day, and then proceeded to sell off for the next 7 weeks. Good call, Jim!!
To be fair however, I should also point out that this is not too unusual, considering the run-up the stock had seen in the two months prior to Intel's Q1 earnings. Some would say that Intel's good earnings were already "priced in" and that the stock really shouldn't be priced much higher. We should also note that at the time Intel really started selling off, the rest of the market was doing the same thing. This is back when Greece was the hot topic in Europe and everything over there was going to hell in a hand basket. So, okay...maybe Intel would've gone higher had it not been a victim of the overall market plunge...I'll give them a pass on Q1.
Now let's fast forward to Q2 earnings. Intel President and CEO Paul Otellini had the following to say:
Hmmmm.... maybe I should treat myself to another dram and re-evaluate my interpretation? As we can see in the above chart, the stock gapped up after earnings and had a nice little run, but by the close of the day, had sold almost back down to the opening price. From that day forward, Intel has not been able to challenge those highs, much less overtake them, and since mid August, the stock has completely tanked. If you bought and held Intel based on Paul Otellini's rosy Q2 earnings announcement, you're now down about 15%.
And now, here we are, just 6 short weeks after "the best quarterly results ever" and "robust Q3 guidance", and Intel has come out with revised Q3 guidance, slashing both top line revenue and margins. What's up with that?? I mean seriously folks, did I miss a headline somewhere? Did two or three of Intel's production facilities get blown up or something? Probably not, but I'll tell you what I believe is and has been happening.
First of all, despite what you'll hear from the pump-monkeys and the money-honeys on CNBC, it's important to understand that this entire so-called recovery and the run-up in equities since March 2009 has been nothing but an attempt by the Federal Reserve Bank and our Government to paper over a problem by printing money and promoting consumer spending in the economy. This in itself is a longer topic that I will post on at some point in the future, but the important thing to recognize now is that in March/April of 2010, the Fed officially ended its quantitative easing (QE) program, whereby it had been injecting liquidity into the banking system by regularly purchasingtoxic assets, ahem, mortgage backed securities (MBS) from the "too big to fail" banks. Two weeks later, at the end of April, also marked the end of the Govt.'s home-buyer tax credit program.
These programs represented the two largest forms of stimulus that were put in place by "the powers that be" in an attempt to jump start the economy, and together, they have added over $1.5 Trillion to our country's level of debt. These programs, and the accompanying debt, were sold to the U.S. public as way to help Main Street by freeing up the credit markets and promoting job growth. Well, they have failed miserably on both counts. The banks still aren't lending, and the unemployment situation hasn't improved a bit. In fact, I would argue that it's worse, but that too is a topic for another post. The bottom line is, the only people who have benefited from all of this stimulus are the very people who got us into this mess in the first place - the banks, or as some like to say, the banksters. I could write a book on that topic too...but back to today's post...
It is my humble opinion that though most major corporations like Intel were not the direct recipients of Govt. subsidies, they were indirect beneficiaries of the stimulus programs simply due to how much money was pumped into the system in such a short span of time. Our Govt. and many other govt.'s around the world created an artificial recovery via stimulus programs, which for a short amount of time drove spending and allowed companies like Intel to show growth, but as soon as the Govt. tit gets taken away, the situation deteriorates rapidly, something that we have clearly seen in the weakening weekly and monthly econ reports that have been published since May. I'm not going to list all of the examples here, but the two latest from this past week were the miserable Durable Goods Report, which showed only 0.3% growth vs. an expected full 3% growth in orders for durable goods [Yahoo Finance article here], and the Q2 GDP revision from 2.4% growth originally reported down to 1.6%, a 30% reduction that will likely be reduced even further next month when the final Q2 GDP number is released. You can read some of my previous comments on the latter by clicking here. If you require more extensive proof, Google all of the reports that come out on a regular basis and see for yourself....construction spending, new home sales, retail sales, unemployment, durable goods, etc. With the exception of a minor uptick in the first week of July, these and many other economic indicators have been getting progressively worse since the stimulus officially ended.
So where do we go from here? I think Intel's warning and Q3 downward revision are just the first of many more warnings we'll see from corporate America in the coming weeks, and short of any new Govt. stimulus programs, I believe the economic situation will continue to deteriorate. As for Intel's stock price, it's been dropping like a rock over the past several weeks, so I would expect some sort of bounce in the short term, with first resistance at 19 and second resistance at the gap fill around 19.45 - 19.50.
Your feedback is welcome. Good luck trading.
So, back to Q1 earnings for Intel - announced after the bell on April 13th, and by all accounts, they were excellent. Revenue was up, margins were up, the sun was shining and the birds were singing. On April 14th,
the stock had gapped up a dollar, and analysts were all coming out with bullish calls on the stock. Here's an interview with Jim Cramer [Cramer Interview] from The Street.com where Jim is calling for higher prices. Well, gotta give him credit...Intel did trade higher for one day, and then proceeded to sell off for the next 7 weeks. Good call, Jim!!
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Now let's fast forward to Q2 earnings. Intel President and CEO Paul Otellini had the following to say:
"In Q2, Intel posted its best quarterly results ever as the economics of the world continue to reflect renewed economic momentum. Intel growth continues to run ahead of economic growth, reflecting what we believe is a fundamental shift driven by Internet adoption. Our second quarter was up 5% from Q1 versus a seasonal norm of down 2%."During the Q&A session, an analyst from UBS asks about how things are tracking for Q3 within the distribution channel for inventories. Paul's response
"Well, so far so good. I mean we gave guidance to a very robust third quarter. As Stacy said it was basically seasonal or just slightly below the midpoint of seasonality. We don’t see any inventory issues out there."Click here to read the full transcript of the Q2 earnings call, courtesy of SeekingAlpha.com, but let's focus on the text that I have highlighted above. SingleMalt interprets this as follows: in the history of the company, earnings at Intel have never been better, and the future's so bright, I gotta wear shades! Well hell, on news like that, the stock should be headed to the moon, right??? Let's take a look....
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And now, here we are, just 6 short weeks after "the best quarterly results ever" and "robust Q3 guidance", and Intel has come out with revised Q3 guidance, slashing both top line revenue and margins. What's up with that?? I mean seriously folks, did I miss a headline somewhere? Did two or three of Intel's production facilities get blown up or something? Probably not, but I'll tell you what I believe is and has been happening.
First of all, despite what you'll hear from the pump-monkeys and the money-honeys on CNBC, it's important to understand that this entire so-called recovery and the run-up in equities since March 2009 has been nothing but an attempt by the Federal Reserve Bank and our Government to paper over a problem by printing money and promoting consumer spending in the economy. This in itself is a longer topic that I will post on at some point in the future, but the important thing to recognize now is that in March/April of 2010, the Fed officially ended its quantitative easing (QE) program, whereby it had been injecting liquidity into the banking system by regularly purchasing
These programs represented the two largest forms of stimulus that were put in place by "the powers that be" in an attempt to jump start the economy, and together, they have added over $1.5 Trillion to our country's level of debt. These programs, and the accompanying debt, were sold to the U.S. public as way to help Main Street by freeing up the credit markets and promoting job growth. Well, they have failed miserably on both counts. The banks still aren't lending, and the unemployment situation hasn't improved a bit. In fact, I would argue that it's worse, but that too is a topic for another post. The bottom line is, the only people who have benefited from all of this stimulus are the very people who got us into this mess in the first place - the banks, or as some like to say, the banksters. I could write a book on that topic too...but back to today's post...
It is my humble opinion that though most major corporations like Intel were not the direct recipients of Govt. subsidies, they were indirect beneficiaries of the stimulus programs simply due to how much money was pumped into the system in such a short span of time. Our Govt. and many other govt.'s around the world created an artificial recovery via stimulus programs, which for a short amount of time drove spending and allowed companies like Intel to show growth, but as soon as the Govt. tit gets taken away, the situation deteriorates rapidly, something that we have clearly seen in the weakening weekly and monthly econ reports that have been published since May. I'm not going to list all of the examples here, but the two latest from this past week were the miserable Durable Goods Report, which showed only 0.3% growth vs. an expected full 3% growth in orders for durable goods [Yahoo Finance article here], and the Q2 GDP revision from 2.4% growth originally reported down to 1.6%, a 30% reduction that will likely be reduced even further next month when the final Q2 GDP number is released. You can read some of my previous comments on the latter by clicking here. If you require more extensive proof, Google all of the reports that come out on a regular basis and see for yourself....construction spending, new home sales, retail sales, unemployment, durable goods, etc. With the exception of a minor uptick in the first week of July, these and many other economic indicators have been getting progressively worse since the stimulus officially ended.
So where do we go from here? I think Intel's warning and Q3 downward revision are just the first of many more warnings we'll see from corporate America in the coming weeks, and short of any new Govt. stimulus programs, I believe the economic situation will continue to deteriorate. As for Intel's stock price, it's been dropping like a rock over the past several weeks, so I would expect some sort of bounce in the short term, with first resistance at 19 and second resistance at the gap fill around 19.45 - 19.50.
Your feedback is welcome. Good luck trading.
Friday, August 27, 2010
To Short or not to Short....
So far the bears have held the line at yesterday's highs, and I'm still thinking that there's a good chance that we sell into the close. But, in looking at the market internals, I see that the ADD is still close to high of day at +1930, while the TRIN and VIX are at or near low of day - all very bullish signs. Plus, I made really good money this morning, and I'd hate to give it back going into the last hour of the week.
I think I'll pass on that short today....a bird in the hand, and all......
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I think I'll pass on that short today....a bird in the hand, and all......
Still looking Bullish
Nice bull pennant forming on the R1 line. Upside targets would be yesterday's high at 106.58, and then the gap fill from Monday (blue line) at 107.10. Volume has completely dropped off now, so I would expect the HFT algos to take over and ramp the market through the early afternoon...see if the bears come out and defend yesterdays high, or if they extend their lunch to 3 martinis (it is Friday after all) and let the algos go for the gap fill. Hmmm....
Let's see if we get any volume back in the last hour of trading, and which way it's moving.
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And Bernanke with the stick save!!!
Can always count on good ole Ben to come through in the clutch....not even 30 minutes later, and the U. of M. data is forgotten, as Ben promises more Fed stimulus available. http://www.cnbc.com/id/38879706
But I gotta admit...I just love trading a news driven market like this. The U. of M. miss got my gap fill from the open and much more...traded out at the S1 pivot point....and then I could get long for a 20 minute run-up on Big Ben's announcement. I'm flat again for the day and likely finished, but I will check back later this afternoon to see where we are. With Intel coming out and slashing Q3 guidance http://ransquawk.com/headlines/92546 I'm thinking not many people will want to be long going into the weekend. Could see a brutal sell-off into the close.....
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FIrst step towards that bounce I mentioned?
Last night I was talking about a bounce that I've been expecting S&P Where do we go from here?, and it looks like this morning's GDP revision is giving us the first leg up. Original Q2 GDP showed growth of 2.4%, and the expected revision was anticipated to come in at just 1.4%. Low and behold - it was only revised down to 1.6%! Futures are rallying as a result.....something that I never get. So the news is bad - GDP growth is 30% lower than what was originally stated, but...it's not quite as bad as what we thought it could be, so lets go gun the market???
I can't wait for the final Q2 revision to come out next month....likely below 1%...we'll see. More to the point however, why are we looking backwards and rallying on what happened in the past? Current quarter GDP numbers are likely to show contraction, but that's okay...I was looking for a bounce to get into short positions again anyway, so bring it on! Next on deck - University of Michigan at 10:00. Will it add to the rally, or pop the balloon???
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Very, very quiet this morning
Futures are up very slightly this morning, but nothing to write home about, and at the time of this post, the SPY has only traded 640,000 shares and the Q's just 10% of that. Currencies have also been more or less flat-lining overnight. On deck we have GDP revision at 8:30 EDT, and U. Michigan Consumer Sentiment at 10:00 EDT. Then we have my buddy, Big Ben Bernanke, speaking at the Kansas City Fed's conference at Jackson Hole at 10:00 AM as well. What he says (or doesn't say) could really get us moving in one direction or the other today, and I think he'll need to be very careful with his choice of words. Two possible scenarios that I see as being likely:
1. He confirms that more substantial Quantitative Easing (QE) is coming. Result: Equities rally, dollar sells off, Gold rallies.
2. He doesn't say much new at all. Result: Equities sell-off, dollar rallies, Gold continues to consolidate, or pulls back a bit, before continuing its march to new highs.
Or maybe none of the above??
Keep an eye on Gold....
1. He confirms that more substantial Quantitative Easing (QE) is coming. Result: Equities rally, dollar sells off, Gold rallies.
2. He doesn't say much new at all. Result: Equities sell-off, dollar rallies, Gold continues to consolidate, or pulls back a bit, before continuing its march to new highs.
Or maybe none of the above??
Keep an eye on Gold....
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Wells Fargo looking ugly....
For that matter, the whole financial sector hasn't been looking all that good lately, but WFC has fallen off a cliff the past couple of weeks, and has made a real break of the H&S neckline, indicating that we should see significantly lower prices in the not too distant future. Found whole number support at 23 on Weds and traded back up to 24 yesterday before closing at 23.50. I wouldn't be surprised to see a back test of the neckline, so be careful of shorting now.
Good luck trading.
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Thursday, August 26, 2010
AMZN - Setting up for big move
I noticed this early today, because I day-traded Amazon to the short side and did quite well. Here on the daily chart, check out how coiled up price has gotten...trading within a 7 point range for the last 17 trading days - damn near a month! As a result, the ADX has plummeted and is now reading 13.54 at today's close.
So what does this all mean? Typically, an ADX reading below 15 means that price is consolidating in preparation for a larger move. The longer the consolidation period lasts, the more pronounced the move will be. What the ADX does not tell you, is in what direction the move will occur. Just looking at the chart on it's own, I would say the pattern is looking pretty bullish, but considering the bearish undertones of the overall market, I wouldn't commit to a long position yet. I should also note that there is nothing saying that this pattern can't continue for another 3 weeks...it certainly can....be patient. Below, Amazon shows us a perfect example back in March of exactly what I'm talking about. After 19 days of trading between 115 and 120, price explodes to 150 in the following 6 weeks. Also note where the ADX was just prior to the move.
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S&P - Where do we go from here??
I've been pretty bearish since April, and did quite well during the sell-offs in May/June. July sort of caught me by surprise - not so good for the home team, but when the bulls weren't able to take out the swing high from June, I started getting those bearish vibes again. I stayed on the sidelines though waiting for some confirmation and finally entered short positions when price dropped below 1100 and failed to retake this level on a backtest. This week I took profits on those swings as we tested support in the lower 1040's, but right now, I have to admit, I'm at a bit of a loss. After testing support, I was really expecting to see a bounce back into the 1070's and perhaps up to 1080, but the bulls haven't really shown up. Not that there's really any reason why they should...after all, the econ reports this week have been pretty horrid, but that's never stopped the bulls before (over the last 18 months anyway), and we were technically oversold in the short term....so yeah...I was expecting a bounce.....
Well, so far no bounce, and I'm having a hard time seeing how we're going to get one tomorrow, considering that revised GDP numbers for Q2 come out, and everyone seems to be in agreement that it will be revised significantly lower. But then again, maybe it won't be as bad as everyone expects, and we'll get that bounce after all. If we don't....we could be in serious trouble, as we're right back at that Head & Shoulders neckline. We got a teaser break of the neckline in early July, which is why I got caught by surprise (and got hosed pretty good), but something's telling me that if we break the neckline again, it'll be for real this time....look out below!!!
For the uninitiated, potential target level has been illustrated, which is based on a measured move that is roughly equal to the distance from the top of the head to the neckline. Sub 900 on the S&P again...very possible....and if it happens, don't say I didn't warn you!
Good luck trading.
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Well, so far no bounce, and I'm having a hard time seeing how we're going to get one tomorrow, considering that revised GDP numbers for Q2 come out, and everyone seems to be in agreement that it will be revised significantly lower. But then again, maybe it won't be as bad as everyone expects, and we'll get that bounce after all. If we don't....we could be in serious trouble, as we're right back at that Head & Shoulders neckline. We got a teaser break of the neckline in early July, which is why I got caught by surprise (and got hosed pretty good), but something's telling me that if we break the neckline again, it'll be for real this time....look out below!!!
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Good luck trading.
Welcome
For those who know me well, you of course also know that I have become pretty active in the stock markets over the past years, and that I avidly follow a multitude of topics and issues that impact our markets. I've decided to start this blog primarily as a way of sharing information that I come across regarding the economy and the markets that you may not ever see on CNBC or Fox Business, but that is equally relevant, not to mention critically important, to anyone who is a trader, an investor, or a 401k holder. In doing so, I will of course be providing my own commentary and color to the posts that I make, but whenever possible, I will also be providing attachments or links to hard data that support or substantiate my comments. My reasons for doing this are not to try to change anyone's mind on any particular topic, but to simply present the information, and rely on you the reader to review the material with an open mind. Have no doubt however, my comments will definitely let you know where I stand, and since it's my blog, I'll not be shy about saying my piece. :-)
The other reason I've started this blog is because I truly enjoy analyzing stock charts and entering trades based on what the technical analysis is telling me, so expect to see frequent posts containing charts of individual stocks, indexes and ETF's, along with my commentary on what I see happening. Keep in mind however that I'm doing this for my own amusement, and that none of my comments should be construed as trading or investment advice.
Well, I think that'll do it for the introductions....once again, welcome to my blog, and enjoy!!
The other reason I've started this blog is because I truly enjoy analyzing stock charts and entering trades based on what the technical analysis is telling me, so expect to see frequent posts containing charts of individual stocks, indexes and ETF's, along with my commentary on what I see happening. Keep in mind however that I'm doing this for my own amusement, and that none of my comments should be construed as trading or investment advice.
Well, I think that'll do it for the introductions....once again, welcome to my blog, and enjoy!!
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