Lots of good trading material on the MarketClub Blog.

One don’t miss is a Cycles & Oscillators Seminar by Walt Bressert. The seminar includes audio and PDF notes. Best of all its FREE.

In the first part of his workshop, Walt will explain the four dominant cycles and discuss techniques to find these cycles in the market. The development and use of timing bands and Fibonacci ratios will be examined to determine the timing of the cycles and specific techniques will be illustrated for determining the future price levels of cycle tops and bottoms.

Several techniques will be presented to improve the performance of oscillators, often turning a mediocre one into a powerhouse. Walter will explain how to combine oscillators with cycles to identify tops and bottoms as they are occurring, and will show specific oscillator cycle combinations to identify cycle tops and bottoms mechanically.

The Federal Reserve’s rate cut is dominating the news, as did recent Fed injections into the market. And the media continues to hold its collective breath each time Bernanke meets or prepares for an announcement.

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Inflation, but what about deflation?
What can I do to protect myself?
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When day trading the SP and Nasdaq futures, do you rely on your moving averages more than your support & resistant areas?

During the first hour of trading, the support and resistance zones on the SP and Nasdaq futures are the most important things to watch. The moving averages have not yet had a chance to come into play.

After that, if a trend is developing I watch several key exponential and simple moving averages on the 2 minute, the 5 minute and the 13 minute SP and Nasdaq futures charts.

These specific moving averages give reliable support and resistance for the market as long as the slope of the moving averages are fairly steep, indicating a trend. When there is no trend, the moving averages are flat and pretty much worthless.

When a trending market makes a countertrend move, and hits a key moving average on two or more different time frames at the same time, the probability of a good trade setup increases dramatically. If you get three hits at the same time, its even better. Sometimes youll see one key moving average get hit on the five minute SP chart at the same time another moving average is hit on the 13 minute Nasdaq chart. This also gives a good trade setup.

Eventually, a trending market will reach the next major support or resistance zone. At that point the zones once again become more important than the moving averages.

In afternoon trading, the market has often broken through a support or resistance zone several times. In that case, the zone is no longer useful, and new areas of support and resistance can usually be found. When I find them, I send my subscribers an RBI Intraday Update with the new support or resistance areas, and a description of what I think the market will do if it moves above or below them.

About the Author

Mike Reed is author of TradeStalker’s RBI Trader’s Updates. He has been trading the Market for 23 years. His support and resistance numbers have been published on the internet since 1996. Mike’s nightly support and resistance zones are specific and incredibly accurate. He offers an unlimited free trial of his nightly TradeStalker RBI Trader’s Updates.

Senior Commodities Analyst Jeffrey Kennedy just authored “What’s Next In Wheat?” which is the focus of the Monthly Feature section of the September issue of EWI’s Monthly Futures Junctures (MFJ) – now online. And you’re in luck, because right now, during FreeWeek, you can read it absolutely free – all 12 pages of it, loaded with 34 commodity charts, plus a Trader’s Classroom lesson on how the “3-in-1 Reverse” bar pattern can reveal trading opportunities you may have overlooked.

All you need to read the September MFJ is a free Club EWI membership.

Click on the image for a 5 min video on using triangles to trade the oil market and how the indicators are shaping up for an indication of the future of crude oil prices.

If someone tells you that you can get rich quick day trading…run for the hills! There are no overnight successes, unless you are very lucky!

Day Trading isn’t easy, but with experience, dedication, self- control and hard work, you *can* become a successful day trader.

1. How to Treat Gap Openings.

A gap up or gap down open is an emotional move, and it often will reverse course and turn in to “trap open”. Gaps that are less than 4 points on the SP Future tend to get filled in the same day, especially Tuesday through Thursday. Turns will occur within 20 to 40 minutes after the open. A trader must be on the lookout for a reversal as soon as early momentum is lost.

A gap into a good support /resistance zone is almost always a good “fade” - with stops no more than 1 point on other side of the support /resistance zone. (A “fade” is simply entering a position opposite of the direction of the gap. If the market gapped down, a “fade” would be entering a long position (buying) in to the selloff.)

2. When the Market Moves Against You, When Do You Exit a Trade?

The way I trade, I exit as quickly as possible. There’s no sense in waiting around for your “stop-loss” to get triggered when the perceived edge is gone. I like to stay in control of my trades, and if the market doesnt do as anticipated, I don’t wait for my stop to get hit. When there is no longer a high probability situation, exit and take a second look.

3. When Are The Best Times of the Day to be Trading?

For me, the best times of the day for trading are the first hour and the last 2 hours. Here’s an old rule of thumb (and this used to work like clockwork in the “old days”, and although it has diminished a bit, it still happens):

“The Minor Time of Day”- f the Market opens higher, then there tends to be a pullback within the first 20 to 40 minutes. If the pullback is weak, there will probably be a continuation of rally into the early afternoon. But, if the pullback is sharp, then you’ve likely seen the high for the day and you’ll want to be selling the bounces.

“Major Time of Day”- Around the 2:20pm to 2:40pm time frame, we’ll often see moves reverse or gather steam in that timeframe. People that have been holding positions all day long become a bit “antsy” - they have to do something with them before the Market closes for the day. When people holding losing positions into late into the day see the time until the close is near, that can cause the market to make some sharp turns in the last 90 minutes. The program gang also likes to get active that time of day.

4. How Can Anyone Trade a Choppy Market?

I take a number of scalps in choppy markets. I time entries with Tick extremes, especially when price pops into previous high areas of congestion, or other intraday support and resistance. Moving averages are not good during choppy days.(Scalps : small profit, “hit and run” type of trades)

5. How Do You Measure Pullbacks?

In a trend move, I like to see shallow pullbacks to a steeply sloped moving average on one of the 3 time frames I follow. (more time frames, the better) Pullbacks to symmetry in a persistent trend are useful when present.

Example: Rally, dip 2.00 points Another run up, then a dip of 2.25 points A another push higher, then a dip 1.75 points. Note continued dips of 1.75-2.25 points repeatedly hold. A pattern has developed, and you want to be buying those shallow pullbacks. This works great used in conjunction with a steep slope of the 20 ema on the 5 minutes charts, or slightly bigger picture, the 60 ema on the 5 minute chart.

About the Author

Mike Reed is author of TradeStalker’s RBI Trader’s Updates. He has been trading the Market for 23 years. His support and resistance numbers have been published on the internet since 1996. Mike’s nightly support and resistance zones are specific and incredibly accurate. He offers an unlimited free trial of his nightly TradeStalker RBI Trader’s Updates. http://www.TradeStalker.com

Looking for new charts? You can check out MarketClub’s Recent Trade Triangles page or select Chart Analysis patterns in Smart Scan and then click on “Chart Analyze Entire Page”. No matter if you are a new or old member… you go to the Tutorial Section for updates on the latest tools brought to you by MarketClub. The Interactive Help Section gets you up to speed on a seemingly endless list of traders’ resources.

During FreeWeek, you’ll have access to Elliott Wave International’s Daily Futures Junctures and Monthly Futures Junctures. Senior Analyst Jeffrey Kennedy scours the markets to find the best commodity opportunities and serves them up to you on three different time frames.

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By Susan C. Walker,
Elliott Wave International
September 7, 2007

Central bankers who "follow the yellow brick road" end up in Jackson Hole, Wyoming, every Labor Day weekend for their annual symposium sponsored by – who else? – the Kansas City Fed. (Who can forget Judy Garland saying to her little dog, "Toto, I’ve got a feeling we’re not in Kansas anymore," in the 1939 movie, The Wizard of Oz?)

The Jackson Hole Resort serves as the Federal Reserve’s equivalent of the Emerald City, as Fed governors and presidents meet with central bankers and economists from around the world to discuss economic issues. This year, the symposium focused on housing and monetary policy. Usually, the Fed chairman kicks off the symposium and, this year, the new chairman, Ben S. Bernanke, did the honors. He closed his speech with these words:

"The interaction of housing, housing finance, and economic activity has for years been of central importance for understanding the behavior of the economy, and it will continue to be central to our thinking as we try to anticipate economic and financial developments."

Then came the other speeches. And it seems that some of the guests in Emerald City were waiting for their chance to pull back the curtain and prove that the Wonderful Wizard of Oz isn’t such a wizard after all. Bloomberg reported that "Federal Reserve officials, wrestling with a housing recession that jeopardizes U.S. growth, got an earful from critics at a weekend retreat, arguing they should use regulation and interest rates yo prevent asset-price bubbles." Apparently, one academic paper presented at Jackson Hole graded the Fed an ‘F’ for the way it has handled the repercussions from the rise and fall of the housing market.

Truth be told, these folks are a little late to the table as critics of the Fed. We’re glad they’re joining us, but here’s what they still haven’t learned: It isn’t because the Federal Reserve messes up by allowing credit, asset and stock bubbles to form that it’s not a wizard. The Federal Reserve isn’t a wizard for one particular reason that it doesn’t want anybody to know – and that is that the Fed doesn’t lead the financial markets, it follows them.

People everywhere want to believe in the Fed’s wizardry. But all this talk about how the Fed will be able to help the U.S. economy and hold up the markets by cutting rates now is as much hooey as the Wizard of Oz promising Dorothy, the Scarecrow, the Tin Man and the Cowardly Lion that he could give them what they wanted: a return to Kansas, a brain, a heart, and courage. Because when the Fed does do something, it always comes after the markets have already made their moves.

If you don’t believe it, you should look at one chart from the most recent Elliott Wave Financial Forecast. It compares the movements in the Fed Funds rate with the movements of the 3-month U.S. Treasury Bill Yield. What does it reveal? That the Fed has followed the T-Bill yield up and down every step of the way since 2000. And the interesting question becomes this: Since the T-bill yield has dropped nearly two points since February, how soon will the Fed cut its rate to follow the market’s lead this time?

[Editor’s note: You can see this chart and read the Special Section it appears in by accessing the free report, The Unwonderful Wizardry of the Fed.]

We’ve got our own brains, heart and courage here at Elliott Wave International, and we’ve used them to explain over and over again that putting faith in the Fed to turn around the markets and the economy is blind faith indeed.

"This blind faith in the Fed’s power to hold up the economy and stocks epitomizes the following definition of magic offered by Teller of the illusionist and comedy team of Penn and Teller: a ‘theatrical linking of a cause with an effect that has no basis in physical reality, but that – in our hearts – ought to be.’" [September 2007, The Elliott Wave Financial Forecast]

Because, you see, what makes the markets move has less to do with what the unwizardly Fed does and more with changes in the mass psychology of all the people investing in those markets. The Elliott Wave Principle describes how bullish and bearish trends in the financial markets reflect changes in social mood, from positive to negative and back again. To extend the metaphor: The Fed can’t affect social mood anymore than the Wonderful Wizard of Oz could change the direction of the wind that brought his hot air balloon to the Land of Oz in the first place.

As our EWI analysts write, "With respect to the timing of the Federal Reserve Board rate cuts, we need to reiterate one key point. The market, not the Fed, sets rates." Being able to understand this information puts you one step closer to clicking your ruby red shoes together and whispering those magic words: "There’s no place like home." Once you land back in Kansas, your eyes will open, and you will see that an unwarranted faith in the Fed was just a bad dream.

Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. She has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter for the Federal Reserve Bank of Atlanta. Her columns also appear regularly on FoxNews.com.

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