Mid Day Market Thoughts 12 May 05

After releasing news that Trade Deficit for April 05 was the lowest in 6 mths coming in at $60B, the US indices performed a one-day v-bottom reversal to close positive. Amid the positive response, the Trade Deficit for the year is still projected (at abt $696B) to exceed the 2004 level of abt $617B. I had initially hoped that the decrease in deficit would strengthen the USD and bring down the AUD - cos I might be starting my masters program in Australia if I'm unable to find employment.

On the charts, whether this one-day reversal has any effect still remains to be seen as it is still a lower-high + lower-low candle. After previously entering 2 trades after a similar 1-day reversal (when the Fed pointed out that productivity was still good), I saw a 400+ paper profit turned into a 300+ loss.... partly due to my reluctance (or foolishness not) to cut losses.

Today, the market opening saw Deutsche Bank adjusting the Hang Seng warrants up by 2cts in anticipation of a rally in Hang Seng as well as to discourage arbitragers (such as myself and my ex-colleagues) from taking advantage.

To my surprise, Noble was up 5cts and Starhub by 12cts... a sour feeling came over me as these 2 guys were on my warrants watchlist. But then again, I cant complain since I wasnt able to spot them before the move happened and I wasnt keeping my eyes peeled to the monitor this morning, I decided not to feel bad for missing the move, but instead decided to consult the charts to see if there were entry points that I could've taken to position myself before the rally ensued other than the breakout entry which requires me to stare at the monitor perpetually (or if my market monitoring program was completed...heheh).

I consulted 3 indicators (Accumulation/Distribution, MACD & 15,3,3 Stochastics) for both daily charts of Noble and Starhub. The first indicator showed that Starhub had been distributing and there was also a period in the past that Noble did likewise. I would like to see if de-trending the ADV indicator (perhaps by using a regressional average MACD) and slapping on a Bollinger Band would make things a little clearer. The MACD did not provide any obvious clues (I was looking for divergences). Finally the Stochastics oscillator. Besides the usual oversold crossover, there was nothing much as well... but I scanned leftwards to look for divergences (again). An observation made was that Type A Divergences usually show-up as a short/intermediate Wave 1 was about to begin, and Type B Divergences usually show-up on continuation moves. And I was thinking if I should just trade only when either of these Divergences appear as they are high probability signals.

One of the reasons why I was not in Starhub was becos of the shooting stars that were appearing in the charts. I should probably start laying down some rules to signify a nullification of the pattern.

I also looked at the performance of small caps. Magnecomp was up 4cts as well... Bringing up the chart showed that mid-April had a small broad-based rally which 'slapped' me in the face for slacking on the development of my market monitoring program; which would've given me more confidence to know that the small-caps were also moving.

The market monitoring program (if it were completed) would've notified me of these few things:
1. Type A & B Divergences
2. Intraday breakout of daily consolidation (on big-fish activity in T&S matrix)
3. The state of the broad market