TTP Trading has one of the most unique trading services available today as members have access to not one, but two traders, CJ Agresta of Trust The Process Trading and Greg Krupinski of GK Trading. Both traders use a similar methodology as swing to position traders as they look to capture shorter term swing gains with a portion of their trades while trying to capture longer trend following gains on the balance of their positions. TTP Trading has one of the most comprehensive services available as well. Aside from receiving real-time stock alerts, members receive thorough reviews each evening of the action in the major indices and detailed reviews of each open position. Additionally, members also receive a comprehensive weekend letter that includes a detailed chart review of the major indices in preparation for the coming week. Members also receive a 15-20 minute chart video each weekend highlighting new potential trading opportunities as well as a Morning Note laying out the Trading Plan for the day that includes any possible actionable trade ideas we are looking at. Greg runs a hypothetical $50,000 trading portfolio for intermediate traders who are looking to be more active, while CJ runs a smaller $25,000 hypothetical portfolio that newer traders with smaller accounts will be able to keep pace with. Go to http://www.ttptrading.com now to receive a 30 day free trial membership. See you there!
MARKET GAUGE- Confirmed Uptrend
OVERVIEW- The major indices confirmed an attempted rally that started on 10/30 Wednesday by rallying over 2% on an increase in trading volume. It remains to be seen how much traction this rally receives but I think its important to note a few things. Firstly, the market high of September marks a top and a possible change trend until that high is taken out. So, in spite of the newly confirmed uptrend we have to consider we may possibly have new longer to intermediate term trend in place as all signals should be taken seriously. Secondly, we are in a historically positive seasonality period that may help propel this recent rally into the end of the year. Lastly, we also have to recognize that these V-shaped recoveries that print on the charts can be hard to sustain on a shorter term basis. Furthermore, these recoveries are running into some important support/resistance zones on the charts. As usual, the market prints a grey area for traders to navigate thru and as a result they should continue to monitor the health of the general market on a daily and weekly basis, as we do here, while also paying close attention to the action of individual leading stocks. Although our Market Gauge is in “Confirmed Uptrend” mode we feel it would be prudent for bullish traders to get long slowly until the indices prove themselves further, rather than jumping in with both feet. Now, let’s take our weekend run thru the four index charts we monitor here.
SPY- Our confirmed follow thru signal on Wednesday sent the S&P 500 ETF right up into an important support/resistance zone near the $280 level that dates back to March of this year. This V-Shaped recovery that is marked on the chart below traveled over 8% off the corrective lows, registered on 10/29, in just seven sessions. This is a large move in a short period of time and these sharp retracements can be hard to sustain without some type of consolidation over the shorter term, especially as they run into prior support resistance zones on the charts. I think the next couple weeks will prove to be very interesting as positive seasonality may be enough to push prices higher, however, many bears lick their chops when they see these type of set ups on the charts. With a confirmed uptrend in place we will now monitor distribution days in the volume pane and we can see that the ETF did register its first day of distribution of this rally on Friday. Occasional distribution days are normal and acceptable until they start to mount to 5-7 days within a 20-25 session period which would start to put us in a cautionary stance. It is also important to note that distribution days that register quickly on the heels of newly confirmed rallies can raise the odds of failure. Confirmed uptrend or not, cautionary trading may still be the best route into the end of the year.
NASDAQ- The Nasdaq Composite underperformed on Friday losing 1.65%, however if we were to overlay these two charts on top of each other one would be hard pressed to tell the difference. Both charts are challenged by their 50 and 200 day EMA’s as they trade up into resistance areas. The congestion zone for the Composite is a bit wider than that of the S&P 500 ETF ranging from near 7500 to about 7630. Interestingly, the Nasdaq did not register a distribution day while the three other indices we cover here did, which is important because distribution days in close proximity to follow thru days raise the failure rate of newly confirmed uptrends.
QQQ- The Nasdaq 100 rallied hard on Wednesdays follow thru session blasting thru the 200 day EMA and trading right up to the 50 day EMA. This is an interesting area for the index as the 50 day EMA is running concurrently with a major support/resistance zone near $175. Once again we have a sharp V-shaped retracement rally that printed on the chart with plenty of overhead resistance to work thru. The 100 did register a distribution session on Friday as well and closed right on the 200 day EMA after slashing thru it intraday.
IWM- The underperforming Small Cap ETF has been staging a fierce recovery of its own after a nasty decline of over 16% in a short period of time. The index is facing an area of resistance near $160 with plenty of overhead supply above that level that could possibly plague the index down the road. The index also sports an extra bearish development on the charts that the others don’t in the form of a bearish moving cross over of the 200 day and 50 day EMA’s. The index did register a distribution day on Friday in a rather ugly session with a loss of 1.85%. A heavy challenge lies ahead for this index.
MARKET GAUGE: Market in Correction
OVERVIEW- The markets are still a dangerous place to play as the indices continue to work their way thru the current correction. However, if you don’t get out over your ski’s trying to guess at bottoms, and only take what you feel are quality set ups long, or short that fit your methodology, with lower than normal risk, and sit with a high percentage of cash in your account, perhaps you can weather the storm. This weeks recovery attempt stalled on Friday, but the indices are still in a position to capture a confirming follow thru in the coming days. Friday was day four off an attempted rally, which is the first day we look for a confirming follow thru, we didn’t get that on Friday, but we will be watching in the coming days for a signal that a new uptrend could be confirmed with a rally of over 1% in the major indices on an increase in trading volume. We are entering a statistically positive seasonality period which may be a bit of a tail wind in such an effort however, if the market can’t stabilize or rally in this scenario, that could flash a negative sign going forward. In the end nobody knows where we are headed so all we can do is monitor the indices for clues as to the underlying health of the market. For now a possible low may be in place but the markets are still technically scared and we need to wait for confirmation that the current correction has run its course. Let’s take our weekly look at the charts where we will see there is still planet of work to do for the bulls.
SPY- The ETF registered a nice week gaining 2.47% but stalled on Friday after being rejected at the 200 day EMA. Although we don’t officially track index distribution days when we are not in a confirmed uptrend we do note that Fridays trading activity did pick up over Thursdays level marking a distribution session. We also note that the Tuesday thru Tuesday rally saw a decrease in volume each subsequent day. All that being said, the indices are still in position to follow thru on the current rally attempt as long as they do not undercut their most recent 10/29 lows. Current resistance sits in front of us right at the 200 day EMA and if the ETF can retake that line more resistance may sit not too far above that near the $280 level.
NASDAQ- The Nasdaq Composite also fared well for the week with a gain of 2.65% but was also turned back right at the 200 day EMA. Some heavy resistance may lie not far above as the index is in the neighborhood of some tri-lateral resistance with the first obstacle being that 200 day EMA. However, also on the horizon is some formidable horizontal resistance between 7500 and 7650 and that area is also converging with a descending 50 day EMA line.
QQQ- The Nasdaq 100, which was actually the first of the major indices we track here to close back above the 200 day EMA, didn’t fare quite as well this week on a relative basis with a gain of 1.65% and turned in the worst performance on Friday with a loss of 1.56%. Turnover on Friday was noticeable higher over the previous session and price closed right back below the 200 day EMA. If the index can retake this moving average the next line of resistance sits not to far above near $175.
IWM- The much maligned small caps were the only index we cover here to finish in the green on Friday with a gain of 0.33%, but more impressively turned in a stellar week returning 4.5%. This makes for the fourth straight day of gains for the Russell 2000 as it tries to fend of a bearish cross of the 50 and 200 day EMA. This may be nothing more than a sharp retracement in a downward trend for the index, or mark the turning point of a nasty correction. Only time will tell.
That’s all for this weekend. See you all on Monday!
MARKET GAUGE: Market in Correction
OVERVIEW: The major indices undercut their Wednesday lows canceling out Thursdays attempted rally. We now wait for another rally attempt and a confirmation of that rally that may indicate a new uptrend is in place. Unfortunately, a lot of technical damage has been done to this point and there is no guarantee that even a confirmed rally will carry us back to new highs, however, new uptrends rarely start without a initial rally and follow thru confirmation. Until then, we suggest higher cash levels, limited activity, and lower than normal position sizing if putting on new trades. Times like this can be challenging enough for veteran traders, let alone newer traders. Traders must try hard to resist migrating away from their systems and methodologies trying to conform them to the current environment. If you are a trend trader, you can not suddenly decide you are a day trader. If you are a swing trader, you have to resist the urge to become a longer term position trader because certain stock are “on sale” or “trading at a big discount to their long term value.” Sure, as you gain years and years of experience you may add a new trick or two to your trading arsenal, but these new tactics should be used infrequently and should never replace your core methodology. Trying to change your trading style as markets go thru inevitable cycles is usually a recipe for disaster. Your first and most important goal as a trader should be to protect your inventory, that being your trading capital. Without inventory you are out of business. You don’t always need to be firing off trades to be a successful trader. The most successful traders have sitting power, or patience to wait until things line up in their favor. While other traders are scrambling around trying to make a few bucks with every tick, learn to sit back and survey the playing field until things line up with your methodology. Now let’s move on to the index charts.
SPY- Thursdays rally attempt was short circuited by Fridays decline that undercut Wednesdays lows as volume swelled once again. The index has plenty of work to do just to regain the 200 day EMA and price now sits near the middle of two support resistance zones roughly between $280 and $253 that could possible define a trading range into the future. Of coursed we never know for sure where we are headed so we take things one day at a time waiting for the market to clue us in to where we may be headed. Traders should resist the urge to pick a bottom and I would suggest turning the volume down on CNBC and look at the market that is in front of you.
NASDAQ- The Nasdaq Composite likewise undercut the Wednesday lows putting bulls in search of another initial rally attempt. Unlike the S&P 500 the index is still clinging to gains for 2018 but they are becoming thin. I have overlaid possible support and resistance zones here as well for the index and a further trip down into that lower zone should it materialize would wipe out what gains are left for the year. Traders should continue to monitor index action closely and approach each day with an open mind.
QQQ- A rough session by Amazon (AMZN) that saw the behemoth loss nearly 8% helped the Nasdaq 100 turn in the worst performance of the day Friday as the index lost over 2.5%. The index had a slight edge over the others heading into Fridays session in regards to its proximity to the 200 day EMA but that melted away with Fridays losses. Volume levels as highlighted below have been extraordinary here during this current sell-off and any accelerated selling moving down to the next major support levels highlighted on the chart represent another 6-9% downside for the index. Hopefully a bottom is confirmed much sooner.
IWM- The small cap Russell 2000 was actually the best performing index on the day losing only about 1%. The index is approaching a major support level represented by the February lows near $142.50 but at the same time is developing a bearish technical development with the 50 day EMA approaching the 200 day EMA. This is a bearish signal known as a death cross however we shouldn’t overweight these types indicators and rely primarily on price and volume action. The index is now down over 16% from the September top and will have plenty of work to do to repair itself but first must find a viable bottom.
Any trading service can continually throw out trading alerts on a daily basis, especially in strong markets, but can they keep you out of trouble by continually monitoring the indices on a daily and weekly basis by looking for clues that trouble may be on the horizon? Furthermore, are they willing to suggest slowing down or stopping your trading and suggest raising cash when conditions warrant? This is equally, if not more important, than a steady stream of trading recommendations. Here a three excerpts from our nightly and weekly recaps that our members received earlier this month that kept them out of big trouble if they heeded our advice.
Wednesday Wrap Up 10/3
MARKET RECAP- Another day of intra-day reversals in the markets after indices trended higher well into the afternoon however, a bout of selling that hit right at 2:15pm put a damper on things once again. As you can tell from our trading activity today this is causing us to get a little more defensive. Although the S&P 500 has not shown much in the way of distribution, the index has encountered at least moderate intra-day reversals in five of the last six sessions. We talked last night about some distribution concerns within the Russell 2000 and Nasdaq Composite, so this somewhat of a defensive posture here should not come as a big surprise. There seems to be an obvious weakness under the surface with about 60% of Nasdaq stocks below their 50 day moving averages. We sold into the strength today for the most part which proved to be prudent. Let’s take a look at the index charts.
Thursday Wrap Up 10/4
MARKET RECAP- If you have been paying attention here recently, you shouldn’t be too surprised by todays drop in the indices and we will now officially move our Market Gauge indicator to “Uptrend Under Pressure“. We have been pointing out some building distribution and bearish intra-day market behavior and this finally led to a trend day to the downside with the Nasdaq suffering a technical breakdown so perhaps this is the beginning of some corrective action in the markets. We can’t predict how much of a correction may be at hand, if that correction turns out to be something worse or whether this is just a minor blip in the midst of the current strong bull market we have been enjoying. We just need to diligently monitor index behavior and that of our individual positions as well. If things continue to deteriorate your stops should eventually take you out of your positions. Aside from that, we can slow our activity down waiting for better times and quality set ups, long or short, before committing more money to the market. Now let’s take a look at the index charts.
Weekly Market Prep For 10/8
MARKET GAUGE- Uptrend Under Pressure
- Tighten Stops
- Slow Trading Activity
- Lower Risk
OVERVIEW: The technical breakdown in the indices that began on Thursday continued on Friday with the tech sector again taking the brunt of the selling. The only good news was that volume receded somewhat from Thursdays turnover, but this is not much solace as plenty of distribution days can be found, particularly in the small cap and tech area. The Russell 2000 and S&P 500 ETF have come down to some possible support areas, but caution remains the word of the day as some of the underpinnings in the market continue to flash some warning signs including a narrowing of market leadership, as evidenced by the contraction of new highs versus new lows, recent mounting distribution and the breaking of the 50 day lines. We don’t know what kind of correction may be in store, or if another quick buy the dip turn around in this bull market is in store, but the lowering of risk at the present is supported by what we have been seeing in the indices and individual leading stocks. Let’s take our weekly look at the index charts to gain some perspective.
With earnings season kicking into full gear traders should be mindful of the reporting date of companies as they look for set ups. This can be very easy to overlook when going thru hundreds of charts a day, or more. It is our opinion, generally speaking, that swing/position traders should pass on trade set ups if the companies earnings report date is inside 10-14 days. Trading is difficult enough, don’t gamble. Even if you guess right on the earnings, the reaction to the news may be the exact opposite of what you would expect! CSX reported excellent earnings and raised guidance after reporting after the bell on 10/16. On 10/17 they received five analyst upgrades as well. The stock proceeded to lose 8% over the following four sessions.
MARKET GAUGE- Market In Correction
OVERVIEW: The early week rally in the indices gave traders hope that a corrective bottom may have been put in place, but a confirming follow thru day has been absent to this point. In fact, the last two trading days have been marked with distribution type behavior as the major indices fell or heavier trade versus the prior session or turned in a reversal day as they did on Friday. We have put in six trading sessions since the market bottomed on 10/11. The best follow thru signals have historically come on the 4th thru the 7th trading session after a possible bottom with the major indices registering large gains on a notable increase in volume, although many confirmation days of new uptrends have taken much more time to develop, so we will continue to be watchful for this signal. Again, follow thru days do not necessarily guarantee a new uptrend, or how long that uptrend will stay in place, but new bull market rallies rarely start without them. If the lows from 10/11 are undercut, all best are off and we begin anew. For now, cash is king and patience virtue as we wait for the market to signal the worst may be over. Finally with earning season kicking into high gear, the recent volatility may have just begun. We would be paying much more attention to how stocks react to the earnings, rather than what kind of earnings companies post. Now, let’s take our weekend look at the index charts as we start to prepare for the week ahead.
SPY- Although the index ETF finished flat for the week, Thursday and Fridays action saw the index give back early week gains on increasing volume. We don’t officially mark indices with distribution days once in a correction, but we would much rather see them pullback on lighter trade. The $280 resistance level that we have been highlighting did become an obstacle this week as the index took three swipes at the area coming up empty on each attempt. On a positive note, the index did hold the 200 day EMA after bumping up against that level twice late in the week. It remains a dangerous environment with the computer dominated algorithms accounting for the vast majority of the trading volume these days, so we likely have not seen the last of the big price swings.
NASDAQ- Tech stocks turned in relatively weaker performance with the Nasdaq Composite losing 0.64% for the week. With the index carrying the majority of high growth names during bull trends it stands to reason this index may turn in a worse performance when markets go into correction. Like the S&P 500, the index was unable to hold gains from early in the session on Friday, but while the 500 was able to hold a key moving average, the Composite finished below the 200 day EMA.
QQQ- The Nasdaq 100 lost 0.75% for the week and after rallying thru a key level near $175 earlier in the week the index was unable to hold on to it when the bell rang Friday. What stands out on the chart for the Q’s is the explosive volume levels the index has posted during this correction relative to its normal daily volume.
RUSSELL 2000- The pain continues in the small cap area as the IWM turned in the worst performance of the group on Friday losing just over 1%. I have widened the chart out just a bit this week going back to late summer of 2017 just before the index broke out to new highs. Here we can see that the longer term trendline that was established here was broken on 10/11. The index rallied back above that line early in the week, but was unable to hold on and closed back below that line by weeks end. What is a bit more concerning is how quickly the 50 day line is catching up to the 200 day line setting up a possible crossover in the moving averages that bulls would not like to see.
While I have been tasked for the majority of the year trying to find new ways to add value to the service, Greg has been a stalwart for the service providing members with a great example of how to follow a trading process. I know Greg doesn’t like to compare his returns to the S&P 500, or any other index, because he doesn’t want to just “beat an index”, like any other great trader he has an unlimited profit attitude. However, it has to be pointed out that even after a series of stops being taken out during this market correction, his return for the year is still running well above all other indices. One trade made this year in Teledoc (TDOC) provides a great example of process and patience with a touch of discretion sprinkled in.
On 3/1 Greg purchased shares in TDOC at $38.82. In keeping with the methodology, he captured swing gains of 14% on the initial move higher in only a few sessions closing out half of his position at $43.67. Almost immediately after locking in those gains the stock went into a two month consolidation and this is where Greg’s experience and discipline kicked in ultimately rewarding himself and members with one of the biggest winners of the year. In the vast majority of cases big advances take time to complete, and knowing this, Greg was able to trust his stop and exhibit great patience in letting this trade play out. Many traders would have given up on this trade as it pulled back to the entry level and opened profits disappeared. This patience paid of in early May as the stock broke out of that two month base marking the beginning of a five month trend higher before ultimately topping out a couple weeks ago near $90. We talk here often about selectively using some limited discretion, while at the same trying not to micromanage our trades, and on 6/13 Greg mixed in some of this discretion selling another portion of his shares into strength locking in a 55% gains on that lot. More trusting of his process and refusal to micromanage the remainder of his trade was exhibited in late July as the stock corrected by 16% cutting into more open profits. Continuing with his stop placed loosely near the 50 day MA and looking to lock down even bigger gains by following the strong trend, Greg let the rest of the trade play out and this patience added another 30% worth of gains to his remaining shares. In order to achieve these larger gains that really impact the bottom line traders have to give stocks some reasonable room to move, and although Greg gave back a portion of his gains before ultimately being stopped out, something that is unavoidable with trend trading, I’m sure he has zero regrets.