Here we are waiting for Mr. Goodbar

We are short the bonds here and awaiting that nice down bar. The trade is going against us a little at this point but we are about at the average draw down for this particular pattern.

Notice how we continue to have the indicator that measures professional activity within the day lagging the price move upward. I have displayed many of these in the past and it is typical for them to last for a bit. There is no magic to things like this dictating the minute it appears, price will crumble.

We are in a period of seasonal strength in this market, so we cannot be surprised that it is carrying on a bit. However, in general, when we see this type of setup a correction normally ensues. Once again, I display this as a tool. This trade entry does not have this as part of the rules for the entry. Divergences often show up against the direction of the main trend like this, so we need to be careful not to get too carried away with how we use them.

It should be noted, that a trading methodology could be constructed with this tool at the core of it, but it is a tool not the grail. In general divergences should be used to take profits in trends, not to fight the momentum of them.