HOT FOR TEACHER?Great song by Van Halen, and also my mood. I guess I need someone to teach me what to do.
We have several conflicting signals at this point. To the left is the Pit contract for the SP 500, shows a very bullish picture except for the seasonals and a synthetic COT Index ( the red line in the top graph under the price ). This synthetic index has been a very good predictor of direction although not perfect. On the other hand the emini SP 500 looks almost the opposite of his picture, with very bullish sentiment and commercial selling. In general the emini has been the better predictor of price movement in the last 2 years, the volume is much heavier there.
What to do?
There is a new technology which allows projecting price movement matching recent activity, and if that is used as the tie breaker, it is showing a flat to slightly upward move for the next couple of months. Historically these maps have been pretty good. Also, there seem to be way too many people now calling for a correction. As the saying goes, what everyone waits for will never happen.
I am of the belief now that what is going to transpire is some type of correction in September, but it will not be a big one, then prices will kind of meander sideways for the balance of the year. I do have a short position on in ETF's the SH as I posted when I entered my first portion. I have added to it as we creeped a little higher. If we do get the downward move at the beginning of September, which I expect, I will exit this position. I no longer believe at this point that there is a large profit opportunity in this trade. It is marginal at best, and a scratch or a little better is probably the best that can be hoped for.
I will monitor all of my tools if a corrrection does occur to see if there is anything taking place that warrants a change of this view. I have watched one sell pattern after another either fail, or in the case of the Megaphone pattern, not get a fill on the orders. Failed sell signals are buy signals.
I have been of the opinion that the dollar would rally just because the crowd that is typically wrong, was very bearish. Even a blind sow finds an acorn, and they appear to have one in their grasp for once there. Of course if a sharp stock move down were to happen, the dollar is going to soar. At the moment that does not appear likely.
Part of trading is admitting when you are wrong and getting out without getting hurt too badly. I think the bulk of the upward move has occurred here but the trend is very strongly up and alot of historically bearish indicators are failing here. As a result, it is just not a good trade setup anymore. If we were to get a downward move then a quick retracement that failed the highs, and it was accompanied by commercial selling, that is what it will take to setup this trade well for a short sale.
I will be there if that happens. Back to my corner and wearing the Dunce cap for blowing this market call. Fortunately my trading was better than my market calls this month.
4 comments:
Chris, it looks like you were right all along and there's no need for second-guessing. Thanks for posting.
One day does not a top make. Part of trading is not second guessing, there is no place for that. However, it is imperative to always be evaluating and reading what is happening.
I do stand by this post in that I do not expect a large down move here, just a small correction that will get bought. However, it is important now to watch the insiders, the commercials to see what they do as we do down. If they buy, the correction will be small, if they sell I will stay with my short which is now a pretty profitable trade.
Time will tell.
Chris, why wouldn't the PPT act to keep the market supported?
If the stock market caves in, aren't a lot of pension funds and insurance companies going to be in much bigger world of hurt than they already are?
They have been supporting this market for awhile and they do have position limits as they are under the Large Trader Category. As a result they have to pick and choose their spots. Some of those large fund derivative losses banks are dealing with are no doubt some of the PPT's activities that they bailed out. It is one of the reasons why they would not comply with some of the lawsuits like the one fox filed for full disclosure.
It is nothing more than my opinion that they will try to moderate a small correction here to make sure it does not go down too far. At some point there are natural cycles in the market that will overcome their spurt buy programs. As a result I just expect a move down here for a bit, but not a huge one.
However, if for some reason the market does happen to drift down enough to trigger large fund selling, the PPT will not be able to stop that. Time will tell which will happen. Hopefully by reading commercial activity during any decline that does occur, we will be able to make a good guess as to which way things will go bigger picture.
At this point the uptrend is still intact, but we did get a major sell signal in the NAZ a couple weeks back and they tipped off the last large decline so we will have to see if there is a spillover.
I still feel the probabilities are overall for a decline of some type here for the next month or so, I do not know how large it will be but my guess is that it will not be severe.
Probability pattern maps call for a move upward of small magnitude and fundementals say down, so together that says to me small down.
Alot of funds have had huge recoveries, this has been one of the greatest rallies of all time here since March. It is suprising how under the radar it has been.
Post a Comment