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.