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Sunday, November 15, 2009
STOCK MARKET REVIEW TIME
There are several things to cover today, so let's get started.
First, the second graph down is an index created by Larry Williams to mimick what the Large Traders are doing in the market on a daily basis. They are momentum traders, and the general drivers of trends. They tend to pyramid into positions, buying on strength and selling on weakness. In general we want to be in sync with them whenever possible. There are exceptions to this, but that is a topic for another day.
If you notice by looking at all the red arrows I have up, down, up, down, you can see that by this logic, this market has been tough to get a handle on recently. There are alot of cross currents, but even if we did not know that we would be able to tell that just by looking at this. This is why I prefer to not trade on my opinion, and just follow tools like this. The other indicators are purposely un-labeled due to them being proprietary indicators and what they are composed of will not be disclosed. They are from Larry Williams, so anyone who has gone to his recent seminars will recognize them.
These also are see sawing back and forth. You also can look at the COT commercials for this market at the top and see they have 3 signals, 2 of which have been correct, and the 3rd one which is now showing buy is yet to be determined. All of this tells us a couple of different things. First, this market is very tough to trade right now, and has conflicting signals. As a result I just have not been trading it much. I wish I were taking some money out of the long side of this market because overall this rally has just been spectacular. However, I have to trade high probability trades to make money, and they are just not there in this market right now.
Second, all this shows this market should be traded from the long side right here. What I am hoping for is a dip of 2 or 3 days, and that is sets up the proper patterns for a long entry for me. This would be a short term trade only, 2 to 5 days. As per my post from last weekend, I will not make a major commitment to the long side in this market at these levels. It is possible that the government in all they have done has saved the day, and that the worst is behind us. However, until that large picture stuff is resolved one way or the other, and I see all the commercial selling in so many other markets, I still have to lean toward another good leg down being the odds on favorite.