As I stated in yesterday's post, this is a time to be patient. We have had historic down moves in many markets and have just bounced a few days. These bounces are sells, but caution is needed. One of the biggest challenges for me that I constantly fight, is finding the combination between being aggressive and not sloppy at the same time. It seems the more aggressive I get the more marginal trades I find myself in. It is a challenge to be aggressive but at the same time make sure I am not just taking any trade just for the sake of having some action.
I find myself thinking that right at the moment. I am flat, not in a single trade right at the moment, and I am chomping at the bit to get short something. However, when I scroll through charts I see the same thing everywhere, bounces against down trends that at this point do not show any of what I use to trigger things turning back down, even if I project down closes. At times we have to anticipate these turns, but I do not think that is wise following such large thrust moves down. We are kind of in a spot like we were with the indexes after the big drop in August.
The top chart is that of the Russell 2000, the one I plan on shorting if and when this turns back down. If it does not, I will look the buy the NAZ which has been by far the strongest index. This chart is just a mess and I do not see anything for today I can't live without as far as a sell entry goes. We are essentially right in the middle of a trading range, and we are at month end which tends to have an up bias.
Here is the Aussie dollar, another market setting up a pullback shorting opportunity. This has been weaker than the indexes, and since the world is for the most part one trade, I am gauging comparative strength and weakness vs the indexes as a filter for trades right now. What troubles me a bit here is that the Dollar Index as I have shown recently, is set up to be a sell on the weekly chart. This is something I am keeping in the back of my mind. We know the buy season for stocks is approaching, and we have to consider that we will not get another plunge and the next trade could be a buy. This would sync up better with a DX sell. Once again, nothing for today here, but I am watching this one.
Here is a market I have been talking about, Hogs. I have a sell order in for this market today where indicated, and an alarm on the chart to alert me in the event of a fill. I have discussed the reasons for this trade previously. Essentially based on the weekly chart we are in a down trend, and this is a bounce against that trend. At the moment it does not appear a fill is coming, but you never know.
There was a question in one of the prior threads about how I feel about that funny chart I showed a while ago that had so accurately predicted stock price swings. The answer to that is that I feel the same way now. I still think it makes no sense but it is calling for an October 7th week low, and it has been spot on over the last year at almost every turn. As a result, we have to consider that as a possible spot to look for a turn in the indexes. As I stated when I posted that chart, the one problem I have with it is that it is not conceptually correct. What I mean by that is that there has to be some logical predictive connection with tools to market action for them to hold up over time. For example, if you notice that every time your neighbors wife sunbathes topless the markets rally, you cannot expect that to hold up. There is no conceptually correct connection to market action with an event like that no matter how pleasing it might be. Of course it could also be frightening depending on the circumstances.
That chart plots something completely unrelated to stock indexes, even though I did not disclose what it was, so it is not conceptually correct. There is no reason why it should work other than random chance. However, that random chance has sure been regular recently. It is possible there may be an underlying connection I am not aware of yet. The hint I will give is that it is a Commercial activity from the COT report that is plotted in a unusual way, from an unrelated market that just so happens to turn at the right times. It is projected forward a lot of bars so that we can get advance forecasts. We will just have to see how accurate it is this next turn. It indicates up for the rest of the year beginning some time in the next week and a half.