DISQUS

terlyn · 1 month ago

How does this mesh with the prediction of Elliott Wave theorists? Does this invalidate their prediction, which is an imminent downturn?

Corey Rosenbloom, CMT · 1 month ago

Hey Terry!

Ultimately, we have to watch price structure as the ultimate arbiter - as they say, "Price is King."

As long as we're above the 50% median line and price keeps rising at this steady angle, there will be no downturn. We came close to breaking down beneath it last week but it has so far held as support.

It's very difficult to see the rally continuing with all the stated negative breadth, volume, and momentum divergences, but still price rises.

Watch for a break of the 50% line to indicate a change in the character of the market and that could lead to a downturn for sure, but until then, all downside bets seem to be off as the market continues surprisingly to spring bear trap after bear trap..

terlyn · 1 month ago

This is like the rabbit and the duck gestalt picture. Depending on what you focus on, you see a different image. Since volume is not included in the pitchfork, there are no warning signs. When significant selloff happens, the pitchfork would not protect.
Looking at the S&P market from the March lows to today, you can see a head and shoulders forming. I don't have the pitchfork on my trading platform, but I wonder how it would have analyzed the 1929 crash and afterwards.

Corey Rosenbloom, CMT · 1 month ago

That's a good point! I'll try to go back and do a Pitchfork chart of the 1929 Dow.

It's more a case of conflicting signals from different indicators and trying to be objective without being biased in an opinion. There's indicators that say we're going up; indicators that say we're about to crash, but a good analyst is one who can look at the gestalt (larger picture) and assess probabilities from that as best as possible.

From what I can assess, the simple, technical analysis 101 indicators like trendlines, moving averages (and the Pitchfork), are all saying "buy buy buy" and argue for higher prices

while

the more complex/advanced technical analysis methods - like divergences, Elliott Wave, overextended rally - tend to suggest lower prices and perhaps sharply lower prices ahead.

That's what's making it so difficult in my opinion.

terlyn · 1 month ago

I suppose that is the difficulty. Someone I know went to the international technical analyst meeting this year, and half thought the market was going to go up and half thought it was going to go down. That is why I am basically day trading.

Corey Rosenbloom, CMT · 1 month ago

I think in the current market, that's the best solution.

The goal is not to be right - the goal is to make money.

So many people feel the market is playing "Musical Chairs" in its overextended condition so that prevents them from going long and understandably so, but that's why I and so many others prefer the intraday frames.

No overnight risk, can put on larger/leveraged positions, play for smaller, precise targets, can play unbiased (long and short), and it - as strange as it sounds - just is easier right now to do that. There have been some great swings in both directions and plenty of trade set-ups.

Dan de Man · 1 month ago

IMHO Larry Connors RSI2 strategy doesn't work to bad either for short term trades using triggers of 5 and 95

S&P:
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&...
GLD:
http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=0&m...

Dan de Man · 1 month ago

I just wanted to add that if you employ this strategy on a down day, you may want to buy in the last minute or 2 of trading to reduce slippage.

Corey Rosenbloom, CMT · 1 month ago

Nice charts, Dan!

The RSI 2 oversold signal right now corresponds with gold at the upper Bollinger band forming a doji - a confirming sell signal for sure.

And on the S&P 500, nice results there it seems.

Larry's a systematic guy and advocates simplicity and historical testing in trading, which he has done extensively. I have a tendency to overcomplicate or look for too many 'ducks in a row' before trading but we're all different.

Thanks for the feedback and charts!

Dan de Man · 1 month ago

Thank you very much Corey :o) We're all in this game together and helping each other out it key.

Corey Rosenbloom, CMT · 1 month ago

That's the key to it! The more we learn and the more eyes we have out to see data/patterns, the better we'll all (hopefully!) be.

terlyn · 1 month ago

Dan, can you explain the strategy briefly?

Dan de Man · 1 month ago

Hi terlyn,

Here is a link explaining the strategy:
http://www.tradingmarkets.com/.site/stocks/comm...

I use trigger of 5 and 95 because it is a safer bet when an index is tanking. Using bbands can also help find extremes. If you are really aggressive you can use it like an oscillator.

All the best,
Dan

terlyn · 1 month ago

Dan,
Thanks for your advice.
Terry

terlyn · 1 month ago

I get it. So Gold is ready to tank, and the SPX has a little ways to go before it would be in oversold territory. This meshes with the head and shoulders for the SPX and the Elliott Wave for gold, almost. They changed their count to a 5-wave pattern to 1100 because of the recent run-up.

Dan de Man · 1 month ago

I would not say that Gold is ready to tank. For aggressive short term traders the trade is over. Gold has a habit of dancing around doji after doji frustrating some traders. You also have to compliment this indicator with other indicators such as a 3 10 16 MACD to access the trading environment.

terlyn · 1 month ago

Meanwhile, the UUP suddenly had huge volume and price, which is coming down some. But no reaction in DUG or the markets. I don't get it. I heard that investors are buying calls on UUP and selling puts to hedge their portfolio.

Dan de Man · 1 month ago

I could only guess that some new trader with access to a whole lot of money put in a market order if UDN did not move inversely.

Corey Rosenbloom, CMT · 1 month ago

My gosh I picked up on that while watching Twitter feeds and have already put in a few phone calls to see why that might have happened. Not confirmed with the US Dollar Index futures which was choppy but flat on the session.

terlyn · 1 month ago

Insider Trading: Yesterday, I heard on the radio that investors were buying UUP calls. Now this action today. Here is an article calling it insider trading:

http://seekingalpha.com/article/171618-insider-...

terlyn · 1 month ago

Just saw this news, and I bought UUP yesterday:

NEW YORK (Dow Jones)--Deutsche Bank AG (DB:$72.25,00$1.38,001.95%) (DB, DBK.XE) said Thursday that the PowerShares DB US Dollar Index Bullish Fund (UUP:$22.9400,$0.4300,1.91%) had run out of new shares and wouldn't be able to issue any more until it gets clearance from the Securities and Exchange Commission.
The move could lead the $822 million exchange-traded fund, which helps investors bet on the U.S. dollar against a basket of foreign currencies, to trade at a price that is substantially higher than its underlying value.
A number of ETFs that follow commodities like oil and natural gas have also had to suspend issuing new shares amid worries speculators are driving up commodity prices. It wasn't immediately clear why a currency fund would face the same problem.
-By Ian Salisbury, Dow Jones Newswires; 212-416-2241; ian.salisbury@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/nae/al?rnd=BaSS0I8sNMINSIhDK.... You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires
11-05-091347ET
Copyright (c) 2009 Dow Jones & Company, Inc.