Keeping It Real
Friday, August 24, 2007 at 10:38AM
Imagine trading in the market from a pure technical perspective. You never pick up a newspaper, turn on the evening news, watch CNBC, or even worse, read my blog (insert scream). You'll never hear reporters acknowledge or deny any storms brewing in the financial markets. You'll never be influenced by guru's, or financial media celebrities that throw daily opinions in your face, but struggle to outperform the market themselves. You'd be left to form your own opinions, come to your own conclusions, and solicit your own ideas from none other than yourself.
Is this bad?
Technical Analysis is of course the study of price action, and price action represents how market participants feel about the market. What better opinions to gather than that of the actual participants as a consensus. You've heard all the hype about how bad the market is underneath the wad of debt being injected into our system, but how are traders reacting to this? Check this out...
SPY
VIX (5 YR)
If you have read about my approach to trading, you'll know I don't get too caught up with technical indicators. I am an easy goer when it comes to my technical analysis. However, you'll see as clear as day the bullish divergence going on between any oscillator and any major index. Compare this to the bullish divergence that occurred May/June of 06, and the end result.
The VIX has gone flaccid from the black swan run it has taken over the last several weeks. It's reverting back to a historical mean that falls right around the $20 level. I expect it to consolidate here for a little while until the market sorts out some of the lingering credit and housing issues. Who knows... perhaps piling on the debt in a debt fueled crisis is the answer?
Next week I am going to keep a close eye on materials stocks. It seems that they have ceased to move lower, and many you'll find at long term trend lines on long term charts. I don't think that these are bad buys at these levels as long as you are taking care of risk first.
Here are a few interesting set-ups I am throwing money at this afternoon...
Next week I am going to keep a close eye on materials stocks. It seems that they have ceased to move lower, and many you'll find at long term trend lines on long term charts. I don't think that these are bad buys at these levels as long as you are taking care of risk first.
Here are a few interesting set-ups I am throwing money at this afternoon...
ATI
AZO
GMCR
ICE
MA
OII
AZO
GMCR
ICE
MA
OII
PAYX
WYNN
WYNN
I try not to let my opinions get in the way of making money. Neither should anyone looking to become a more efficient trader. I have been open about my feelings on some of the market fundamentals, and yes, these feelings are bearish. But make no mistake, time frames are the only variable. Your time frame is different than that of the next person, and that time frame is what should drive your actions.
Well, I still have a long road to walk today to try and get caught up from my recent absence. I am going to need to a little "Encore" to take us out today...
Recommendation: Drink it in... Goes down smooth.
Long: Fridays, Money, Jay-Z, Linkin Park, and Volume
Short: Time
Recommendation: Drink it in... Goes down smooth.
Long: Fridays, Money, Jay-Z, Linkin Park, and Volume
Short: Time
Reader Comments (86)
For the slow kids in the back, read:me, are you saying that we can expect another move down based on the charts you posted? I went back and looked at May/June 06 and I see a move down.
New trader here looking to understand it all.
Thanks!
If I'm correct, tonight might be an interesting marketcast, since Eric's been very bearish and so has Jeff...until today it seems.
"I have been open about my feelings on some of the market fundamentals, and yes, these feelings are bearish. But make no mistake, time frames are the only variable."
I am bearish on the market overall. But the tech signals I displayed show some bullish indicators for short term movement.
Last time the market was in a rut, these indicators preceeded some great short term movements. I put them on the radar to see if history repeats itself.
Will we ever really face the reality of this ever increasing amount of "Bad Debt" or are we just going to sweep it all under the carpet, say it's now a Global Economy and keep printing money to solve the problem.
Dr. Tony
These are the best kind of posts by you. Thank you for taking the time to point these out to us, and also for clarifying.
Exactly! Sweeping stuff under the carpet is normally a temporary soultion, but at some point the market will start to realize the severity of our problems, and various "bombs" will start to drop again. This is why I mentioned time frames being the variable that drives your trading actions.
What is your time frame?
Thanks again for keeping us thinking. Can't wait to hear your market Cast this evening. Looks like we may have an interesting final trading hour today as well.
I agree with Brett (well... if I don't I'll hear about it, so I guess I'd better.) These kinds of posts are huge to me. I suffered a semi-meltdown whilst you were wearing party hats and downing yards of hooch in Chicago, and this is exactly what I need to get me back on track. I'm away for the next week or so, so I've taken on some paper trades just to keep the "game face" on. Naturally they're doing great. POT is my only real stock at the moment.
Thanks for posting a meaty one, to start us back on the "Post Chicago" road to perdition.
Michelle
Brett, thanks for the explanation on divergence.
Feel free to check my archives also. You can run a blog search for "divergence." Or any other topic for that matter.
Now that Chicago has come and gone, I'll get posts like this going a lot more often, just like the good ol days. Thanks for being patient with me.
I have been away from the blog since 7 AM PST and have periodically checked in the on market although haven’t had time to notice much other than the bullish sentiment right now (VIX, and indices ETF price action) on rather low volume. I logged on to the blog to get EXACTLY the information and thoughts that I and everyone else got. Thank you!
I am reluctant to get too bullish because of the lack of overall volume. I will just take good low risk setups. Since I am positioned correctly to give some bears I have entered recently another day, I will probably take it barring a HUGE end of the day rally to the upside.
It is also real nice to see ideas that you have are ones that I have entered recently. Oh, and may enter in the next few minutes...
Have a great weekend!
Thanks for your insight.
Brett-
Thanks for explaining divergence again for those of us (like me) who forgot what that means.
liz
Jeff, any tally on the number of emails today??? LOL!
Gary
liz
"End of August Murderous 6 of last 10 Years. Average Loss Last 5 Days:
Dow -2.6%, S%P -2.3%, Nasdaq -2.1%"
Long: plenty
Short: plenty