I got taken out of the trade already. Already hit my trailing stop. Looking for the next trade. Im betting on price failure in the next few hours. Looking to get short. Made some points.
Reset my short. Shorted at 850 again. I feel like its real weak right now. Going to redraw charts in a bit. I think we are going to get that collapse real soon.
Stepping out for a bit. My day is done. Setting trailing stop tight. Price is heading for the APEX of the triangle I drew on the chart. A failure through the bottom means a serious re-test of 840. Price came down a lot faster then I thought so Im looking for that failure. I'll let the computer now work the rest of the magic while I do other things.
Trailing stops. Im still experimenting with setting the stops. Right now Im setting them real tight. I got taken out a few times today with a profit, but there could have been more opportunity. Im going to start studying the daily charts a little more to see what I can find in setting them right. Right now, I dont have a true method of setting the stops and just developing the right way to do it. My current method is to set it real tight, maybe a point or two once the price starts going in the right direction. Basically, I am more or less guessing without any specific method is the short answer to your question.
I'm back. Here comes the price collapse that I was anticipating at 2pm. I didnt get taken out this time and have been riding it down on the short side since I left. 838 is the level Im seeing right now. That triangle I drew tends to be the most reliable formation out of the bunch intraday. Price is basically funelling itself tightly into a narrow range where it drops one way. We are past the 840 level and price getting weaker fast. Im going to close the position end of day anyway because I dont hold overnight. Daytrading is just that, trading on the day. Either close at EOD or hit the stop. Price dropped another 2 points to 836 while I typed this. If you look earlier at the chart and my notes, I said that price would collapse right around 2pm and thats whats going on right now.
In the last few minutes, got taken out of the trade and made some points. Price gapped up some to the trend line. Here is the chart I made up just now. I was expecting there to be a nice drop from here, but price turned around to hug the underneath of the triangle which is now reacting like a ceiling. We know now that the 840 line is not set in stone and might drop. My bias is to the downside and all my positions are on the short side of the ES until we start turning back up. My observation is that price went through the bottom of that triangle. The floor is now the ceiling.
Here is an example of what happened today. Thats a bump and run formation or BARF. Price is running up a certain trend line and then starts moving up another trend line irrationally. Everyone is buying and then the buying becomes exhausted and runs out of steam periously falling. Here is a good example of the chart that you can find on stockcharts.com and other websites that talk about technical analysis. This formation was the key formation to making money on the short side in 2000 as all of the tech stocks bubbled up into this. I find that technical formations know no time frame. Today was an example of it happening in a matter of hours not days months or years. This BARF formation can take place over minutes, hours, months, years or decades. It knows no time period.
This chart Im going to put is a candlevolume chart. Instead of placing the volume at the bottom of the chart, the volume is built into each candle. The wider the candle, the more volume. Wider candles tend to indicate a turning point (up or down). Take a look back in September where I have the first circle. I really thought that would be a repeat of today. Two power candles that failed over the middle line followed by a long red skinny indicating a turning point to the downside. This indicates that rallies were sold. Any strength on volume was followed by a sell. This time is different, however, slightly different. Today we didnt sell off after the rally. However, there is a shooting star in the picture and we never made it over the 20 day. The shooting star is indecision, but I would interpret that in an uptrend as bearish. The trend may not continue. This is my own chart.
There is a very good reason for the sell on all rallies as indicated in the prior chart. We were pealing off a lot of margin. About $60,000,000,000 in October was sold and this is the sharpest drop in margin in sometime. We wont know about November until about the end of December when the figures are published. I figured there are two logical areas where margin will bottom. The first point is the trend line of the margin chart (created with Excel spreadsheet supplied by the NYSE website btw). The second point is the lows of 2003. Either about 180-190 billion or 130-140 billion. My conclusion is that a good amount of margin was burned in November and I would imagine it to be right around that trendline on the margin chart. If it respects that trend line, we might be at a bottom in the market. If margin doesnt respect the line and forms a head/shoulders chart, then we will go lower. I suspect if the margin trend line is violated then we have to burn off another 60 billion which will probably take another month or two bringing us down to the 630 area. Well, we didnt power over the 20 day and there is a shooting star on the chart the trend downward might continue with the last bits of margin being thrown into the wind for the climax to around 630. I would give it about a 50-50 chance right now of a bottom in the market. Chart attached is from 1959 to current time, NYSE margin debt. Our stock market relies on a whole load of margin to keep afloat.