Attached is a Daily Chart of the Dow. Showing a possible range where the Dow may find support. This is certainly one heck of a drop on the Dow and usually the first big drops are the ones that bounce the best as the long crowd is still in the camp thats its just a blip on the radar. Understanding that, I do believe firmly that the real opportunities to make money will be to the short side. However, the market will need to bounce substantially in order that I can go short properly in to what would be the rolling over of the 50 day ma as it back ends it with narrow range days. This most likely will take 2-3 weeks to setup. That would set up the most advantageous trades to the short side. However, for those who are brave and feel that they like to buy substantial dips here is a chart for now of the Dow because this is all we have to go with currently. Major shock events like this one on heavy volume are bill board signs the market will post for all to see that says CHANGE OF TREND. However many will ignore it. Will I personally play for a bounce? I have been around the markets enough to see many horrid declines and what usually happens is you have to be willing to hold your nose and just buy when you think the market is too far stretched on one side thus causing a supply/demand imbalance. However, be forewarned that you better have a entry and exit plan in place and know how much money your willing to risk. With a decline like this you probably don't need to be buying 10 ES Contracts or 10 YM contracts as we are getting so far stretched that a small amount of contracts will probably provide a tidy profit over the weeks with far less stress. Once again I am a firm believer that the real money will be the first back end test of the 50 day ma on the major indices as it will set up beautiful short side trades.
We are going to need one heck of a good Bullish Kickback to hold this tomorrow, but if we sell-off strong right out of the open tomorrow that support level break could get things very volatile very quick...like panic selling. Tomorrow is starting to look like a good seat at the big prize fight. I have mentioned in a different thread that the ES04H 200 EMA is at 1078. We are within easy striking distance of that possible support pricing level also.
The Average Bull Market is 27 months long and has atleast 2 corrections of > 5% before the market turns into a Bear. So far, we have gone 19 months and are now experiencing our first major correction > 5% This correction shows nothing that is out of the norm. Only the moronic "top-pickers" who have said that they are still alive after shorting this powerful Bull every day of the month of December and January are now talking trash about being "right" all along . . . Remember, the Dow is a narrowly based index as opposed to the SPX and NYA. Positive divergences among broader indexes will show up first.
Again I say, we will need one heck of a Bullish Kickback to hold this up tomorrow. 19 or 27 months means nothing to me at this point.
Good point, Personally, I think 10000 is a key psychological level and it is possible that the Dow bounces around that for while. Also, most of today's sell-off is based on overexaggerated news. That was panic selling by scared little investors that are probably going to take their money and buy bomb shelters.
waggie945 The Average Bull Market is 27 months long and has atleast 2 corrections of > 5% before the market turns into a Bear. So far, we have gone 19 months and are now experiencing our first major correction > 5% This correction shows nothing that is out of the norm. Only the moronic "top-pickers" who have said that they are still alive after shorting this powerful Bull every day of the month of December and January are now talking trash about being "right" all along . . . Remember, the Dow is a narrowly based index as opposed to the SPX and NYA. Positive divergences among broader indexes will show up first. SPANKY, TECHNICAL ANALYSIS OF STOCK TRENDS BY 'EDWARDS & MAGEE'. DO YOURSELF A FAVOR AND READ IT. HONESTLY.
Waggie I am sure you are speaking about those lunatics that short any rally the whole way up. Those people are just bad investors/traders. As for me I am pointing out ranges for what is front of us right now I could care less about whether its becoming a bear or still a bull. I will let the charts and my experience dicate what side of the market offers the most valuable risk/reward opportunities in my given time frame.
ChartingMarkets, I appreciate your chart analisys for its objectivity and accuracy Could we say that if the trader cannot determine a probable future direction, the best thing he could do is just stand aside and wait until the technical landscape clears and some high probability setups occur? I am asking this because I wonder if I was right to enter only two swing trades (2-4 days) for the last two weeks because I had no idea where the market (NASDAQ) is going (I quickly closed both positions with a small loss)... I've been reading the fights between bulls and bears on the forum lately but I thought that what they were missing is that there are times when a trader should bet that he can make no money and just sit on his hands instead of trying to pick a direction and jump after every up and down move... Isn't our job as traders to exploit price inefficiencies as we recognize them instead of trying to pick the right direction
100% agreed, on all points. Listen the saying "Less is More" has no greater meaning then when applied to trading, especially swing trading. The high probability set up will occur over time that will ring in your ears shouting at you this is it jump on board (short or long). You made mention about doing nothing when your uncertain. I can't agree with you more. Sayings such as "Cash is King" and "Cash is a position" are sayings that have valuable meaning. Unfortunately for many traders in this profession, they're so under capitalized they feel compelled to trade everyday in order to pay the bills. Which is one of the traps of trading in of itself but I wont get into that in detail. However, if you can't ascertain a direction and are not comfortable with the current landscape staying out is the single best idea. When I come to think of it, I have sat out many times over periods of uncertainty and as General Patton said "I never had to pay for the same real estate twice". In other words you don't have to make back what you don't lose to the market. However, with all these thoughts comes the inevitable moment when you will have to participate once again. When that time is of course, is of your own personal choosing. Certain events and trading scenarios become common place to each individual trader the longer they have been around. Their bag of tricks grow and they have more weapons to exploit an ever increasing amount of trading scenarios. The bottom line of trading is to make money, and to sum it up yes, if you're not sure of what to do stay out in cash. Its no stupidity to sit on your hands when your not sure its intelligence. Good Luck.