There was some discussion about seeing the selloff coming intraday. I believe that when daytrading, one must keep several time frames open. While the selloff could not necessarily be seen on the 15 minute chart, it was readily visible on the 5 and lower. Here is the 5 minute chart from friday (after the fact, but wanted to post a chart to show a nice setup--not just saying "I knew this sellof has been coming for weeks). Comments Welcome
Heres the chapter on Cammack from reminiscences. From the top on the 31st Oct to Friday 9th Nov Nasdaq dropped 250 pts.
B1S2, could you discuss that chart a bit? I was watching the 5-minute chart in real-time as things unfolded Friday. I saw the MACD divergence, but it wasn't confirmed with a definitive RSI divergence; you'll note that at the final two highs, the RSI was just about the same. Since it's not uncommon for the market to make three or more higher highs with MACD divergence before turning, I generally treat MACD divergence as leading indicator, but one that needs to be confirmed with RSI divergence ("grail") before concluding that a top or bottom is likely in. In this case, I didn't see the RSI grail (i.e., higher high in the price but a lower high in the RSI). I remember myself thinking "one more high and it's time to enter short" but of course that one more high never happened. Could you comment on how you read these indicators and the price action to conclude that the top was in?
As to the question as to whether the late Friday selloff was "predictable" or not, I would say that strong moves on Friday afternoon are more the rule rather than the exception. Why? I have two theories. First, big money wants to be positioned for the weekend, and since there is no trading until Sunday, late Friday is the only chance left. The final hour tends to be direction already, but on Friday, the effect tends to be stronger. The second might sound a bit conspiracy theory minded (and empiricists like me revile conspiracy theories), but my years of market study have taught me that Richard Wyckoff's admonition--pre-SEC--to see the market in terms of one mind at work makes some sense today . Late Friday afternoon upswings help spur Monday morning buying, which then gets sold; and late Friday afternoon swoons help create fear and loathing over the weekend (on ET, "Black Monday" threads appear, and not all are sarcastic). Traders (NOT investors--most investors don't give two hoots about the market--I am speaking of traders who know just enough to be dangerous with their accounts) then panic and sell on Monday morning. They sell to the strong hands, who get some decent bargains in the process. Friday's action reminded me of that of July 27. I remember that day well. The market made an attempt to rally, and then around 3:00, the bottom dropped out, and the market just fell like a rock. I had had a crummy day until that point, turning a plus 6 lunch into a -8 afternoon, but made back my losses with a 20 point final hour (a comeback that Michigan and Ohio State could have used today!). Monday July 30 opened down, and then rallied strongly. I'd expect the same this Monday. Early weakness is to be BOUGHT, not sold, imo. Good luck to all.
I give this as a gift to you all. May you profit handsomely from it. chart analog. http://www.trade2win.com/boards/showthread.php?t=26559&page=50
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Just something to remember that can add a very small edge. In a bear market the market tends to sell off into the close.
... the reason why NQ was much more interesting was because while all other indexes had already crashed hard from their diamonds.... NQ was still holding... .... sorry b1s2.... after-the-fact ..... this chart shows that while the index was making higher highs.... ... daily rsi was making LOWER HIGHS ... and the last push failed to continue to the top of the channel
Mbusch, First I would like to thank you for all you add here, and second I am curious as to your seemingly radical change in trading tactics. You were always very careful to use close stops, in the 6 to 8 tick range. Now you seem to be using stops of at least 10 points. If possible, would you mind commenting on this?