This is simply a log of market psychology coming from a "novice amateur" in which I believe the smart money takes full advantage of. I can't fully explain it, but I believe a certain aspect of trading is related to the smart money bluffing the dumb money. This is noted in accumulation/distribution phases. So before the big market meltdown of last year, Greece/Asian yuan news overnight, I was positioned to the short side. However it was extremely frustrating to be short as the day session would result with making a higher low intraday, or huge rips higher. Even on a neckline support the YM would test it almost 8 times and hold. So this would result in me covering, which then would lead to an overnight break of support based on "news." When the market was retesting neckline support after the break of August 24th, it would result in chop during day session, then with a huge move down overnight. Then the day after that also resulted in chop which led to a huge move overnight. However that is the past and this log is for the present. For the past few sessions after the Santa Claus Rally of 2015, the move down was orderly in a sense. The market loved to do huge rips higher near the close to force weak handed bears to cover such as I, and then sell it off overnight. Essentially the market wanted to go lower but in order to do so, it needs to fool the public into buying/covering. Now as of 1/20 and 1/21, major indexes have hit key levels and surprisingly held these levels. January 21st's session was the first chop we've seen in a while and what was interesting was that for the first time in a long time, the market just tested resistance, pulled back, and ended with "moderate" selling into the close. It was enough of a resistance test to have weak bulls take profits and have bears remain in their short positions. Technically speaking, I believe a lot of stocks,indexes are severely oversold and there is a significant probability of a reversion to the mean. However intermarket analysis, and other targets in bank stocks are telling me to remain short.
This is called a dead cat bounce. So you better follow other shorters : get out and short higher. Just be ready to short again when resistance holds. Don't anticipate the next leg down. CM
You are on the right track. All financial markets rely on deceit and bluffing on every level. What seems "right" is usually wrong. Don't be fooled! surf
NO. The dumb money leads out betting out of position with marginal holdings--many times with an all in bet. The smart money plays in position with premium hands and makes bets related to the size of the pot and the strength of their hand.
I don't like to think of 'bluffing' and other cute names for every little type of market behavior or activity. -- but rather...it's simply...The Market, and how you're able to play, or read, it. Part art, part science, part intuition, part skill, part alchemy, part sorcery, part luck, part divine intervention, part noise, part bs, part rumors, part emotions,part facts... all constantly involved and mixing with each other ...like a complex painting, kind of.
As of January 28th mid U.S. session, here is my current view of the market. ES is currently trading at 1887.5 Poker wise, I honestly can't tell what the market is trying to do. Ever since holding a major support level, it has "set up enough" to break out higher but still can't break out of it's congestion area. During FOMC minutes yesterday, it tried breaking out on news but failed. One would expect a break out failure to create a sharp reversal in the other direction, but the indexes are very resilient. (This is something to note) (Maybe smart money is accumulating or the bull power vs bear power is at a stand still) -It almost reminds me of when the U.S. indicies have tried to break key support early 2015 many times during day session and failed....but then overnight breaks the level. Maybe it could repeat, but in the opposite direction? European markets have held key levels and have been seeing more green then the rest of the regions in the world. Bank stocks have held mid level support and have rallied moderately since then.Wells Fargo for example still have not broken key support level while Deutsche Bank is sitting on it's last support level that I see. The Yen(Safe Haven play) has held a key level and is seeing weakness despite the weakness in the dollar indicating less of a fear in the markets currently. 30yr Treasuries are coiling around a key resistance, but like bank stocks are at it's mid-level target. China on the other hand has been selling off hard and has broken key support levels indicating a further move down. However keep in mind the strength of the U.S. indicies and Europe despite what is happening in China. Crude oil has rallied sharply since the first post and are now testing a very key resistance level. Vix futures & VXX has made a lower high, although the March contract Vix futures has made a higher high/(Anyone know which one is more significant?) To summarize, although there is a huge case for a bullish move higher and a reversion to the mean, the strength in 30yr Treasuries and the weakness in China should be at least on everyone's radar. On a side note, I'd be rather short Nasdaq rather than the Dow and Sp500. Pick up some bargains that you think have become very cheap that have a great risk/reward ora stock that has higher RS than others. And have some hedges in place such as China, QQQ, long TLT.
So now that we got the break higher, I will add to my arsenal of tools(when market tests a level repeatedly and can't break....but is RESILIENT, anticipate that level to break eventually. If it is not resilient however, then the move will continue in original direction.
How do you know for certain that it's a dead cat bounce? I would expect a dead cat bounce in nature to be much more fast and sharp, rather than create an area of balance and then move higher. Are there any key notes of a dead cat bounce that I should be aware of? I mean one thing that is still having me on my feet is the weakness in China as well as the strength in the 30yr Treasuries. And that bank stocks based on complex H&S patterns, have hit it's mid-level support and rallied, but still have one more area of support that should hit before we give more of a probability that the move has bottomed.
You may be right, but the overwhelming negative outlook is exactly what could propel this market out of resistance. I think the market has one last spasm up heading into the presidential election. Then all the longs get kneecapped.