Is the Rally almost over??

I wouldn't say that your definitions are relevant only to those who swing trade. I trade trends. When the trend is down, as it has been several times in this trading range, I trade the downside. When the trend is up, as it has been several times in this trading range, I trade the upside. But I don't tell myself that there is no trading range. If I were to do so, I'd be selling support and buying resistance, which is the opposite of what should be done in a trading range.

I'm not arguing that this particular upleg is over and I'm not arguing for a straight shoot to the October lows. But neither am I expecting the trading range to vanish simply because we happen to be going up at the moment. We were in an uptrend from October to the end of November, but the trading range is still there. If we are going to break out of this range, somebody's going to have to show me some volume.

 

I need/prefer simple swing systems to determine if the intermediate trend is positive or negative.

The Dow is still positive, the Naz is not.

(How does one attach more than one file?)

 

Both charts as of yesterday's close.

 

I wouldn't pronounce the Naz negative quite so soon. As long as it is able to close above the last reaction low, it's technically still in an uptrend.

 

can you say "broken wedge" boys and girls?

 

True, there are broken wedges all over the place. However, being able to stay above the last reaction low trumps the wedge break.

A better clue will be to watch the volume and price action when the next attempt - if there is one - to make a higher high occurs. If we can't even get that far . . .

 

Hello dbphoenix,

Well, I haven't considered that with my swing charts. Mine are modified Gann charts via Krause. In addition, I have modified his rules just a bit for a swing (I OK an inside day so higher highs or lower lows don't need to be consecutive).

That said, the trend changed for Krause when the current high (peak) or low (valley) was exceeded. I've modified that also because of whipsaws and require a confirmation in the next day or two with a higher high or lower low. It eliminated many whips.

Now, as a greenhorn trader, let me see if I follow you. You said "I wouldn't pronounce the Naz negative quite so soon. As long as it is able to close above the last reaction low, it's technically still in an uptrend."

Is the "Reaction low" the previous swing low of 5/8/03 at 1486.9? And if that's true, just because that low was exceed on 5/20 and confirmed on 5/21, it's still not a trend change until there is an actual close below 1486.9?

If that's correct, then I'll go back and check my charts to see if there is much difference between the two.

Thank you for the input.

Chuck

 

Reaction low, swing low, retracement, pullback. Doesn't really matter. I prefer "reaction" because that's what's been used since the averages were first instituted, and it says what it means. "Swing" seems to have a number of definitions, and communication is difficult enough (cf, "trend").

In any case, 5/8 is correct. However, it is important that price close above that level. If it does, that reinforces the importance of the support. Even if it were to drop below it temporarily, then rebound on strong volume, that would also reinforce the importance of that support.

What price ought to do there, if support is truly being broken, is drop decisively (like Teresa Lo says, "if it doesn't move, you don't want to be there). If it doesn't, you run the risk of being trapped by a fakeout (this is the essence of the Oops Trade).

The same holds for trendlines of all sorts, including the boundary lines used for pennants, flags, coils, wedges, etc. Many people think that once the line is broken, that's it. However, if the price rallies quickly, the signficance of the line is even greater, i.e., it should not be tossed simply because of a temporary breach.

These are important levels here, held for up to a year. Breaking one of them by a few points is most likely meaningless. Something decisive has to happen, whether in terms of price or volume or both. Until that happens, it's just chicken bones and Tarot cards.

And I assume you're following a selection of indexes, not just the Naz.

 

Hello dbphonix,

Just wanted to let you know -- that per your comments, I went back and altered and tested all my swing charts that I keep by hand.

There is no question that your were right on the money. By waiting for the actual "Close" the take out a previous swing high or low, my swing charts are much more robust and the trend changes were much reduced and more accurate.

Thank you.

Chuck

 

There is a reason why the close is so significant, its not simply a mindlessly reiterated maxim that "Amateurs control the open, but professionals control the close."

The close is the value that those who have the wherewithal, the money, and the guts to take positions OVERNIGHT.

For the S&P500 at least, I expect some disorderly selling at the open by the public, followed by short covering professionals who carried over the weekend, a mild drift down from that short covering rally, and then dip buying into the close. But then again, it could do the exact opposite.