Pekelo explains the sell off

Discussion in 'Technical Analysis' started by Pekelo, Feb 7, 2018.

  1. Led the way huh - 4 days after the SPX topped.
    #21     Feb 8, 2018
  2. Pekelo


    After the first drop from the very top there were 3 days of sideways movement, so that was still not too late to get short. From there ES futures still dropped 290 points. The point is, an indicator doesn't need to be leading as long as it is not much behind...
    #22     Feb 8, 2018
  3. The point is ... they said led.

    Behind much or "not much" is not leading.
    #23     Feb 8, 2018
  4. piezoe


    In my opinion you have it exactly right. I always follow the S&P on the monthly chart and there it was crystal clear that the market's rate of increase in January was highly unlikely to be sustained, so when the correction came, it came as no surprise. Had the market maintained the January gain and then proceeded on at the pace established by the longer term trend that extraordinary Jan monthly bar would have been the equivalent of a large unfilled gap, though technically not a gap of course, and therefore I think not likely to remain without backtracking.
    Last edited: Feb 8, 2018
    #24     Feb 8, 2018
  5. LacesOut


    Sure did. On my charts it was very clear.
    ViX was turning at least a week before the sell off started. And then confirmed on the weekly chart.
    #25     Feb 8, 2018
  6. I'd like to see that. Post an image describing what you saw please.

    BTW VIX moving up while markets move down happens all the time.
    #26     Feb 8, 2018
  7. LacesOut


    I can’t (and won’t).
    But the point is that my charts alerted me to the VIX moving up while stocks were going sideways to up. This is what was my key.
    I wish I traded it better than I did!
    #27     Feb 9, 2018
  8. Buy1Sell2


    Don't you need to post this in real time to gain credibilty for your analysis?.
    #28     Feb 9, 2018
    rb7 and RRY16 like this.
  9. No that is the point.

    Chart speaks for itself: VIX.png
    Last edited: Feb 9, 2018
    #29     Feb 9, 2018
  10. Pekelo


    I thought I would explain yesterday's action, because on TV the "experts" looked all confused and out of ideas.

    When there is a big market change specially one starting with a sell ooff most of the time it takes time to turn around again. There is a V recovery, what is just like the name suggest down sharp and up with the same angle sharpness. That is usually intraday when some fake news scared the market and once its nature of truthiness is realized, the market quickly recovers.

    But most sell offs not like that. They usually put in a double bottom, thus I was expecting the second leg to fall. Sure enough we reached the 2 days earlier lows. This was one reason for the drop.

    The second reason is the overstretched string effect. Once it was let go 6 days ago, it swang in one direction down for 4 days, then up for 1 day then down again with wild volatility. Just like the spring eventually, this wild up and downs will come to a much smaller resonancy. 2 rules:

    1. We usually have a 50% retrace. The initial drop was about 340 ES points, and the math gives as 2530 (Sunday night low) + 340/2 = 2700 as a target. The swing back from the lows topped out at 2727 I think, so about 55% of the whole move.

    2. We usually visit the original low in the upcoming days. That is again 2530 ES, so no, it is not over. I expect a huge rally from the lower BB touch on the weekly charts, that is even lower, but still moving.

    All in all, there was nothing unexpected about the drop of the second shoe.... Just look up any chart that show a bubble bursting and you will see the action what we are looking ahead. Bitcoin dropped from 20K to 12K, then rallied back to 17K just to melt down later on. I am not saying we will have similar melt down, but the action and volatility will be the same.
    #30     Feb 9, 2018