Question for all you trend followers

Discussion in 'Trading' started by illiquid, Mar 8, 2004.

  1. and especially those bashing shorts all year (you know who you are): Where is the trend broken? Where do you guys "theoretically" get stopped out (as if -- I'm sure most have covertly sold most of their positions already)? Or is everyone afraid to put out a hard number or technical break-point in case the market shakes them out?

    I just want to see how the other side stands up when push comes to shove, after hearing so many of you confidently rebuking traders trying to short near the highs. Those long the SP have a little more room to breathe, but those long the NDX must decide pretty soon where they stand.

    True bulls have only one answer: buy this dip! :)
  2. I have already stated that I have a LONG BIAS until 1142 breaks on the SPX.

    As far as individual groups go, the Homebuilders and Brokers continue to act super.

  3. I uses the offset of the cash and the front month of the futures for the Dow Jones.

    Right now the offset is neutral (+3 to 5 points). I know this is not what you want because you are restricted to only two opposite trends, unfortunately.

    Past offsets have been +300 points meaning bullish for example.

    A good place to take the measure is the advent of roll over days of front months. The offset will decline, as expected, through the quarter.

    If you plot the futrues indexes daily, you have anice indication as well. 04H was a long that have several IT traverses and they rode up to the top of R ,1162 on ES. Today ,four days from the end of the Q, there was a BO down out of the last long IT trend which was also a FTP. THE BO down may fail over night.

    So by many measures, we are in neutral turf and awaiting a start of trend as a resumption of reversal. It all adds up to a great chance to make a lot of money in a short time.
  4. The trend is "broken" once the market starts making a pattern of lower highs and lower lows on a long-term daily chart. To be a strong signal, these must be sustained lower highs and lows i.e. not just a one day fakeout.

    If you look at a 12 month daily chart of the S&P, you will see that only one significant low has been breached since March 2003 (this occured in late Sep 03), and that was followed by a quick rebound back to new highs. So the trend has remained "unbroken" under the definition in the previous paragraph.

    The most recent significant lows are around the 1120-25 area. A 2 day+ close below those levels would indicate that the trend *may* be about to change. If not followed soon by a strong reversal to the upside, moving to new highs within a couple of weeks, then it would indicate to me that the trend has most likely ended for the time being. I would then exit my S&P position. I also have a "worst case" stop a meaningful amount below the support level (usually placed at the next support down), just in case the market trades straight down. At the moment this is 1102, in Sep 03 it was 982.

    Finally, there is no reason to be "afraid" of getting stopped out, then seeing the market rally back to new highs. False signals are an inevitable part of any trading method which employs stops. The alternative is to use no stops and just sit through massive moves against your position when you turn out to be wrong. I know which I prefer.
  5. I really have no idea whats going on. Im just trying to figure out what the bottom is on my account :)
  6. Yes.
  7. EBOAH


    I agree 100% with you. The 1122 level in the SPX is key. The trend is your friend until its broken!

    Nice to see someone actually post something of VALUE here on ET!!!

  8. balda


    Could be a psychological level at 2000 on Nasdaq.
  9. Lucrum


    I also agree with Cutten's post. I use the same rule of higher lows for an up trend or lower highs for a down trend to define the trend (when there is one) in all time frames. As for your question about the IT trend, on a daily chart it could take many weeks or even months before a new trend is well established. Of course by then the ultimate top will be long gone behind us.
  10. There is no secret trend indicator. It doesn't matter if you use higher highs, lower lows, m.av crosses or what ever. As long as it is consistent. There is no secret level at where a trend 'changes'.
    I like trends to be easy to start and harder to stop.
    #10     Mar 9, 2004