Stock trading and politicians share similarities, primarily the ability to flip flop to make a buck; however, traders are different in that they must also admit when they are wrong or held the wrong belief because the penalty can be swift and harsh. In part a reason why traders must be so quick to change their mind is that each moment in the market is unique, yet paradoxically ubiquitous, so at times it feels a lot like dancing barefoot on a pin head which takes a sense of balance coupled with the ability to withstand a little pain. It's difficult to alter opinion with frequency because it's an inefficient use of grey matter and results in a constant sense of disharmony and discomfort.
When perusing through some previous post prior to beginning this one I noted how all over the map I was. My general outlook was very pessimistic a couple of weeks back and recently I was resigned to another Summer of a choppy, volatile range. At the same time I was periodically optimistic that perhaps there is something going on underneath the surface that my negative mood was biased against observing. Perhaps a bit bi-polar, but that's what the markets do to me at times. As I've come to have greater acceptance of my abilities and more realistic understanding of my capabilities I've acquiesced to the reality that I just don't have the knack right now to trade the market daily and must be more selective when I do and learn to be much more patient and wait for those moments. I've been trading long enough now to know they will come around, I simply have to assuage the frustration through discipline.
One of the nice things about being all over the map however, is being able to see a lot of different vistas. One of the lessons that's been drilled in over the past two weeks is that although I was constantly monitoring the market and noting observations I was a little too negative in my mind set to maintain my daily process and ritual and being fully prepared for whatever happened the next day. I became a little too blase and lackadaisical in my approach and got a little sloppy in my habits, so what I'll work on carrying forward from this day is sticking to the program period.
For the past two weeks I've been working off of one chart template which I've designed to give me insight into the market behavior based upon historic volatility, the separation of the 15 MA from the 30MA, and the number of 1% and 2% days in the market. One of the reasons I'm keying in on this more precisely is due to it more closely aligning with my studies and observations of price expansion/contraction cycles as well as velocity of price moves offering me a simpler view from which to approach charting. It's cleaner and more to the point of my aims.
From this perspective my observations are that today's move shares similarities to the 12/20/11 bar that commenced the linear up trend through mid-March. The 15-30 had a cross above 0 a few sessions before this move began, not unlike now. Onward I'll pay attention to HV and note if it declines as well as if the number of 1% and 2% days diminish from this point forward. In a smooth, linear uptrend HV should decline and wide range days decrease in frequency.
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| SPX 06/29/12 |
A very positive sign is the Russell which outperformed the other indexes this week. I've noted before it is my contention that the Russell must lead and today it clearly took charge with a 2.91% gain. Another noteworthy sign is that the NASDAQ-100 lagged considerably. Of the indexes I watch, having these two be the bookends indicates to me that we're entering a market where risk is being taken on and that money is flowing away from many of the old guard leaders and I anticipate that this will be a more robust and broader rally with money flowing out of the same: CMG, PCLN, APPL etc... and flows into small cap.
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| %Change |
Looking at the underlying breadth, the secondary has had a near straight moon shoot over the past couple of days and placing this indicator firmly on the bullish side with a decisive break from an oscillating period. Another positive is that the primary if still bearish, albeit slightly, indicating that there is a lot of powder left in the keg for a sustainable rally.
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| Secondary |
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| Primary |
Everything I look for to determine my trading periods and level of aggressiveness has aligned so going into next week it's simply a matter of stalking and taking shots when my triggers alert. I'm expecting volume to decline due to the holiday shortened week so any trades I take I don't plan on staying with for too long, particularly since Friday's gap busted a number of short term patterns that I follow, so a few days rest would allow many to reset.
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