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Stock market turning points - are we there yet?


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Just now, dmedin said:

Follow the trend, and it happens to be up (buying) right now

Until it reverses, which is the whole point of my post.  If you are a daytrader or a scalper ok but if you are a longer term trader then the risk is too high of getting caught out by a sudden reversal, especially if you are not sat glued to the screens all day, which most are not.  I am the latter so buying when the market is high makes no sense and even if I am wrong I will be fine to be wrong and stand aside until I am right and look at other markets that are less insane.

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3 hours ago, elle said:

surely we get a "good" pullback at some point  ??????????????

Certainly possible but then again if the market is in a melt up then there is really no telling where it will end and the next pull back would be a complete reversal...

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In other words, it's as good as random and any kind of TA is completely hopeless at explaining the situation until after it's happened (the hindsight thing that all good TA videos warn you about for 2 - 10 seconds at the start).

Maybe a buy and hold approach would be best, using a cost-averaging technique to drip-feed funds in?

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6 hours ago, elle said:

surely we get a "good" pullback at some point

What does your 'technical analysis' tell you?  What invaluable insights does that German guy reveal with his price technique 'secrets'?  Surely all the answers are right there if only you look close enough.

Edited by dmedin
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4 hours ago, TrendFollower said:

I recall you saying this around 12 months ago and major US indices have made new highs. It all depends on your trading strategy.

No the greater potential IS to the downside unless you believe stocks will double from here, do you?  The issue I pointed out was when.  I don't know when the worm will turn but I chose to follow the basic principle of but low sell high and by any measure the stock market and the bond market is high (well higher than it has every been!).  So to be clear, I am not calling the top, I was merely responding to the point made by @dmedin about potential.  And to reiterate a point I made previously, if you are a day trader then buying stocks and getting out within the day or a couple of days may be fine for you but if you are a longer term trader the risk is too great and there are other less risky market opportunities around.

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4 hours ago, TrendFollower said:

I recall you saying this around 12 months ago and major US indices have made new highs.

And for the record, 12 months ago I was trading stocks long so I think you need to check your fact...  Perhaps you were thinking about 16 months ago when any sane trader was bearish stocks...

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On 09/02/2020 at 18:48, elle said:

surely we get a "good" pullback at some point  ??????????????

Perhaps we will get this soon...  The Dax is at another pivotal point with potential coronavirus headwinds seemingly the news of the day and yet stocks kept on rising.  Someone asked me how this is happening as in any other era such events would produce a significant correction but hey it's not real economics or business earnings or profitability or going concern robustness (that's about zombie companies), it is about central bank liquidity, period!  Unless or until that falters or faith in it falters the rocket to the moon continues, because this time it really is different! 🙈🙉🙊

For me, as it has been since around mid 2019, the risk of a major and swift capitulation is too great for MT/LT Long trading, only swift scalping and day trading makes sense, which is not my bag so good luck to those that are into that.  On stocks I am waiting just below the water line for the inevitable bear phases.  And if PMs are about to rally with USD still strong then maybe stocks will drop on the same sentiment drivers...

So much for the so-called fundamentals, on the Dax right now I see the following from a technical perspective:

  • Dax is at a critical juncture that ought to decide whether this is the end of a wave 5 or the beginning of a major wave 3 rally.  Price is at a medium term resistance trend line that has been active since late 2018 and is in new ATH territory, which is also end of wave 5 territory of course...  However there is a long term trend line (purple) that may offer resistance to a longer bull scenario.
  • If the Summer 2019 deep correction was a Flag and the chartist rule that the Flag marks the halfway point in a rally holds true then price is currently at or about the end of the rally, which is coinciding with that MT resistance trend line (light blue).  If that correction was a 1-2 (red) then the wave 3 has likely much further to rally yet.  Note final wave 5s (AKA ending channels) are tricky beasts with all the usual "rules" out the window.
  • A plausible 1-5 (blue on weekly chart) can be labelled, which would put the market in a final wave 5 of wave 5.  On the daily chart there is a plausible 1-5 (green) off the Flag breakout and another 1-5 (pale blue) in the wave 5 (green) up to were price is currently sitting, waiting for the US markets to open.
  • There is NMD on all time frame charts below monthly (the monthly is typically not relevant) and other oscillators are in over bought zone across the board.

The stage is set for a bearish reversal but we would need to see short term channel breaks to the downside and other indices also showing similar reversal patterns.  Is this conclusive, absolutely not until we see an actual price action response.  Clearly the over exuberant madness can continue and even if we do see a turn on the Dax I wouldn't be surprised to see a correction and rally to new ATHs on the US large caps as the melt up doesn't seem to be done on the crazy Tech stocks yet...  Ya pays yer money ya takes yer chances...  Or not and stay on the sidelines until things become clearer...

DAX-Weekly_120220.thumb.png.7f5c2bd1a94db997539459b07df6bd0d.pngDAX-Daily_120220.thumb.png.8506d2ed91fbda0369d265a45e816be5.pngDAX-1-hour_120220.thumb.png.648e640bec4eb3e0b6f1a8f17a0cd5f2.png

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7 minutes ago, dmedin said:

If it does keep rising, surely one should go with the flow.

I am only going to answer this one last time, which I already have in the post you commented on.  IMO, if you are a short term trader then go with the flow if the market breaks to the upside.  As a long term trader I see too much downside risk so I seek other markets with a better risk reward ratio.  That does not mean that I cannot see stocks rallying hard but to buy here does not meet my system rules so I do not take the trade.  Do you have a system with rules that suggests you should go long?  If so great, horses for courses.  Unlike some other Forum contributors I do not mind if other people see things differently, I do not feel the need to ridicule opinions that clash with my world view, which always strikes me as quite insecure and betrays a clear bias... (BTW, I am not suggesting that is what you were doing with the above quote.).  So net, feel free to use my post to help you decide to either go Long or Short or do nothing, depending on how price action moves in the coming hours and days and on how it fits with your own system, which is the ONLY thing you should be using to decide to trade and in which direction.  If you don't have a system then devise one and practice it, ideally in demo, until you have a high degree of confidence in it. 

 

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I'm not sure TA is useful for predicting index moves. Don't indices reflect the overall moves of their components? If so, then traders trading the indices aren't moving the price using their own evaluation of TA. The indices are moving according to their component moves.

Furthermore, I think TA in general, can only be one part of the evaluation of price movement. That's because there are numerous TA reference points on a chart, that it begs the question, did a market move by hitting a TA target, or was it just a coincidental move?

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27 minutes ago, SAMMYDAVID said:

I'm not sure TA is useful for predicting index moves. Don't indices reflect the overall moves of their components? If so, then traders trading the indices aren't moving the price using their own evaluation of TA. The indices are moving according to their component moves.

Furthermore, I think TA in general, can only be one part of the evaluation of price movement. That's because there are numerous TA reference points on a chart, that it begs the question, did a market move by hitting a TA target, or was it just a coincidental move?

What is TA?

My original understanding was that it is the attempt to analyse price patterns to identify trends and follow them.  But since then I've learned that that is simply trend following and isn't the goal of all people who use 'technical' analysis.  EWP people call themselves contrarians and actually look for oppotunities to trade against the trend (in the hope or belief that a new trend is beginning). 

So if you can't even define what something is ... it's probably just whatever you want it to be.  It has no 'objective' reality.

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1 hour ago, SAMMYDAVID said:

I'm not sure TA is useful for predicting index moves.

Used properly TA isn't for making predictions but merely identifying opportunities and triggers for trades and stops.

People on this forum often talk abut TA a a single thing, it isn't.  There are many forms and combinations used by many types of traders, the most basic being support/resistance zones.

1 hour ago, SAMMYDAVID said:

traders trading the indices aren't moving the price

The S&P500 E-mini futures index is the biggest single traded vehicle in the stocks world, it does move the market, as do EFTs.

1 hour ago, SAMMYDAVID said:

it begs the question, did a market move by hitting a TA target, or was it just a coincidental move?

Another erroneous received wisdom point is that TA is self fulfilling or that TA analysts/traders seek to "move" the market or expect the market to be moved by their TA. This is a fallacy oft stated by critics who don't actually use much TA (or don't recognise that they do...).  Most TA, I might say all really, seeks to map the recurring sentiment that drives markets based on human nature, which never changes.  This is where EWT, Wychoff theory, Dow theory etc is rooted.  The markets do not move because of TA, it is merely a way to map and visualise price action.  Markets are only ever moved by sentiment (chiefly greed and fear and the tension between these two).

58 minutes ago, dmedin said:

EWP people call themselves contrarians

This is a misrepresentation.  EWT practitioners can be contrarians but can also be trend followers and swing traders.  They can be long term or day traders.

 

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Looks like a wave 5 top has given way and broken through the lower channel line.  This is all very short term at present and naturally the perma-bulls will be talking up the dips, why wouldn't they?  However if we see a short drop followed by a retrace rally that turns with a lower low and the right price action then we could be in for a more sustained drop.  Early days but many such moves begin with a strange overnight/Asian session move, which we certainly got.  Given the set ups and the rather lackluster price action from the Bulls I has a feeling something like this might happen so I was up waiting for the Japan opening and am Short on the first candle drop.

Let's see.  This time it could be different... 😉

DAX-1-hour_130220.thumb.png.1fe5b2a6a1443c595d705e9a8cef948a.png 

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For those interested in the FTSE100, which did not put in a new ATH but is showing strong evidence of having topped out much earlier and being in a proto Bear market, the recent rally closed a gap at the top of a resistance zone and then fell away.  This completes a retrace rally in A-B-C form and the turn occurred on NMD.  As with the Dax it is early days and I will be looking for a further drop in motive wave form followed by another relief rally to turn at a lower high to really get the Bear party started.

FTSE100-4-hours_130220.thumb.png.54fa2d0ff4a919fc2aad3d8cfbe572c0.png

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Gold and Silver just keep going and going.  Bitcoin looks bearish, potentially, unconfirmed as yet. Apple took a tumble.  Tesla before that.  Facebook too and Netflixs a while ago, now all rallying but is it a relief rally to set up another big bearish move?  Hong Kong is decidedly bearish in set up as is the Russell and the FTSE100.  Risk off, Risk off Risk off?

If it is then I would expect perhaps a short rally on US open to hit key resistance areas before the sell of to begin.  Not saying this is a mortal lock, just something to track and be ready for because it it happens it will happen fast a hard...

SPTRD-1-hour_150120.thumb.png.33d5b6171335b52a7902981437583599.pngDAX-Daily_180220.thumb.png.6dd91480f39dd5f8fa7bb279d852c62b.pngDAX-1-hour_180220.thumb.png.cac652c419c3989d324099d025a11c3e.png

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Didn't even close the gap (only an intra day gap anyway).  Price only made the Fib 38% before joining the Dow at lower lows.  Dax and Russell following.  FTSE100 and Nikkei already there.  Only the Tech stuff are hold outs, as one might expect of a tech driven bull market.

SPTRD-1-hour_180220.thumb.png.da493e90ee2d7bcab7c5e65971c8fbf9.png

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11 minutes ago, dmedin said:

Right, so you're day trading on hourly charts then?

I only do long term swing trading, rarely day trading and only in a full and fast bear market.  I enter and exit trades on 1H charts but positioned within longer term charts (typically weekly/monthly and daily/4H).  It is known as the 3 screen method as devised by Dr. Alexander Elder (of Trading for a Living fame). 

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