US Tech 100

[Nelsy-Boy]

Based on my daily chart strategy, I see divergence on RSI and Stochastic. Therefore, I should trade this long right now. On this occasion though, I feel a bit nervy. Anyone thinking the same?

[dmedin]

At this moment in time I feel like I shouldn't be trading anything ... except maybe taking long-term positions on a few select stocks.  Stay the heck away from indices as they are swinging up and down every day in huge, random bursts, pretty much the same with FX.  And we have people telling us that gold will drop when it's rising and rising and rising.  Stay the hell away if you have any reservations.

Edited August 7, 2019 by dmedin

[WallStFoxy]

25 minutes ago, dmedin said:

At this moment in time I feel like I shouldn't be trading anything ... except maybe taking long-term positions on a few select stocks.  Stay the heck away from indices as they are swinging up and down every day in huge, random bursts, pretty much the same with FX.  And we have people telling us that gold will drop when it's rising and rising and rising.  Stay the hell away if you have any reservations.

@dmedin

I know they say don't use short term charts but for me you can't use long term charts for short term trades it doesn't make any sense. Wall St. has been a peach today I got 200 points in just a couple of hours. Take a look at the m1 chart and you see how easy it was. 👿

 

[Mercury]

To answer your question @Nelsy-Boy, I too think the same but you are right to be nervy as, if I am right about the US large caps being in an end game scenario, we could see a lot of whipsaw action as this move progresses up either to a new ATH (purple 5 on my chart) or a retrace turn (blue 2).  The market is at overhead resistance and must break through this zone to carry on.  You could look at the rally off the Christmas lows for comparatives but each phase has its own path so I doubt it will trace exactly the same path as last time.

@dmedin, the "swinging up and down every day in huge, random bursts" you refer to may become more pronounced as this move progresses, if this is an end game scenario, and therefore you may be right to stay out until a direction becomes more apparent (either a rocket, this time its different, rally or a bearish turn confirmation).  At least then you will know the prevailing direction, although some people are convinced they already do know... 

However I do not agree that the price action you are referring to is random and the hugeness is what others call volatility, which a trader needs to embrace to make money.  I use my technical analysis method to make sense of the apparent randomness and identify trade triggers.  There are lots of valid methods, it would be churlish of me to denigrate any others as different methods suit different people, their psychology and attitude in particular.  Also markets move in different phases (consolidation, motive, turning points etc) and therefore you need different methods to analyse and trade these phases.  For example I use swing trading methods in consolidation and turning point phases and trend following in motive waves.  The trick is to figure out where in a cycle we are and where we are likely to head.  Buy low, sell high,  That part at least is simple... 

I can say 2 things for sure:1) people may seek the comfort of simplicity but financial markets are the exact opposite of simple (to me simplicity is a shroud rather than a comfort blanket); 2) for me you need to develop a method that you believe in and a strategy for trading execution, and practice it with iron discipline, learning from both gains and losses (you never stop learning).  Until you have such a method you are in great danger of losing.  This is about the trader not the market.  Blaming the market, your broker, forum posts, wider market manipulation, Trump tweets etc is just a symptom.  No one is out to get you, 80% or whatever of retail traders lose money all by themselves.  I did too at first, a lot!  There are some great past posts from various people on what retail traders need to learn and watch out for on the forum, worth checking out.  These posters are speaking from painful experience and sharing it freely, that is a gift, as is everything people post on this forum, shame more people don't respect that more...

Getting back to the set up question, my technical analysis showed me the following:

1. The recent ATH could be either a market top OR a potential wave 3 that is signalling the next ATH as a market top - I have been wrong on this before as some posters like to gloat about but the point is to try things and protect yourself appropriately.  And having this attitude reaped me multiple positions and nearly 2000 points (Dow).  Not bad.
2. I had a so-called ending channel (light blue lines) with 5 good touches on the boundary lines (a-e) and then a breakout, which I traded Short (stops above the ATH).  We got a large so-called "hard retest" of the channel around the Fed rate announcement but price swiftly turned at key resistance and droped sharply, allowing another Short taking opportunity (as was the second break of the lower channel line).  So that was 3 Short entry opportunities.
3. Fast daily moves then ensued, I am not a day trader so I held my shorts, adding judiciously, until I recognised the end of the move by a bounce off my daily chart lower large channel line (dark blue).  This is a strong channel, despite the overshoot, which doesn't appear on the other US large caps (note: the 3 US large caps are tracing pretty much the same pattern and route map, with the Dow perhaps a little less bullish, so cross comparisons are useful).  It is important to take profits when offered but you don't want to be premature or too late as you give up too much so I took half my positions on the bounce and the other half when it became clear to me that the Bear move was over, for now.  Old saying, there is always another trade tomorrow so if the ATH is in already I wont sweat taking profits, I will use them to rejoin on signals.
4. Based on my daily chart and long term projections I see 2 leading scenarios: 1) we rally up to new ATHs but this could be a protracted affair with lots of whipsaw price action, 2) we already have the Bull ending top and now we will see a retrace rally to a lower high.
5. Looking at the 1H chart I see that the bounce off the daily channel line rose up in a 1-5 form.  If this was a small retrace it would have been an A-B-C.  Next I was looking for a retrace down (which I posted on in another thread in advance using the Dow) and that is what we got.  In fact we got a Fib 50% retracement prior to and after the US open, fairly typical to see this kind of thing on the open.
6. On the Dow/SP500 I caught the falling knife at there respective Fib bounce backs but Nasdaq is a bit more spiky so I waited for the next small 1-2 and bounce to go Long on this market.
7. The market duly rose up and put in another 1-2 before knocking on the door of the overhead resistance overnight, which is where we are now.

All the stock indices at at their own resistances and need to break through to begin the next leg up.  I am already Long from lower down and stop protected at break even so my next move is to trade the breakout, leveraging the paper profits of my previous trades to pay for stops.  This is pyramiding (well technically it is leveraging the profit for margin, which I am also doing).  Price action will inform which road map we may be following but that is a decision for tomorrow, today it is about whether the market will breakout out and sustain a rally above the S/R level.

Good luck!

[dmedin]

12 hours ago, Foxy said:

@dmedin

I know they say don't use short term charts but for me you can't use long term charts for short term trades it doesn't make any sense. Wall St. has been a peach today I got 200 points in just a couple of hours. Take a look at the m1 chart and you see how easy it was. 👿

 

 

 

 

I'm jealous

 

[dmedin]

@Mercury

 

Very well-called.

[WallStFoxy]

52 minutes ago, dmedin said:

19I'm jealous

@dmedin

Don't be, Just trust me if you want to trade short term master M15 & M5 even M1 if you can but keep H1 & H4 for long term plans, direction and trends. Identify the main trend ie Wall St. is in a down trend just now so I look for highs to sell (then wait for a sign that it is turning back down) until it turns up then I buy lows in the up trend. That is why you should wait if you want to take a position in Gold, I would never buy the high but wait for a dip and enter as it turns back up this way you have a reasonable stop loss position. It is always best if you decide before you enter if you are day trading or taking a position because if you want to take a position you need a futures contract not a DFB. I don't open a trade every day but wait until the market appears to be doing what I expect it to. Many people over trade because they feel they need to be in the market all the time then end up chasing losses. You have said that Indices are unpredictable but they are far more predictable than you realise. When you follow them every day you should note previous day close (24:00) overnight highs and overnight lows Pivot R1,  R2 ,R3, S1, S2, S3 then you will learn how they behave at the open often testing highs and lows before they move for R1 or S1 and the times they move are very predictable. There is often a correction of the overnight move that starts around 06:00. There is often a move on the Dax at the open 07:00 to test either the previous day close or the overnight high or low. there is often a move at 08:00 as the FTSE opens, this for me is the start of the day and 08:00 to 09:30 can be good for nimble traders as the highs and lows get tested. 09:30 to 11:00 is normally more settled and a move for R1 or S1 is likely. This is followed by a pause until around 12:00 to 13:00 then a second move often takes place to R2, S2 or pull back to test earlier Support or Resistance then everything waits for Wall St. to open. This is a bit of a lottery because wall St. can drive the market mad or just run like crazy but if its mad volatile it normally settles down between 17:00 and 19:00 and runs steady to 21:30 or 22:00. This is a lot to take in I know and it only guides the day but study the markets (Dax, Wall St. and FTSE) with this in mind and within a short time you should see what I mean. Most beginners have lost enough before 19:00 packed up and gone but its the easiest most reliable time to trade but be warned don't make the mistake of thinking every pull back will be a reversal that's a novice mistake. This is how I work no RSI no MAC-D just SMA, Support, Resistance, a little bit of trend lines on H4 only and a feel for how the markets work. I'm not saying all the other stuff is trash but I have no need for it.

P.S. I just pass the 100% up on my fund.

All The Best. 👿

 

[WallStFoxy]

2 hours ago, dmedin said:

I'm jealous 

@dmedin

I guess I should show you what I mean so I took a look at the DAX for you. 👿

 

[Mercury]

European indecision hands the initiative back to the US so I don't expect much movement until the open at 14.30, barring some pre open algo jockeying.  Just goes to show how US centric this bull market is, which does not bode well for the perma bulls in my opinion.  All indices bar the 3 US large caps made ATHs coming up on a year or year and a half ago, unless they all rally strongly now...

Anyway the key to Tech short term, and all of the indices really, is a breakout to the upside through ST resistance. This morning we saw a pull away from that with European indecision and we may get a further pull back on US open before a rally up through so watch out or that.  Technicals do not rule out a resumption of the Bear either so, as I said this morning, nervousness is the correct feeling.  My favourite phrase, which I repeat to myself every day is, "if in doubt, stay out".

 

[dmedin]

@Foxy

 

Futures put me off because the spread on them is so big.  I'd rather pay a few pence interest for a holding of a few days.

[WallStFoxy]

9 minutes ago, Mercury said:

Technicals do not rule out a resumption of the Bear either so, as I said this morning, nervousness is the correct feeling.  My favourite phrase, which I repeat to myself every day is, "if in doubt, stay out".

@Mercury

Not everyone believes in cycles yet since I started back in April we have seen to the day monthly cycles. The first day in April started a bull run. The first day in May started a bear run. The first day in June started started a bull run. July was pretty flat then the first day in August started a bear run so I think the Summer bear I spoke of late in July is here. That said there is always a strong correction in any bear run and I can see potential for 26,500 on Wall St. There is strong resistance at 26,800 so I think that is pivotal for now. I hope you are right about the rally I would love to short 26,600 or higher. 👿

[WallStFoxy]

7 minutes ago, dmedin said:

@Foxy

 

Futures put me off because the spread on them is so big.  I'd rather pay a few pence interest for a holding of a few days.

@dmedin

Sure so would I but by "position Trade" I mean weeks or months. You are more familiar with stocks so may be take a look at the futures prices for Indices and Gold they are much cheaper. 👿 

[Mercury]

@Foxy, not quite sure what you mean by cycles there, are you talking lunar or economic or something else?

Consensus among the contrarian bears on stocks is for an autumn Bear, however this could be when the meat gets going after a top out earlier (i.e. now).  One key common factor for all tops is that the are silent, no big news or fanfare, that comes later.  That fits.  However I would need to see a break of my lower channel lines in all 3 US large caps to get with the Bear full on.  We may yet see fresh ATHs we may just see a retrace, time and price action will tell the tale if we are open minded enough to see it and brave enough to act.  There is plenty of time and there will be several opportunities to get in on any bear move so no need to think it is a once only chance.  For now the buy the dips boys appear to be back in full swing.  let's see what the US open brings.

[WallStFoxy]

6 minutes ago, Mercury said:

not quite sure what you mean by cycles there, are you talking lunar or economic or something else?

@Mercury

I am sorry I thought it was clear from the text that I was referring to monthly cycles and therefore the Summer Bear is in for August at least. This will be very interesting as I am selling the highs (unless 26,800 is broken) and you are buying the lows, that is the essence of the market and I look forward to seeing how this plays out. 👿

[Mercury]

Thanks for the clarification @Foxy, I have never heard people talk about a monthly cycle, unless it is about monthly accounting, that is more of a quarterly thing though as that is when the funds issue performance stats.  I have heard of lunar cycles, Solstice/Equinox effects, Santa Claus rally and summer doldrums though, maybe something worth discussing in my myth busting thread?  I am sure forum members have some more.

As a clarification to your statement, I am both selling the highs and buying the lows but only at the risk range extremes.  I would only add tactical positions once I see a short term trend established.  I would not buy at the 26800 level as it would be too close to the eventual end state, although I might let existing longs run beyond that, depends on price action form.

[WallStFoxy]

@dmedin

Further to this morning I can now show you how the rest of this morning relates to my script. 👿

 

[dmedin]

@Mercury

How on earth do you know what overbought/oversold extremes are when the market slides 6% on one day and then slides all the way back up again the very next day?

Edited August 8, 2019 by dmedin

[dmedin]

@Foxy

 

I've tried 15 min charts before ... I found it a lot of work for little gain as you are really in the market and back out again very quickly before all your profits evaporate.  Lots of work for little reward and a high chance of losing lots of money if you trade too many times is what I found.  The right response to the recent move was to stand aside and not take part, I guess.

[dmedin]

@Foxy

Every time I look back at 1hr or even 15m charts I see clear signs of when I should have gone long or short, but I never seem to be able to do this very well until after the fact.  Sad!

[WallStFoxy]

44 minutes ago, dmedin said:

@Foxy

 

I've tried 15 min charts before ... I found it a lot of work for little gain as you are really in the market and back out again very quickly before all your profits evaporate.  Lots of work for little reward and a high chance of losing lots of money if you trade too many times is what I found.  The right response to the recent move was to stand aside and not take part, I guess.

@dmedin

I don't know what others do but I look for big moves so I only trade max once or twice a day. Today I'm not in at all because I am looking for a sell and the market is rising so I wait for the market to come to me. Take a look at my 15 min chart it shows a down trend below 26,600 so I'm looking for a sell opportunity below 26,600. I could buy the correction but think back to last Thursday when I faded the spike for 423 points, if I had gone long it would have messed with my head so I don't do it. like @Mercury says if in doubt stay out, plus this way I don't worry about is the market going up or is it going down, just when to enter. 👿

 

[Nelsy-Boy]

13 minutes ago, dmedin said:

@Foxy

Every time I look back at 1hr or even 15m charts I see clear signs of when I should have gone long or short, but I never seem to be able to do this very well until after the fact.  Sad!

Hi @dmedin. It doesn't sound sad to me. Sounds pretty normal for someone who hasn't settled in to a comfortable strategy or timeframe. I have been there on more than one occasion. I personally find the 15m charts way too fast. I only trade dailys but if you are able to monitor/trade throughout the day then I found the 1hr charts the easiest to follow. Most of the time, checking the close on the hour, depending what I am monitoring. Alternatively, using the alerts are quite helpful. What do you think about that?

[WallStFoxy]

8 minutes ago, dmedin said:

@Foxy

Every time I look back at 1hr or even 15m charts I see clear signs of when I should have gone long or short, but I never seem to be able to do this very well until after the fact.  Sad!

@dmedin

For me it's all about my charts. I know lot's of people think SMA is for armatures or not true TA like RSI, MAC-D or Elliots etc. but I have defined my trends so I trust the info. On the pro-real-charts the colours may look strange but they do help identify the trend and they work very well for me. I still miss out on opportunities and close out to early or jump in to early but that's just getting the experience. I started to test my system in April on the Demo and went live in May. By the end of may I was still level in my fund and still learning my system. Improvements over June and July have been good and like I said earlier I have just hit the 100% up level in my fund. So it can be done, just keep working on your charts till you find your trends. 👿 

[Mercury]

1 hour ago, dmedin said:

How on earth do you know what overbought/oversold extremes are when the market slides 6% on one day and then slides all the way back up again the very next day?

Not sure if that was a rhetorical question or not @dmedin  Overbought/oversold is not the factor that I look at, except for corroboration via oscillators.  I find you cannot successfully use oscillators as a trigger for a trade, far too many false turns, especially in a strong trend, which this is not.

My method is based on EWT overlaid with charting techniques and a supported by a handful of mathematical indicators.  I need to see most or all of my signals to take a trade and the trade needs to fit my road map.  If I see price action that does not fit my road map I stay out or cut my trades short and wait until I can make sense of things again.  Note I will have several possible scenarios in play at any one time with different levels of confidence.  The speed of the move is important as the faster the breakout the more likely it is correct, however you do get sharp reversals, especially around key data releases/policy announcements as the algos go crazy.  Best to wait that out generally.

After than it is about watching the progression of price action through key support/resistance levels and mapping the move with EWT in flight.  Momentum Divergence is a key tool for me to identify turns and reversals.  So is historic price action.  For instance on stocks we often get a sharp V shaped reversal at bottoms.  If this occurs at a key support zone I will typically assume the move is over and cash at least half.  This is what happened on US large caps (all of them simultaneously)  on Monday.  The balance of probabilities suggested to me that it would happen again and we would see another ATH.  However we may only get a retrace and a drop again through the supporting trend-line of the channel.  If that happens the Bear is on.

In terms of catching the Short, I have posted on this already but to summarise:

1. Price has traced a credible EWT count to a turning point
2. Price was at or about a very long term resistance trend line (monthly/quarterly) and a medium term (daily) upper channel line
3. There was strong NMD on all time frames I look at (nothing lower than 1H, occasionally lower to get some clarity for EWT or to reduce my entry exposure if trading manually rather than stop ins.
4. There was a a short term (4H/1H) ending channel with the 5 touches I look for (can only take 4 sometimes if the fifth falls short).
5. There was a breakout of that ending channel to trigger a Short (Stops above the ATH).
6. Annoyingly there was that sharp reversal but it came up to the Fib 76/78% resistance zone and didn't stop me out and then crashed fast back through the channel lower line offering another Short opportunity.

This all happened on all the related markets and something similar happened on the FTSE but without ATHs).