Today is Thursday, May 7th and the markets put in a reversal day today.
I could have been only a day early, but with today’s action the market pushed higher on the open and formed a real nice triangle formation on the larger time frame charts, then broke down to first fill the higher gap open that we put in. Then, continued to trade down for the rest of the session.
Today, really looks like a reversal day and this may be all this rally has. When you see the markets push up early in the session and later close at their lows for the day, that is not a good sign. This is the first day of price action that we have had that meets this description. This long move has not put in a session like this in 42 trading days.
I don’t know what the internals are, ADV/DEC, but I would bet that today it was real bad. Yesterday’s session looked to have some solid resistance, at the high end of the upper blue line that I drew on the daily chart and with a move slightly past that, THEY drew traders and investors into the web, only to take it down pretty hard. That is the kind of price action you see at market tops. This may only be a short term market top, we don’t know what is going to happen as the pullback takes hold.
Let me remind everyone, that we are still in the up-trend and technically no real damage has taken place. We will have to break the lower blue trend line that I drew on the daily chart, that would violate the uptrend and get things going to the downside. Or it should. The market may buy itself some time and move to the right so that it will have a chance to touch the outside purple line, going back about a year. It is all real close.
Originally I saw the top at 940, but I gave it a little extra room to the upside to get people to bite. It may be that with today’s price action, that may have happened and the short term top may be in. Just watch price action and the key support levels that I mentioned as your clue, but I am getting the feeling we could see more selling soon.
Today’s trading turned out OK in the end, but it was a bit rough. Nothing like yesterday. Difficult days are going to happen, that is just how it is and I realize that. I do have my mental safety net, of no greater of a loss than double my daily goal. My daily goal has been $500 dollars, but I most often trade to double that or more. So my maximum daily loss can be no more than $1,000 before commission cost. I got down to $-800 which is about 3 stops of 1 point each. I had a few gains in there at first, then had a downdraft, follow by a recovery, and one more downdraft, before I saw the light again. I ended up a little over double daily goal in the end.
Trading is not always easy, but it can be very rewarding to those who are committed to the process. Nothing in life is worth while is ever easy. It takes work and dedication. I believe, if someone wants to be a successful trader bad enough, it can be attained. Each individual is different and there are no two traders alike. But there are skills that can be learned and applied, to bring about consistent returns. We need to pursue those skills, they are not going to come to you by accident or mistake, but with purpose.
What ever you do, continue to add to your knowledge and stay humble. Never take the attitude, that you have got this thing licked. There is always something else to learn and experience, keep moving forward and strive to be the best that you can. You may not be the best in the field, but you can strive for your personal best. As I mentioned yesterday, confidence comes from repetition of consistent successful actions, done over and over. You need to want it. If you do find it, you can be richly rewarded.
http://www.screencast.com/t/x9KFNYyDqjm Today’s equity chart
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Tags: daily goal, reversal day, trend line
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