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Trading Psychology, should not be overlooked

Thursday, December 30th, 2010

Today is Thursday, December 30th and we saw the market back off early and close down slightly for the day.

The market is still in the doldrums with low volume and movement in the major index’s. Look for things to get back to normal after the second week of January. No trading for me until after the New Year, but am posting the low risk market turns as shown in the chart below.

As we approach a new year, traders will be looking for answers to there personal trading performance. Many times, they will be looking for new trading methods and or trading systems to solve their problems and that could be the answer for many, but their could be other solutions to look at first. Trading psychology is best not overlooked.

One of the first things we need to look at when assessing our trading performance is “ourselves”.  I will agree first of all, if you don’t have a solid trading method that you follow, with rules for entry and exit, that is clearly defined and in writing, you are going to have a hard time. Having it in writing, is important, as it defines exactly why, where and when you are to enter a trade. Then can define, when you should exit a trade. All of that said, to say this;  If you have that and things are not working out, many times, it is the unseen things withing ourselves that we are overlooking that is holding you back.

I know for sure that their are traders who have a good trading method that they themselves have come up with and or, purchased from the outside but have failed to make it work. The first order of business is to examine ourselves and see if something has been overlooked within ourselves that is holding us back from hitting our trading goals.

Many times it is these hidden things that if uncovered, will set us straight and put us on the road towards our long term trading goals. Let me expose just a few of them which may help jar some memories.

Do you move your stop after entry?     Do you second guess yourself after pulling the trade trigger?       Do you find yourself over-trading?       Do you find yourself always cutting your gains off early?     Are you taking bigger stops than you should be?      Do you have blow out days?

All of the above are things related to “US” as traders and many times not the trading method. We need to be able to follow the method and not our emotions while trading. That can be easier said than done, but if you identify the possible problems, then you are better able to do something about it. Ignoring these issues will not make you a better trader and looking for the Holy Grail of trading systems or methods will not do it either.

This may sound a little harsh, but it is intended to help only. We need to be totally honest with ourselves if we are going to see the lasting change we desire.

Go back over the list of questions above and ask yourself to answer those question to see if you are doing any of them. No one will see your answers but you.  You need to come clean with yourself and if you find that you are doing some of those things above, ask yourself why? Then ask, what can I do to stop?  Often the answers are found much deeper within you and can be difficult to extract, but is possible.

Fear, is all to often a reason for some of the above. Fear of loss can get you out of a good trade and force you into a bad trade. Both are motivated by a very strong emotion. Eliminating or getting control of that emotion is essential and must start with asking what am I afraid of. Is it fear of being wrong? If so, then it could be your ego is getting in the way. To often we don’t like to be wrong and will force trades and or re-enter a trade to quickly because we so want to be right.

Their is no room for large Ego’s in being successful in this business. The market will humble any trader who sports this attitude before to long. Humility is the opposite of this and is what is needed. If its not within your character to be this way, then you know the first thing you have to change.

Greed is another strong emotion that often goes together with trading fear, kind of like, peanut butter and jelly (lol). Trading greed can make you do things that you will question long after the trade has been made. You will say, “why did I do that, I knew better”. Well, these are only some of the obvious factors that can hold us back at traders. I am not immune to all of this myself. Writing about it, helps me maintain the right attitude and hopefully helps a few along the way.

Not trading with true risk capital can bring in additional pressures that not need be present, which can be traced back to a lack of patients, to wait until your financial situation is best suited to take on this risk. So here risk capital is traced back to lack of patients to wait. What do you think will get transferred to your trading screen and account if you lacked patients before in pushing to trade sooner than your situation properly allowed? That is right, a lack of patients to wait for the right setups and a lack of patients to wait for the trade to develop once in. Both are going to give you less than optimal results.

I can continue, and may pick this up from here tomorrow, but you can see, the traders who engage in some of these things may have perfectly good trading methods, but the problem is within themselves. It is not always the case, but it can be.  Every trader needs a written plan for their trading and it needs to cover everything, whether it is self done or purchased from the outside.

Examine your self and trading behavior to best see the results you desire this coming year, 2011.

Good Trading to all, Vince.            P.S.    Please feel free to comment on the above !

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Are we Seeing Stock Market Highs?

Thursday, December 30th, 2010

Today is Wednesday December 29th and today the market was asleep with low volume and no movement.

The market displayed little movement as I checked on the action just before the close. I have not been trading and won’t start up until sometime late next week. It is very trying to sit through a market that does little or nothing. To me, it makes the most sense to take some time off and enjoy what we work for. Everyone is different, so I am not saying everyone should do this, but it works for me. Below is a still shot of just one chart that is stripped down a bit showing key turning points. The indicators are not the method but is consistent with it.

The market is up against the wall right here. There could be just a few S&P points left in this market at best, but I am willing to say, that we just saw the top of the market here today.  Let me say that again. I think we saw the top of this market here today for the foreseeable future. This is just my opinion and not investment advise. Do your own research, but this is what I think.

We have seen the market sentiment move up week after week just slightly and with the gains in the market from this week, it is likely to have climbed again. I will see those number at the close of tomorrows session. The general public is very bullish right now, more so than any time in recent history. That should be cause for concern and I am.

The other day, I said that we could see a retest of the highs and go slightly higher and we have done just that. I see the market in a very dangerous place right here.   In the news today, there was nothing good.

*Consumer confidence well below expectations.

* Housing Prices are in the process of a Double Dip decline.

* Tuesdays 5 year note auction was a disaster, no buyers, interest rates spike

* European Central Banks also had a failed auction as they tried to sell the toxic assets they bought from Greece, Ireland and others (13.5 Billion ).

* Allstate sues B of A for mortgage fraud which will open the gate for other to follow suite.

The way I see it, the market has gifted to those who can use this rally as a clean exit (long term investors).  The economic recovery has very little substance to it and can be shaken at any moment. Their are some bright spots if you want to focus on them and that can bring a glimmer of hope, but is it lasting?   Time will tell.  I am comfortable in saying that I think we have seen the top in this market.  I would love to be wrong about it as the month of January will have something to say about that.

The January effect is a pretty good barometer for how the rest of the year is going to go. It first starts out as, the first 5 trading days. If they are down, it does not pose well for the market for the rest of the year and if the whole month of January is down, that is even a stronger indication of a negative year. There is statistical president for this and is somewhere around 78%, that is just by memory. So watching the first week of January to start will be a clue.

From where the market is right now, January is not looking to good. Gold and Silver are voting with a no confidence as prices are making all time highs for Gold at 1412.60.  I believe we will see price inflation for the coming year in a big way. Commodity prices will continue to be strong as people look to tangible assets to invest in. We will see big increases in food prices as manufacturers will have to factor in much higher contract prices going forward. They have used a good portion of their inventory at the lower prices and will need to replace it with a much higher cost basis.

Here is a good website to take a look at. These guys do good research and you can gain some insight into the next year. Their website is www.inflation.us   They are called the National Inflation Association. There video’s are an eye opener for those who are daring to watch.

All in all, next year we should see much more volatility and movement, so don’t be to anxious about the slow market movement, it will change and with it, opportunities will open up.   Trade Safe,  Vince.

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Merry Christmas

Sunday, December 26th, 2010

December 26th, 2010;  Hope everyone had a Merry Christmas this week. Best Wishes to all my readers.

This last week, I was expecting a few things and they did happen in the market. First, I was looking for the market sentiment to continue to rise as it has been over the last 5 weeks. The market reversed never triggering the potential sell off as mentioned back then and have been pushing the upper envelope of the range so to speak. We just ran into strong overhead resistance last Wednesday. The market could make another attempt to retest and move slightly higher, but the upper limits are and have been clearly defined.

As noted, the market sentiment has been very slowly moving up into stronger territory. This last week it moved up 2% and is pushing 58+ %.  A reading of 55 or higher is danger zone area. When the sentiment lingers like this, it usually is only building for a bigger move in the opposite direction.

The public is very bullish and has been for about 5 weeks now. If investors feel like the crowd is a good barometer for future moves, that position has rarely ever work out the way planed.

No trading for me last week and I will likely take this week off as well. I will have more to say tomorrow, so until then, Good Trading, if you are and for sure, have a Happy New Year coming;

Vince

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Trading Lesson – What you Believe can make all the difference-

Sunday, December 19th, 2010

This post is for Friday’s sessions, December 17th, as we saw the market with no gain or loss in the major index’s.

Currently the Stock Market is flirting with new highs for the year as we saw a nice reversal off of Friday’s bottom. As mentioned a few days back, their is more room in this market if it wants to rally. The S&P has upward sloping resistance at around 1258 give or take. Currently we are at 1238.50 as of Fridays close. With that said, it looks like around 20 S&P points and or 200 Dow points to run into this overhead resistance.

Typically, the week before Christmas is a bullish time for stock overall, but the volume tends to dry up. Don’t look for high volume days this week, because a lot of traders will be taking this week off and I will likely be one of them. I will play it by ear as of Monday’s session. If I can get up early enough to put on a trade or two, I will if the market looks active. If I wait to long, the volume will dry up and that is no fun, waiting around for something to happen. Below is my one set of trades from Fridays session. Two entries, two exits, on one move, two points and done.

I will be traveling to the S.F. Bay Area this week, for a few days, so it is unlikely I will do much trading. Outside of that, this is a good time to do some evaluating of your goals and plans for the coming year. This is always a good time to start making plans for 2011. The volume will likely be back by then and starting the new year where we would like to see ourselves be is a good idea.

With that said, I was thinking of a few things the other day and shared them with my group. It started with a single word, “Believe”.  Let me share a small piece of what I sent out to my group the other day, as this is a pretty big issue in what ever method or trade style you hold to. You can apply this to how you trade or the way you see the market. If you have a good trading method, then this may be just one thing that is holding you up. If you need a good consistent trade method, then you could always contact me, but that is all besides the point. See if some of this can help you right now, where you are at. I hope it does.

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When trading, you need to quiet yourself down internally and just express onto the screen what you have learned. Sounds easy, but that can be harder than we to often make it. If their are doubts in your mind that you may not find your way to profitability, you need to get rid of that right now. Do not allow for doubts and negativity to creep into your thinking. You have come so far and need to finish the race. Confidence is important, but we are not even talking about that emotion right now. First, lets start with “believe”. You need to do that first and get that deep down inside of you. The more of that one thought the trader gets into his or her mind, the more power you possess to actually make this happen.

In the dictionary, the word “believe” shows some of these meanings. See how you can apply these attributes to your own trading.
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Believe:  be·lieve  (b-lv)

v. be·lieved, be·liev·ing, be·lieves
v.tr.

1. To accept as true or real: Do you believe the news stories?
2. To credit with veracity: I believe you.
3. To expect or suppose; think: I believe they will arrive shortly.
v.intr.

1. To have firm faith, especially religious faith.
2. To have faith, confidence, or trust: I believe in your ability to solve the problem.
3. To have confidence in the truth or value of something: We believe in free speech.
4. To have an opinion; think: They have already left, I believe.

Idioms:

believe (one’s) ears

To trust what one has heard.

believe (one’s) eyes To trust what one has seen
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Their are so many good points here. To accept as true or real.  Do you accept as true or real what you have learned with this method?  If their are any doubts, then you know what you must do, change that.

Next, to expect;  Do you expect to find what you need in the session to get your points for the day?  If you don’t you need to start thinking that way, not negatively or with doubts.

Next one; To have faith, confidence, or trust, I believe in my ability to solve the problem. Do you have faith in your ability to solve the problems that come up as the trading day is trying to derail you and your emotions?  If you don’t, you need to find some, because you need this, all of this in your trading.

Next on the list; To trust what one has heard. Do you trust that what you have seen and heard with this trading method?

Next;  Believe (one’s) eyes, to trust what one has seen. Do you believe with your eyes the things that you have seen and how it can be harnessed to give the ambitious trader a few points a day?  If you don’t you should, because this works.

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The word “believe” is a power word if it is harnessed properly. If you have doubts, you are going to have problems. You need to get to the place where you possess the real likelihood of overcoming anything that is holding you back. If it is a lack of knowledge, you need to do something about that. If it is your own emotions, running wild, you need to settle down and re-evaluate. With every problem, their is a solution, but it all comes down to us. Are we willing and able to meet the challenge. For some, the cost is too great and for others, they only need a little structure and guidance to help them stay straight. Either way, only you know you need. Take the time with coming weeks to evaluate where you are and where you want to go. Your strengths and your weaknesses. Taking action is always better then just sitting on our hands hoping for something to change. We must make it change.

I wish everyone a great Holiday Session coming up. Enjoy time with your family, and keep a healthy perceptive on everything.

Good Trading to all. Vince

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Expecting Bullish Market Sentiment to Rise Further

Thursday, December 16th, 2010

Hello, Vince here on this Thursday December 16th as we saw some renewed interest in equities with the Dow +42 and the S&P  emini +6 points for the session.

Before I get started let me post my trades here below and will then give some commentary regarding the daily market.

Just before Thanks Giving the market sentiment turned extremely bearish usually signaling a change of direction. I called that out very loudly, but was looking for a closing break below the 11175 area to confirm the move, it never came.  A reversal back up was very likely to half the recent sell off and or a complete tracement  of the move back up to the highs, is exactly what I said back then.We have since moved past the old highs now with a new target in mind.

As the market moves higher, more investors are coming back into the market as the herd mentality is starting to take over. That does not usually last long, so be on guard. Their are some powder kegs brewing for a list of various excuses the market will use to sell off, when we finish this run. The maximum right now, is a little higher as time passes,  as high as 1255 to 1260. This is would be a retest of the initial resistance I called at lower levels around 1220, but the resistance is slanted up at an angle to account for the passage of time.

If anyone has not noticed, the Yields on 10 year Treasury Bonds as increased for 2.50% to 3.48% in one month. That is a 33% increase in 20 trading days and is a lot. This is exactly when the Fed was exercising Quantitative Easing, or buy back Treasury Bonds to keep interest rates down. Well, that does not seem to be working to well. In fact there are much larger forces now at work here and you can expect yields to move up much more, creating competition for stocks.

If anyone has not noticed, The Euro Dollar looks like its in big trouble. This is going to bring down country after country in Europe and more and more money is going to be needed to shore it up from collapsing. That is a big one. A financial Tsunami  brewing out there. Things may be OK for the rest of this year and maybe even early into the next, but those are just a few Mega problems brewing that can derail any recovery.

I would like to be optimistic, but being a realist is the smarter play. The point to all of that, Be Careful. Don’t become blind to the real economic situation across the country, lack of jobs being one of them.

Being a successful day trader can take a lot of pressure off an individual looking to find his place in the work place. I have received a lot of good emails recently sharing traders recent successes and thought I would share one of them here with you today. I believe this trader in the below email he sent me, will make it long term as a successful trader. With some personal coaching he is understanding the importance of keeping his mind clean and void of allusions of riches, all which will cloud and alter ones performance.  Taking it one day at time and trading only that which he understands from the method, he will make it.

This trader has a general knowledge of markets and has struggled finding something that works. After taking in all the information, he had great results in simulation having 7 days in a row of gains without one single loss. He shared with me in a previous email that he has never before been able to see the market the way he now does because of the trading method.

We had a personal training session together before he went live this week and he has done very well for himself. Giving the fact that Monday and Tuesday were very slow trading days, with Wednesday being a little more active. This is but one reason why I like to teach and share my method, to make a difference. This trader was considering on giving up the whole idea of making his dream a reality. It is early, as he indicates in the email, but he has never done this good before. I am very happy and proud of his progress as well as other students who have been able to put it all together. His email below:

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Hi Vince,

Today I took 5 trades: all Russell2k (TF), all 1 contract but the first
one

Long: +4 ticks – 2 C’s
Long: -4 ticks -  1 C
Long: +13 ticks – 1 C
Long: +9 ticks – 1 C
Short: +2 ticks – 1 C

Total: +24 ticks for today and +44 Gross for the week thus far.

I did make a couple of mistakes but was able to collect myself
and deal with the situation. Today was a beautiful market for day
trading many gyrations showed up. I keep studying and reviewing your work,
thanks a lot for the information and videos. Another thing I tried was to trade
stocks in my IRA, trying to apply the method and guess what happened?
…
I bought PIP as it crossed a reference point early on near the open and
collected a cool $150 IN NO TIME.

What can I say, I know it is early to sing victory but I am very happy
and very grateful our paths crossed. Your ideas really brought it altogether
for me. I know this is just the beginning and I need to learn more, I
will continue to do my part maintaining the focus and concentration.

Thanks, Gio.

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Much success to all my readers, Vince

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Day Trading against other Traders

Wednesday, December 15th, 2010

Today is Wednesday December 15th and the market pulled back a bit today with the Dow off -19 and the S&P -5 points.

Today we saw a little more action with the trading range expanding from the tight range of the past few days. That is welcomed by many I am sure. It can be hard to make money when the market moves are so restricted, but having a short term scalp model that offers small risk tied with small rewards works just fine.

If your trading model is only as such that you need the big swings to make money, what do you do when things quiet down. You can trade other markets and that is an option, but many traders prefer to trade what they know and will stay with it. I would say, if your trading model is not equipt to make money on small moves, you either need to stop trading until it changes, or trade something else that is moving. If you force trades in a low volatility environment, you will only loose money.

Knowing how to trade in any condition, trending  with nice multiple point swings, or short choppy moves you can make money in either condition. Many traders do not like to scalp trade, as they say that is too hard. I would say that it can be harder at first, but after one knows how to handle the market by understanding who is moving the market, he can retake the trading edge.

What I mean by that is, traders trade against other traders. They are not trading against indicators. If you know how other traders will react under certain conditions, that is the first step in getting that trading edge. Knowledge is power and those that possess that knowledge have the power or trading advantage. That is what every trader needs, otherwise, you are entering a game with other professionals that feast on those who only think that they are ready to do battle.

That is not meant to put anyone down, by no mean, but to build you up so that you are ready to handle the challenges.

Their are four levels when looking at a market. Traders first are trading against other traders. Knowing what is their likely next move ahead of time and positioning yourself in front of them is first. There reactions is what causes the price to move, so you know ahead of time what they are thinking and their likely reactions will put you in the right position. The price only moves as a reaction to their actions.

That all translates into the price moves that we see on the screen and would be the second level. Again this is a reaction to the first. With that said, based off of these price adjustments we see follow through, played out onto the screen. That follow through with price, causes trading indicators to move and adjust. On time indicators will be the closest thing to price and that would be the third level. The last level is lagging indicators and those are behind price, sometimes significantly. This often is the one most traders are following to help them interpret the market and its direction.

In my opinion, traders need to be looking at the first level, which quickly moves into the second level to help give them the trading advantage. There are ways that traders can know with a pretty high degree of certainty, that price is going to react in a predictable fashion. This is first understanding the first level. We are not born knowing this and will have to be taught it. Some traders can stumble upon it, but it could take several years and or never to find.

There are ways to project where prices will go after you have entered, giving you a road map to follow, if in-fact you can hold on for the full trip. If not, scaling out along the way is a great way to reduce risk and lock in profits. When conditions say, just take 1 point, you can do that, knowing that you are not really risking any more than 1 point, a one to one ratio.

Most people who try and scalp trade any market can not find the lowest risk entry points to give them that low risk entry. One that will not come back against them, causing painful draw downs and stop outs. That is why I have called my trading method, Sniper Day Trading. I have been able to identify the low risk area’s where 1,2,3 points or more can be captured. The key is low risk. Their is a way, to not only find the low risk entries but project where prices will move too, very often. I have a few unique things that I do, that I have never really seen anywhere else.

I have never bought a trading method or system or service of any kind since I have been following the markets back in the early 1980’s.  I can’t say why, but I just never did. I discovered some unique things about the markets that most traders are never able to uncover and have put them all together to make up Sniper Day Trading.

I am proud of my accomplishments, but I am working towards a much bigger trading goal and know that I can do better. When I feel I am ready, I do plan on trading a significantly larger amount of contracts, but that can be a topic for another day.

I will pick this up form here in tomorrows post. Until then, Good Trading to all.

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Low Volatility Keeps Traders Away

Tuesday, December 14th, 2010

Today is Tuesday December 14th, and what a slow day of trading until the Fed announcement at 11:15 West Coast today.

The last few sessions have seen slow range bound market moves that are very trying for many traders. I was happy to have basically stepped aside the last few days. I dipped my toe in the water today before the Fed announcement, but I did not like what I felt and left the trade with a one tick gain. I thought it just might have been best to close it up and see if I can wait for tomorrow session. I hope to be ready for the open and see if I can make up some ground for not trading much the last few days.

The market seems to be a bit resilient in that it does not want to go down. Since Thanksgiving, the market sentiment turned very bullish which generally is not a good sign and will likely mark a coming change in direction. I have seen many times over the years, as if you don’t get a reaction after the shift in market sentiment, a bigger play is at hand.

More and more traders, investors, and the like are and have become more bullish as the tax repeal seems like it is going to go through which for one, will keep capital gains at the lower level. If for what ever reason, it seems like capital gains tax will go up, you will see the peoples reaction in selling equities.

In looking at the daily charts, I do see a little more room up if the market wants to exercise that, to around 1260 or so, but we will take one day at a time. With the masses being so bullish right now, a sell off can come in at any time. The longer it takes for things to settle in, the more people will become fully invested and the slaughter will become that much more painful for those who don’t see it coming. I have never seen an extreme bullish bias correct by itself without the help of a falling market. I am sure this one will be no different, but we will just have to wait it out.

Currently, the daily momentum is still  pointing up, but the last two sessions we have seen late sell-offs towards the end of the day usually not a sign a strength.

Below is a U-Tube video of today’s action leading up to the Fed announcement. Nothing to exciting but show a few scalp trades entry spots that could have been had. I trade and teach how to trade based off of the price and the traders that drive the price. If you know how they typically think and react when certain conditions are present, you gain valuable insight into the next move. That is what I teach and how to project where prices can go. You can take this method and move it  to different size tick or volume charts and or move it to time charts. It will work on stocks and or other futures.

In the video above, towards the end, I show the S&P 500 cash market in a daily chart and point out some of the corresponding trade signals based on the indicators, but that again is to show how they line up with the indicators on a much larger time frame. Trading and following indicators is not the Sniper Day Trading Method, but understanding price action and how traders react to certain area’s as it unfolds is. The indicators can confirm your decision to buy or sell, but is no means the reason.

Good Trading to all.

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New Contract Rollover ESH11 & Two Trade Video’s Below

Thursday, December 9th, 2010

Today is Thursday December 9th and we have a new contract symbol for the emini markets coming in today.

Just a reminder, to change all your symbols for your futures contract trading for sure in Fridays market. The volume will have shifted to the new contract and that is where most traders will be at.

The market remains strong as it accepts all the new players into the market. As long as their are new buyers coming in, the move will continue. We have hit a point of exuberance in market direction on November 16th, three weeks ago. The stock market continues to hold up in the face of this strong emotion. The public is buying into this rally, believing that all is well. This market can go higher as it is, but not for long.

On November 18th, I put out a warning about this shift in market sentiment. That sudden change, put a strong bullish bias onto the market by the public. I mentioned back then, that a close below the S&P futures 1175 area, would kick off the decline, but we never did that. The best was an intra day low met with a reversal above that number. If those prices  hold, a move back up to the middle of the range and or back up the very top of the range was possible as I pointed out. We did that now in both index’s, the Dow and the S&P. The market still looks strong and can not rule out some short term continued strength. As all this time has passed, it has allowed for the market to move higher, if it wants to. The key there is time and it has passed which can make way for some addition short term highs.

Personally, I am glad to see the market move higher hear as it does allow those who want to better recover some of their long term losses that opportunity. You will never realize those gains, if you don’t sell as the market is moving up into resistance. Their could be a little more room on the upside, and I do see it. I am sure others in “the know” also see it.

The market sentiment did increase to 56.2 bullish, up slightly from last week. This just announces that the public is getting comfortable with the rally and may just pour more money into the market. The news is looking upbeat as forecasters are  adjusting their estimates up based on a few key points. The Tax issue is still not solved, but I keep hearing on the radio, that it will get worked out and I hope so. If for some reason, it falls through, you will see sudden price rejection. It is a biggie. Prices are being bid up on the hope of something that has not yet happened, so be careful with that. I hope we can move into the New Year with the market on the highs, why not, it will make a few people happy, at least for while.

I don’t think it is going to last, as all market extremes in market sentiment of the past 25 years that I have been watching has always ended in the excess being worked off by a reverse in direction of significant magnitude. I can not imagine that this time is going to be any different.

In my week end post, I will be sure to put up a daily chart or do a video of what is happening in the daily/weekly markets so you can see how all of this relates to the price and what we can expect. So, be sure to look for that. I hope to get that up tomorrow.

I did not post yesterday, but have a U-Tube Video I did yesterday and one I did for today. Both days had hit the modest side of my daily goal and was OK with it. Yesterday I think there was only two trades and today only one. The volume was light today, as I had to wait quiet a while for the price to get to where I saw it going, but it  got there and all was well.

The video’s above, if you care to watch. I show the turning points and likely continuation moves as marked on the screen. I would not be taking all of those trades typically, as I only need one or two. At times, I trade for a lot more and pick up over and beyond my daily goal by several times. Picking up a few points with little struggle is nothing to complain about.    Good Trading.

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Reversal Day Off Highs

Tuesday, December 7th, 2010

Today is Tuesday December 7th and we saw a powerful reversal day in the stock market.

The Dow and S&P gaped up on the open so that the Dow could move on up to that double top high that I thought might happen. The move took the Dow to within 1/2 of one Dow point, to 11,450.81 before it retreated lower. Both markets traded at their lows for the day and marks a pretty important development. So often, traders will take that double top as a reason to unload some of their positions. What happens after that, often times is an exit for doors all at once.

The good news is out (no tax increases)  and is also another reason to lighten up on positions, the old adage, sell the news. Since the Dow was lagging as compared to the S&P as I mentioned yesterday, another good reason to bid up the price to the old highs. It often times acts as a trade to target by so many, in addition, it also acts like a low risk selling opportunity by others.

The main point at this time is, the market reversal. The index’s and the stocks that make them up, closed on their lows of the day, which is not a good sign for the bulls. This is the double top I was looking for and we now have it. The last few days we saw good price movement back up, but I can’t call those that bid the price up on the daily’s, “Strong Hands”. They are coming in late, because they thought they were going to miss the next big leg up, but the problem is their is not likely going to be a big leg up. These late comers do not have built in profit from much lower levels like so many others who bought off the lows in late August / early September. At the first sign of trouble, these guys will start to bail out, but only after they have big losses.

The time frame mentioned about was when I was calling for a big extended market run, just like the one we saw over the last few months. I called nearly the exact top with a 4 S&P futures points coming off those lows mentioned. That was 180 S&P points higher and 160 points from the 1060 area where I said confirmation of the move would take place.

That is all old news right now. The S&P did make a new intra day high today, but not a new closing high, so the top still holds. A new sentiment poll is coming out tomorrow and it is possible seeing new highs, even if they are intra day highs, will sway the News letter writers and thus the public, to become more bullish to add to their already strong bullish bias.

Today’s move is a mild version of the perfect storm. If the pull back continues off of today’s close, this could be all this market has in it. With the bullish sentiment lingering for a few weeks, that only makes the case for a counter move back down even stronger. It won’t be long. This is all of course my own opinion and is not to be taken as investment advise. That is just the way I see it.

Reversal Days are significant, in that a gap higher on the open, shows an over exuberance, combined with the fact that the market then closes on the low of the day. Not quiet the same conviction as it started out. This is often a sign to sell as it shows a lack of conviction to hold on at the highs of the day. This has to be some of the riskiest area to a long term holder of stocks right now in my opinion.

In spite of the Tax increase issues Obama is taking care of, the economy has some very deep seeded problems. To sum it up, everyone is drowning in debt, all across the board and it is not going away any time soon. If you go to www.debtclock.org you will see on one page the state of affairs we are in. Everything is on that one page, 76 running tabs on various aspects of the economy. It is a tough one to swallow, but that is the reality of things. The best we could hope for is a soft landing and not a crash. I would love to be totally wrong about this one. I have gotten so many market calls right over the last two years, writing about them well in advance, but this one is one I hope I get wrong.

This is all in the daily market and I follow it for a variety of reasons. It is part of a bigger trending market, which is then tucked inside the weekly chart, but it all unwinds down from there, down to the hourly charts, into the various minute chart settings and into tick charts. The various time and tick charts are all fractal in nature. They all bear similar price action traits relative to the time or tick chart intervals. A hierarchy of dominance exists  based on these intervals where the higher time frame swallows up the smaller.

This is true when trading stocks just the same as trading index futures. You can put Forex right in their too, as the trading principles I use are the same in all markets. Not all markets act the same, but I have not seen any market that can not be traded by my method.

In today’s trading, I stopped after about 2 hours, I was up for the open or close to it as today was just a break even day more or less. I had a couple of losses to start things off and took larger stops than I normally take.  The next few trades were for nice small gains and was able to get to even. I was getting tired and needed to stop. Break even is not really a bad day, but I can attribute this to trader error on my part and not the method. Losing days usually only come when I am going beyond the trade method. If I stick close to what I know, the points add up without much struggle.

Good Trading to all.

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Inside Day Develops as Market Stalls

Monday, December 6th, 2010

Today is Monday, December 6th and we saw the market stall here at the top of the range with little to no movement.

The market took the day off as we saw very slow trading early on. It looked almost like a pre-holiday market from the first few opening hours. It did pick up later in the session as the S&P moved up to Fridays exact market high, but immediately sold off.  That would put today’s action into the “inside day category”. Today’s prices remained inside of Friday trading range.When you see a inside day, typically we see added volatility and movement once price moves out of that confined range. I would expect this case to be the same.

The Dow is currently sitting on support at 11,362 and the S&P is close to similar support with a few points to spare at 1220, which also happens to be today’s low. One interesting thing to note, with the market rally move last week, the Dow is lagging behind the S&P by about 75 Dow points. The S&P has made a legitimate double top and the Dow is as of yet to do that. It would need 75 more points to meet the same status. If that is going to occur, it would be safe to say that the S&P is likely to move out above its now established high of 1224 by around 7 S&P points. The question is, will the Dow make a double top or just come up short.

On another note, the market sentiment as described by “Investors Intelligence”, a survey of investment newsletter writers, has remained in the bullish camp now since its first posting on November 16th with the reading then being 56.2% bullish. The next two readings have been 55.7 and 55.4, all above the warning area (55%)  for a potential market reversal. When you have these readings stay in this signal area for extended periods of time, it only reinforces the coming reversal. The first signal from a few weeks ago was a wake up call that a shift is now brewing. I have seen this before where you don’t get the movement right away. This has always just allowed the public to bit a little harder and deeper on the long side before a reversal takes place.

Weeks past, I had mentioned as well as last week in a U Tube video that we would likely try and make an attempt at a double top or that it would be normal for that to happen. That was before the big run up and in fact that run up did happen. The line in the sand that was stated then and still now is a close below the 1175 area which never happened, but the reversal run up to the highs did.

So here we are near the yearly highs with the general public bullish to an established market extreme. I wont’ say that the market won’t push up a little higher from here, it is possible, but the next BIG MOVE is going to a surprise and it will be to the downside. If the market wanted to keep the same trajectory as it had over the last few months, it is conceivable we could see around 1245 on the S&P cash market. If we did get those numbers in the next week or so, that would be the perfect storm to catch the public at large. The market would trade right into overhead resistance and that could be the market highs for the foreseeable future. That is only twenty points or so and will be considered a minor move in relation to the move that is brewing short. The only way to work off the excess bullish sentiment is for the market to sell off and that will happen to the majorities surprise.

I got back to trading today and put on just a few scalp trades. My first trade was premature and anticipatory, not a good trade, but the ones after that were all OK. I did have one trade that should have been a gain, but instead was a three tick loss. That was my own fault as I had to walk away from the computer and did not get back in time. I did not have a target but only a stop in place. I am sure I would have had 1 point on that scalp move. Even though it was a loss, in my mind, it was still a good trade. I have all the trades I took today below.

My trading method is basically a scalp trading method, designed to capture 1,2 or 3 points generally. At times I will close out my trades for less and take less if the price action says so. Break even is not a bad trade as well, as I wait for next move.

The method is based on price action or the study of price. The trade indicators are only confirmation of what is already present within the trade method. I like to show the indicators I use above to give those who follow me some kind of an idea how one could time their entries even using these indicators. Knowing the method, you will see the trade coming and be ahead of any indicator signal generated, but again, it is nice to see a confirming signal for many traders. Their are other indicators I use as well, but these are the only ones I can show. I figure it is better to see some rational for the trades to those who look on than nothing. This is the smallest time frame of three that I use as the others are designed to work inside this small tick chart like a glove. I will pick it tomorrow, so until then,

Good Trading to all.

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