Posts Tagged ‘market pressure’

Trading Indicators Reflect Price part 2

Tuesday, January 10th, 2012

Today is Tuesday January 10th, 2012 as the market has been very quiet with low volume for the past several session.

We saw a large gap in today’s action and then the market went to sleep, again. It is hard to make money with low trading ranges and you need extra patients to let things come together and then again, let them get played out. Before I get going to far, I will post my last three trading session since my last post, Friday, Monday and Today’s. This kind of slow environment is best to be on the cautious side and not push the envelope and certainly not to over-trade, of which I am aware of. All three days came out good with the lightest day being today, but its enough if its on the positive side of the market. The screen-shots below.  Friday’s here;

Monday’s day here below;

Today’s trades below;

Trading indicators reflect price

Trading indicators are a tool that reflects the behavior of the price action it mimic’s. It is a reflection, but it is not the original. The original is always first and in this case that is the price. The price is the original and the indicator is a copy or reflection of the price.

That is so very important. We as traders need to be able to interpret the price first. If you can do that, you will know which trade is stronger and which is in a weaker position. We don’t have to trade every twist and turn the market generates, but only those trades that lends us the “low risk trading advantage” towards our efforts.

Limiting yourself to those low risk trades puts you in control of your trading and your results. We don’t have to hope or wish for things to swing our way, we only need to position ourselves where we have that trading advantage or market edge.

The market is predictable at certain points. You don’t have to know every move it makes but just accept it at its current value. When the market pressure is built and factored in, and time has run its course, the last part is for the market to express itself back onto the screen in an upward and or downward move. Position yourself properly, and you have a low risk entry and high reward return. Trading is not easy, but it can be simple in some ways.

Many come into this thinking that it could not be that hard, but the market is filled with emotions and it can make you do things that you would not normally do, to take the wrong side.

If you understand how to read the price action as it is reflected in support and resistance, you can find those low risk entries and profit form it, but you need a method that will keep you looking and doing the same types of things over and over again. Without one, you will be all over the map, and left with losses.

Recap, which comes first, the price or the indicator?  The Chicken or the Egg ? I would say, the first one on both of those, but some might argue that. The first question, it is undoubtedly the price. The price drives the indicator and that gets projected onto the screen. Learn to read the price and understand its nature and behavior and you will better understand what and when to trade. The trade indicators are a guide and they can be helpful to get you to see what is already there, but your eyes are just not trained to see and interpret it at that time.

Being successful is very possible if you take the steps that will get you there. It is up to each individual to find his or here way, but we can get help that will take us in the right direction.

There are many ways to trade the market, some of them are good, and other not so good, but the key is up to you. Do you have the drive, will and determination to overcome all obstacles.  If the answer is “Yes”, I would say, take your time. Don’t rush into anything, do your own homework and first see what type of trader you are?  Short term scalper or position trader? How much time do you want to invest in following the markets? All day, or only a couple of hours? Answers to those questions will help to uncover a few key objectives and match yourself up with a good fit as far as style.

There are lot more questions one could ask, but just remember, price is always first and if you train your eyes to see and learn what drives the price action on the screen, you will be on your way to building a solid foundation. Anything else, will just leave you unsure and loosing valuable time and energy. Think about it?

Trade Well, Trade Committed !   Vince

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Equity Markets are Moving

Tuesday, September 6th, 2011

A chart of the days turns in a “Larger” directional picture view.

Today is September 6th and many are coming back from vacation and or a long weekend at least. In my case the first, a good long break. I did not trade the regular session today, but just slipped in a after market trade for 1.5 points, nothing big, but getting my feet wet.

The market has really been moving, these past two weeks, with prices going from high to low ranges with huge point swings. The market is in a very unique spot right here. From the way it looks, we rally a little more and stall. revisit the today’s lows and then break them for new market lows.

That is one scenario I will be watching for. The momentum is to the downside and we are just holding and moving sideways.  The longer we hold up here, creates more room for the market to go down once it breaks. Here, time is a factor and a necessary ingredient for this to play out. If it were to break down now, it would have limited room to move down and be met with buyers, so as more time is allowed, more room for the break will be factored in.

The possibility does exist for one more rally just like the last two we saw on the daily charts over the last couple of weeks. If that happens, then as mentioned, more time will be allowed to pass and the new market high of say 1240, followed by a 200 point drop in the S&P’s would not or can not be ruled out.

The drop would be about the same magnitude as the one we just saw from the end of the July highs to early August lows. It is hard to say which one of those senario’s will play out, as both of them are very similar, but one waits for the market to build up more pressure before moving lower.

We are coming into September ,followed by October, which are the two worst months of the year. An important note about the market during this time in the calendar cycle. The last two years, the September/October months have been up months, bucking the long term track record for bearish performance during the said time frame. That I would add, would put the odds a little more in favor that this time around we will see the bearish scenario play out.

One thing I am looking at closely, is the market sentiment as noted in “Investors Intelligence” market survey. The last two weeks, we were hoovering close to a bullish reading, in the 40’s. A reading of 35 or lower, is a very bullish reading for stocks and has sparked countless rallies of very good size in previous decades, following this sentiment gauge. The readings will be out tomorrow and will lend a good deal of insight as to how the market will play itself out in the coming days and weeks. My first bearish scenario could be premature and we may get more of a rally pushing prices back up the upper range once again and then, that could ease the bearish sentiment, get the street more bullish and later be in that position to drop.

So, we shall see.  I am not making any formal predictions, but just sharing my thoughts right now. OK, that’s it for today, but will be back tomorrow for an update on the daily market and maybe more insight as things develop.

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Stock Market Pressure is building on both sides !

Monday, November 22nd, 2010

Just a short post here today Monday November 22nd.  The market made a terrific come back from the early selling after the open. The gap was again closed today just before the close of the session to the tick and the market closed the day strong and at the top of its daily range.

Their are still open gaps from three days ago that are still not closed, which is at S&P 1178. The 1180 area on a closing basis is still valid as far as key major support for the uptrend.

We now have three days of market pressure built up at the S&P 1200 area and that is significant. I had mentioned a few days back that 1200 area was key resistance and with the market stalling there for three days, that seems to have been validated. The market did back fill some important levels today which it had to do if it was going to make a case for a move back up, like in tomorrow session. It will have to clear the 1200 area which was again defined in today’s session.

A close above 1200 will be bullish for the market short term, maybe to a double top, but I don’t see a prolong rally in the face of so much optimism. That strong sentiment can linger for a while, but usually it builds stronger if a reaction move has not happened within a few days. So, being that this is Thanksgiving week, typically a bullish week for the market, we could be on the look out for strength above 1200. The old high was exactly where I had called the top and so far that is around S&P futures 1220

In yesterdays blog, I posted that 1193 was going to be some key support and should see some selling if broken. The major support is at 1180, but the 1193 area was going to produce a reaction and it happened perfectly today. The market broke that number and went lower, had a small pull back up and proceeded lower moves down to 1182,  just two points from the next level of support called, 1180.  So those were good numbers in my book and it was nice to see the market react as it did.

Currently at 11 pm Monday evening, the night session has taken the market down off of today’s comeback. The opening bell should show some good volume to it as it did today, but be wary if things slow up later on in the session. We need market volume and movement to make up a good market. Its hard to make money is a slow market, so try and trade with volume. I would do well to take that advise myself. Us West Coast traders have it a little harder than the East, but when their is a will their is a way.  I am still working on the will.

Good Trading to all and trade safe, Happy Thanks Giving  in advance,  Vince    P.S.   no trading for me with week.

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Two market scenario’s, which will prevail ?

Saturday, August 21st, 2010

Today is Saturday August 21st and the markets had an interesting week keeping the selling contained.

The markets were rising early on in the week, only to give it back plus a little more. As the week moved on, the selling was contained. I am pretty sure that we are going to hold up in this area. There are a few cross currents taking place, but I think this is what is needed to purge the excess out of the market before any future advance can take place.

Looking back I was a little off in initial support of the market, which it did come in as expected, but it did not hold. The lower area of support held more or less, off by a couple of points (S&P futures 1065), as other factors take hold of this market in its support for a possible sustained rally.

The market sentiment changed for the better in defense of the bulls, in that the sentiment turned a bit more negative, which in turn is positive. We never did get the big rally, but only a smaller reaction rally coming off the lows of the much larger sell-off from months past. The market needs time to fill in the gaps and that is what it was doing. I would add, if the market really wanted to go down, it sure is in a perfect place right here to “crack”, but somehow, I don’t think that is going to happen, again, just my opinion, which could be wrong.

I see the current position in the market as finding support in this area. We may hoover for a couple of days, as again the new sentiment numbers will be voted on after Tuesdays closing market. This is useful for a couple of reasons. Last week the market sentiment turned down from 41.7 to around 37%.  That was significant because the signal changed as the market had advanced sizable on the day of the poll.  So we saw a 4% shift negatively as the market advanced. The selling that took place Thursday and Friday should add to the negative sentiment if the market can hold in this area come Monday and Tuesday. Either way, there is a lot of negative sentiment floating around which usually can only be erased by a market advance.

The market needed to work off the excess and time needed to pass to better allow the market to be and get in a position so that it could move out. Either way, the energy is being built up so that it can be expelled in one direction or another. As day-traders, we don’t really care which way it goes, only that it goes and it will.

So my best guess is that we consolidate in the general area for a couple of days, further building up this market pressure for a surprise market advance later in the coming week. This time, the market should have some staying power and the shorts will really be covering themselves in full force. I do realize that something could make this change of which I have no control, not that I had or have control anyway, but this is just the big picture and how I could see things shaping up. Late July and early August the market wanted to advance, but a continued move from that point would have been to obvious, so a little head fake was in order. In addition, this move back is very normal and consistent with general market movements before a rally, again I say if it comes.

I want to through this in, just to balance out my opinion on the coming move. When I look at the daily charts, I see the other side of the equation as well and I need to look at it no matter how or what I think will happen with the next move. In fact before I continue with my reasoning, this is exactly what needs to take place for any smaller market move when deciding to go long or short. You size up your analysis based on your trading method and which ever direction has more evidence for that directional move, you need to consider a trade in that prevailing direction. Looking at the other side of the equation though is just as important. I know when I get one-sided in my opinion I can get tripped up as any trader can.

With that said, the market is also in a perfect place to continue its sell-off,  if in-fact it wants to.  I will put up a daily chart of what I am talking about so you can see all of what I am saying. Where the S&P 500 currently stands, their exists a free flowing path to the downside area, around the bottom red line as drawn would be normal and natural for it to occur. That would be looking at both sides of the market and a wise thing to do. This is where market sentiment can give you a clue as to the next major market move and where I am taking one of my clues from. I have been following this “Investment Advisory Market Sentiment” figures for a long, long time and have seen it come through time and time again.

If the market can hold up Monday and Tuesday, the outlook for the market advance becomes stronger. Again, be sure to take a look at the daily chart below. You can also see market resistance coming in at around 1110 or so, the top red line. Currently the daily and hourly momentum is down and the path of least resistance is down, but lets see if we HOLD this Monday and Tuesday to give my scenario a chance for life. 

I did no trading this week as I took some time off to spend with family. I have a couple of shots below of my area, where I got out to enjoy some of God’s creation. My kids came to visit and it was great to see them. My son John, 28 who is an electrical engineer in Portland Oregon and my daughter Angie, 24,   (entrepreneur) visiting from the San Francisco Bay Area.

We hiked on the Pacific Crest Trail which is a trail that links from Mexico to Canada and passes right through where I live.  I have a shot of a nearby waterfall and swimming hole a couple of miles from my home, very cool, take a peek if you care to.                                 Thanks for stopping by and Good Trading to all,  Vince.

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“Day Trading Support & Resistance”

Thursday, July 29th, 2010

Today is Thursday, July 29th and the market advanced and then retreated after the open to close down 5.25 points for the session.

Yesterday, I mentioned that the early morning move was likely a move to 1106 and at which time we would, ” pull back for a moment” and that is first what happened. The market pulled back 3 S&P points and then broke out over the 1106 area making a run for the 1110/ 1111 target area mentioned in yesterdays blog post. Unfortunately all of that happened in the pre-market before the open. We did go a couple of points higher than that, around 1113 before the pullback began. With such a large opening gap, it looked apparent that we were going to fill the gap and it did.

The market continued with the selling into the late morning session where it gained its footing at much lower levels and staged a good rally back up. Selling came in with a slight pull back and that is where we are now, 1096.75 on the S&P 500 emini futures.

I think we still have more of a pull back to go in early trading for tomorrow. I see some short term resistance at 1100 after which we could pull back with a break of 1095 triggering a continuation of the selling of which could take us to 1080 rather quickly in tomorrow session. Support should come in around that level if in fact the sell off takes hold.

On the other hand, if 1103 were to break to the upside, that will be the first sign that the selling has stopped and further sideways to up action could be expected. If 1110 gets taken out, that should spark a very good rally with legs behind it to continue with the overall advance.

By tomorrow mornings pre-market open, I could get a better idea of which way this is going to go. If I had to pick one now, I would say to the downside, but will be met with a lot of buying off that lower level back up rather quickly to continue the advance. At this point its a little hard to say, but I do think the advance will continue into next week after this correction.

Today’s trading went pretty quickly and I did OK picking up my daily goal in short order, about 35 minutes of trading. In-fact it came by way of a few Short trades in the markets second hour. I have my screen shot below and a few notes on it showing the good and the bad parts. I don’t show all of my screen but as I note on the chart, some is better than non. This consistent view of the market on a regular basis, hopefully can give you an idea of the timing that is available to those who see this as a value to there own trading. I don’t say what the tools are and or how I construct it, but the consistent view of price action moving off of the turning points as identified on the screen, as mentioned, may be a help to some traders who think that they could benefit from this.

There is a whole lot more to being successful at day trading, but showing what I do on a regular basis, can help you decide over time if this is something you could see yourself using. I have other time frame charts that work together with this as well as learning how to read the price moves themselves. Trading indicators are a reflection of the price itself as I have said many times, if you can find low risk area’s of interest at short term market turning points and trade with the natural rhythm and flow of the markets, you could do well. The only thing that can likely stop you, is “Yourself”.

We can be our worst enemy, when it comes to trading. Having unrealistic expectations of what we think the market can and should do for us, can be a problem. The first thing any trader needs to do is understand price structure. The market gets taken up, to only get taken down. It does this at key spots for many different reasons. An understanding of support and resistance is also a must. This is the way prices move. When there is a barrier of resistance overhead, prices can not advance. That resistance becomes re-enforced as it attempts to overcome the invisible barrier. As time passes, more resistance and market pressure has built up, and the barrier has now been over-run. A flood of orders hit the market tripping buy orders for different reasons. Some are buying to take advantage of the new move, while others are buying as a means of protection to limit there losses. The same action but for different reasons. I don’t care what the reasons are, but my job is to assess the pressure and see if it is adequate enough for a trade. The more pressure the greater the move.

Time comes into the picture as I mentioned yesterday, by allowing the market pressure to build. If the market has spent all of its energy on a one directional move, it will often need time, to bring in more pressure, trade positions, above and below the current market. Those orders are placed in time and space, which establishes the next level of advancement, long or short. Without the element of time, the process and positions are weak.

This is established on every time frame and with a level of unseen co-operation at every level. Time charts at the yearly, monthly, weekly, daily, hourly, minute, and down into tick and volume charts of every size. There is something for everyone at all levels. Your strategy and trading personality will determine what is best for you. Be sure you put the right peg in the right hole, which means, trade according to your strengths and dominant trading personality. Don’t hold positions overnight if you are a scalp trader and don’t scalp trade if you hold for longer swing trades.

More on the topic tomorrow from where I left off today…   Until then, Good Trading.

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Stock Market Building Up Pressure, tomorrow could be the day

Thursday, November 19th, 2009

Today is Wednesday November 18th and tomorrow could be the day.  

I am sure as I said yesterday that I know a lot of traders are just a bit surprised that we have not dropped big as of yet. I think they still think it is coming, but it won’t come until the majority stop expecting it. That is just how it works. If the majority were always right, no one would make any money.

We are playing off many emotions at this point of the rally, those who are just sure we are going to drop like any moment and are building positions to take advantage of that drop. They have been loading the boat, so to speak during the last few days.

What is going to happen, when the boat leaves the dock and decides to go to Alaska and they have only packed cloths for Cancun. The itinerary changed and they did not get “The Memo”. Can you say, short covering rally. I can it say just fine.

All of this talk, is  just to get your attention, to pay attention to the price action and don’t get sucked in too much by your emotions.

Trading is an emotional endeavor and will always be that way, that is what gets people to place orders, their conviction about direction in the stocks they follow. The important part is to not become attached to any one position or belief that is so strong that you can not see the changes that are taking place.

If this market takes off , I believe it will be a rally of several hundred points on the Dow. That is not a popular opinion right now. I may be all by myself with that call and that is OK.

I will tell you, if certain events happen and things change, I will change along with them. That is how it is during the day while day trading which is what I do.

If you get to convinced that a move is going to happen or about to happen, you can become blind. I am not kidding. I can only imagine that it must happen to a lot of people.

This is one of the biggest things that turned my trading around and was one of the biggest problems I had to overcome. CONVICTIONS. If they are to strong, and you dont’ get it right, you are in trouble. You end up building your game plan around what you have already decided and see everything through the conclusions that you have already made. This is big one.

I hope everyone reading this can let that sink in a bit, I am sure I was not the only one who used to do this. I know it happens everyday by more people than would care to admit to it.

So, in short, look both ways and try and come to an understanding of how price movements work. Indicators are nice, but they have limitations. You want to be able to understand why price is moving and how it relates to momentum and  the release of pressure points.

Momentum takes place in every time frame and is relative to the time and space that it takes up. When you ride through highs and lows to an overall price objective, it can be said that you are in a trending market. You have to be willing to give up profit, for the great gain down the line, which means you need to stay in the market longer.

Having an idea of how far the market will carry you towards your price objective is important, but how do you do that. Well, as I said, I believe every trader needs to understand how, why and when all of this takes place. A better way to describe it is coming to understand that the stock market is 3 DIMENSIONAL . You may say, “what is he talking about”?

The three components that make up the market are as follows;  * TIME * PRICE  * SPACE . It is the spacial relationship of these three components that drives the stock market. The combination of these three elements are what moves markets. When one of these three and or a combinations of them in varying degree’s gets out of whack, they re-align themselves and adjust.

If a market stalls and goes sideways for several days, it may be absorbing previous gains and needs to rest, so time is now a factor. As time passes, buy orders are being placed on both sides of the market and will add to or take away from the current price in a very big way. Prices have as well stalled along with time and will only add to the move once it again resumes. Space is the element of the current price range that takes up the previous two, time and price.

I will tell you know, this is not an easy concept to explain and if I choose to expand on its many functions and how it relates to price action, I promise I will do it slowly. There really is something to this. Understanding how and why prices move and how it can be used to identify key target area’s can only add to your overall bottom line.

Maybe tomorrow, I will go back to a very simple way of explaining this concept first and if I continue with expressing myself on the subject I will go a little deeper. Overall this is not rocket science or has nothing to do with things like Eliott Wave or what have you.

I have only heard one person in my 25 years of following the market talk about these spatial  relationships. I have looked on the internet and I can not find anything on the subject. I have seen the fullness of this expressed in the markets on a daily basis. Writing about it here, affords me the opportunity to clarify my idea’s and hopefully help a few people on the way.

That is it, I hit my limit, 1000 words. STOP, DO NOT PASS GO…..

 

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S&P Day Trading: Part Five

Monday, June 29th, 2009

This is Monday, June 29th and the markets have moved back to the middle of their most recent range.

The market has performed  in a very predictable pattern at this point. The natural rhythm of the market would say that we back off to the downside one more time, but this time the thing to watch is going to be if we can hold above or somewhere in the middle of this move of the last week. That would put pivot points above and pivot points below, setting itself up for a pretty big move outside of those pivots. Nothing here would surprise me and we can not rule out a move below last weeks pivot low. Just have to wait and see what kind price action we get.

The move to the high today is what I called for last week, that was right into the mid Fibonacci range on the dailyies. Day traders need to wait for the setups and go from there.

Last week I talked a lot about what does it take to become and stay profitable as a day trader. Discussed the things to avoid and controlling your mind-set. The real battle is between your ears. You have the ability to come out on top, which will take work and dedication to the whole process. You also have the ability to let the market pressures get you down and abandon your plan. Yes, you need a real plan on paper. One that clearly defines what constitutes a buy and sell signal. A stop must always be in place. If you trade without one, you will eventually be sorry. The markets move fast and you will inevitably take a much bigger loss than you bargained for trading without a stop.

For those trying to get started, I would caution you to have a modest daily goal and modest daily stop for the day. This will resolve in you, that you will not take a huge loss any one day. I have gone over this before but a little overall recap. Ask yourself, are you trading to get rich or make a living? If you are trading for a living, then you need to ask one more question. How much do you want to get paid per week? What do you currently make at your current job or your last job? Was that a fair wage for what you did at the company? Ok, how much time are you planning to trade each day to make your wage?

I really only like to trade for about an hour, sometimes two. Everyone is different, but the longer you stay, the chances are you will do worst. You will not be able to overcome all the mind games the market plays on its participants each day. Maybe in time you can increase you trade time, but concentrate on your trade setups and focus on your timing. When you see a base trade setup, take it. Don’t hesitate, doing so only creates a lack of confidence and indecision. You take the trade only when the price action tells you to, if not, stay out.

For most people 1500 per week would be a good wage. Many in America only average about half of that per week, so if you are able to do better than Most Americans and do it in 1 to 2 hours per day, would you not say, that is a good living for the time you are putting into your work. The answer would have to be yes. You always have the ability to get a raise, but only if your performance warrants it.

So, just getting started, let’s break this down. A weekly salary of 1500 per week is 300 per day. You would need to trade with 2 contracts and pick up 3 points per day and or 15 points per week. When you say 15 points per week, it sounds like a lot, but when you say 3 points per day, it sounds possible. That would be three 1 point trades or one 2 point trade and another 1 point. You can also get it this way, by picking up four 3/4 point trades. If you get out too soon on a big runner, why would you care, if your daily goal is to make a consistent living. If you become greedy, you will likely end up with nothing. Greed and Fear are your enemies.

Let’s focus on “Greed”. This is a natural emotion that traders have to deal with. You need to put this one in its place and control your desire for more. It is a victory knowing that on any one trade that you could get more, but you choose to only trade for the amount left that will give you your goal for the day. This is especially important in the beginning, confidence is critical and you cannot get it if you are not able to put a string of winning days together in a row. If you don’t control this particular emotion early on and get rid of the idea of making thousands per day, you most certainly will not make any dollars per day.

Just because it is possible does not mean it is going to happen, not to say that it will never happen, but not before its time. There is no get rich quick stories that should be floating around in your head while you are getting started. Again if you are able to string these modest targets together each day, it is so imperative that you do not give back 3 days of profits all in one morning or day. You need to preserve your capital and chip away at it.

When a sculptor sets out to create a piece of art, his intention is to create it with one chip at a time, day after day until he has what he was intending to create. The same is true here. Take it step by step and control your emotions for wanting more – it will only hurt you in the long run. There will be plenty of days in the future that the price action will give you a lot more than few points a day, but you should not be looking for what is not there in the beginning. It takes 21 days to create a new habit, start now, with DAY ONE.

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