When utilizing TA, it is not just about evaluating the most current price action that is unfolding for patterns and levels. It is also about considering that price action in light of the bigger picture. Many less experienced traders forget that part, and get sucked into misleading signals as a result. The other factor that must always be considered before assembling a scenario for a trade is the time horizon, day? swing? position trade? because that also affects what information carries more weight.
At the moment, the small picture shows a lower high off of a minor of 11871 to 12316 (.618 of recent swing) and a possible triangle break to the side. Isn't this a short setup? Sure, IF you are day trading, because this setup is occurring right into a major that has not been compromised yet.
I am observing this market from the position trade perspective which means I am interested in broader structures and levels, like the 10534 to 8656 (.618 of recent structure). For me, the fact that price is still fluctuating in this area and not pushing below levels such as 9683 (written about in previous reports) means that it is not as weak as the immediate price action implies. For this reason, I am anticipating a reversal within the and a break of the 11871 to 12316 area rather than a retest of 8K.
Now keep in mind, I could be wrong. I have been doing this long enough to know that the market is always right. The best I can do is interpret price action, make comparisons, develop scenarios and then see which path the market chooses. My thoughts, feelings and opinions are irrelevant. This is why managing risk is more important than being "right" as so many less experienced participants naturally value more. So with that being said, IF this market does not show any reversal signs and pushes below the 8656 area with conviction, I will just hold my position trade and wait until the market finds stability before doing anything else. Since I am in this for the bigger picture, my carefully managed size keeps me out of trouble.
In summary, react less and compare more. Know what time frame you are looking to take risk on and weight information from there. For me, the big picture is in a descending and forming a broad higher low, it is just a matter of catalyst before the next rally structure begins. I watched this market go to 1K back in 2013, and then pullback for 2 YEARS before it entered into the bull market that we saw more recently. As long as the general fundamentals of this space stay intact, I prefer to buy more, especially upon reversal patterns within broad support zones. This is my perspective because I am in a position trade which aims to capture much broader market moves.
Questions and comments welcome.
I believe the bearish sentiment only counts if it evolves in those with skin in the game (sounds obvious I know!). The recent Citibank calls for $4k or whatever don't count, for example, as bearish sentiment in the market (as Citibank don't have any position until they have a mandate to do so, which is not at the moment).
I've been teetering on the fence over this but I'm going to stick with my original view (view I came to just before Xmas 2017) for the time being, and according to that view we have yet to see a capitulation as sentiment among market participants is not bearish enough yet.
Generally speaking I think the turnaround in sentiment should accelerate at this point, but maybe this will be a slow, grinding, excruciating affair.