I have discussed in my earlier posts some of these signals, such as deterioration, add to that the breakout in high yield corporate bonds shown on chart, note that HYC bonds have been diverging failing to confirm the upside in equities for more than a year now.(HYCB and equities have been positively correlated).
Another behavior that evolved recently is the out performance of consumer staples sector compared to consumer discretionary, within the past 20 years, tops were preceded by such behavior(which is logical as defensive sectors are more appealing to investors in risk-aversion environment).
If we get a move higher following the FOMC meeting, i will be looking to short near 2035.
If you want to read more about these technical deterioration signals, please check the related links below
Guys, lets make a small sentiment survey here, if you're just comment "Bearish", if you're comment "Bullish".. for the coming few months ..I think we could ask the question in different way, do you think the latest high is the top for for the coming six months, or no? ..... Thank you
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1. Trades are taken in two units
2. First unit would be closed at first target
3. Stop loss is then moved to break-even
4. Second unit would be closed at second target
5) If 90 percent of first target is reached I move stop loss to breakeven.
6) If 90 percent of first target is reached without triggering entry I cancel the trade.
7) Remember: Losing is a main part of the game
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Though I went short way too early. I bought SPY151219P00130000 back in May. I improved my signals and went short again on 17/Nov with DIA150117P00170000. Yesterdays close put me slightly in front across both trades. Watching the Fed today in case crude's deflationary pressure will change Yellen's language.
Against all December Stats and in break of market dynamics since 2 years (not an easy call and I may be wrong for the next few weeks but can't see SP500 higher than 2110 in Jan15 or 2200 in June)
Your idea about the survey is great. It would be a great tool.
There is a tool that I would have liked to develop: "the fast money" survey, I noticed: when everyone agrees on CNBC: it is wrong.
I think What people do is more important than what they think or say which may be different at different point of the day.
I know some guys who are constantly long and constantly negative about the outcome... Maybe a way to hedge the potential loss intellectually... Vast subject:)
If we are looking at the monthly chart we are trying to see a long term prediction. To interpret at the monthly chart be cautious about the last candlestick as the month is not over yet. This candlestick can change a lot during the next two weeks. See the october candle. Everyone was talking then about a bearish market. And see what happened.
One way to see the trend at the monthly chart is to use SMA 12. If the candlestick is closing over the SMA 12 the market is bullish. And if it closes below it is a bear market. If you want to be sure the trend has changed have two consecetive candles closing above or under SMA 12.
So my conclusion at this point by looking at the monthly chart there is no sign yet for a bearish market as the candle is above SMA 12. SMA 12 is at 1932 today. But if the the december month candle will close under SMA 12 (1932) I will get bearish on longterm. And especially if the January month candle will do it too.
1 - Pull back against Logarithmic Trendline taking bottoms of oct11 and Jun12
2 - Pull back against Logarithmic Trendline taking bottoms of Jun13, Oct13, Feb14, Apr14, Aug14.
3 - 61.8% Retracement of the whole move down
4 - Close to Monthly Pivot at 2048.
+ There is HARD resistance at 2090 and the market is moving 40pts a day.... something does not add up.
+ The realised volatility increasing in a narrowing cone is telling something is cooking (Regardless of whether the short works here, the future outcome is likely to be some large correction).
Do you know the difference between: I Know, I think, I feel?...
Most of the time (not to say always with the market), we dont know but we construct a game that is relatively well backed. And often 2 opposite stories co exist (true in all midfield pivots)...
Same thing goes with I am right/wrong... There are good reasoning which work or not.... SO: "You are right, You are wrong" as definitive statements are a bit out of place. "I disagree" maybe, just a suggestion.
The market does not care what we think. Time will tell and here we will know in a few days.
It made me realise that convictions are amost a chemical reaction and that different brains with different physiology/cultural/technical background could reach different conclusions...
The very different thing about trading is that unlike other strong beliefs (religious or others), it gives you the opportunity to discover that what you thought was impossible can happen...
Vast subject... Loads of psychology involved in here
It could reach 2100 in 1.5 days.
It could reach 1900 in 4days.
Do I know for sure the side? NO. Absolutely not. Nobody knows.
Do I think that 2120 can be broken until end of january: NO. I have good tools that suggest no but it is not impossible. I strongly think not but I DONT KNOW.
Do I have an instinct, a feeling, a desire, a vision? YES.
Do I have a game plan with clear metrics. YES stop on close above 2055.
Cheap Leverage can get acquired cheaply if you hold the view it wont hold:
26 dec 2014:
Put spread 2000/1950
It could be worth 50 max end of next week if santa claus week is not as expected.
Cheap way to play it even if wrong knowing that 3.3 is what you make or lose every 5 minute on the future.