First question I asked myself today was who is stupid here? The equity bulls buying more in euphoria, feeling no risk at all, or me and of course some others joining the idea that stocks are extremely overbought, therefor doing top hunting... or maybe everybody lost their mind?
Well, we can not argue with Price action, and I have to admit that I was too early to buy those Put options and to enter bearish positions. But I would also like to highlight something interesting that may happen here within 4-5 days, and which may later prove that most of overenthusiastic bulls will face some problem too.
Daily: First of all, I'd like to show the real bullish channel. So when we thought in early october that the bullish trend was broken, that was defenatley not true, as the major and ultimate bullish trendline was a lot lower. You can zoom out your charts, you'll see from where it starts. The channel is perfect. In fact that drop was nothing but a bearish counter trend to the weekly chart. OK, that's the past, but has an importan information for the future: the ultimate trend support and horizontal support comes ard 1900 now by Feb/2015. No real bear market will come until SP500 stays in this range.
Of course a pull back should and will happen, and that can be aagain a decent one. But we have to wait minimum 4-5 more days for a possible take profit or counter trend sell signal. Why? It is very simple. Look at Kijun Sen (the 26 days avg - red line)! Until yesterday it was flat, but what happens from today? It starts a sharp catch up to current Price candles, simply because the bottom we had 27 days ago. That means the lows of the big up candles 26 days back will quickly increase, so Kijun Sen will very sharply increase in next 4-5 days and will soon catch up to Price and the Tenkan Sen line. So will behave Senkou A, as that is the average of Tenkan and Kijun. Senkou B will be laggish as 52 days avg won't change quickly. So the Kumo will become thick, representing the volatility seen in the past months. A thick Kumo will be harder to break later, but can be penetrated.
What is really important, that all good counter trend sell signals come, when everything stay together. A good sell occurs, when both Tenkan and Kijun are close to Price, so Tenkan and Kijun are close to each other too. When you have a MACD, Slow Stoch and Price/Kijun cross (followed by a weak bearish Tenkan/Kijun cross) sell signal together, and you also see the bearish Kumo break on 4 Hrs chart, then your risk-reward is good! Until then we do only top hunting if we go short, and guess what, finally early bears kill themselves, as they kill each other with their stops.
4 Hrs: Notes on the chart. Slow Stoch overbought again, but that's not a reason to fight with Bulls. You have to fight them when they get weaker, so when Price breaks below Kumo and Key support.
p.s.: I read this quote yesterday: "The market can stay "irrational" longer than you can stay liquid"... how true it is if you fck up timing or position sizing (leverage).
Well, we can not argue with Price action, and I have to admit that I was too early to buy those Put options and to enter bearish positions. But I would also like to highlight something interesting that may happen here within 4-5 days, and which may later prove that most of overenthusiastic bulls will face some problem too.
Daily: First of all, I'd like to show the real bullish channel. So when we thought in early october that the bullish trend was broken, that was defenatley not true, as the major and ultimate bullish trendline was a lot lower. You can zoom out your charts, you'll see from where it starts. The channel is perfect. In fact that drop was nothing but a bearish counter trend to the weekly chart. OK, that's the past, but has an importan information for the future: the ultimate trend support and horizontal support comes ard 1900 now by Feb/2015. No real bear market will come until SP500 stays in this range.
Of course a pull back should and will happen, and that can be aagain a decent one. But we have to wait minimum 4-5 more days for a possible take profit or counter trend sell signal. Why? It is very simple. Look at Kijun Sen (the 26 days avg - red line)! Until yesterday it was flat, but what happens from today? It starts a sharp catch up to current Price candles, simply because the bottom we had 27 days ago. That means the lows of the big up candles 26 days back will quickly increase, so Kijun Sen will very sharply increase in next 4-5 days and will soon catch up to Price and the Tenkan Sen line. So will behave Senkou A, as that is the average of Tenkan and Kijun. Senkou B will be laggish as 52 days avg won't change quickly. So the Kumo will become thick, representing the volatility seen in the past months. A thick Kumo will be harder to break later, but can be penetrated.
What is really important, that all good counter trend sell signals come, when everything stay together. A good sell occurs, when both Tenkan and Kijun are close to Price, so Tenkan and Kijun are close to each other too. When you have a MACD, Slow Stoch and Price/Kijun cross (followed by a weak bearish Tenkan/Kijun cross) sell signal together, and you also see the bearish Kumo break on 4 Hrs chart, then your risk-reward is good! Until then we do only top hunting if we go short, and guess what, finally early bears kill themselves, as they kill each other with their stops.
4 Hrs: Notes on the chart. Slow Stoch overbought again, but that's not a reason to fight with Bulls. You have to fight them when they get weaker, so when Price breaks below Kumo and Key support.
p.s.: I read this quote yesterday: "The market can stay "irrational" longer than you can stay liquid"... how true it is if you fck up timing or position sizing (leverage).
