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).
Comments
stockSMASH
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I have a sell sell signal at the top of my algo on nasdaq. Arc angles suggest a motivated DROP to come in the coming weeks. please excuse my ignorance... but I see a thinning on cloud whick suggests a move one way or another? Your weekend assessment would be appreciated..
A-shot
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Any chart you can attach with this comment?
Kumowizard
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The thickness of the cloud has only one information, it tells you how market volatility changes. Senkou A can move quicker as that is the average ov Tenkan and Kijun ( (9+26)/2 days), while Senkou B is the "slowest" line, as measures the average of last 52 days' trading range.
As I said, for few more days Kijun will catch up to Price quickly, which means Senkou A will increase faster too, so the future cloud itself will become thicker.
Could you please show us your model signals in details? I also think it would be good if you could post a chart with your indicator. Thx vm.
stockSMASH
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I am learning concepts of your analysis slowly, but for my part appreciate the time you take to detail graphs in different time frames. and your willingness to share your understanding of "clouds" I have designed algo lines that aid me in trend changes and we are creeping up those lines. The angle of ascent of the algo lines do portend an energetic reversal. But price can be and in recent years usually is pushed up the arc lines, but rarely breached... The market will likely surge in a blow off that will destroy shorts, (i was in the money on TZA and now.. not) ,,,,then start selling when the insanity is fever pitch.. The lines work very well in scalping C for some reason. Again thank you for your postings. Your updates make a difference.
Kumowizard
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yeah, that is a good point you mention. When the sell signal occurs, the pull back will be quick and sharp as profit takers will have no one to sell due to complete lack of short players by then.
A-shot
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with this, i prefer to go short in the thin trading range before the sell, rather than during the huge sell-off. Its the insuiders that sell first, andyou're the last to do it. It is always better to take winnings, rather than stop losses.
jonatsgonats
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But you never know until the Trip to Jersusalem ends... so if you sell on finding the top... the risk is a lot lot more if you are wrong esp if very very wrong