Terrific gap up unlikely to fully close on the day. Enthusiasm is nuts. IMO gonna get to 300 in July. Probly just a gamble but as former resistance in 258 - 262 area may turn to support, expect higher- probly in the day, certainly this week. GLTA!
Trade at your own risk- this isnt advice. Pure speculative gambling at this point!
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Look back at 20 June same pattern if it plays that way. Gapped up strongly; traded to former resistance and popped up. Safest to sit out but a bull spread might work here. Buying July monthlies, selling the dailies above strike.
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Looking for a sell spike to form inverted H&S looks like it made a left shoulder (maybe!)...
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Might be looking at the inverted head now at 258 see if it holds!
Order cancelled
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Looks like its headed down to close the gap. After that... who knows.
Certainly didn't get the cup... an illusion. Gonna sit and watch it.
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It did give us a retrace EOD of ~50% and a new closing ATH but this was bearish all day and the rally is weak. Expect another pump-up overnight and an even weaker rally on Tues. L@@K DJIA was up 280 in AM and closed + 117, futures lower aftermarket. NQ was up near 2%, closed +1%. SPY did better with about a 0.62 retrace. Market climbs a wall of worry but it's looking pretty shaky now...
Trade active
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Today Sand P & NQ make tiny marginal gains, but Transports are off -110, Russell -16; these are leading indicators- bottom about to fall out IMO. Shorting!
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Volume on QQQ advance today was 17m shares, c/w 41m on 20 June. Eking out marginal new highs on vanishingly smaller volume, 1/3 of the previous high.
SPY traded 61.5m shares today but on 20 June at the previous ATH it rose on 116.5m shares; volume is half on this lift.
Dow Theory: Volume MUST confirm the trend and Divergences in averages (DJT, RUT) occur near change in Trend.
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Yeah look at the madness... Hedged my shorts with call options that doubled lol!
6. Trends Persist Until a Clear Reversal Occurs
Reversals in primary trends can be confused with secondary trends. It is difficult to determine whether an upswing in a bear market is a reversal or a short-lived rally to be followed by still lower lows, and the Dow theory advocates caution, insisting that a possible reversal be confirmed.
Special Considerations
Here are some additional points to consider about Dow Theory.
Closing Prices and Line Ranges
Charles Dow relied solely on closing prices and was not concerned about the intraday movements of the index. For a trend signal to be formed, the closing price has to signal the trend, not an intraday price movement.
Another feature in Dow theory is the idea of line ranges, also referred to as trading ranges in other areas of technical analysis. These periods of sideways (or horizontal) price movements are seen as a period of consolidation, and traders should wait for the price movement to break the trend line before coming to a conclusion on which way the market is headed. For example, if the price were to move above the line, it's likely that the market will trend up.
One of the main techniques used to identify trend reversals in Dow theory is peak-and-trough analysis. A peak is defined as the highest price of a market movement, while a trough is seen as the lowest price of a market movement. Note that Dow theory assumes that the market doesn't move in a straight line but from highs (peaks) to lows (troughs), with the overall moves of the market trending in a direction.
An upward trend in Dow theory is a series of successively higher peaks and higher troughs. A downward trend is a series of successively lower peaks and lower troughs.
The sixth tenet of Dow theory contends that a trend remains in effect until there is a clear sign that the trend has reversed. Much like Newton's first law of motion, an object in motion tends to move in a single direction until a force disrupts that movement. Similarly, the market will continue to move in a primary direction until a force, such as a change in business conditions, is strong enough to change the direction of this primary move.
A reversal in the primary trend is signaled when the market is unable to create another successive peak and trough in the direction of the primary trend. For an uptrend, a reversal would be signaled by an inability to reach a new high followed by the inability to reach a higher low. In this situation, the market has gone from a period of successively higher highs and lows to successively lower highs and lows, which are the components of a downward primary trend.
The reversal of a downward primary trend occurs when the market no longer falls to lower lows and highs. This happens when the market establishes a peak that is higher than the previous peak, followed by a trough that is higher than the previous trough, which are the components of an upward trend.
DaddySawbucks
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Here's the skinny on DOw Theory for a refresher course, just six principles:
Putting the Dow Theory to Work
There are six main components to the Dow theory.
1. The Market Discounts Everything
The Dow theory operates on the efficient markets hypothesis (EMH), which states that asset prices incorporate all available information. In other words, this approach is the antithesis of behavioral economics.
Earnings potential, competitive advantage, management competence—all of these factors and more are priced into the market, even if not every individual knows all or any of these details. In more strict readings of this theory, even future events are discounted in the form of risk.
2. There Are Three Primary Kinds of Market Trends
Markets experience primary trends which last a year or more, such as a bull or bear market. Within these broader trends, they experience secondary trends, often working against the primary trend, such as a pullback within a bull market or a rally within a bear market; these secondary trends last from three weeks to three months. Finally, there are minor trends lasting less than three weeks, which are largely noise.
3. Primary Trends Have Three Phases
A primary trend will pass through three phases, according to the Dow theory. In a bull market, these are the accumulation phase, the public participation (or big move) phase, and the excess phase. In a bear market, they are called the distribution phase, the public participation phase, and the panic (or despair) phase.
4. Indices Must Confirm Each Other
In order for a trend to be established, Dow postulated indices or market averages must confirm each other. This means that the signals that occur on one index must match or correspond with the signals on the other. If one index, such as the Dow Jones Industrial Average, is confirming a new primary uptrend, but another index remains in a primary downward trend, traders should not assume that a new trend has begun.
Dow used the two indices he and his partners invented, the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA), on the assumption that if business conditions were, in fact, healthy, as a rise in the DJIA might suggest, the railroads would be profiting from moving the freight this business activity required. If asset prices were rising but the railroads were suffering, the trend would likely not be sustainable. The converse also applies: if railroads are profiting but the market is in a downturn, there is no clear trend.
5. Volume Must Confirm the Trend
Volume should increase if the price is moving in the direction of the primary trend and decrease if it is moving against it. Low volume signals a weakness in the trend. For example, in a bull market, the volume should increase as the price is rising, and fall during secondary pullbacks. If in this example the volume picks up during a pullback, it could be a sign that the trend is reversing as more market participants turn bearish.
DACapitalTrading
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Keep it up! Amazing content mate :)
DaddySawbucks
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@DACapitalTrading, It's distribution phase. Probly gonna retest ATH and sink back again. TY for kind comment on a rather weak idea!
Reversals in primary trends can be confused with secondary trends. It is difficult to determine whether an upswing in a bear market is a reversal or a short-lived rally to be followed by still lower lows, and the Dow theory advocates caution, insisting that a possible reversal be confirmed.
Special Considerations
Here are some additional points to consider about Dow Theory.
Closing Prices and Line Ranges
Charles Dow relied solely on closing prices and was not concerned about the intraday movements of the index. For a trend signal to be formed, the closing price has to signal the trend, not an intraday price movement.
Another feature in Dow theory is the idea of line ranges, also referred to as trading ranges in other areas of technical analysis. These periods of sideways (or horizontal) price movements are seen as a period of consolidation, and traders should wait for the price movement to break the trend line before coming to a conclusion on which way the market is headed. For example, if the price were to move above the line, it's likely that the market will trend up.
One of the main techniques used to identify trend reversals in Dow theory is peak-and-trough analysis. A peak is defined as the highest price of a market movement, while a trough is seen as the lowest price of a market movement. Note that Dow theory assumes that the market doesn't move in a straight line but from highs (peaks) to lows (troughs), with the overall moves of the market trending in a direction.
An upward trend in Dow theory is a series of successively higher peaks and higher troughs. A downward trend is a series of successively lower peaks and lower troughs.
The sixth tenet of Dow theory contends that a trend remains in effect until there is a clear sign that the trend has reversed. Much like Newton's first law of motion, an object in motion tends to move in a single direction until a force disrupts that movement. Similarly, the market will continue to move in a primary direction until a force, such as a change in business conditions, is strong enough to change the direction of this primary move.
A reversal in the primary trend is signaled when the market is unable to create another successive peak and trough in the direction of the primary trend. For an uptrend, a reversal would be signaled by an inability to reach a new high followed by the inability to reach a higher low. In this situation, the market has gone from a period of successively higher highs and lows to successively lower highs and lows, which are the components of a downward primary trend.
The reversal of a downward primary trend occurs when the market no longer falls to lower lows and highs. This happens when the market establishes a peak that is higher than the previous peak, followed by a trough that is higher than the previous trough, which are the components of an upward trend.