Wednesday, February 25, 2009

Special: A Traders Dream

Well after seeing the morning setup I decided to give the market a bit more attention today regardless. Today was what I would call a traders dream. We have had perfect setups, incredible signs and amazing protection in many trades today.
I had mentioned in the comments that we were setting up for something we have seen many times, significant low point in the market, rally driven by fundamentals, 38% retracement the next day and a great trend line. We hit the 754 range which represented a great entry for long with great protection of 2-3 points (752). We overshot very slightly (my stop loss was literally a few cents away).
The steep trendline from the previous day provided resistance all the way towards the end of the day. Mid day we had the chance for a descending triangle here, pennant or W formation, all 3 of those pattners gave you a great entry even if you missed out on the first sell off in the morning hours. We broke out at 13:35 just as we had assumed and yet again used the previous trendline as resistance with the lower trendline as support completing the W formation as a double top.
You could have also used a gann fan here but sometimes manual trendlines are more precise. We overshot the upper line towards the afternoon and retraced back down closing above the important 762 mark and at the bottom of our new uptrend.
To top it off all trendlines and fibs gave us perfect time signals for entry and exits here. I did 2 long trades today and was tempted to go short at the end of the day however one of my trade rules is no new position after 3:00 so I had to let this one run away but a drop here was to be expected.
I wish the market would give us days like today more often.


  1. There are some positive news that will influence the market for a while. So we'll see
    we might want to hold on just a little longer.

  2. news is something that is quite a difficult indicator to evaluate at the moment. You remember the 800 ranges back in Jan? News was horrible, I mean it does not get any worse then what we had, yet we were able to maintain the 800 range and rally. The dangerous thing with good news is that you will have hopeful buyers step in that do not want to miss the bottom but then institutions and hedge funds selling into those moves as a way to close out large positions. Who will win here? Not the small guy.

    The primary trend is down, so any up move will face extreme pressures. We really need significant changes in the market place itself to give the big guys confidence that 1) they should keep their position and 2) buy more. I do not see this type of change occur anywhere here.

    The turning point is the 800/820 range - this is where we will decide if we have legs or not. When you look at my long term outlooks I am still confident of the 650 range towards the end of March, beginning of April, we waited for our signs and those signs occured, there is no reason to believe otherwise at the moment even with the jump we have had the past 2 days.

  3. also keep in mind what we have been saying since mid january. We have waited patiently for our big signs to show us the mid term direction. Back in Jan we have been talking about the potential of the mid 600 range after the market gives us the proper signs. Its kind of funny that now, a month later you can see analysts and other blogs talking about those same numbers when a month ago they were all screaming the bottom is in at the 800 range. Of course its easy to say after the fact but the good thing is we have known it well ahead of time. Even if you go back to my october long term forecasts you can see how those numbers and directional indications still hold true. The market had a chance off the 800 range in January to change direction towards the upside and it did not occur, it will take a LOT of work from where we are today to beat the odds and continue to rally significantly.