Wednesday, July 15, 2009


Thus far we are trading in a stepping day as expected. Days like today especially on such low volume normally end at their highs as many are sitting on the side lines giving retail buyers a chance to buy at the top with the promise of higher ranges.

The total lack of volume really shows what will be in store for the market long term. I think every other blog is referring to this low volume as well - probably one of the only positive signs for bears at the moment.

Now looking at the above chart - what a chart I tell you - things I have never seen in my young trading live. We blew through resistances without any step - highest RSI value on the 60 min in like ever. 3 waves on the MACD. It seems the market has finally found a point to hold at at this very important resistance level here - though that does not mean we will not see a breach on this level to go higher.

Now an interesting formation that could be taken from here is the megaphone pattern. Ranges are expanding and if this pattern holds true we should try to attempt the upper most ranges at least - of course this is one of those instances where I look for a bearish pattern when everything seems bullish - so please do not misunderstand what I am trying to say. Yes we should get some pull back but the question remains how much higher this may go here. As a bull or a bear this needs to be answered to continue in this difficult market. IF this pattern plays out (and I am not saying it will) this could be another extreme waiting for us ... an extreme to the downside. Of course this is all nice and great to "dream" as I am not using this as a guide for any trading.

I never watch cramer and when I walk by our TV on CNBC I keep on seeing his "stop trading sign" not sure what the context is but maybe its something we should all try to go by.

Either way - I hope many of you manage to keep losses at a minimum and hopefully make some money. As mentioned by a fellow reader in the comments - the market will be there tomorrow. So on that note - let me ask you. Would you rather short here? or would you rather go long at 800 if we ever get there? What do you think has a higher chance of success. Maybe this chop here is the BEST learning lesson we as traders can take from this - patience and waiting for the right position, even if that means having to wait months for this to happen.


  1. hi chaugner! I'm a fan of your blog ... and a rookie at the same time (trying to learn). Personally, I'm with you. I mean I prefer to stay on the sideline; not heavily invested, very small positions in nat gas (GAS on TSX) and in CIT (to go with the bailout flow ... if I get lucky). I'm scared by two things:
    - the completely opposite analists' opinions (half of them proclame a crash in the near future, and half a bull mkt)
    - the 'abnormalities' of charts

    So, I will play conservatively:
    - if no 'crash' by end of Sept-midOctober, I will dip a toe playing the last quarter and assuming that a bad market will be very bad for the US administration (so, small chances for this to happen).
    - if in August we will violate the neckline - 870, I will go short with EEV


  2. Hey daniel, congrats on the first post =)

    And yes I am with you, the past year has been from one extreme to the next. From worst quarter, to best quarter, to worst this, best this, most extreme here, most extreme there.

    There is no middle ground - we are always dealing with the market and its moves on one side of the spectrum - there is no neutral ground. The one thing I keep on telling myself - if I can manage to trade through this market without blowing up an account and actually come out making a little bit of money, well we will have acquired a skill that will bring us "riches" for the rest of our live.

    While I am going through the same waves as the market from emotional highs to emotional lows - its important to keep perspective and control this emotion and anger.

    We will get our chance - I am sure of this and we will do out best to come out on top. If it were easy everyone would be doing it =)

  3. amen brother, amen.