Friday, April 5, 2013

One day up, one day down...

... this was the pattern in the last 13 trading days! Yet the gains were a little bit larger than the drops that allowed SPX to climb to all time highs(1,571). However, with today's drop SPX is just slightly above the level seen 3 weeks ago.

Once again the EMAs on 2 hours chart look like are about to give a bearish crossing. The last two bearish crossings turned out to be fake moves on the downside. Is the market really going to give a third whip-saw in the row? That remains to be seen.

Talking about whip-saws let's look on 4 hours chart, a time frame that didn't give any whip-saw in the last 18 months. I hate to go to this time frame since the "buy" and "sell" signals are coming quite late compared to those on 2 hours chart but keeping in mind the last two whip-saws, especially the last one that took a bite of my overall profit I might consider.

Alternatively, I can blindly obey the crossing on two hours chart without trying to outsmart my own system when it gives a "buy" signal just a few days after a "sell" signal. Looking back, the whip-saw was not that bad, "sell" signal around 1,490-1,495 and a new "buy" signal around 1,515 for a 20-25 points whip-saw. Unfortunately, I waited until 1,540 to cover my shorts. Emotions, emotions, emotions! Emotions are my great enemy when trading.

Daily chart looks a little bit bearish; notice the lower low (not that clear) and also the fact that daily DMI has turned negative.

Weekly chart also shows a lower low but weekly DMI continues to be positive.

It's hard to draw a conclusion when market goes one day up and the next day down. Some people may argue that market is overbought. The thing is, during a rally, market can stay overbought for a long period of time. Just because market needs a corrections doesn't mean is going to get one. It needs a catalyst, some bad news to move down for good. Let's see if market manages to break down the pattern (one up, one down) on Monday. today it went very bearish in the morning but afternoon bulls managed to push it up. It actually went bellow rising SMA 120!

Take care!


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