ES Journal Archive (2006 - 2008)

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Quote from Buy1Sell2:

No, but it usually helps. The maturity factor is not there on this divergence yet due to the fact that the Histogram has not yet shown it's extreme point in the trough(hasn't turned back up for one bar yet).
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Maybe I am stupid - could you try it again.....???:eek:
 
Quote from hpeganz:

Maybe I am stupid - could you try it again.....???:eek:
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What it means is that as of the time of the writing the Histogram was getting bigger. It needs to beginning reducing in size to have a full divergence.
 
Quote from Buy1Sell2:

What it means is that as of the time of the writing the Histogram was getting bigger. It needs to beginning reducing in size to have a full divergence.
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Do you mean the MCAD bar with the arrow (green) has to be less negative??:cool:

Edit: I assume that the second MCAD curve should have had its negative maximum?
 

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There is a psychological reason that the MA flattening and a basing helps the reversal. Take today for examle where you have bears pushing the price down. There comes up a point where fresh sellers are not in abundance and the same bears try to push the price down farther. They may be able to for a bit but as time goes on the thrusts are smaller and smaller which causes the MA to flatten a bit. Most humans are built the same way, and get bored or panicked in generally the same amount of time. As I have said before, most TA traders are MA traders and as they see the MA flatten, they become afraid of losing their gains which they had already counted as income and may have actually spent. They begin covering the shorts. At the same time traders like myself are eagerly looking for the divergence that we know is caused by these psychological factors. We begin buying. The MA flattens and begins to turn upwards. More shorts cover, more MA traders and divergence traders begin buying. It begins to feed on itself, then the trend followers jump in and we get a furthe pop. Then prices break as day traders looking for two points take profits. Then people who thought they had missed the initial opportunity begin to jump in because they are afraid that they may miss the move and now they have a chance to still get in on the pullback. And on and on and on---

Notice how during that discussion, there was no mention of fundamentals.
 
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