IF we head back down below 8000...
- Thread starter S2007S
- Start date
Everyone can see, even RFT, that we are in a highly volatile consolidation phase in what is, up to now, a strongly down trending market. The support and resistance levels for this consolidation are fairly well established, and we trade off those. Technically, we know that when we break from a consolidation it is more likely that we will continue the trend, down in this case, rather than reverse it. This seems even more probable given the dismal economic news. We also know that the longer a consolidation phase lasts the less reliable is the prediction of which direction it will break. We don't know when the breakdown/breakout from either support or resistance will occur, but whenever we are near S/R levels we will remain vigilant and try to jump aboard in the correct direction if a break occur. We will use our own methods to enter and to avoid fakeouts.
In my post immediately above, i omitted perhaps the single most important point to be drawn from the present market technicals. If an intraday trader wants to trade conservatively and minimize risk in this extremely volatile market, the best way to do it, other than staying out altogether, is to take only short trades off the upper side of the resistance band when the trade is well supported by the market internals. This is less risky than trading long off the lower side of the support band, because, at present, the risk off getting caught in a breakdown is greater than the risk of being caught in a breakout.
RSI and MACD divergences are fools gold, look good in some instances but no edge there. Not saying that we won't be rallying especially as I am long from Thursday's rally, just that such divergences are not useful in picking a direction. More useful divergences are AD, HL, and P&F buy and sell signals vs price.
this seems like the most likely outcome.
Quote from riskfreetrading:
You did not understand, and he did not understand. Just like drunks do-- lean on each other.
Remember that the reason why prices move is because some people are wrong.
Ponder what makes people wrong, and therefore the market right.
Are you Hersheys evil twin?
steve i cant post a chart,but if you draw a yearly from 1929 til present,u can connect 1929,1987 highs and u have 805 support in spx,if we break that you connect 1942 and 1974 lows and u have support at 605,this supports both points of view and as always the market will do one or the other and it will be right,making the opinions of all on ET useless about 50% of the time
ok, looks like got it all wrong with my prediction.
so, your methodology is two steps: 1. identify losers, 2. identify the level when the losers bail out. this is all pretty quantitative so it is not about speculating based on the chart where support/resistance lies. this is how you get the super-precision in your calls.
i will venture another guess about late friday action and monday reaction based on what you wrote. looks like longs could be the losers here (unless they got exhasted, quite possibly because ton of stops got hit). this may get clear on monday. if we gap down, this will flush the remaining longs and we will rally.
what if we gap up? then i assume the long losers bailed out on friday and now shorts are the losers stuck with market going against them. it is possible the gap won't fill in the morning and will will rally till loser shorts bail.
