Is the Rally almost over??
- Thread starter Trend Fader
- Start date
I don't want to start anything, but this misconception of "trend" seems to be widespread in ET (and everywhere else).
To call an upmove or a downmove in a trading range (which, in this case, is moving sideways) a "trend" is to imply a basic misunderstanding of trend. Ordinarily, since the bottom of the range is to be bought and the top of the range is to be sold, this misunderstanding wouldn't matter.
However, when one begins to believe that he has the tiger by the tail and that a "new bull market" has begun simply because prices are going up, he can get himself into a great deal of trouble.
At the moment, we're still in a bear market, we're still in a trading range, and we're still trendless, no matter what CNBC says. A "bull" who believes that anything up to a 50% retracement is only a pullback is not going to be playing the trading range correctly. It's always possible that the trading range may be broken and that a genuine uptrend may have begun. But we're not there yet, except for the hopeful.
Good point!!
Dbphoenix,
I believe that although your rebuke carries general truth, it also lacks in precision. But I am not going to criticize you for that because when I posted I too did not bother to be dogmatic about trend.
At any given point in time, there are multiple trends at work. I use Sperandeo's classification, short term (days to weeks), intermediate term (weeks to months), long term (6 months to years). That is nothing new to most traders of course.
Your comments on the current 'trend' all pertain to the long term trend, which obviously, is down and portrays the vicious bear market we are in.
The 'trend' I was referring in my one line post, is the intermediate trend from March 10th to now. That has clearly been broken today, if you draw it correctly, that is from the lowest low to the lowest low preceding the highest high, while not going through prices in between.
So, my post was simply a question: Will this intermediate uptrend stall out here, giving rise to a change of intermediate uptrend to intermediate downtrend or will this intermediate trendline break lead to a simple pullback in this intermediate uptrend?
phew. That's why I used one line.
I did not know it would bring righteous indignation from trading theologians.
Take it easy Db, it's all good man. Sure, they're a good number of people on ET who have haphazard trading beliefs and annoying comments to make. I just don't think it's worth policing them. You can use your energy a lot more constructively. I like your journal for example, and believe that you did a fantastic job there. How's your ORB strategy doing?
Peace,
Maverick.
I believe that although your rebuke carries general truth, it also lacks in precision. But I am not going to criticize you for that because when I posted I too did not bother to be dogmatic about trend.
At any given point in time, there are multiple trends at work. I use Sperandeo's classification, short term (days to weeks), intermediate term (weeks to months), long term (6 months to years). That is nothing new to most traders of course.
Your comments on the current 'trend' all pertain to the long term trend, which obviously, is down and portrays the vicious bear market we are in.
The 'trend' I was referring in my one line post, is the intermediate trend from March 10th to now. That has clearly been broken today, if you draw it correctly, that is from the lowest low to the lowest low preceding the highest high, while not going through prices in between.
So, my post was simply a question: Will this intermediate uptrend stall out here, giving rise to a change of intermediate uptrend to intermediate downtrend or will this intermediate trendline break lead to a simple pullback in this intermediate uptrend?
phew. That's why I used one line.
I did not know it would bring righteous indignation from trading theologians.
Take it easy Db, it's all good man. Sure, they're a good number of people on ET who have haphazard trading beliefs and annoying comments to make. I just don't think it's worth policing them. You can use your energy a lot more constructively. I like your journal for example, and believe that you did a fantastic job there. How's your ORB strategy doing?
Peace,
Maverick.
No "rebuke" was intended, and my comments had nothing to do with the direction of the current trend per se. Rather they were directed toward the use of the term "trend" when one is in a trading range.
A trading range has a support level and a resistance level. You buy at or near the support level with a target of the resistance level and sell or short at the resistance level with a target of the support level. Naturally the price rises and falls within that trading range. That's what it's supposed to do. But it's hardly trending. To call the upmove in the trading range an uptrend and the downmove a downtrend is to ignore the dynamic of the trading range.
If you want to call these trends, that's your prerogative. But by doing so, you'll be missing your best entry opportunities. For example, if you allow price to come back 10% or 20% or 38% or the last reaction low or whatever before calling the action a reversal, you will be long past the lowest-risk/highest-probability entry point for the opposite side of your trade. Only when price has broken out of the trading range and is in a genuine trend do considerations of pullbacks and pyramiding and continuation entries and so forth enter into the equation.
All of which addresses your question. Whatever you choose to call it is supposed to stall here, and the appropriate action is to take the opposite side of the trade. Being concerned about whether or not it is "only a pullback" is not pertinent.
A trading range has a support level and a resistance level. You buy at or near the support level with a target of the resistance level and sell or short at the resistance level with a target of the support level. Naturally the price rises and falls within that trading range. That's what it's supposed to do. But it's hardly trending. To call the upmove in the trading range an uptrend and the downmove a downtrend is to ignore the dynamic of the trading range.
If you want to call these trends, that's your prerogative. But by doing so, you'll be missing your best entry opportunities. For example, if you allow price to come back 10% or 20% or 38% or the last reaction low or whatever before calling the action a reversal, you will be long past the lowest-risk/highest-probability entry point for the opposite side of your trade. Only when price has broken out of the trading range and is in a genuine trend do considerations of pullbacks and pyramiding and continuation entries and so forth enter into the equation.
All of which addresses your question. Whatever you choose to call it is supposed to stall here, and the appropriate action is to take the opposite side of the trade. Being concerned about whether or not it is "only a pullback" is not pertinent.
Calling what we are in know a trading range presupposes that you are taking a position on direction. By definition, a trading range is a directionless.
You are operating on a different set of assumptions and definitions of trend. Trends are fractal in nature. They happen on a 5 min chart, they happen on a quarterly chart. No one has any PATENT on the definition of trend. And that will remain the case until technical analysis is rigorously (and I don't mean Edwards and Mcgee) defined and classified. Which will probably never happen btw.
You're right, it is my prerogative to call what I described above trends. I do not derive this from my own analysis, but from Victor Sperandeo's methods. You are also free to disagree with Trader Vic. That's fine. That's the beauty of the market.
As for your comments on what consitutes the 'best' entries, Using Trader Vic's methodology, you can often set up trades with fantastic risk rewards. But you don't identify with his way of classifying trends so there is no reason for me to go any further into the setups and attempt a defense. I have no interest in a debate here. They are pointless, to me.
Best,
Maverick.
All of this puts your question in context, since one must first define trend in order to address the question.
As I said, in a trading range, price is supposed to stall here. If you're using Sperandeo's definition of trend reversal, the trend will have reversed if price drops below the last reaction low. Whether you want to wait that long (on the daily chart) or not is up to you. Since these definitions are not 100%, price could easily reject the reversal scenario and resume the uptrend, but there's no way you can determine that in advance, which is why Sperandeo codifies trend, trend change, and trend reversal.
There's no debate but rather a matter of tactics. Since there's no way of knowing the future, anyone who's long has a number of questions to address. Do I hold? For how long? Do I sell? Do I scale out? Do I short? If so, where? If price resumes its uptrend, do I short a lower high? Do I cover and buy a breakout? If I don't buy the breakout, do I buy the retracement? And so on.
Using Sperandeo's definitions, there's no way of knowing whether or not this is a reversal until price reaches the last reaction low. Since there's no way of knowing in advance whether price will do that, much less what it'll do in the event, it's more productive to plan for a variety of contingencies rather than make hasty decisions under the gun.
The prior pace and momentum has halted. How far / long do we correct ? As we all know, nobody knows. However the decline / time of correction will be telling. There will be many different perceptions of this halt / pullback, hence, this is what makes a market, no ?