Picking Tops.

Just a note to bear in mind.

You may be able to identify the divergences easily but it is not necessarily the case with some of us here. When I look at the RSI, I'm seeing divergence here etc or a higher high etc but you do not necessarily take or identify them. And do not for a moment think that I didn't put in any effort to try to identify them either. For me, I find that identifying them through price action and volume and hopefully channels is easier at the moment and hope to improve.



Quote from romik:

From what I've read so far on ET B1S2 is one of very few (if not the only one that reveals his methods) that has the right approach to identifying tops/bottoms through divergences. If one looks at various charts he/she will realise that this is perhaps the only analyses based on technicals that links the majority of tops/bottoms in indexes. Another method he uses, which is also fantastic intraday (personally tested and used by me 80% of the time now) is a failure swing. So, if one looks at all 3 charts (d/w/m) of the S&P500 there is no sign of a divergence or failure swing happening. I was tracking a 3 day chart of S&P500 which showed a possible bearish failure swing, but it simply was not "allowed" to happen by the bulls, as these chart formations do carry a lot of meaning, firstly fundamental and secondly when TA traders (and there are a lot of them classed as 'Smart Money') identify patterns like these they start shifting their bias from one to another and that is why we get tops and bottoms. Smart Money are the only people that have sufficient levels of capitalisation and experience to know when it's over and act upon it. I haven't "been" through many tops/bottoms, but so far I tend to think that this has more chances of happening when everybody thinks otherwise.
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Billp, how you doing? You know I would have never thought that a pattern is difficult to spot, I know that it's not always straight forward to trade these patterns, but I just didn't realise that it might be difficult to spot price making higher highs when an oscillator is making lower highs. But I do realise that it might be considered complex by some people. It does not change them being present at times of many reversals, not just pullbacks.
 
I is pretty obvious when a top is forming

Either

1. high volume distribution at a resistance point

2. a blowoff top characterized by increased volume and price appreciation. The chart resembles a parabola.

NONE of the indicies are showing ANY of these signs which is why the bull market will continue for a very long time.

Time 2 buy
 
How to know when the market is topped?

Great question and one that many, many traders attempt to perdict. Just see the threads on ET recently with all the 'top callers'. My reco is to not stand in the path of the train. Eventually the train will stop, but it can be costly trying to figure out when.
 
Quote from Dackster:

picking a top or joining a trend, which is riskier?
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Depends who you ask Dack. Recently, the trend followers are saying WOW, THIS IS FUN. The reversals are saying OUCH, THIS HURTS. It also depends if you are asking day-traders or swing traders. I personally just trade intraday, so I just want the markets to move - up or down, I don't care. There are day-traders making money shorting throughout this runup as it just depends on how you enter and how you exit. Example - if you are going for a 1 point profit on the ES, you could make this shorting throughout this entire runup since the markets typically do not shoot straight up all day.

Personally, I would say that picking a top is much riskier simply b/c it is much harder to do. As I said in another reply, it's not easy standing in front of the train. Eventually that train will slow down, but it can cost a few bucks trying to figure out when.
 
I have lost tens of thousands trying to pick tops and bottoms. You get super highs and super lows. I was close a few times to being out of the game completely. Now I follow the crowd and go with the trend. Short squeezes, M&A's and such are even harder to pick. The S&P really looks like a top, but it may just ride horizontal for a few weeks. I need a trend change before I would short it. Until then I will look to nickel and dime it long.
 
I was short Thursday into Friday, I will be closing the short on Sunday asap, as great short set-ups simply do not offer enough points, price seems to pullback to lower trend line and reverse back into a bull mode. I expect Wed/Thursday's double top to be taken easily this coming week.
 
Quote from Dackster:

How do traders know when a top is approaching?
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There is no top in the forseeable future.

The secret is rampant unmitigated global monetary inflation and good 'ol govt manipulation of the markets. All that toilet paper has to be used up somewhere.

Don't fade the governments, all the dips are for buying!
 
Quote from Dackster:

How do traders know when a top is approaching?
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It depends what time frame you are trading. I can give you 60-70% odds everyday on an intraday top or bottom. When you say top, I am guessing that you are referring to say a 10% correction or so which would require analysis on a weekly chart. Here it is...
http://elitetrader.com/vb/showthread.php?s=&threadid=79351

Learn to use your fibs, they are the only way to anticipate tops and bottoms with some decent odds IMO
 
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