Trading the Indices on Fundamentals

[FXtrader8911]

I still have yet to see

You are not alone... conditions for recovery are not there yet, the bottom is hard to pick however selling the rally is less of a risk than buying the dip at the moment. Too many loose mouths and too much heavy-handed draconian measures announced, both cause panic, one needs to look past this and focus on the economy. Many businesses will close, particularly small businesses, unemployment will skyrocket so the consumer that was driving the economy until Feb is evaporating.

Trump is proving not to be a good leader, he's running around like a chook with no head, making meaningless comments but doing nothing for business and in the absence of a "master plan", the state Governers are resorting to draconian measures which in my opinion are adding panic but solving little.

Myself, I consider any rally within this bear market as a selling opportunity, the bottom will find its own level when the impact on the economy has been assed... trying to pick it now will cause pain.

THANK HEAVEN IT'S FRIDAY!

 

[expiated]

...the bottom will find its own level when the impact on the economy has been assed... trying to pick it now will cause pain.

I know you trade based on fundamentals, which I can fully understand given that I'm aware of guys (or at least one) who met with steady failure until they started trading fundamentals, after which they became very successful. But I'm just the opposite. I trust the numbers much more than I trust my assessment of fundamental influences. For example, if I were an investor (which I'm not...I'm a day trader) I wouldn't start buying again until candlesticks started forming above a climbing 12-period SMA on the monthly chart:

 

[NotKnown]

Picking a bottom is almost impossible but this is a daily of one of my charts. We are still sitting in bear territory and until we move above the mid (black line) a long on the index would be tough. We may push sideways before a further drop or rise. It will depend on how quickly the effect of the virus is brought under a measurable control.

 

[expiated]

Picking a bottom is almost impossible but this is a daily of one of my charts. We are still sitting in bear territory and until we move above the mid (black line) a long on the index would be tough. We may push sideways before a further drop or rise. It will depend on how quickly the effect of the virus is brought under a measurable control.

Most of the advice I read while I was first learning to trade supported the contention that "picking a bottom is almost impossible," but I rejected this notion and I'm glad I did in that identifying tops and bottoms is my "bread and butter" and helps me to maximize profits. It just seemed counter intuitive to me to hold that probability and statistics are unable to convey what is happening with price.

Like you wrote: "...until we move above the mid (black line) a long on the index would be tough."

This is exactly my point. I think it IS impossible to predict tops and bottoms and therefore completely avoid any kind of approach that bases decisions on predictions. However, once the numbers have indicated price is no longer rising and is now falling...I sell. When the numbers say price is no longer falling and is now rising...I buy. It's not about ME "picking" bottoms, but rather, it's about listening for when the MATH says it has painted a picture establishing that a bottom has now formed, which as you pointed out, ain't happening yet.

 

[FXtrader8911]

I'm aware of guys (or at least one) who met with steady failure until they started trading fundamentals, after which they became very successful. But I'm just the opposite.

Fundamentals or technicals? Either one can give you success in trading, just a matter of how you trade, your time horizon and your pain tolerance. Technicals measure sentiment, sentiment often goes against fundamentals so you can successfully trade that on day trades. However, indices reflect the projected earnings of a group of companies and earnings are very much relative to the economy, therefore there comes a point that sentiment no longer is the driver so markets settle on a fair value i.e. if you trade longer term, the targets estimated on the fundamentals are likely to be reached eventually, perhaps just momentarily, but markets do get there and stay there till sentiment again takes the driver's seat, then the process restarts.

Tops & bottoms can be estimated using fundamentals but because of sentiment those levels often overshoot that's why you can't pick them with any accuracy. Euphoria overshoot on the up-side (as was the case till late Feb) while pessimism and panic overshoot on the downside (as is the current mood).

My final word on technicals v fundamentals is that either is a ligament trading strategy, however, using only one and ignoring the other is a sign of laziness that can cost you money.

 

[FXtrader8911]

until we move above the mid (black line) a long on the index would be tough

Feel free to post more of these graphs on the DOW, particularly whenever I might give a view based on the fundamentals, it's always nice to see what the technicals are telling us and how they compare to what the fundaments are pointing at.

 

[NotKnown]

using only one and ignoring the other is a sign of laziness that can cost you money

Indeed, I always keep an eye on both as you should.

Feel free to post more of these graphs on the DOW

When I see something of interest I will post up a chart or 2

 

[NotKnown]

Interesting night on the DAX

We have a hook turn on the daily with a cross over so tomorrow might be interesting. Problem is in the current environment a reversal is always a probability. Will have to find out why the market went for a run but a great short term trade

 

[FXtrader8911]

I'm not calling a bottom as the economic impact of the virus is not yet clear, however, I do think that things are likely to improve from here. The medicine of lock-downs of cities might help save lives but then people are losing their job, their ability to pay rent, pay mortgages and many small and not so small businesses are going bankrupt. I believe the people themselves will ban together to say no more medicine "I'll take my chances" and so the economic damage will cease. At that point, the figures can be calculated and a bottom also calculated. Trump's current tone is leaning towards the above, particularly as Congress, despite the emergency, is delaying the rescue packages on "principal", "stupidity" and "general bickering"

Today I have turned net long on the DOW & NDAQ while also keeping watch on the other markets to turn long when I think it's appropriate to do so.

 

[NotKnown]

I'm not calling a bottom as the economic impact of the virus is not yet clear

Nor am I but the chart above does give us a clue. Usually if we are forming a bottom of sorts you will see all markets mirror each other in terms of their progression. That is not the case yet hence we need to see what happens today/tonight. Monster trades are still to be had intraday. I suspect the economic impact will be sustained for some time to come. Markets will be factoring this in so there will be many a wild swing to come.