Archive through December 29, 2004

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alann

Member

Post Number: 30
Registered: 05-2004

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Votes: 4


Saturday, November 13, 2004 - 02:27 am:

Mosaic1996,

What is Ranging? What is the trading psychology that causes it? And, how do you trade it?

What is a Head and Shoulders pattern? What is the trading psychology that causes it? And, how do you trade it?

Each of these patterns and all other known patterns are caused by a certain trading psychology in the market. And, having recognized the pattern and what possibilities it offers stock prices in the future, gives us a clue as to how to trade that pattern.

A False Breakout is also a recognizable pattern that develops because of a certain market psychology. Having recognized a False Breakout pattern there is a certain way to trade it based upon the future possibilities of stock prices due to this pattern.

The pattern that is developing in my POST above is taking the shape of a false breakout. The psychology that causes false breakouts was also described in that POST. It is a known fact that when False Breakouts occur they are caused by a certain trading psychology of the Pro's (floor traders) and public buyers and sellers. And there is a known POSSIBLE future direction of stock prices based upon this pattern as there are with all chart patterns.

Having recognized that a False Breakout COULD be developing all I did was describe the known trading psychology that causes these breakouts occur. Read Dr. Alexander Elders book entitled "Come Into My Trading Room".

Now having recognized that a False Breakout pattern is developing, I am not so nieve as to think that the market must retrace back into the trading range it broke out of. As we all know, any developing pattern can breakdown if there is a change in trading psychology. I also know that if there is a change in trading psychology this would be extremely bullish and could propel the market much higher. But that change in psychology has not yet taken place.

So here is my position: The current trading psychology of the DOW components is producing a False Breakout pattern for the DJIA. A False Breakout pattern completes itself when prices fall back into the trading range from whence it came. Prices start falling when public buying volume dries up, which it has been doing for the last 4 trading sessions. Should the trading psychology of the DOW components change and the DJIA respects the resistance line by bouncing off it instead of breaking back through it will confirm the continuation of the previous bull market trend. Until then, the DJIA is still ranging with a slight downward, bearish, bias and the False Breakout does not change that.

Am I a desperate bear? No! The market just simply has not yet done anything to confirm a change in direction. And that direction is from a trading range to a trading trend.

So you see, I am following the trend because it is my friend.

How do you read the current chart pattern, what is the current trend, what do you say is the trading psychology behind it, how has the trend confirmed itself, and how do you trade it?

Alann,

I cannot predict the future I can only follow the trend. Why? Because the trend is my friend.

iwillwin

Member

Post Number: 23
Registered: 10-2004

Rating: N/A
Votes: 0


Saturday, November 13, 2004 - 11:21 am:

Hi

so far the trend id up the next few weeks shall reveal all..

for now im a bull and am loving it! hint,hint "$$" :-)

bye

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andrewk

Member

Post Number: 197
Registered: 09-2003

Rating: N/A
Votes: 0


Saturday, November 13, 2004 - 12:26 pm:

Which trend is your friend?

The short term trend is currently bullish.

alann

Member

Post Number: 33
Registered: 05-2004

Rating: N/A
Votes: 0


Saturday, November 13, 2004 - 11:46 pm:

iwillwin,

Which trend is up, long, intermediate, or short term? What time frame do you look at, how have you identified this trend as being up and how has this trend confirmed itself?

Andrewk,

Same question. How have you identified the short term trend as being up, what time frame do you look at, and how has the trend confirmed itself?

My Response to AndrewK's question:

I am a short term trader so the trend that I follow and is my friend is the short term trend.

Alann,

I cannot predict the future I can only follow the trend. Why? Because the trend is my friend.

iwillwin

Member

Post Number: 25
Registered: 10-2004

Rating: N/A
Votes: 0


Sunday, November 14, 2004 - 01:30 am:

Hi

I follow the 1 hour and 1 day charts, i use the intra day charts to come in on the current trend when price meets my entry point.....from there on its a battle with the mind...

the 1 hour trend shows me whats happening now as it fluctuates arround a certain price...i try my best to come in near the 63 day ema on any trend.

bye

alann

Member

Post Number: 34
Registered: 05-2004

Rating: N/A
Votes: 0


Sunday, November 14, 2004 - 09:07 am:

iwillwin,

In your POST above you said that the trend was up. What trend is up and how has that trend confirmed itself?

Alann,

I cannot predict the future I can only follow the trend. Why? Because the trend is my friend.

iwillwin

Member

Post Number: 27
Registered: 10-2004

Rating: N/A
Votes: 0


Sunday, November 14, 2004 - 09:54 am:

Hi

the 1 hour chart is just flying upwards with a bit of sideways movement after a good run up....

OK, well to me the twiggs money flow 100 is above its signal line, 63 day average volume is increasing and the main factor....the price is increasing session by session!!

i'm looking for a juicy correction if it does occur, otherwise it will just keep on going!

i follow the price on the 1 hour chart so i guess the trend im following is on this cycle...also what i noticed was that price did not drop much below the 63 day ema in the rescent run ups....

hope this helps.....by the way have u traded the dow?? or are you looking to?? just curious :-)

bye

mosaic1996

Member

Post Number: 1026
Registered: 01-2003

Rating: N/A
Votes: 0


Sunday, November 14, 2004 - 10:45 am:

Hi AlanN,

Seeing that you didn't answer most of my questions, I won't answer most of your questions - fair?

How do you tell 'a break out' from a 'false breakout'?

We probably agree that the art of the chart..... 'is to (attempt to) read the (trading/investing psychology) that is driving the market from chart patterns'.

What this trading/investing psychology comes down to is supply and demand, or more directly money flows. So in my opinion, we are trying to interpret the past and the likely future money flows from price (and volume) action on the chart.

To help you understand the way that I think I will give you a very simplified version of my market model and the forces that drive it:

a) the dominant forces that drive markets are the actions of traders and active investors
b) ranging markets are dominated by the actions of range traders
c) trending markets require strong and decisive action by active investors to get a trend started, which is then supported by trend traders, and then supported by passive investors
d) range traders become trend traders and vice versa, and can be active investors as well - i.e., they are not mutually exclusive.

In an early post I said that I believed that there was a lot of money on the sidelines, and that once the election was out of the way this money would start to flow into the equity markets. In terms of my market model, significant 'active investor' money was likely to flow into the equity markets which would change market dynamics from ranging/consolidating to trending (up)..

According to TrimTabs, big USA buck$ have been flowing into equity funds (both USA and Global) since the election, which is consistent with the recent behaviour of markets. Surely money flow information gives us a direct insight into the psychology of active/passive investors - a major driving force of markets, and hence it is unnecessary to second guess the chart!.

Am I certain that the USA markets have broken out, rather than a false break? No! However, it does appear to be following the path that I anticipated in my early posts.

Can't resist being a bit silly. Is the following a H&S pattern? I know it IS upside down, but it is the only one I could find at short notice.....

Cheers, and Good Luck,
Mosaic

alann

Member

Post Number: 35
Registered: 05-2004

Rating: N/A
Votes: 0


Sunday, November 14, 2004 - 11:36 pm:

Mosaic1996

I think now I know where you are coming from and I think we are both looking for the same thing the future direction of the market. However, the way I am seeking direction is through Technical Analysis (Reading the chart and its indicators) and they way you are seeking direction is more from other sources. Since this is a technical analysis forum I tend to dodge questions, etc, that would lead this forum in other directions. When I first started this forum I stated that it was a technical analysis forum and that I was hoping that others would get involved in some good technical analysis of the DJIA. For the most part this has been accomplished and I anxiously sit here waiting for others to contribute with some good solid technical analysis of the current behaviour of the DJIA. I would like to know how others are currently reading the charts and applying indicators to their analysis. Personally I am not interested in fundamental analysis in this forum but also stated in my original POST that it would be good for someone to also initiate a Fundamental Analysis Forum. I am a Technical Analyst not a Fundamental Analyst so I do not feel that I should start such a forum but would be interested in seeing all you good Fundamental Analyists' POST's in such a forum.

It is my hope that as this forum goes forward from here that we will all get into some good healthy Technical Analysis discussions. To define my view on Technical Analysis it is the reading of the charts and indicators to determine the current condition of the DJIA (in this case) and to define risk/reward and entry and exit points from our analysis. I am also interested in how the current trend or lack of a trend has confirmed itself.

Sometimes a little silliness is good, it helps to keep us smiling and laughing.

Alann,

I cannot predict the future I can only follow the trend. Why? Because the trend is my friend.

rederob

Member

Post Number: 468
Registered: 10-2002

Rating: N/A
Votes: 0


Monday, November 15, 2004 - 12:27 am:

Alann
Let me briefly rain on your technical parade.
I am not a technical analyst but add these distractions.
It's no use knowing what the temperature is if you don't also know other other things that affect its impact. In this analogy knowing humidity levels would be useful, although relative humidity would prove the better measure (as saturation vapour pressure is a function of temperature).
Knowing the prevailing season is also important as it impacts the probability of temperatures moving higher or lower going forward.
It seems that the point of your technical analysis is to determine the trend (and use this for investing/trading purposes going forward).
So I am unsure of why this thread is not looking more widely for significant technical indicators that assist validate trend direction - I assume there are dozens of these.
Not endowed with your technical skills I look for simpler indicators that can prove effective. In this case the 20monthma crossed the 40monthma in October 2004 suggesting go long. The opposite occurred in April 2002, suggesting go short.
In my airconditioned office it's irrelevant what temperatures are outdoors, tho I do enjoy hearing rain on the roof.
All the best with this exercise and apologies for fundamentally interrupting this thread.

smallworld

Member

Post Number: 64
Registered: 01-2004

Rating: N/A
Votes: 0


Monday, November 15, 2004 - 12:35 am:

Has anybody seen the divergence between DJIA and SPX. I notice Mosaic you probably have. SPX is leading the race, and IXIC is catching up real quick too. There is no false break in SPX or IXIC (or unlikely given the move we have had)
Usually the sweetest moments to trade is the first 2 weeks after breakout from consolidation. However, we will never know its a breakout for sure until we look back at our rear vision mirror.
If you look at mosaic's chart. Have you noticed how strong the SPX has been since March 03, not only by the strength of its trend, but by the amount of retracements it has given back - a total of 25% of last drive, and thats looks a strong trend to me. I dont discard for one moment the bearish possibilities here, but I can always get out when I am wrong.
Alan, on Friday 5/11 (or 11/5 from the US), you indicated that close of that day will indicate the story, and on sunday 7/11, you are waiting for ADX to confirm. Have your position changed or are you still defending the bear.
sw

(Message edited by smallworld on November 15, 2004)

iwillwin

Member

Post Number: 28
Registered: 10-2004

Rating: N/A
Votes: 0


Monday, November 15, 2004 - 07:58 am:

Hi all,

i just wanted to say something....

to all those who are trading dont let no ones comments disturb you....as long as your personal objectives are accomplished by your trading skills nothing else matters....

to all those who must be right...forget about it...if your always waiting for confirmations of price movements your missing the whole objective of trading..you people will always miss the opportunities which are placed infront of you...and you will never make the real $ which the market offers....

and to all of us who know how to keep it real....just make sure the losses are smaller then the wins!!!

final word, we are here to make a profit so if thats not your reason we dont need your input on anything!!

this is not an attack but just a feeling i get when i read some posts...so may god bless us all and increase our bank
balances!!! :-)

bye now

alann

Member

Post Number: 37
Registered: 05-2004

Rating: N/A
Votes: 0


Monday, November 15, 2004 - 08:41 am:

smallworld,

My comments on 11/5 was that the daily chart could be tracing a Kangaroo tail and that if it was a kangaroo tail we would know by the close of the DJIA on Friday. Obviously as it turned out it was not a Kangaroo tail. My comments on the ADX on 11/7 was made in reference to the weekly chart and not the daily. So obviously these are two different time frames and two differing TA's. Don't let the differing time frames trip you up. One time frame can trace out one trading pattern while another time frame can trace out a completely different pattern. Sometimes one time frame can even be bullish while the other bearish. So we must always pay attention to the time frame being analyzed.

As to if I am still defending the bear stay tuned for my next WEEKLY TA.

Alann,

I cannot predict the future I can only follow the trend. Why? Because the trend is my friend.