Once every quarter you will read a quality post in here.
(17 votes, average: 4.18 out of 5)
Loading ...After predicting accurately where the S&P(futures) would be in September (http://www.ibankcoin.com/peanut_gallery/index.php/2009/07/18/a-different-market-view/)  I am back to do another post here at iBC. Hopefully this time I won’t get much grief by clowns like Zmoose about my grammatical errors. I have said it many times before that I don’t use technical indicators they are the destruction of the retail investor, seriously if you trade based on a MACD or RSI you should just quit. That is why I feel that most iBC contributors who use those Lie!!!! You all Lie!!!!
There are several issues with such indicators for example an RSI(14 or whatever) assumes that the market moves is 14 period cycles all the time, as we all know that is not true. Market change all the time they do not move in fixed cycles. The other issue with this type of indicators is that they will always diverge when markets make a higher high or lower low. They will give the impression that the market should follow suit, that is false what people tend to forget is that price leads those indicators not the other way around. Price doesn’t follow indicators!!!!
Anyways I predicted that the market would touch 1070 (http://www.ibankcoin.com/peanut_gallery/index.php/2009/07/18/a-different-market-view/) Â by the end of September, and here we are September 21 today and last Thursday market touched 1071.50. Where do we go from here? I have been shorting here with very tight stops as I am unclear about the current direction. The 1070 -80 is a MAJOR resistance area, that pocket has not been seen for over a year (see picture below).
Market Profile 1 year view.
As we can see that 1070 has no volume on simple terms that is the selling tail. For that condition to change a large buyer has to come in and move prices beyond this area, if not than anything close to that area should be sold. If we look at a shorter perspective of Market profile we will see that the market continues to build value higher (see picture below), and as seen on the picture (above) the 1060 level has got quite a bit of volume recently.
20 Day Market Profile view
The blue boxes offer key reference area or support levels that need to break for more downside.
From a structural stand point we have to see a clear brake of 1050 for something more significant to the downside, but due to the risk reward factors I am only taking short trades (with tight stops).
I am not a market profiler, but am intrigued by it. Thanks for your post and insights. I prefer to use these indicators as confirmation of my ideas, especially for the bigger picture. I find the market usually goes further than the bears expect and not as far as the bulls want . Still room to run long side but after 400 points up caution is the word obviously for longs. The ‘head and shoulders” pattern was negated in July, and it seems the dollar demise may be part of the asset inflation, with the admin trying to regain the 900 area (year open) to get mom and pop back in the game.
Lots of unfilled downsde gaps.
daily http://www.screencast.com/users/eminiwizard/folders/Jing/media/12f273f5-d3c5-44c9-9881-4aec6a49afd0
weekly http://www.screencast.com/users/eminiwizard/folders/Jing/media/94396013-5acb-4db3-bc08-98c2de764174
my 2 cents. not sophisticated like you. great call on 1070.
Macd and other similar indicators are “ok” is range markets …. they will ALWAYS show the patters that you just showed. If they are great on weekly’s why not daily’s? Those things have been repackaged and sold to the retail 1000 times how many more time’s do people have to use them before they find out that they are useless. Anyways I don’t mean to discourage anyone to find out on their own I myself am strictly volume kind of guy. =)
Al,
Which program or setup are you using to get the market profile shown by volume?
refreshing to see something different here
There are several programs out there some of the best ones are market delta, investor RT, the first pict is a subscription to IOMT but you can also get something like http://fin-alg.com/ on the cheap side for Ninja.
An indicator/system is only as good as the discipline and money management attached to it, regardless of whether it’s based on technicals, fundamentals, magic 8-balls, etc.
On many levels, shorting because you think that 1070 is a MAJOR resistance area versus shorting because your RSI(14) says the market is overbought is the exact same thing. Without a properly managed account, you’d blow yourself up in either case should we continue to blast higher.
I still can’t understand the fascination with shorting. Can anyone explain to me why you would want to trade AGAINST the primary trend? It puts all of the risk management probabilities against you. I just don’t get it.
Dpeezy, good point about the magic 8-ball. The first thing ANY piker trader needs to learn is risk management, position sizing, and position management. Everything else is secondary. All the rest might be irrelevant.
AI, almost forgot 5*. Nice job on the post.
If you guys haven’t noticed I have only been trading long, last week is the only time I took short trades. DP the term overbought does not exist in my book not sure what it even means it usually used by people who dont understand the market and the building process……. I trade what I see and based on the Risk Reward parameters.
Does reading comprehension exist in your book?
I was talking about you specifically with the overbought RSI(14). All I was saying is that some are shorting because of risk:reward, while others are shorting because of technical indicators.
But today, you/we’re all wrong. Little does it matter WHY you went short. If you had proper money management, you got out with small losses and moved on. If you didn’t, you’re out there begging for change on the corner of 1st & 3rd.
ugh…”wasn’t” talking about specifically (instead of “was”).
The levels that I highlighted are 1070 (with 1060 support) ……please pay attention. The day is not over I usually dont trade intra day noise.
Well done.
Al, good call, back in July.
I must take issue with some of your blanket statements.
First, there are some indicators that work, some that used to work and don’t now, and some that never worked. I did an extensive test of the MACD, and it doesn’t really work as most believe it does. It can work as a contrary indicator simply because the last 10 years have been a period of strong mean-reversion.
However, some indicators work very well, and no matter how you test them, even testing the results for significance, they work.
They just don’t work for you, and that is fine.
Everything is relative in the stock market. Everyone is trading differing time frames, issues, setups, biases, etc. What works for one person may not work for another due to trading style, personality, etc.