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[ 本帖最后由 hefeiddd 于 2009-3-23 10:56 编辑 ]
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Index Support Shattered and Dollar Hits New Low
October 19th, 2007 by Corey Rosenbloom
The headline may sound like something out of The Twilight Zone but that is exactly what happened with the anniversary of the 1987 Stock Market Crash on October 19th, or Black Monday.
The Dow Jones Industrial Average surrendered 367 points (-2.64%), which drove price definitively through the rising 20 and flattening 50 period exponential moving averages, which have served as temporary support.
The gains from the Federal Reserve Decision have almost been eroded, and the momentum reading registered a new low, warning of potential new price lows (at least lower than the current price) are likely to come soon.
Divergences with momentum are resolving to the downside, yet there are indeed bullish technical factors to consider… albeit weak factors.
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/dowoct19.png
Price appears to be completing a violent sell swing, yet volume did not spike to a higher level, adding a bit of hope for the bulls.
Our Momentum Oscillator (3-10-16 MACD) did not yet make an official new low, yet it did register a lower relative low.ÂA new momentum low will be set in place should price continue to decline.
Expected support was shattered today.ÂSupport potentially could arise from the highs of the consolidation area from August 20th to September 17th.
The Weekly Dow Jones Chart offers a bit of hope for the bulls, as price terminated at a potential support zone:
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/dowoct19w.png
A momentum divergence has developed (and is possibly resolving) with price.
Bulls can hope for price to support at the rising 20 period exponential moving average, but should price falter and fail through this level, the bullish case will be severely questioned for validity.ÂThe next likely support - should price decisively break 13,500, may be the psychological support area of 13,000 which also corresponds with the rising 50 period moving average.
Again, price may find support at the 13,500 area at the consolidation zone established last month.ÂTime will tell.
Looking beyond the Dow Jones, the US Dollar Index made a new index low today, meaning other currences strengthened relative to the US Dollar yet again.
I highly recommend an excellent yet brief and easy to understand article from Aakansha Singh entitled “sagging dollar” which details what a new index low means, as well as why it is happening and what the implications might be for US citizens.
Now, let us view the strong downtrend in the Dollar Index:
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/dollaroct19.png
Price made a new low yet momentum failed to make a new low.
The posture of the moving averages are ultimately bearish, with the 20 period a distance from the falling 50, which is very far beneath the 200 period.
Until the trend is changed, the trend is in force, and we can expect lower prices in the US Dollar Index.
With the stock market in potential overall weakness, and the fact that October has historically yielded a few shocking surprises for the market, one might do well to be overly cautious at this time.
All the best.
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Momentum Divergence Example
October 18th, 2007 by Corey Rosenbloom
The momentum divergence concept can help you exit a trade near the expected peak in price, or it can help you enter a position with a relatively high probability of success.
Recall that the price action moves in waves, as the overall supply/demand imbalance in a trend shifts from buying, to profit taking, to more buying, to more profit taking with new short positions, etc.
We can use various momentum indicators to measure the length of the relative swings to each other, in an attempt to visualize increasing or decreasing pressure on the side of the more dominant market force (buyers/sellers).
We compare price highs and price lows to customized oscillator highs and lows. We want to see confirmation in the indicator with the price structure, but non-confirmations warn of price divergences.
Let’s look at a recent picture-perfect example:
DIA on October 15th (5-minute)
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/101807-1631-momentumdiv1.jpg
There are actually two forms (trendlines) of divergence occurring here. There are the shorter term swings and the longer term structure.
As price is making new lows on the day, momentum is making higher lows on the day, meaning sellers are losing ‘momentum’ in pushing price lower. We should be expecting a bullish/buying resolution to take us to the price where the divergence was first observed.
There are four new price lows in the DIA, and four higher price lows in the oscillator. Eventually, buyers resolved the divergence with a strong move into the close towards the upside.
Let’s look at the same move from a chart in TradeStation:
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/101807-1631-momentumdiv2.jpg
When you see a momentum divergence, especially a lengthy one, you can use it to exit your position at a new price low (with non-confirmation from an oscillator), or you can be aggressive and establish a speculative position that the opposing force will prevail.
Because this is a countertrend trade by nature, it is best to use absolute stops if you are speculating against the trend.
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Updates to Overcoming Fear Page
October 16th, 2007 by Corey Rosenbloom
I have updated my links to posts I have written, and links I have compiled (and am developing) on my page (link in upper right of blog) entitled “Overcoming Fear.”
After all, overcoming fear and gaining a solid education to approach trading with renewed confidence is what this blogsite (and eventual website) is all about from a practical/actionable standpoint.
Education is wonderful, but there comes a point in time where you must apply your learning to gain experience.
It is my intention to continue to write posts on my insights and experiences as to market education and overcoming fear in trading, and I will continually update that page with new posts and links. Please keep checking back and reading the articles and I appreciate all of you who do and those who have benefited from the site or interactions.
Also, browse through some of my strategies and trade set-ups I use most frequently on the educational component on the site entitled “My Strategies.” Although I’m lagging behind in updating this section, I will continue to do so in the next few weeks.
To get you started in overcoming your fears and anxieties, I have selected a few posts from my blog for further reading. Be sure to check out the most updated list on the “Overcoming Fear” link above:
How to Overcome Deer in the Headlights Syndrome
Ride Out Emotions for Greater Success
Shifting Focus for Greater Success
Regret Aversion
To Over-Conservative Traders - Comments from a Master
How do Emotions Affect my Trading Targets?
Also, don’t miss my page on Fear Links - including the Four Fears of Trading - as written by Price Headley.
If you have any articles/blog posts, or know of any particularly helpful posts from other authors, please send me a comment or email so that I can link to that source.
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Corey is visiting Chicago this weekend
October 15th, 2007 by Corey Rosenbloom
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/chicago.jpgAs the headline states, I will be traveling to Chicago from Friday, October 19th until Sunday, October 21st. I’ll still try to keep brief posts and perhaps share a few weekend reading links.
I will be visiting a client in Chicago and touring around the city, but also wanted to extend an invitation to any blog reader/trader/MTA Member who lives in or around Chicago.
If you would like to network with me, or meet me, I will have some free time during my visit and encourage you to say ‘hello’ and would like to meet you as well and perhaps have lunch or dinner as a group.
If you would be available during that time, please contact me at corey AT afraidtotrade DOT com to connect before a possible meeting.
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It’s my first visit to Chicago, so I’m excited to see what this great city has to offer!
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[ 本帖最后由 hefeiddd 于 2009-3-23 11:03 编辑 ]
Dollar Continues its Decline
October 11th, 2007 by Corey Rosenbloom
The US Dollar Index ($USD) looks ready to continue its decline, as signs of a bottom are yet to be found.
Let’s view the chart briefly:
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/101107-1732-dollarconti1.png
Price has made a new momentum low, which has set up the “Impulse Sell” signal after price returned to the falling 20 period moving average.
New momentum lows often forecast the actual price low has yet to come. If we were setting up a trade in this, we would target the most recent price low for an exit, yet price often continues to decline further than the recent low in the “Impulse Sell” condition. One may ask “How much lower can the Dollar go?”
The structure of the Weekly Chart offers no clues of a ‘bottom’ either:
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/101107-1732-dollarconti2.png
The weekly chart indicates that we may test up to the $80 index level, but if price fails to reach that point, we could be in more serious trouble.
The momentum oscillator recently recorded the lowest level of 2007, again forecasting lower prices are yet to come (but not instantly).
The Dow Jones may be making new highs, but the US Dollar is making new lows.
It’s not a picture of strength that allows American to celebrate as jubilantly as the Newscasters would have us believe.
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How Do We Play Overextended Conditions?
October 10th, 2007 by Corey Rosenbloom
Many market participants, as well as many oscillating indicators, are calling the recent market action “overextended.”
By definition, price is overextended, but does this always imply a price correction because price is overextended?
Absolutely not.
What does overextension mean?
By definition, a price overextension is evidence of extremely strong and sustained buying or selling pressure, and an immense imbalance in short-term supply and demand.
While many traders are tempted to ‘fade’ market strength and try to enter new short positions against the imbalance, essentially ‘betting’ that the imbalance will resolve itself, doing so generally is not the wisest course of action.
For starters, what is your ‘entry’ signal? Where exactly do you enter a position against an overextended price move? Is there a specific set-up you look for? How do you define overextension?
Instead of trying to ‘fade’ a move, why not trade in the direction of the strong momentum?
One simple technique involves identifying the number of closes on one side of a 5-period moving average as a gauge of strength of recent price action.
In addition to using the 5-period moving average filter as a ‘trend’ indicator (multiple closes on one side indicates a strong trend), the average can serve as a place to set your trailing profit stop, so that you stay in the trade longer than you normally would have, but don’t give up too much in the ‘impending’ retracement or reversal.
Let’s look at a few recent examples:
http://blog.afraidtotrade.com/wp-content/uploads/2007/10/101107-0253-howdoweplay1.png
If we expect a trend condition, we can use this filter as a point of confirmation that we should remain in a trade (or at least not enter a short-trade if we’re out).
Look at the number of CLOSES (closing prices) on one side of the MA (blue line). Stay in your trade â
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[ 本帖最后由 hefeiddd 于 2009-3-23 11:09 编辑 ]
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What’s happening at a glance right now?
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[ 本帖最后由 hefeiddd 于 2009-3-23 11:17 编辑 ]
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