Yesterday’s action was no surprise, a big sell off. The indexes moved up on Wednesday a little more than I thought, but no real surprise there, just before a sell off, drawing in those who wanted higher prices. Wednesday I said that at the open we should see some continuation going higher by a few points, but once the trajectory of the up move is broken, you will see the wave down to lower prices. We needed to see how deep the sell off was going to be and if the market could support itself above the last pivot low and hold.
Well, we did just exactly that, but the sell off was already a little deeper which says we may be going lower on Monday. In addition, there was no bounce off the bottom and the market closed at its lows for the day, usually not a good sign. As of now the neckline has not been broken, but I would have to say that it does not look too good. The daily chart is definitely in a downtrend and has been for some time. The rally last week was a reactionary move back to the middle of the range and that is why I was looking for lower prices. The part that we didn’t know was by how much and how soon. Well, we are here now and to explain things a little further I put together a 5 minute video showing the price action and what we may expect over the next week or so, so check it out.
I have not been trading lately, my connection is still being restricted and I think I have two more weeks before I get my full bandwidth back. I will have to watch my screen time so that I do not go over my alloted usage of 5 gigs download and upload. The satellite venture was a failure, trying to get more speed into my system. I have heard there is another company that seems to do a better job, but I am a little worn out right now with the whole process.
This has been a good time for me to take a break anyway. I am not anxious about it, because I see the volume on the board has been very light. I hate that. It seems that the open is the only time worth trading, say the first hour. After that everything seems to have slowed down to a snail’s pace. That can work heavily against you, by testing your patience. You wait and wait and the market seems to do nothing and then, you put a trade on and it goes no where. That is not good. Even the afternoon trading is terrible. People are on vacation. It usually happens this way every year. So now is a good time for me to get things in order, rest up, and get my bandwidth and connection problems behinds me.
TRADING IDEA’S TO CONSIDER: Anyone who is trading, now is a difficult time, so be careful. The market is not giving very many opportunities to get ahead and or recover for those underwater. You have to be much more selective and wait for the good trades.
Everyone who is currently trading, I believe you should be keeping a journal of your progress. Ask yourself before you take a trade, does this trade line up with my method and name out the key points. You should even make a check list and before entering a trade, or as you think a trade is developing, start marking off the characteristics of your method for taking the entry. Does this trade have this present, that present, and the other, what ever your entries call for. It only takes a few seconds and I think you should check it off as it comes together. This will keep you from getting clouded vision and reacting from emotion.
All of your training and practice will boil down to this: are you taking base trade setups? Meaning are you following your method or system. If you are not, it will be easy to identify where the problem is. That is why you need to have a daily loss limit, so that you have time to catch yourself before you bleed out. Every trader should do this. Yes, it takes time and effort to make up a sheet that has a check list on it. In fact, if the market conditions change and they so often do, you can have different sheets made up for different strategies. That way you have before you your map to follow. If you don’t have a tour guide, you will get lost in a foreign country, for sure. How will you know where to go? But if you have a guide, you can easily follow your guide and or your map. This takes the stress away and frees you up to be on the lookout for your trades. Having all of your ideas only in your head adds more processes to compute and slows down the computer in your mind, but by writing it down and following a quick check list of things you are looking for, will free up valuable disk space for more meaningful insight into where do you go from here. Doesn’t that make sense? And if you follow it, it will make dollars too.