lowtrade

[lowtrade]

Any one interested in The market and what has been happening at the S&P? Or specifically happened today, at the market.

This one may become long, as I will be covering several things. Including sentiment/phycology, technicals, fundamentals, and teach about a little followed chart pattern. The expanding triangle. And why it's little followed.
------------------------------------------- No doubt now, after a proof read, it became long! But could have been longer. Hope some take something away from my babble.

I'll start with a little "waste your time" comments.
Turned on the computer to check my portfolio yesterday and everything was up strongly. Turned on CNBC to see "WHY" and the talking heads were rehashing every positive, about the longer term investor phycology.

Turned on my computer to check today and everything was strong down. Back to CNBC to find "WHY" and the talking heads were making chit up, to explain todays complete short term sentiment reversal from what they said yesterday.

LOL Have no idea why I waste my time checking what I call the big boards; message board. (CNBC or any financial TV station) I don't follow OTC message boards, why check the TV expecting actual facts other then opinions. Worst yet opinions which change like the weather.

At any rate habits are hard to change. I know this, but always end up looking for "why" where I know I won't find the answer. LOL

Ok here's why I'm wasting your time posting about that. I'm an individual trader and determine my opinion on my own evaluations eventually. Making sense of the S&P takes work and time. Which I just spent the last hour doing. But can't seem to kick a bad habit and check CNBC as a knee jerk reaction to surprise. Just wanted you guys to know I understand why it's so hard to stay away from message boards. Shees.
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Now to my technical market up date; obviously the "V" bottom continuation, I've been hoping for, has officially failed this Monday. When the throwback break didn't keep going.

The chart pattern which followed is one few Technical Annalist use. It's been a subject of argument for years. Does it exist or doesn't it. Well obviously the pattern exists, but can an annalist use it to aid with trading decisions. There are 2 camps, the most excepted one says the expanding triangle is a reversal pattern, found at trending tops or bottoms. The other feels it's a continuation pattern, depending on prior trend only. Just like the symmetrical triangle.

Right now the S&P has formed an expanding triangle. Seen in dark blue. The question is, which camp should I decide to follow, the reversal or continuation camp. LOL



Expanding triangle pattern
So now it's time to teach how I use this pattern.

Reversal at tops & bottoms camp



Continuation prior trend camp



Both these chart examples are for upside eval. Reverse for downside eval.

Notice the reversal camp chart shows a reversal mid way to next trend line. And the continuation shows a double tap before continuation. I found this difference is the key. Expect a reversal, if you see a mid term reversal in price direction. And expect a continuation, if you see a double tap at trend line.

Note the black word "kicker" in the chart which made me choose reversal.

So the above S&P chart is calling for a reversal.
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That covers the technical end of this market evaluation. Now to sentiment/phycology;

Remember I say sentiment is short term and phycology longer term. Sentiment drives what happens tomorrow and phycology drives what happens next week. Sentiment is news driven and phycology is fundamentals driven. Or trade vs. invest.

Market sentiment has been in a state of flux the past several weeks. With a phycology of up trend based on market fundamentals. Presently the S&P earning stands 6.5% above last years Q and the P/E ratio is 16. Average S&P P/E being 15, so plenty of room for improvement on good earnings this Q.

So market fundamentals are positive, calling for continuation.
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Now I'll post about now non-factual things can effect the markets phycology. Meaning over 2 years without a correction. We've had 6 retraces from 3 to 5%, but not 1, long over due, correction of 10% or more. Big guys are crying for a correction. Mainly because institutional & hedge funds can't come close to the S&P performance wise. So their excuse is we need a correction, this isn't a normal market. So for the last 2 years every time the 50MA is touched, their emotion caused over reactions seen in the short term chart sentiment. Which gets bought, because of positive phycology.

The expanding triangle is a perfect example of what is called a market hysteria reaction. Or should I say over reaction. That's what the first part of this post is all about. Yesterday large up day, today large down day. And the unanswered question was "WHY" ?
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Specifically happened today.

The expanding triangle nickname is the answer to todays market action. Big guy non performance Hysteria, not FED statements, or global turmoil, or over due correction, or any other thing other then big money is scared they get caught in the over due correction and have even worst performance for their rich clients, While retail investors are positive on continued positive earnings and free money from the FED, buying every dip before correction. IMO

So lets rap this up;

IMO
Time to trade FAS/FAZ, I started Tuesday, after Mondays cause of the "V" bottom failure. Had 2 nice trades based on the S&P futures premarket direction. As the big guys change their minds every day. Causing the markets instability for a while. Event with the negative expanding triangle chart. I don't feel sentiment hysteria will over power philological continuation for a 10% correction, with positive market fundamentals. At worst, we may see another 4% buying op dip to chart pattern target of 1930.

Chart shows short term hysteria fear, fundamentals show long term continuation phycology. Short term FAS/FAZ seems a logical place to be. While the knuckle heads, talking heads, and big guys, play instability for a while. When trend comes back in a few weeks, I'll start stock picking again. But IMO, till new trend, the shifting wind could produce many 97% of 500 S&P stocks to shift up or down daily on emotions. Just like the last two days.

And that opinion is completely based on the fact there is now a expanding triangle pattern, saying market indecision to hysterical levels. The only thing mathematicians can agree about a inverse symmetrical triangle is it implies hysteria in the stock seen with it. And the FAS/FAZ 3x ETF is great for day trading hysteria.

Need to watch pre market S&P 500 futures and buy the open, depending on pre market direction. FAS up or FAZ down. This can be very lucrative if you get good at it. Because during large price swings, you can make 2 - 3% a day, instead of 2 -3% per week swing trading.