Chip:
This kind of market can kill an option trader. Generally, the things I use result in fairly exact identification of market turns that will last for more than a month or so. Several things must happen very near the same time for these to work. However, since July, I have not had crisp readings and things will not happen at the same time. So things appear off. I had thought that the personality of this market had changed. Maybe it has.
Currently, the market has the stored energy to move up. However, as you note, the catalyst is missing. I think fundamentals support market psychology after it has changed. For me, the catalyst must be the market's conclusion that we can go down no further or we can go up no further.
Back on September 10, there was a market conclusion that we could go up no further. I noted it as a major failure to move up. We should have moved up smartly that day but did not. So we moved down fairly hard.
I am looking for the opposite now. However, I would prefer to see something definite. There should be a reason for a strong move down with the market failing to go down. That would be a market conclusion that it will not go down. Once that understanding occurs, the process of piling on the rally starts and volume builds. That is why volume is so important to me. It shows the market's fear that it may miss out on something good. At key turning points, the market feels and acts like a single individual. Sometimes, there will be a 4 or 5 hour grace period in which to perceive this. Sometimes, it may stretch over a two day period.
Something could happen in the next week unless volume dies after the end of the quarter today. Currently, the individual is still part of a confused mob. Over the next week, look for the following. We will believe the market will go down hard. However, it will only go down a third to a half of what we expected. Then it will refuse to go down. At that point, you should sense this failure yourself. You will be saying it mentally. If it is a pronounced action, that is the moment that the market will act as an individual and begin to turn. Then, the piling on starts.
We are now set for this to happen. Whether it will or not, I have no idea. The only thing I can do at this time is try to identify the action and see it for myself. If I can see it occur as I have explained, I will make my money. |
