TB:" Libido Ergo Sum "
>DJIA was really interesting today, and brings home the point I want to make. We came right up to the daily DTL and 50 day EMA and retreated. It was Intensity !
yes, it was! Even though you and I were both sittin' on the dock o' the bay, we had that index pretty much wired, dude.
Drawing the DTL from CLOSEs, the precision of our ~104.5 exit for any long, T+3 trade made this week was startling. I am thus inclined to interpret such as the essence of "a technical correction".
If we consider, draw another DTL from DJX-30 HIGHs, 25-AUG and 10-SEP, there is still some wiggle room up there between 104.5~106.5 roughly = DOW 50d EMA +/-100 points.
And above this area, on my DOW chart I have placed a DownTrend Line construct parallel to and potentially indicative of a larger, DownTrend trading range-channel. As there is no "second data point" for this magic line, it is a purely speculative measure of upside mo.
In my gut, Berney, a clean bounce from "DOW 10,000" would be so elegant as to border on the fantastic. As DOW10K is a purely psychological support, I must interpret the apparent lack of fund outflows, indeed - fund inflows - and other buying as being: purely psychological at a magic number perceived to have "value".
That being said, DOW ~9900 or, just one more bone down on SPY ( ~122.5 ) would have signaled my next, "2x" dip buying trigger... hence my plea (18-OCT) at the time: WE NEED MORE PAIN.
I think it is important for us to examine the differences that exist between the DJX-30 - index, and the actual DIA - index trading vehicle.
Gersh, who is an active index trader on paper and in fact, has made some important observations in this regard. For it is one thing to have the DOW index chart "wired", and quite another thing to endeavour to trade the available DOW index vehicles.
Yes, these vehicles follow the DOW index but, they are derived from and motivated by futures and so exhibit gaps at OPEN, for example - and entirely different daily candlestick sentiments than the raw index chart itself. This becomes obvious when we compare INDU and DIA or, SPX.X and SPY or, NDX.X and QQQ.
To be sure, DIA/SPY and QQQ - or, indeed any index as opposed to any component thereof - represents a dramatic reduction of "specific risk" towards inherent market "diversified risk"; But for the most part, this has relevance more to investors rather than traders.
When I trade say - T+3 or, T+5 weekly or even T+20 monthly movements, I am accepting more to less risk of implied volatility, even when riding a "diversified risk" index vehicle.
Implied Volatility tends to decrease for the trader as the duration and/or extent of the move, the spread between target entry and target exit, increases.
The i.v. risk of (this recent T+3) move from DIA long entry ~102 to DIA exit at ~104.5 was unacceptable to me. Insofar as I was concerned, that trade was tantamount to a "bank shot" against a soft, psychological-support cushion, made all the more difficult by the gappy, jUmPy nature of the DIA vehicle cue-ball (^_^)
"listening to the shoe", your apt and entertaining metaphor - well, the "shoe" is that intermediate-term DownTrend Line, n'est-ce pas ? ;-)
...avez un bon week-end
-Steve |
