Paul
I completely agree with your leaning in the direction of
further rally from here. Yesterday, I was expecting to see
a short term low, but was completely fooled early by the
trading action. From Thursday's close, it seemed to me some
follow through downside Friday early was a shoe-in, especially with all the expectations of a 2800 test. A low was achieved (minimally) and when the rally started, I was
expecting more selling as we have become accustomed to lately. Realizing the rally was not being sold, indicators I
follow convinced me a turnaround was in progress. Hence, I
closed all my short positions and reversed long. To be honest, I was expecting a deeper decline early, and had to
overcome my expectations of a sell-off.
One of my reasons for believing a short term bottom has been
put in is that I like to be aware of the market's action in relation to lunar cycles. It has impressed me many times in the past how uncanny for instance full moons often mark important junctures and turning points. It would not be surprising to me if Friday's full moon marks the short term
bottom I was expecting. I do not believe THE bottom has been
achieved as complete capitulatory climax was not achieved IMO. Hence, I am in agreement with others who believe this will be another bear market rally. I think Brinker's call for
this to be a GET OUT rally will prove correct over the weeks
to come. In the meantime, I plan to attract gains on the long
side.
Tecnically, Friday's action...White Marubozu, Bullish Engulfing makes me believe Monday will continue and validate
the turnaround. Also, FWIW another set of indicators show
promise of further gains to be achieved. Aside from the usual suspects, Stochastics and ADX and OBV (all showing up), I also use a combination of moving averages. As has been
tested and found a viable trading system on T. Carr's Befriend The Trend thread, 5e 8s moving averages and their
crossovers are very good. I use them in conjunction with my own idea of a 30 period ma. I've seen others use 20 and other
periods, but I could never understand the significance of say
a 20 period moving average as I see no relation in the real world of that time frame. On the other hand, the 30 period corresponds with the 29.5 day length of a lunar cycle, a cycle to which all life responds: tides, human behavior, crops, etc. etc. I find still to may utter amazement how
price action will follow the 30 period ma on any time frame.
In downtrending action, the 30 period ma contains rallies, often nearly to the penny and a downtrending stock will drop,
rally to the 30 ma, then continue to drop. A downtrending stock will trade under the 30 period ma, a stock moving up
will trade above the 30 period ma, using the rising line as
support on bouts of profit taking. Fridays significant action
popped a great many stocks I have been following above their
30 period moving averages and trading above for the first
time in what seems forever.
Also, many of what I consider upper tier stocks; JNPR, PMCS, SUNW, EMC, etc clearly broke their short term downtrends and should lead this short term rally higher. A couple of positive days for the $COMPX will break the short term downtrend established 9/1 to the upside. I don't think this
rally will be very strong and I would expect 3600 (around the
30 ma on the daily) to contain the rally. Underlying weakness
which propelled stocks to their current lows will not disappear and will begin anew fresh selling once this rally runs out of steam.
My strategy until I see evidence of the next turnaround will be to remain long, buying dips and selling rallies. For
example, one play I made STLW clearly broke it downtrend on the daily and is for the first time in awhile, trading above the 30 period ma on the 60 minute chart. From the 9/5 high
to the 10/11 low, I will be playing for the 38/50/62 % retracements of 32.34,35.85, 39.37 respectively. In at 27,
the lowest retracement will yield a 20% gain, a worthwhile play for me. As I will be selling at resistance, and reentering at supports, I expect to beat my minimum expected
gain easily.
I wish everyone here good trading and as many don't like to
play the short side, I expect the mood on this thread to be a
lot better, at least for a while. I think the upward bias
should last a few weeks, maybe even through the election with
bouts of selling as always here and there.
As I have not been around here long enough, I really don't expect to be taken very seriously. As I am very grateful for
the knowledge acquired here and the great work of the many contributors, my desire is to also be a contributor rather than constantly taking without giving something back. Hopefully the effort will prove worthy in the future.
Regards,
Eichler
P.S. I use the 30 day exponential rather than simple MA, it
seems to "fit" better. |
