Gersh; RE:" blip "
>scratchin' my head .. the market activity the last couple of days has produced a blip on my chart that shouldn't be there. Probably caused by the out of phase fed action...
yeah the Fed action has made charts difficult to read; begs the question, "How much is too much?" With so many earnings announcements coming due, it really gets tricky now.
Going back, my chart for the XMI.X - Major Market Index shows the most clear T/A-like breakout.
geocities.com
Draw a DownTrend Line starting from 17-JULY close, through 29-SEP close as point two and finally 09-OCT close. This is (was) the dominant DownTrend.
Now draw an UpTrend Line starting from 31-AUG close, through 01-OCT close as point two - and beyond. Lines parallel to this UpTrend show the trading range channel we have been in, with a top roughly set by the (parallel) line set between 08-SEP to 29-SEP. Carrying this top-of-channel line out, Thursday's big push-up on Fed news pierced through the top-of channel around XMI.X 896.425 - which is an important horizontal support/resistance, as well as a fibonacci level on the chart. We are now well above the top of trading range channel.
The important T/A story begins just after 09-OCT; that day was a hammer candlestick. Most folks, including myself, went flat that Friday afternoon, though - as the close was on the DownTrend Line, and Friday has been the time to take profits and go into cash. The next session, Monday 12-OCT did a lot of things: it confirmed the bullish hammer; broke up, out of the DownTrend Line; and said the near-target was XMI.X ~895, the top-of-channel. Tuesday and Wednesday's sessions were classical "technical corrections" that pause pull back to the old DownTrend Line - and so the ideal T/A buying opportunities.
Jurgen saw this ideal entry point - I did not - the OEX and SPX charts are not nearly so clear as this XMI.X chart. Indeed, the OEX.X and SPX.X charts do not "break out" from their DownTrends until the Thursday push-up on Fed news. The DJIA-30 does show a break out from DownTrend on Monday 12-OCT, but the indicated near-target is only ~8100, which seems hardly worth taking any position, long or short. A Long Straddle at DOW 8000 would have been my best guess then: 7700 seemed more likely than 8300, but both were possible.
At this point in time, the XMI.X over ~917 is over-bought on stochastics; the near-support is that ~895 horizontal level; there is no DownTrend any more; the trading range channel is no longer intact; any short-term UpTrend drawn from 01-OCT looks awfully steep; and my best guess as to lower supports are the 200d and 50d EMA lines sitting between 880~890. One would expect profit-taking here - as well as mixed trading due to earnings announcements - so indeed, this is not an easy place for us to do T/A.
The real question is this: what is the trading bias; ie., do we, as traders now buy on dips rather than sell into rallies ?
-Steve |
