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Strategies & Market Trends : NetCurrents NTCS -- Ignore unavailable to you. Want to Upgrade?

To: Jill who wrote (6052)	3/15/2001 3:56:42 AM
From: Michael Watkins	Read Replies (1) \| Respond to of 8925

Hi Jill, I know we discussed bias a while ago but I forget the context. I like to share what my personal demons are, or what they used to be, that what I am learning or have learned is useful to others. When it comes to overall market expectations, I certainly have an opinion and it has been 'bearish' for some time. When it comes to trading, its time to put opinion aside and simply trade what is in front of us. I certainly have had a negative bias on the technology sector since very early last year (well, through most of the rapid rise into 2000 also). I saw no evidence that could convince me that the fanciful valuation schemes the street was cooking up, seemingly on a weekly basis, had any chance of standing the test of time. I'll be the first to admit, I once had trouble separating my views from the information the chart contained. It wasn't until I added some simple techniques to my kit bag that I was able to become more objective. In my opinion Trader Vic's (Sperandeo) methodology for trend line construction and determining trend changes is invaluable in this regard. If you take his simple yet structured approach to trend line construction, mix that with the classics in chart formation from Edwards and Magee, plus add his 1-2-3 trend change approach - you have a very complete tool kit. Suitably armed, it still took me some time to be able to "think diabolically" in both directions. I am not quite sure what the turning point for me was, but there was a definite change in my mental attitude - if nothing else I guess experience is a good teacher if we are willing to be open to lessons. So, long story short - I can categorically state that I have no bias when reviewing a chart, because a chart is a chart. While its true that different people will occasionally have completely different conclusions about a chart, generally speaking if consistent methods are used to evaluate the chart, the conclusions should more or less be the same. Sure, some will 'see' one pattern, while others will 'see' another, but when it comes down to it, the basics are inescapably simple. - is it trading in a range, or not? (a trend pause or possibly a prelude to a change in trend) - is in in an upswing - is it in a downswing Once we have the chart mapped out then trading it becomes a simple case of developing if/then/else scenarios for exploiting it. Recognize that standing aside is frequently the right thing to do as well! Back to the chart at hand, there is no bearish bias in my interpretation of the chart I presented when we can clearly see that the past 7 weeks on COMPX have not had a single up bar, the wedge formed from the start of the year broke and resolved right on cue. The SPX is the same. In both cases on the daily charts price hovered briefly around the range bottom but have moved clearly below. The bottom edge of the range in both cases will be formidable resistance should a rally be mounted. The bottom line is this, until we start seeing "up bars"; a return to the range; and ultimately a break above the range;- this market remains in a significant downtrend. Thinking diabolically, the market is very stretched to the downside. Its either going to snap almost immediately and make a big thrust down, or its going to grind along, possibly attempt a rally to resistance. We need to build a trading plan that takes into account either possibility. Mike