History, while it does not repeat, does often rhyme

The chart above shows the market from 1/19/1906 - 9/25/1911 and from 10/9/2007 - 9/20/2011.

For more insight you can check the chart/blog from August 4, 2011. Is the history repeating ?

Anything is possible in this environment and we have to be prepared and ready for the unexpected.

                              Sideways chop continues. Stay patient and take care of job #1 capital preservation.

It's a volatile world !

We are at the moment in no man's land, after the last hour sell off, and we can go ether way based upon the next headline. We need to get a tip from Mr. Market in which direction to go before we can get involved.

Stay alert and patient.

A trader's question:
 “How far can a market rally built on rumors, technicals, short-covering and quarter-end window dressing take us?”
Well, we are about to find out.

Short term swing trade.

I mentioned the possibility of a short term, swing higher, window dressing trade at the end of the month on last Thursday's blog. Today's price action confirmed that scenario and the probability that we will see a rally back to the 50 dma area this week increased significantly.
                               

                               

    

The information contained herein is for educational purposes only and is not, and should not be construed as an offer to hold, sell or an offer to buy any securities.

                           

Looking at the week ahead.

Clues are just the clues not the guaranties, they are just the indication to go one way or the other. 1120 SP area is the area that is "the line in the sand" for bulls. May be the most important area for months to come. Choppy 2011 continues and pattern failures are common in this kind of an environment. Capital preservation is the most important at this juncture.

                                 monthly view

Reflection.

Don Quixote, despite being delusional, saw in people more than they ever possessed. He meets Aldonnza, a farm girl (a woman of the “oldest profession”) and, either blinded by love or insanity (probably both), he sees only a lady in her, and starts treating her like one, calling her by another name, Ducinea. She knows that she doesn’t deserve this treatment, but she starts believing him, and this belief transforms her into a different person – she aspires to be the person Don Quixote sees in her. My grandmother was like Don Quixote: she always saw a much greater person in me, though I rarely deserved it (she really had a rich imagination); and I tried to rise to become what she saw. Now that I’m a father of two wonderful men, I do the same for them. The little things we say to our kids and others really do matter!

Markets now.

afterhours:  From here we can begin a swing higher short term window dressing, push-squeeze play trade OR a full-blown breakdown below the August lows.


Remember, the top three priorities in trading: First, is preservation of capital. Second, is consistency in executing your plan. Then pursue the third, which is superior performance

Bears in town.

                               premarket:  watching for downside follow through

Wisdom.

I see the younger generation [of hedge fund managers] hampered by the need to

understand and rationalize why something should go up or down. Usually, by the time that

information on fundamentals, and what little information one could get was largely imperfect. We 

becomes self-evident, the move is already over. When I got into the business, there was so little

learned just to go with the chart. Why work when Mr. Market can do it for you? These days, there

are many more deep intellectuals in the business, and that, coupled with the explosion of

information on the Internet, creates the illusion that there is an explanation for everything.. There

are young men and women graduating from college who have a tremendous work ethic, but they

get lost trying to understand the logic behind a whole variety of market moves. [At the end of a

bull market or bear market] there's typically no logic to it; irrationality reigns supreme, and no

class can teach you what to do during that brief, volatile, reign.

-Paul Tudor Jones

Capital preservation still remains the most important priority.

Tomorrow we'll see if today's action can be shaken off and we get end of quarter push up trade or we go down to test and potentially violate that lower flag line.

SP-500 now.

daily view

1-hour view

10-min. view

If you have rode this move higher, take some profits. Reduce you risk some in front of the Fed decision. You can always reposition afterwards. If you miss some points, so be it. We are still in a big range and it isn't wise to push your luck too far. 

Greed & Fear

There is a little known element about Greed & Fear: Greed is actually a variant of Fear — the fear of missing the move higher, fear of leaving profits on the table, fear of losing clients, fear of lower income, fear of losing your job. Hence, when most people say that Fear & Greed drives the market, they are really saying FEAR drives the market in both directions. True Greed doesn’t come into the picture until we get to the stupid phase — think DotComs bubble 1999 or Housing bubble 2005.

The tone has changed.

I went long and my account was up, supporting my scenario, but I sold out at up 2.83% on the account and went into cash today at the end of the day. Just want to get a new perspective and be ready to go with the money flow rather then the story. Focus on the price action. We are still in a range. Big move is coming.

Bears will have their chance at the market tomorrow but the fact that the market continues to hold firm into the Fed must be recognized.

Going into Fed week !

We have unconfirmed patterns, head and shoulders, bear flag and possibly a channel, be on guard and make preserving your capital job #1. Focus on price action, I think this is going to be a pivotal week for the market. Big move is coming.

FYI

weekly time frame

100% in cash now.

I am taking a week off of trading and going to do some volunteer work. It's good for the soul.

Remember, it is very important to stay flexible in one's thinking and open to any new market technical developments.

See you here Sunday, September 18th when we'll take a look at the market and make a plan for the week ahead.

Volatile market with large swings continues.

weekly view

       daily view

                                                           hourly view with ATR signals

It does help to have a probability mindset.

Look at the formula bellow:

(AVG $ Win X WinRate) - (AVG $ Loss X LossRate) = Positive Result

Let's have a look behind the formula:

We derive the AVG $Win by dividing the positive '$' results

by the number of winning trades.

We derive the WinRate by dividing the number of winning

trades by the total number of trades.

We derive the AVG $ Loss by dividing the negative '$' results

by the number of losing trades.

We derive the Loss Rate by dividing the number of losing

trades by the total number of trades.

If we consider the formula, we shall find all the elements of a probability mindset The first thing to notice is that you determine success or failure over the long-term rather than on the result of any one trade. Focus on achieving consistent long-term results. You do not live or die on any single trade. Focus on achieving a robust decision-making process. Take advantage of market conditions by all means, but never confuse being good with being lucky

Trading secret !

                                       Successful trading requires Faith !
We trade our beliefs not the market, so we better know what we believe about the market before we start trading it !

The man who grasps principles can successfully select his own methods.

Trading principles that work,

2. Ride your winners
3. Cut your losses short
4.Use stops
5.Manage your money so you can stay in the game
6.Stick to one methodology, system and/or a plan

Very simple !

Performance in complex or competitive endeavors often follows a sine curve.

The Performance Cycle 

Awareness !

Looking at the week ahead.

Last week we have identified potential bear flag which has been playing out so far. See blog August 28. Four day weeks are usually very challenging and I don't expect this one to be different. Be short or be in cash is the game now. Not much to say but the line of least resistance is downward. Exercise self discipline, this means that you will do your market studies every day, thoroughly and religiously, and that you will follow the rules of successful trading. Remember, markets are never too high or too low and be aware of your emotions of fear and greed. Indecision of the market participants and volatility is expected to continue.
All the best in the week ahead !

interesting