Rebound continues

I WILL BE ON VACATION UNTIL MONDAY, AUG 27th. I WILL RESUME POSTING THEN. PLEASE NOTE THE TRENDS ARE ONLY UPDATED THROUGH TODAY, AUGUST 22nd. Also, if you post a first comment I may not be able to approve it until I return.

sp0822.gifThe stock indexes continued higher today. The bulk of the move happened on the open, then the markets churned sideways for most of the session. In the final hour the indexes push out of the sideways range to move higher, and have pushed even higher in after-hours trading. My concern in the comment yesterday was that the indexes could roll back down since most indexes couldn’t make much progress after the open on most trading days lately. This was resolved today, at least for the moment. The light blue dots on the S&P chart appear when the current bar is the narrowest of the last seven bars. The bar yesterday was narrower than the previous seven, and the bar today was even narrower. It is not too surprising being the second to the last week in August, and following unusually wide range bars. Bit it is still worth noting that the ranges are contracting. Following range contraction there is usually a period of range expansion. There is not really an implication of direction, but since the overall trend is now down, with much overhead resistance, it is probably best to expect some sort of re-test to see if the reversal candle of five bars ago is meant to hold. This would set up a much healthier market environment if this were to occur. (For more on NR7 days check the writing of Toby Crabel, who originated the concept, as well as Larry Connors and Linda Raschke who also did research in this area.)

Of course the above opinion is just an opinion based on observation of similar situations in the past. The market will do what it wants, and right now momentum is up, prices are staying above the three day pivot, so I trade from the long side but keep in mind that the overall trend is still down. Sharp reversals can occur quickly in counter-trend moves. I watch the ETF charts intra-day to better time entry and exits in this environment.

I read many blogs each day. Many try to figure out what the Fed is going to do, and how the market will react to what they do. There are many opinions with just about every possible scenario. I just don’t see how it is useful to even try to figure out what will happen, and then how the market will interpret it. The consensus of all those opinions is in the last price, and the accumulation of those opinions and prices form momentum and trends that indicators with quantifiable probabilities can assess better than an opinion based on a bias. My trading would be far less stressful if I could stop trying to find justification and reason for what the market does. It is all in the prices, and the indicators help put those prices into a context. All the rest of the analysis just creates confusion, and often a false sense of comfort if the opinions one seeks out conform to the direction of the position being held.

Gold is still stuck in a sideways trend for now.

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