Archive for June, 2011

Market Turning Points | Andre Gratian | 2011-06-26

Posted in education, technical analysis on 2011-06-26 by Strategesis


Even though the SPX closed 3 points lower than the previous week, it was the first time since the correction started at 1370 that the SPX and other equity indices did not make weekly lows, and this could be significant. Even the XLF, the weakest of them all, held its ground! However, it will take another week or two to determine if SPX can hold above a low of 1258 and start reversing its downtrend.

As we will see, the odds that it will are fairly decent. The stock market has a history of correcting into late June or early July. In the past two weeks, a nest of cycles – including Martin Armstrong’s 8.6-yr economic cycle — made lows, and the next cycle which could affect the market is not due until the middle of July. This should give the market an opportunity to start an uptrend so that it doesn’t get shoved down to a new low by the bottoming 9-mo cycle.

Our “White Knight” (the SentimenTrader) is still giving strongly positive readings. Inaddition,two other indicators that were giving us concern, the Summation Index and the “Black Knight” (NDX:SPX), appear to have bottomed and have started to turn up. Also, the SPX and QQQ may both have started a pattern of higher highs and higher lows. If they prevail and starts to gain some upside momentum, it would be a strong signal that a reversal is taking place.



US Stock Indexes: Short term bearish, intermediate tem bullish

Posted in technical analysis on 2011-06-26 by Strategesis


So what is likely going on now? The market spent most of the time last week in a range and chopped up traders, when we see price action like that, its classic of a 4th wave, potentially a triangle or flat pattern.

So with that in mind, the idea of a 4th wave of smaller degree from the highs at 1270SPX started to make sense, late last week, and staying under 1280SPX keeps the trend lower and potentially seeing under 1248SPX from here to complete a 5 wave decline as well as a larger expanded flat pattern.


Quote from “The Psychology Of Trading” | Steenbarger

Posted in book recommendation, education, trader psychology on 2011-06-25 by Strategesis

From (pg 48):

Many traders attempt to predict the market and look for prices to follow. Great traders understand the market’s language and follow along…you can best apprehend the market’s messages by attending to your own volatility.

There is a myth among beginning…traders that consummate professionals check their emotions at the door and operate under strict logic and reason. Is it possible to shut off your feelings in such a manner? Would this even be desirable?

…A number of studies have investigated individuals with brain lesions who display what would seem to be a trader’s dream: Their reasoning mind remains intact, even as their capacity for feeling is blunted. The result is not a superrational, intelligent being, such as Mr. Spock from the old Star Trek series. …

Why is this? It appears that feelings are one’s guide to the value and the meaning of events. …

…the successful trader feels the markets, but does not become lost in those feelings. Emotions are information, no less than a wide-range bar on a chart. Indeed, a strong emotion can be thought of as a personal volatility breakout. Just as an experienced trader becomes exquisitely sensitive to the patterns emerging from the tape, traders who know themselves will attend to their own patterns. ….the real market you’re trading is the market called Self.

Don’t ignore your emotions. Observe them. Use them as trading filters and trading signals:

The more giddy you are with success, the more likely you are to do something wrong—perhaps an ill-adivised entry, or perhaps staying in a trade too long.

The more you feel dejected and unworthy, the more likely you are to miss a trade you should have taken.

The more you disbelieve what you see the market doing, the more likely you are to trade counter-trend when you shouldn’t, or stay in a trade when you should immediately exit at the market, or to fail to enter a trade you should be entering.

So be aware of your emotions, have trading rules that determine what you will do in response to those emotions, and then do what the rules say, not what your emotions would have you do.

New Stock Bear? | Adam Hamilton

Posted in education, technical analysis on 2011-06-25 by Strategesis


Any new stock bear today has to be cyclical. The US stock markets (as measured by the flagship S&P 500 stock index (SPX)) soared 102% higher between March 2009 and April 2011 in a powerful cyclical bull. So a cyclical bear is certainly due next when the past-couple-years’ bull inevitably gives up its ghost at some point. Is that time now? Maybe, but we don’t have a high-probability new-bear setup yet.


Market Turning Points | Andre Gratian | 2011-06-19

Posted in education, technical analysis on 2011-06-19 by Strategesis


Reading the technical tea leaves results in the picture of a market which may soon be ready to have a short-term uptrend, but which will probably have to spend some additional time completing an intermediate correction that may have started with the 1344.07 top in mid-February. This is the thinking of Tony Caldaro, and I believe he is right. That is the date on which the financial index made its recent high. The move to 1370 was premature, and this why the market needed additional corrective action.

There are some cycles bottoming in the Fall which may help the indices to complete their intermediate correction in that time frame, followed by a final bull market top in 2012.


Book Recommendation: “The Psychology of Trading” by Brett Steenbarger

Posted in book recommendation, trader psychology on 2011-06-18 by Strategesis


Behavior is patterned. Beginning with this premise, noted clinical psychologist and active trader Dr. Brett Steenbarger opens the therapist’s door, demonstrating how traders can identify, interrupt, and change the problem patterns that interfere with successful trading. In The Psychology of Trading, Dr. Steenbarger draws upon real-life case studies and offers hands-on techniques for emotional change to assist traders in becoming their own therapists. Themes that set The Psychology of Trading apart include:

  • “Trading from the couch” by utilizing emotions as valuable market data
  • Identifying and building solution patterns that capture hidden trading expertise
  • Techniques for assessing and trading against the emotions of market participants
  • Methods for building focus and concentration for more automatic and trustworthy trading decisions
  • Creating shifts in states of consciousness to rapidly exit anxious, impulsive, depressed, and guilty frames of mind

In an engaging manner that provides practical solutions to real trading problems, Dr. Steenbarger walks you through the most common cognitive and emotional tendencies that distort efforts at identifying and trading market patterns. He then describes specific skills derived from years of brief therapy practice to help you become an effective observer of these tendencies and gain control over them. By blending state-of-the-art research from psychology and cognitive neuroscience with detailed case studies, The Psychology of Trading provides you with the intellectual and emotional ammunition to face yourself and transform your approach to risk and reward.

Market Turning Points | Andre Gratian | 2011-06-12

Posted in education, technical analysis on 2011-06-12 by Strategesis


Last week, the SPX shed another 29 points. This brings the index to a total decline of about 100 points in the space of six week. Is it done yet? Before we get into that, let’s ask an expert what kind of a decline this is. At the 1370 top, the VIX was at about 14. In the course of the downtrend, it reached a high of about 20. And last Friday, it closed just below 19.

Clearly, Mr. VIX is not too worried about the extent of this correction. During last year’s intermediate correction, the VIX went from about 15 to a high of about 48. If this is how the VIX behaves in an intermediate correction, we have to deduce that we are not in one, but only in an extended short-term correction period, and that the intermediate trend is most likely still up! Of course, the VIX could still wake up and forecast much more decline ahead but, until it does, we have accept what it is telling us and not dwell on what it is not.

Now, is it done yet? We can ask another expert: The SentimenTrader what it thinks, and its answer is: “I can’t tell you that exactly because I am not a timing indicator, but I feel that we are pretty darn close!” (We’ll see a picture of the “SentimenTrader” a little later on.)

That’s too vague! Perhaps we can get more specific answers, from our charts.