Booyah baby! I’m off the bench and back in this market on the short side.
Pardon? What happened to the 5 day punishment it has barely been three trading days?
What would make me spring from off the sidelines and into the stock market today?
Why the stock market itself of course.
Today was a magnificent sell off in close proximity to trend channel resistance. The sell off was so severe that market club has downgraded the Dow, NASDAQ, and S&P 500 to a strong downtrend rating. Conversely, most short ETFs were upgraded to strong uptrends.
I’m taking another go at the Ultra-short Consumer Services ETF (SCC). In the previous week I suffered an 8.5% thrashing by not respecting the swing trade range and buying at the lower end of the swing. I chased SCC on the Burial Cross which proved to be a critical mistake.
I sense that my entry is a lot better this time. I have been schooled with a agonizing lesson about chasing SCC.
In this episode, I do technical analysis on the NASDAQ and SCC using an incredible tool. I give you my downside target for the Nasdaq and my upside target for SCC.
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I have been evaluating a huge amount of gossip on today’s chart about how the volume on the buy side is genuinely dreadful. This is simply not factual in regards to the Nasdaq.
Buy side volume has been escalating into the upward move. Provided you watch my vids you understand that I utterly love buy side volume rising into a up move. That implies more and more followers are switching over to the bullish side.
One more reason behind why this is bullish not only for the Nasdaq but the whole stock market is because of sector rotation theory. Technology stocks are often the first to guide the market out of a bear market.
Think about it. Where is the modernization coming from to cut costs to business? Technology. A greater number of businesses have picked up their use of email and decreased their use of regular postal mail to save costs. Greater number of businesses are purchasing more computers to advertise for free over the Internet and save money on in-print marketing. Quicker copiers are being purchased with instant convert to pdf and email from copier capabilities. Certainly, lean and mean businesses will a recession create and technology is the essential factor that makes efficiency and expense reduction feasible. That’s why it makes sense that technology is the bull market leader coming out of a slump.
From a technical analysis standpoint you should not be stock trading in this market. You ought to be on the sidelines right now as no dominant group, neither bulls nor bears, have come out as the leader. At the end of June the bears held the trend but all that changed in July. Over the last 2 weeks, the bulls have been so influential that they have canceled the downtrend and forced us into a cash and sidelines rating.
Still if we do get a pullback now, I bet we’ll have a higher low and a fresh trend channel can cultivate. Take into account, most trend channels have lifespans that are a good deal shorter than the present downtrend channel we have had since April. Put another way, this channel is outside its life expectancy and we should have a fresh one form soon.
The technique to play this market is to stay in cash and let the big boys battle this out for dominance. You are a little warrior and do not wish to get trapped between two attacking armies. Stay in the bush and let the armies fight it out. As soon as one army, either bulls or bears, becomes dominant, then jump out of the bushes and attack on their side. Only place your bets on the winning side once a obvious dominance or trend has formed.
In this episode I perform technical analysis on QQQQ and update you on why you should be on the sidelines and in the protection of cash.
There is a shame concerning being wrong in technical analyst circles. The disgrace is so widespread that it leads famous technical analysts like John Murphy, thought of by some to be the king of contemporary technical analysis and inter-market correlations, to declare he is a commentator only and will not provide authentic buy or sell recommendations.
Provided you have faith in what you sermonize, why not have buy and sell recommendations for no other basis than to establish you can make money with technical analysis! That is something that I will always look down on John Murphy and Arthur Hill about. I say put your money where your boasting is and stop hiding behind this fear of being mistaken and coming up with some dumb excuse that you are a technical analysis commentator only. That’s a huge cop out.
But worse than chickening out is to re-trace your trend channel lines and hope no one will become aware of where you had it beforehand. That is technical analysis deceitfulness and something I personally witnessed 5 other stock technical analysts do over the last couple of months.
No one is ever flawless in their technical analysis. Every person gets it wrong. Accordingly if getting it wrong every so often is a essential part of what it means to stock trade then why are so many technical analysts scared to divulge when they get it wrong? Why do the bulk of technical analysts act like they are unbiased stock market commentators for terror of being wrong? Why are some technical analysts so frightened of being wrong that they re-sketch their trend channel lines and hope that no one will commit to memory where they drew it before?
In this video I let you see a fresh instance of technical analysis deceitfulness.
It is formal. The Stock Trading Master got out traded today. What happened? Lance got blindsided in to shorting the stock market by the bearish Head and Shoulders top and the Burial Cross and then was creamed by bulls as the stock market reversed.
Worse, this is the Stock Trading Master’s third loss back to back. That means that the stock trading decree activates where Lance tells himself he needs to take a seat on the sidelines for about 1 week.
It is humorous. When you do not have a individual investment in the market how apparent matters become. You are not a bull considering things from a positive preconceived notion, nor are you a bear looking at things from a pessimistic prejudice. You actually have no bias for the reason that not a bit of your own money is at stake. As a result, your opinions become clear as you see the market for what it truly is.
Having a trading loss statute is so important that some credit the reality that institutional investors out trade rookie traders just since they have such a decree. When a gentleman at a trading desk has a succession of losses, the manager comes up and taps the trader on the shoulder. That means he’s done for the trading day. No questions. No disagreeing. As soon as the tap comes, you turn off your trading workstation and go home.
In this video Lance literally breathes fire in fury over his 3 successive losses. He then lectures himself and screams no more trading!
If you watched the weekend update video on SPY then you already know that I am looking to close my short position for a loss. If that happens, it will be my third hammering in a row and will activate in my in-house stop loss law of no more stock trading for awhile. Nevertheless, to close out my short, bulls have to prove they hold sway over the trend. Specifically, I want to witness the downtrend channel wall resistance broke, the Fibonacci 61.8% retracement level broke, and it has to transpire on good volume.
Volume today was atrocious. Upside volume fell even lower than last Friday. Over the past week of stock trading, we have had oodles of buying going into the closing hour of stock trading. You can see that over the last four trading days, this final hour gush has been getting weaker and weaker.
Now what does the declining volume mean? It implies that fewer and fewer traders are willing to chase stocks higher and buy at these levels. This should give bears self-confidence that bulls can no longer take the market higher and give us the next swing downward.
What is truly interesting is if you study the money flow on the weekly chart. You can make out that we have a bearish divergence concerning the price of SPY and the money flow. We have a like negative divergence back at the end of 2007 that predicted the great move down on SPY from 155 to 70. The money flow is at this time telling us that we will have another large move down.
In this video I perform technical analysis on SPY in three time frames: weekly, daily, and hourly. I demonstrate the reason why I’m still holding my short even though I am down good and feeling the short press that the bulls have had me in since the previous week.
Major economic news coming on Wednesday, July 14th 2010 is Retail Sales. I can definitely see a situation come into being where June Retail Sales are worse than predicted and that could easily hurl the markets lower. It would also give a boost to the case for a double dip recession.
The major indices have had one of the best up weeks that they’ve experienced in about a year.
Short terms traders that followed last weekends FTV video hopefully were able to play the upswing. On the other hand if you are a long term trader then you did not want to buy last week since we continue to be in the boundaries of a downtrend channel. That suggests that you have lower swing highs and lower swing lows.
It is especially risky for any stock trader to try and oppose the trend. The trend is your friend. Stay in the right channel. We are in a down channel so you need to be more bearish than bullish. If we were in an uptrend channel you would want to be more bullish than bearish.
My fellow stock trading warriors, we are at crucial moment going into next week as we roll into earnings season. Everybody is going to be listening to what these earning reports are telling us.
What we have on the stock chart of the S&P 500 is we are at a strategic resistance if you trace the upper downtrend channel line touching the June 21 2010 high.
The crucial resistance zone to watch on the S&P 500 daily chart is 1080 to 1093 on the S&P 500.
The vital resistance zone to look at on the S&P 500 weekly chart is 1100.
The main support level to watch on the S&P 500 is 1050. If we plummet back below 1050, stock traders who are short this market will make a killing.
Accordingly we have a ton of resistance areas coming up that bulls are going to have to break through.
What I believe is going to happen as evidenced by the falling volume over the last week is that we may well get up to this resistance zone and then swing back down. On the other hand, this downtrend channel has had 3 swings up and down now so the life cycle of this trend channel is coming to an end. If the trend was going to reverse, now would be the time to do it.
Technically speaking, as we are still within a downtrend there’s a greater probability of us falling than there is busting through this upper trend channel resistance.
Check out this new technical analysis video from FTV.
U.S. economic news coming next week:
Jul 14 08:30 Retail Sales Jun
Jul 15 08:30 Initial Claims 07/10
Jul 15 08:30 Core PPI Jun
Jul 16 08:30 Core CPI Jun
Bulls kick Bears butt and take the market higher once more. I’m short this stock market. Monday might be a strategic day for me because I will be looking to close out my short position and move to cash.
But, there is something critical I need to see from the bulls on Monday before I close out my short position. This is volume.
The volume over the preceding 3 trading days has been dropping into the up move. Although it is more than only that. We are approaching a significant resistance zone that extends from the 61.8% Fibonacci retracement level all the way up to the 50 day moving average.
Something that is very worthy of note is that buyers are drying up as we come up to that important resistance zone. That tells me one thing. With volume dropping, there’s no way bulls are going to possess the momentum to break through that key resistance zone. Volume has to increase on the buy side. Buyers must step in to this market in large numbers on Monday or Tuesday in order to smash through this level.
At this time like I said, I’m short this stock market. Therefore I am not moving to close out my short until I see proof of lots of buyers stepping in next week.
With the volume declining into this upward move, bears are gaining faith that bulls are not going to be able to smash the 61.8% Fibonacci retracement resistance or the 50 day MA line.
In this video I do technical analysis on SPY and illustrate to you what I am looking for next week in order to close out my short position and move to the sidelines.