Archive for the ‘Psychology’ Category

fallen from graceland

fallen from graceland

Has Elvis left the building?

The market plunge continues to frustrate bulls and bears alike.

Extra-ordinary bounces like yesterday are meant to do one thing: squeeze shorts and hope they go away.

The egregious run-up over night is a great example of mis-direction. It stops out the shorts position trades, and then it entices buyers to be looking the wrong way and buy pullbacks as the car is falling off the cliff.

Smart shorts NEVER short too low, accept stop outs, and if unwilling to ride the elevator up courtesy of the PPT and rumors about bailouts, at least wait until the apex is hit and then use the signal bar technique to say “take a shot here”.

Trying to buy pullbacks long all morning was suicidal. Today’s double bottom bounce that had bulls cheering for 1200 and 1210 at the close was wishful thinking.

They were still reading from yesterday’s playbook. A new page was inserted, and only the most gullible of newbies believed that script.

Sometimes we need a hound dog to sniff out the truth, sometimes just a little common sense.


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Today was what I call the bowling alley trade.

The premarket dump turned out to be the perfect setup for the 123 lower low as the price rebounded. After a long lunch slim jim, the globex hi was taken out on the other side in the afternoon. Then the boys played the same game and caught the late buyers buying the pullback.

You can only anticipate moves like these by being in front of the computer for a number of years and seeing all the games that they play. Experience is one of the best teachers I know.

Marginal lows and high’s are a bit tricky, but the enlightened ones know how to play this game exceptionally well. Being aware of possible reversal zones and times is the key to catching these trades that change direction.

Kevin haggerty’s signal bar strategy is one of the best techniques out there day in and day out to capture these powerful ricochet moves.

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Chevy Chase at his finest.

Round and round we go. Market bottom is in. Housing crisis solved. Etc, etc.

What can Mr Bernancke and the government cook up now?

We’ll just have to wait and see. The market loves to squeeze the shorts. When “they” run out of gas, re -enter until it stops working.

Meanwhile, looks like taxpayers are now officially on the hook for all the indiscretions of the past few years.

Just take advantage of the volatility and take your signals.

If the odds favor  regression to the mean, play it.


Gap and Trap

Gap and Trap

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“Amity Island had everything. Clear skies. Gentle surf. Warm water. People flocked there every summer. It was the perfect feeding ground…”

At 11:30 I suggested to colleagues to take their short profits off before noon today. It could have gone to any day low, but I felt the weekly shorts should capture their profits early after such a great week.

It turned out to be a lucky call.

Guessing against the trend is never easy, but odds and probability shift and you have to adjust your plans accordingly. (Remember the Commander’s Intent theory?) 

There are many techinques that technical traders use to project possible targets, but it is not an exact science; it is more about being prepared for areas  or “zones” of support and resistance, and then not being stubborn when the momentum clearly shifts from one side to the other.

When there is blood in the street, be on the lookout for jaws.


jaws loves to catch those late to the party

jaws loves to catch those late to the party

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Well, what an interesting day. Overnight globex ramp up, then gap up at the open taking out last week’ s high.

Clear sailing, right?

Wrong. Another misdirection trade catching traders buying the pullbacks all day long. Momentum didn’t begin in earnest until the lunch breakdown.

Overight actiivity is always suspect since volume is low and price can be easily manipulated.

In a book I am reading, a theory of war was being discussed. CI (Commander’s Intent) theory was suggested, as “No plan survives contact with the enemy”. I instinctively knew what the author meant. Planning is important, but then we must react in the heat of battle, just as skilled athletes need to perform under pressure.

As a technical trader, the “why” doesn’t concern me. Stops are stops, targets are targets.

The range for the past three weeks seems to lie within the big yellow box.

Many breakouts are false; seeing the bigger picture allows us to take reasonable trades where resistance may give us better odds for a reversal.

There are many good traders out there like Bernie Mitchell; make sure you check them out and get an education from someone willing to mentor you.

It’s too costly in this business to learn from only your own mistakes. 


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 Eisenheim : Everything you have seen here has been an illusion.

Nothing is what it seems.

Monday’s misdirection play was a thing of beauty; even the great Eisenheim would have been applauding.

Traders were so busy looking through their rear view mirrors at the premarket high that they forgot to look at the cliff they were driving off.

After Friday’s low broke, the bull’s had their heads held under water until they were finally let up for air late in the day. Intraday shorts scrambled to capture profits before the closing bell after kissing last week’s low.

All eyes are on that uptrendline on the daily chart.


Eisenheim Day

Eisenheim Day

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Option expiration is a study in volatility.

If you accept the premise that wall street insiders have an edge, then you are ahead of the game. The trick is to synchronize our mind with theirs, and stay one step ahead of the pack rather than always being a step behind.

If you also accept the premise that the market tries to confuse as may traders as possible, go to the head of the class.

The early longs got trashed at the open, and it looked like the trend down day was being established. The two tick lower low at lunch then smoldered awhile, and then squeezing the shorts, ran for 20 points, passing the globex hi. Profit taking set in at the weekly middle, and the market closed near the daily middle.

The battle between long and short term traders continues, as it always will.

Trend traders cannot be stubborn when the bounce is stronger than expected. Many professionals prefer to go to lunch flat and relax. Then they will risk a portion of the morning’s winnings for the afternoon session. 

Trading with the trend until it stops working is one of the most valid forms of trading, and should be embraced by typically conservative traders.

Fibo traders were rewarded for guessing right regarding the down up down sequence.



Confucius short and long

Confucius short and long

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