21 November 2012

S&P500 : It's Now or Never

  • This is a great example of why I think TL breaks make lousy trading signals on their own. Weekly UpTL broken (at 1385) 2 weeks ago, closed below for 2 consecutive weeks, yet we have a rally from a low of 1340 to 1388 now. Any which way you look at it, any subsequent entry point other than on the immediate break of the  UpTL break would be a disaster.
  • Current rally, however, is the classic pull-back to test the validity of the UpTL break. From here, we either turn back down quickly to affirm the trend change (ie down), or we go on to rally further and this whole saga turns out to be a consolidation of the up move and new highs are seen later.
  • This week, the UpTL crosses at 1393. Nearby is also the NL of the daily SHS top at 1395. So, if one were starting from scratch, current 1388 makes a great risk/reward short entry.
  • One would have to be a supremely confident and lucky technical trader to see the TL break at 1385, done nothing while it sold off to 1340, and waited till now to initiate a short though. 
  • Unfortunately, I am not so clever here. Great entry at 1421, nicely hedged up -ES vs +TY on seeing the bottom on the daily candle, but removed the TY hedge (133-30) and added onto the ES core (1377) too soon. Right idea, poor execution. Need to exercise greater patience. Missed out a large chunk of the TY sell off (133-12 now).
  • Moral of story : Dangerous to trade on TL breaks. Must use in tandem with other supporting signals.
  • For what it's worth, I think the SHS objective of 1320 should be easily seen, by which time the weekly chart would be looking truly horrible.


Taichiseal said...

Stopped out 1396.5

BLoody pain in the ass market.

Anonymous said...

TS, don't get mad, get even. Get even by studying the charts over again, analyse your approach and see if you can learn from past experience to improve your methods. - Pandu

Anonymous said...

TS, perhaps trying to be very patient means you are too slow to act on an opportunity? Markets ranges are pretty high these days, so missing one turn can mean 20-40 points in the SP in a day sometimes. Or another angle to the same situation is that you need very wide stops, with correspondingly smaller position sizes. - Pandu