A Trend Is Near, and Here Is Why

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September 1, 2010

A trending move is very near. I know this because I am becoming disillusioned with the market. I’m starting to not care, the swings have been too short to swing and overnight positions are getting gapped one way or the other. The guys/gals who start trading depending on how the market opens are doing well. I was talking with my trading friends (outside of this blog) and I mentioned a few points there yesterday.

1. I was worried about a MACD cross up before we head lower, which price had to move higher first. (Check)
2. Was worried about a 21d ema test before going lower. That was posted also here. (Check)
3. I was talking about despite being right by being short, it was extremely unsatisfactory in terms of gain and overall satisfaction.
4. RSI positive divergence printed the other day that didn’t produce much up.

From what I can tell is that today was a make up day. The market should have gone up further a day or two days ago. With the excuses (news bits) that came out it was fuel to squeeze the shorts. However, the market needed to make this move. There is room to move a little higher, but the trend hasn’t change it was just a nice move. A really nice move.

This morning I woke up late around 10:15AM and dumped my EDZ and TZA positions eating somewhere between 7-8% loss. About 10 minutes later I rebought TZA and then 5 minutes after that sold it and was done for the day as I saw it was trend up stair stepper. I did keep my index funds short and did not touch that position.

Its becoming painfully obvious that trend trading over the summer is becoming a bust unless you get out at oversold/overbought levels. The problem or mistake I looked at on this trade was that I thought we would break this time. However, we have been talking about in the comments over the last few days that its probably not going to break (if it breaks) until after Labor Day.

One interesting item is that the monthly charts flopped to the downside on all 3 indexes. With the monthlies there is alot of room to screw around. Right now there is some screwing around.


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  • Bill

    I think you are right about how the rally was overdue but was delayed. It was the old “delayed check raise” again and I fell for it hook line and sinker. You would think I would know better by now HA!… So the real question is why was the rally delayed? Was it just to hook some more shorts or was it so that the bearish monthly candle for August would be preserved? I suspect it was the latter… But if so was that done so the market would have more room/time to jerk everyone around without disturbing the bearish trend OR it was setting up the ultimate bear trap. Who knows at this point. Alot of very smart traders are very bulled up here so maybe the trend is gonna turn back up now. Toughest most confusing market I have ever experienced in 12 years of trading.

  • http://www.stockrake.com StockRake

    Its definitely a situation that has happened many times. The delay effect. I never thought the pessimism was high. Didn’t see many short. Apparently that AAI was very bearish.

    The monthly is setup for sure to the downside, however, it can flop back and if it did, then there is a chance this next one is for a real move higher. I’m not really in that camp until it happens though.

  • Bill

    Sentiment is so hard to judge anymore, you get AAII numbers showing lots of bears but then everyone is a contrarian nowadays so then everyone turns bullish to fade AAII. Sentiment used to be more useful back when there was alot of Retail in the market. Now that Joe Sixpack is no longer interested in stocks what you have is a bunch of fund managers and active traders all trying to game sentiment so it turns on a dime IMHO… Anecdotally it feels to me like everyone and their dog in the blog/twitter community is calling THE bottom awfully quick here. TWT…

  • http://zentrader.ca zentrader

    I think tomorrow is do or die with the jobs #. If we continue rising, we’re going to move higher for awhile. If we reverse it’s look out below time.

  • Bill

    Well looks increasingly like the trend coming out of this range will be to the upside. Short side definitely not the right side. Guess the AAII numbers were the tell worth paying attention to. Painful lesson…