This excellent chart from Decision Point shows advances and declines specific to the S&P 500 stocks. Notice that we are making fresh bear market lows in the SPX A-D line (bottom pane) and that 13 of the last 15 trading sessions have had more declining stocks than advancers. Moreover, four of the past 15 sessions have seen more than 400 decliners of the 500 SPX stocks--unusually broad weakness.
The situation is very similar among the S&P 400 midcaps and the S&P 600 small caps: the A-D lines are at bear market lows and declining stocks have swamped advancers for three weeks running. I will resume regular coverage of market indicators and S&P 500 price targets starting with Friday morning's Twitter posts.
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3 comments:
Looking at the SPX A-D line, the last time we were at these levels, S&P bounced 100+ points. A short covering rally is in order.
Hey Doc, I read the first chapter of your book; "Enhancing Trader Performance" and I got a real whack on the side of my head.
First off, accept my apologies for posting on the wrong topic, but I needed to get this out. Secondly, this post might be a little long.
I started paper trading ES futures after I busted my options trading account. In hindsight, it probably wasn't the best time to start learning trading this year- but what the heck, I've already started.
I found myself deeply interested in the way markets responded and worked in addition to economics. I read alot of blogs, mostly economic blogs and found myself very intrigued about the different schools of economics and its societal/political effects... to the extent that I even bought economic books and found them to be such pleasurable reading.
This was one strength that I realized I had after reading a sentence you wrote that goes to the tune of "You're probably already doing something you're naturally inclined to do" and after asking myself several times why my trading was starting to hit a brick wall after early tremendous success, another quote hit my head, "The answer to the problem lies in question itself."
Let me explain my early success in paper trading (Nov to Jan). I had an instinctive trading method, which I did not really know after busting my options account. I was going to keep shorting, cos I had an economic view of so, and I will scalp trades, cos I thought I was pretty good at reading the price actions of ES. I also had a well defined target of 10pts/day; I hit it almost successfully everyday- there were days where I would catch 6pts, but it didnt really matter even though I didnt hit my target.
I enjoyed the after market reviews that I did myself (and still do) on the good/bad trades and also reviewing the economic data and forming an opinion on where the longer term direction/sentiment is.
So here I realize my strength- a long term hat and a intraday hat. They were working in harmony and Mr. Market was cooperating as well. Everyday was a wonderful experience; hit after hit (although "reflexivity", as mentioned by Soros, might have played into this somewhat, that's another story).
And then came Chinese New Year (i'm chinese), the X'mas holiday in Chinese culture. I took a week long break mingling with relatives and the like and came back to my trading desk. I was pretty confident, and decided to open a real futures account with a small capital.
Didn't start off too well, miss after miss, and I didn't quite understand why. Because I was still new at this, I started to second-guess myself... and it is a torrid, torrid experience to be second guessing yourself- I pray that anyone reading this do not get into that situation.
The small account lost 70%, where it is now... and I felt like a complete and utter fool.
Where did it all go wrong? Surely I can't blame Mr. Market, must've been something I changed- and it was.
I had a trading buddy who was with me in the beginning. She wasn't very successful then, but I was. As my bad streak started, it coincided with her having a blazing streak.
When I look back, her strategies were clearly entirely different from mine- she didnt give a darn about economic data/analysis and any of the indicators that I use. She just traded what she saw and got successful.
As I lost confidence, I seeked advice from her... needless to say, she unknowingly gave advice that was entirely against my natural abilities/inclinations.
Some of the advice she gave: "Those stuff that you read are entirely useless, just trade the charts",
"Economic analysis/opinion are pointless",
"Stop trying to fade the rallies, go with it! Reading the price action is rather silly don't you think?",
"Inter-market relationships are too subtle, I think you are thinking too much",
"I think its ridiculous that you only short, you gotta be as willing to go long as you go short",
"Having a profit target is useful, but don't stick to it hard and fast cos you gotta let profits run to cover for your losses."
"Doing post market reviews help, but don't think too much into it; I don't do it and im doing much better"
"Take a break, you're too emotional... you can't review ur trades that much cos the market is moving too fast"
"Don't trade/track multiple markets, stick to ONE market, best if you stick to ES only"
The problem was, these were the stuff that contributed to the success I had earlier. Dazed and confused, I tried going against what worked for me- with loss after loss. For instance, everytime I tried to jump on a rally, every fibre of my body was virtually screaming "No!", due to my own economic and geopolitical opinion.
And when gauging a breakout, I kept asking myself "how are the treasuries/currencies/commodities market responding to this?", but I didnt check them cos I was told to "look at one chart only".
And when I see a rally/small spike, in the past instinctively I would read it and gauge it and decide whether to backoff or short it. In the past few weeks, I didn't, cos I was trying to subscribe to my buddy's methodology.
Also, these confusions contributed to alot of bad decision making on my part.
So right now, I'm not sure if I'm going in the right direction, but I'm gonna go back to try what worked for back then (in paper of course). Its funny too, that I can change my trading strategy, even when I knew that I was doing so.
I could be right or wrong... but what is the definition of those anyway? In any case, it felt right and was entirely effortless back then... the problem is, if i can unlearn what I have learnt.
Cheers to everyone!
Hi OKL,
You make a very, very important point. There are many ways to be successful in markets, but the trick is to discover the ways that work for you.
Brett
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