And Now For Something Completely Different
Before I do a wrap up of where I think we are price-wise with the $spx I just took a little yen trade, and its a concept I havent shown before, so I may as well school you up.
Concept: The daily highs and lows are, as a general proposition, where a lot of stops are clustered. It stands to reason that these levels act like pivots, and are extraordinarily well-defended.
Take a look at the USDJPY today
We have both bullish and bearish potential here. Quite obviously recent momentum is DOWN, and its waaaay oversold, but the trend is showing signs of weakening. This could either be working off oversold momo, before another plunge downwards, or it could be a retest of the lows before a SHORT SQUEEZE, and potentially a chenge of trend.
We DONT WANT TO BE BIASED HERE, just stay alive to all the possibilities
My point is that you want to be long on a break of the high, and short on a break of the low (its the other way round with USDJPY, but lets keep it simple eh)
When we have a situation like today, where we have a down close thats a LONG WAY from a long trigger point, with a clear place to place our stops, we have an opportunity to get in ahead of time, not on any other basis than the risk is small and the payoff is huge.
That is, we arent even THINKING ABOUT WHAT PRICE WILL DO, simply that its a good bet. Imagine you are at the roulette wheel, and the casino all of a sudden announces that single numbers pay off at 50:1 instead of 35:1. The odds are in your favor.
Looking at the small timeframe chart, its clear that there is evidence it is finding support ahead of the daily low
I get long (I know its really short, but for simplicity’s sake I’m calling a bet that USDJPY goes up on the chart a long) at the open with a stop at the daily low.
I have a small position, with an order to take partial profits at the daily high, and leave me some of the position running, with a breakeven stop in that event.
Its a good tactic that I examine when the daily close is very close to a low which should be defended.
$SPX… exhibit A – PRICE
By any measure price is bullish as FUCK. The IHS is complete, we have bullish price patterns working, price is embedded in the upper bollinger. We *should* be taking every long setup from now. Smells like a blow off top to me.
The only fly in the ointment is this, market internals have not confirmed the upmove. What this means is that the rally is on shaky ground, and VULNERABLE TO A BLACK SWAN TYPE EVENT.
What this means kids, is that stops on longs should by very tight right now, the market is capable of a big one day fall at any time UNTIL the market confirms the new highs with new market internal highs.
Gut call – dont get short yet, but be cautious with longs. Frustrating, I know