I know exactly how you feel. For weeks on end equities gyrate inside a 50 handle channel and suddenly we get a blast off out of nowhere. Annoying. But absolutely unavoidable and I recommend you don’t waste time emotionally chasing a trade which was largely bot driven and may be reversed at a moment’s notice. The Zero chart below shows us minimal participation throughout yesterday’s session and as such the advance should not be trusted. Congrats to you if you managed to trade it higher but it is probably best to not overstay your welcome.
The Dow Jones Industrial apparently channeled its inner Tenzing Norgay and managed to climb to new highs at 18900 and all that without the use of an oxygen mask. The S&P and Nasdaq remained at camp IV for now but I have an inkling that they’ll make an attempt to reach the top before we ring in the new year. Clearly very few saw this one coming and the ensuing short squeeze has been a sight to behold.
It’s not unusual to get a sideways session or two after a big move up and today we’ll cover how to read the early signs and avoid wasting time and trading capital on getting trapped in the gyrations. Most of you guys prefer the big moves and entry opportunities but it’s equally important to be able to recognize when to stay away.
Today’s session was a lot more tricky to navigate than the past two. We opened with a relatively bullish signal which however quickly dissipated and after some hemming and hawing near VWAP gravity quickly set back in. Great session to learn how to assess sentiment and participation after a series of selling sessions. It’s easy to get mentally locked into ‘business as usual’ after months of sideways churn where mean reversion is the name of the game. The dynamics shift significantly during a sell off and thus it is important to look for clear signs of a low (e.g. a spike low accompanied by a positive signal that remains for two candles or more) before jumping [...]