Post Session Musings

Today’s session took most of us a bit of surprise. Although we expected a directional change fueled by a high volatility period the bulls managed to run the tape all the way into the close. So what’s going on? Where are we going from here? Are we still in for a sideways shake out?

One of the most important qualities of a successful trader is that of humility. It takes humility to accept the emotional impact of mistakes and plain old losses on a daily basis. We try to limit both as much as possible but we are not robots and no matter how Zen we think we are, a missed (winning) campaign or a few consecutive losses can out of the blue elicit emotions we thought we learned to control.

Daily participation can also take its toll – the tape has a way of getting to all of us every once in a while. It doesn’t even have to be a bad day. Just one stop run too many may break the camel’s back and somehow trigger a flood of pent up frustration. Never forget that the market runs on the basis of inflicting maximum pain on as many participants as possible. And it is really really good at doing just that.

In my mind the best way of facing the daily onslaught is to simply embrace the pain, to accept chaos and nasty surprises into your life, to engage in humility and to reach a state of acceptance. Make no mistake – you will not succeed on ‘beating the market’ my friend – for she is smarter, bigger, more devious and cunning than all of us. Also reflect on the fact that the tape will run its course with our without us. It was there long before any of us were born and barring a global apocalypse it’ll still be ticking along after we have been forgotten and our bones have turned to dust.

The reason why I am bringing all this up today is because high volatility periods like these are plastered with the corpses of feisty retail traders who didn’t know their place in the Darwinian pecking order. In case you have forgotten or are unaware: You are a field mouse scraping for scraps on the outside and you know jack. It is a miracle you have come this far as you are effectively competing against an army of professional soldiers (e.g. HFTs, prop desks, fund managers, etc.) wielding pocket knives and sharpened shivs. The sheer fact that you made it through this year is a bloody miracle and if nothing else I pride myself by the fact that I just may have something to do with that. I didn’t call every wrinkle but I think I did kept you guys from being thrown to the wolves. It’s been one of the toughest years since 2010 and we’re not done yet.

Which brings me to today’s session. The Zero shows us small but consistent momentum after a pretty nasty bear trap to the downside. No warning there at all (not even on the Zero – sorry) and it was easy to get caught as buying pressure materialized out of the blue. However the signal from then on is consistently positive and and ran every single stop above it into the close. Let’s not under estimate this fact!

Here’s the daily and LT context side by side for your convenience. Which is rather brilliant I must say for we are touching not only a daily and a weekly Net-Line Buy Level at the same time, but we are also right above the monthly Net-Line Sell Level at 2013.5.

Suffice to say that this is a very serious cluster of resistance across all time frames and should we hold here more than a session then the bulls are pretty much back in the driver’s seat. The only chance for the bears here is to produce massive selling right now and right here – I may give them until Monday if the tape is starting to look divergent (watch the Zero). We have come too far and tepid selling simply won’t do at this point – all that would produce is a just better BTFD opportunity for the bulls. If big sellers intend to strike at the last possible opportunity – well, this it.

So in a nutshell: Unless the bears strike hard and fast the bulls will probably run this horse into the new year. We may see a bit of hemming and hawing in the coming days. But short of a massive technical failure tomorrow or Monday at the latest, one which leads us far South, the bears are looking at another cold winter.

The future is now – so don’t bring a knife to a raygun fight. If you are interested in becoming a Zero subscriber then don’t waste time and sign up here. A Zero subscription comes with full access to all Gold posts, so you actually get double the bang for your buck.

Cheers,