Trend Bending Continued
Traders are always trying to work out what happens next. But in the process of becoming convinced of something we actively block out information which doesn’t fit with our narrative. We become openly hostile to those who have an opposing view. We become biased.
It’s extremely tough to avoid this. Myself, even after 7 years in permabear recovery, I still don’t like being long stock indexes and have to force myself to take the setups as they appear. Deep inside there is a part of me that wants to see it all burned down. Taken to an extreme is the kind of idiocy you see at the slopeofhope, where the internet’s 3 remaining bears huddle together for warmth, wanting to be right and not rich. I hung out there for a little bit, and the stink is tough to wash off.
Our job as traders is to interpret the never ending flow of information in the now moment. Let’s look at the price action on Friday.
Some things I want to point out. We talked in the previous sub only post about the importance of how a move starts. The kickoff to this rally is the Trump election, and a historically strong move that day, 1000 dow point round trip closing at the highs. Since that day we have seen volatility decrease.
Stated more correctly the character of the move is a LOW VOLATILITY MELT UP. These moves, you see on all timeframes have certain characteristics. It’s covered in more detail in the subscription section today but the bottom line is that in low volatility upmoves, counter trend setups just don’t work. The reasons are quite intuitive when you think about it, and if you want to know more about them – PAY THE MOLE!
Another illustration of the strong kickoff principle we discussed last week is in the 30 year bond, which when correctly back adjusted shows a clear breakdown from a trading range in the direction of the now primary trend. This is a big deal, and with the rate rise anticipation being the big news all eyes will be on this market in the coming week.
The bond markets (all correlated) look to have a confirmed downside breakout. If you are looking for victims to trade intraday, look no further than ZB and ZN intraday.
And now moving on.
Let’s talk about trends, as they end.
Trends generally end in one of the following ways
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I have to jump on a plane, but I’ll continue on with this when I get back to Australia.
Questions in the comment section