I started out in the investing/trading world as a price and volume guy. Almost everything you need is in the price and volume. I don’t care much for derivative indicators except the 20dma - and then only as a reference line. The 50dma and 200dma work because everyone watches them and big money moves based on only the relationship of price to these moving averages. My theory has always been the 45 day is more useful because it is one half of 90 days (one reporting quarter in the corporate world). But the 50dma actually works better because both pro and retail investors use it as a buy/sell point. It does not matter if there is any validate technical reason to use the 50dma - if everyone does use it then theory goes out the window. Always trade what “is” and not what you think it “should be”.
Notice above I side “almost” everything you need is in price and volume. My studies and actual trading found something lacking. Cups-with-handles that broke out sometimes failed. Why did it fail? I began looking at time which led me to Gann who greatly shortened the learning curve. Many failed breakouts occur when they happen at the wrong time. Price and volume could be perfect, but the third dimension in trading is actually the fourth dimension in the physical world.
I ramble on above because I was thinking on Thursday that according to price and volume we should have hit the low for a while. But time slapped back the move because it appears that the market needed to go back into the oven and cook some more. June 5th was a 50% move of the SP500 Index (SPX) Oct07-Mar08 move. The 50% price retrace was at SPX 1416 and price did it’s best to get there on Thursday - hitting 1404. That was the time force behind the recent rally.
Last week I mentioned that a number of other Gannish analysts were pointing to SPX 1350-60 as a low. It turns out they were correct and time was on their side. The range from March to May needs more time before it can move up. June 20th at 1348 is the 50% retrace. With the current momentum, it would not surprise me to see price below 1348 for a short time before recovering to the 50/50 point.
The SPX Roadmap I have been following for a couple years remains intact. Because we are nearing the end of the time run - from here to the end of July depending on which cycle we look at - price is breaking down and will retest the highs from below the slope I laid out last March. It is possible that price will make a new high, but I am losing confidence in a substantial new high before the rollover into October.
Here are a few other data points I have collected this weekend.
- TRIN and TRINQ both above 2.0 - almost certain short term rally
- Short term tick is oversold - I look at moving averages of the 5 and 60 minute
- VIX has made a 50% move since May 19th - a pretty big move even for me who doesn’t think much of the VIX
- Advance / Decline not exceptionally oversold - maybe another day or two of weakness
- Record short interest and short ratio
- Hedge funds still very short
I remain bullish after October and hope the SPX 1230ish level holds. My premium subscribers can see my thoughts on all long term markets this week and see why I am long term bullish. Stepping back and ignoring short and intermediate term action shows charts working off the bull move from Oct02 quite nicely.
Post Modified: July 31st, 2008 at 11:47 pm
Tags: Accumulation Day · Breakout · Cup with Handle · Distribution Day · Market Outlook · Roadmap · Slope · Standard and Poor's 500 (S&P500) · Volume17 Comments
17 responses so far ↓
Andy,
I wrote it before, but to me Friday just seems to have been one of those odd days. Oil up 10 bucks, but DUG up 2.5% as well? Oil companies had a big pop, end that faded…
volume was amazingly high, and it seemed almost like people running to the exits….
I also think that a short term bounce is due, it may come after a bit of a sell-off (monday maybe, open down and then bounce up….)…..
Kurt - yes, Friday was odd after Thursday. I don’t know much about oil (except it cost $76 to fill the car and lawn mower yesterday). Gee, I should push the premium subscriptions as only a couple fill-ups of the gas tank… LOL!. At times like these I stay a long way away from short term trades. I have no idea where price will be next Friday. Still, with the TRIN over 2 I would be careful on the short side for a few days or more.
Andy, I’d be thrilled had I been short…however, I am way long on SP500 calls (june too…ugh)… the ‘nice thing’ is that i pretty much just need a bounce to 1390-1400 to make a nice profit, 1440-50 by June 20th and i’d be ExTRemely happy
(won’t happen, and even if it did, I would not hod the calls that long)…
1357…. MAN, your group of people really hit it on the head… ugh… ugly day…. very ugly day… (for me….have june sp500 calls ugh)
There should be some way to read the latest comments posted on all blogs.. Is there one ?
I wanted to see if anyone posted any comments on your apple blog from last week. But i had to search it and then go there and then check it out….
yes, actually some sort of message board would be cool, but likely it would cost some more, and then there is the whole mess of having to moderate it and so on…. maybe more than Andy wants to handle?
thoughts on todays action? good volume, reversal day?
it would be swell if this was IT…. who am i supposed to pray for to get my 2 week rally ;)…
TK - I added a Recent Comments widget on the right panel. Try it for several days and let me know how that works out for you. You can also use the Sitemap link to see all the posts on one page.
Kurt - I have the capability to add a forum on my site. I don’t have time now. I have created a ptv-investing forum at Yahoo just to reserve the name. I don’t want to link it here because it will draw spam. But you can search for it at Yahoo groups. Let me know if you post there and we can try it. Eventually, I would like to start a forum here. Keep in mind that 25-50% of my reason for blogging is to learn about the software behind the internet. So building a forum from scratch will be fun… but I just don’t have the time this month.
Andy you can reduce the font size by a couple.
In my opinion, It’s too big right now. Big enough that its harder to read than if it was smaller.
big font size = less on screen = more scrolling = more work.
And thx for the recent comments widget.
By the way , i have used this website from an iPhone and it is very readable.
Kudos bossman
that works great Andy! thanks!
I guess what I was trying to refer to before was a way for some users to exchange thoughts…but it seems that its only you, TK and me posting anything at all…
TK - I reduced the sidebar font. Let me know if that helps. Glad to hear it shows up on your iphone. I shows up on my blackberry well also.
Andy - in the short term chart you have used 1257 as the base. However, i don’t see any bars touching 1257.. ??
TK - the March low was 1256.98 at Stockcharts.com.
Why doesn’t it show up here.
http://ptv-investing.com/Pix/SPX_VST_Time_GA.gif
I don’t see any bars that go to 1257
TK - The bar is hidden by the black line. Here I removed that line.
http://ptv-investing.com/tmp/spx_tmp.gif
Andy - The way markets are behaving i think its very likely for March lows to be taken out before October …