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bobrabcd@xxxxxxxxxxx wrote:
>
> Walt, I think it would be interesting if you would interpret the attached
> chart of the SPX with your FEAR indicators applied.
>
> Thanks,
> BobR
Bob,
I would be happy to. :)
In starting, lest there be any confusion, the numeric values you
see at the top of the chart are NOT the price plot values.
What you are seeing are some of the ratio calculations.
1. ) As can be expected in a runaway bull market, the larger specs
(RED and YELLOW) are leading the way.
2.) Notice, that in the run up, each time the CYAN (SmallSpec) line
touched or crossed over the RED or YELLOW plot, there were small
market retracements. The little guys were either taking profits or
being consumed by the market.
3.) We have had two retracements to the RED plot, with the second
being deeper than the first. This would lead me to believe that the
next time we get several bars whose ENTIRE range is under the RED
PLOT , we could be seeing a market reversal.
4.) Today was a nice reversal as the FEAREnv denied higher prices.
5.) Is today's close below the RED plot the start of a BEAR run?
I don't think so. Look for the large concerns to keep the market
"pinned" near the FEAREnv until the July options expire. (7/18)
Start watching HARD from 7/16 on.
6.) Look for the following set-ups in the days to come:
Prices trade to or slightly penetrate the FEAREnv and:
a. ) The YELLOW plot moves below prices and the FEAREnv, while the
RED and CYAN plots rise slightly and start to "flat-line".
b. ) The YELLOW plot remains high and the RED and CYAN plots
converge on it, and all three begin to flatline.
Under these scenarios, aggressive traders can SELL the FEAREnv,
and others can start selling when we get a close BELOW the YELLOW
plot. Once again, anytime we get several full bars under the RED
plot, I will be very tempted to SELL anything that gets near the
RED plot again.
To conclude our analysis of the current SPX situation, let's look
at some historical/seasonal considerations:
Statistically , the end of JULY has usually been very strong.
This lends itself to another bio-neural concept I call "COUNTER-
TRADING". The concept is simple: Find a system that has a lot of
people trading it, take a look at how the market is taking them
out, and trade THAT.
The SPX situation looks very juicy to me, because near the end of
this month, you are going to have a TON of people piling in to the
market on seasonal (sure thing) trades. If you profile the average
seasonal trader you will find that, sadly, they are often first or
second time traders, that are betting the ranch. It will be the
"pros" vs. the beginners. When pressed, these traders will tend
to hold too long, and panic quickly once they reach their maximum
fear thresholds. The market action that will indicate the beginning
of this phenomena, will probably start around 7/22. Look for a
small dip followed by sharp buying, and then a SHARP decrease, as
the pro's start to pressure the positions. When the market has
moved down from the buying peak the equivalent of the margin it
takes to hold 1 SP contract, look for further sharp selling, as
the seasonals fold up.
Well, Good trading!
walt :)
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