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Putting things in perspective, I'm a discretionary trader whether day
trading or position trading so I'm not following a fixed set of rules which
says divergence = buy/sell. Divergences can last a long time e.g. the entire
rally into the July highs was a divergence from the April highs. When I see
divergences, I add the information to the weight of evidence I use to
evaluate the price action and my trading time frame, however I use the price
action to define the trend and I do not fight that trend. Going into this
morning we had good breadth and strong upward price action with little
evidence of selling pressure (in spite of volume and McOsc divergences) so I
looked for trades on the long side rather than the short side. The
divergences told me not to hang in for the last dollar, so when my price
objective was hit, I got out. As I'm writing this, the price action appears
to be weakening but I'm not about to go short until the price action
confirms the other divergences. Hope this helps.
Earl
-----Original Message-----
From: ken weiner <traderksw@xxxxxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Friday, October 30, 1998 12:22 PM
Subject: Re: sp500 update
>Earl, Ben
> Granted that there is negative divergence in the McOsc, but given the
>seemingly characterisic lengthy lag times for response of prices (weeks to
>months - at least from recent historical examples) wherein lies the value
of
>this divergence as a timing tool in the immediate present/future?
> Or, alternatively, are you guys viewing this divergence as an enabling
>indicator which sets the stage for the directional move which you don't
act
>on unless and until your proprietary triggering indicators (which I trust
>you will share with the RT brotherhood before Gary makes his next
prediction
>or Slick Willie is re-elected) signal the exact timing of an entry.
> Pearls of wisdom appreciated by all, Ken
>
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