Friday, August 13, 2010

No Closure - But For Another Day

I really thought there would be closure on the future direction of the stock market today but alas, it was not to be.  I continue to believe that the US Dollar's days heading north are numbered, as demonstrated in these two charts.
This first chart of the US Dollar simply reminds me that the 50 dma  and 50 ema are close overhead current price.  As this moving average has provided either support or resistance in the past, it would appear at this time it will provide resistance and keep price from climbing much higher, if at all.
The other thing that is even more encouraging to me is something few would observe.  And that is that the MACD is BELOW ZERO.  Generally speaking, when the MACD (or TSI, if this particular software had it) is BELOW zero, that is bearish.  If the indicator should reverse its northward direction any time before it reaches ZERO, price would fall with 100% certainty.  So Mr. Dollar may appear to be on a roll, but he is on a roll in bear country and will, in my opinion, not escape this 'below zero' zone with his shirt on.
Click on the charts to ENLARGE
This second chart is a 15 minute chart of the US Dollar.  This chart I find really amusing.  The boys and girls trading the great US Dollar spent 3 hours bringing the price up to just a single penny above the previous high so that a negative divergence in favor of a drop in the US Dollar would be in place.  
Please, don't even try to tell me that the various markets trade hourly on fundamentals. It is psychology, pure and simple.  Sentiment, psychology and skillful manipulation, to put it bluntly.  
Anyway, I'll try to keep posting next week and thereafter, but things will change with my work schedule change.  
Thank you for joining me this summer and I hope you keep an eye on me in the future.  It has been my great pleasure to dialog with many of my readers.  
As always, please feel free to contact me in the future!  
Best always, 


  1. Hello, John

    I have been wondering about your tna trades. Typically, I look for divergences as you do, but I wait for clear upside breaches of trendlines to confirm that my suspicions were correct before I make the trade. I assume you have tried this and decided to predict the move and jump in advance. Any comments or thoughts you might have about these strategies will be most appreciated.

    joe p.

  2. Hi Joe - thanks for a great question!

    The challenge to timing the market successfully is partly a question of the time frame one choses to view it and act on it.

    To be really safe, one should use a weekly time frame. Then a little more risky is the daily time frame. Then 60 minutes, 30 minutes, 15 minutes, and so on.

    With TNA, I was going off the 30 minute chart and in my assessing things, used time frames down to 5 and even 1 minute.

    And of course, on the faster time frames you will see buy and sell signals that will not even remotely show up on the slower time frames, such as 60 minutes. Yes, these were often the signals I was acting on with BUY orders.

    The catch to using the shorter time frames, I am relearning, is that you can make great very short term calls, but they do not necessarily hold up favorably in the longer term.

    In the bigger picture of things I believe that Ben is going to sink the US Dollar, but contrasted with using 30 minute and faster time frames, it proved difficult these past two days for me to profitably reconcile the two conflicting views - one bigger picture and the other, very very short term.

    The true lesson to be learned (in my case 'relearned' until I get it through my head enough times) is that you need to trade - buy AND sell - using the general time frame appropriate for the desired holding period of the position.

    Numerous times I KNEW when price was going to turn against me, but I did not sell because I wanted to hold for a longer time frame. In effect, I had one time frame on my computer and another in my head. That just doesn't seem to work real well :)

    But in my defense, I remind myself that at one point yesterday I had a 10.4% draw down with BRD, a 7.1% draw down in both CDY and JAG, and today a 8.7% with BAA. That did not bother me one bit that I can remember.

    My total position in TNA ended today with a draw down of 6.2%. So I guess I have to be thankful for that, and I am.

    Besides, I had great fun these past two days, this opportunity to sit around and watch the stock market all day has now come and gone, and I have no regrets, just good memories.

    Thanks for your post.

  3. So true John. I often see trades at the small time frames and start to take them only to look at the next higher time frame to see that at that level, it is right at resistance and likely to correct. I like to use the hourly time frame as my trading time frame. If I see a set up at the time frame, I then look at the 5 minute to try to identify the opportune moment to enter, same with the exit. If I'm trading the daily time frame, I might use just the hourly for my entries/exits. One way to handle the situation you describe where you know it is going to go against you on one time frame, but you are holding for a longer time frame is to segment your trading capital so that you trade on both time frames. That is, sell part on the sell signal of the shorter time frame, but hold the other part for the longer term.

    It's been great having you walk and talk us through your trading methods, I'm sure you are a great teacher in person too.