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What's discouraging is that this analog, in retrospect, nailed every single turn in the market for two solid years, but the recent surge made have been the equivalent of a fatal knife wound to the analog. Here's the S&P – – point #20 is the aforementioned wound.
Below is the corresponding past…….point #20 was supposed to stop at about the same area as points 16 and 18, which would mean the S&P should have stopped at about 1130. As it is now, it's all the bears can do but pray that the S&P returns to that level, having blasted past it by 120 points and counting.
Could the analog get back on track? Sure it could – – – the entire point in front of #19 might be "POMO elevated". But it's disquieting to see my best friend the analog potentially mortally wounded at this point.
If you are not going to use stops, because either 1) you prefer mental stops 2) the MM's will "steal" my shares or 3) you're afraid of it popping back up as soon as you get stopped out, is no excuse to not use stops, in fact, if you don't do it, you better confine yourself to a life defined by Dwight Schrute – pay careful attention to what he is doing AND what he says is the reason for doing what he is doing!
Is it extreme what I am saying here? No, it isn't. In fact, it couldn't be any more true. Take for example last week, MasterCard (MA) and Visa (V), after the fed introduced a proposal for interchange fee regulation right in the middle of the trading day. Had you decided to buy MA and subsequently take an 'extended bathroom break", within 20 minutes MA would have dropped from $253.35 down to $232.50 for an 8.1% decline. Had you decided to grab a bite to eat (assuming you washed your hands of course), you would have come back to a 12.5% loss. Visa was even worse, a quick run to the local Piggly-Wiggly and within 30 minutes you have an 8.8% loss on your hands, and if you go back for desert, you have 14.6% in losses. And let me tell you, your stomach isn't going to be the only thing hurting after that quick bite to eat.
Don't think that Visa and Mastercard are the only instances of this, stocks like Dendreon (DNDN) saw its stock drop from $22.50 all the way down to $7.50 in a few moments back on 4/28/09. Yes it did recover, the next day, as it resumed trading in the $20's, but when the bottom was literally falling out from underneath it, you had no clue what its fate would be the next day, and I for one, would rather be stopped out 4 or 5% below the current share price and see it pop back up the next day (which of course happens to me quite often), rather than wondering at sub-$10, whether the stock would recover or not. Because, folks when stocks get torn up like that, and at a pace as ferocious as what I just explained, you're not thinking about the what-if's for tomorrow, instead you are staring solely at the deep bloody red color in your account with a loss larger than what you had ever desired to take on.
You see, small losses are okay and are very recoverable, and at times, if you continuously take small losses over time, you will have instances, where the Market Makers stole or shook you out of your shares, you'll see your stop triggered only to have it go on to be a would be stock pick of the year, and many other cases that seem unjust and unfair. But that is part of the game, and trust me, I'd rather take a small loss from someone who wants to take my shares at a cheap price, then let one of these stocks (or a flash-crash too) rip me a new one, because my ego was too big to control losses by any means other than a stop-loss. And because of the examples outlined above, and how close I was to buying Visa (V) as a legit breakout play back on 12/15, that if I didn't use hard stops I'd be like Dwight with the a 2-liter bottle in hand for when nature calls.
Although Slope is well-known as a "bearish blog", I have been offering up more and more long ideas. Getting my head blown off by a relentlessly rising market got old a long, long time ago, so I am taking a greater and greater interest in intriguing long positions (per my video last night).
Today I've had the most success with energy longs. Here's just one example:
There are some new features in the Slope comments system, and I wanted to point out search in particular. (Please note that it's important to Clear Your Browser's Cache if you are seeing oddities, particularly if you see an ad on the left side of the screen blocking stuff).
Using the Search feature on comments is easy – just click the magnifying glass.
Next, type in what you want to seek. Keep in mind, this searches comments, not the blog posts. That search function has been there a long time and is accessed by clicking the "Search Slope" entry box in the upper right.
A Hermes handbag. A Tesla sports car. Chart Your Way to Profits.
All of these are on Christmas wish lists around the country, yet for many, their price makes them out of reach.
I, for one, intend to make a difference. On that last item – the book – I am doing a today-only offer of $50 for delivery by Christmas Eve for residents of the United States. That is one-third off the regular price, and I will happily sign the book to the trader of your choice.
Read about the book here, and if you want to pursue this once-in-a-lunchtime opportunity, send $50 via PayPal today to firstname.lastname@example.org – – there's no other book in the world about ProphetCharts, and even if there were, the author's hair wouldn't be as full and lustrous as my own.
I saw an alarming rising channel on EURUSD last night, and I'm watching that very carefully this morning. An IHS of surpassing ugliness may be forming within it:
Equities have been trading sideways to up for the last few days, while EURUSD has been moving down. If EURUSD reverses decisively and rises 400 odd pips from here to the top of the channel then we might well see that end, and equities move up quite a bit. One to watch and I am reminded looking at it that my ES daily rising wedge upper trendline was never hit. That would be in the 1270 area now.
On ES itself I'm seeing a gentle rising channel with support at 1241 and resistance at 1249 at the time of writing. That looks fairly solid and may well define the trading range today:
IWM broke the previous high with confidence yesterday and my upside target trendline for IWM now looks likely to be hit. That target is in the 79.5 area today:
I've been having a look at copper this morning, and have a couple of observations to make. On the 60min chart there is a strong trendline running through the rise from 360, and if that is hit again then the upside target would be in the 430 area. I've drawn two trendlines below to show immediate and slightly longer term support:
On the weekly chart there is an obvious target for copper in the 440 area and that is pretty much the final major resistance trendline on the copper chart. if that is broken then the upside looks wide open, though I have drawn in a green trendline that would then be the trendline to watch.
I'm still very doubtful about seeing much downside on equities this week.