First let's review where we came from: In October when price was at 10,000 I anticipated a fast 500 point drop and then a move up to the 10468 area. That is exactly what transpired. Price has now been stuck at the 10468 area ceiling for a little over a month with various dips and moves back to that area. Most recently focusing on the 12/18/2009 low at 10201 to the high on 12/29/2009 at 10526 I am viewing this price action as a classic bull trap. Granted we have had holiday volume but the declining volume is textbook bull trap volume. We also now have 5 months of negative divergence.
What do I expect from here? The answer is a fairly fast move down to the 10156 – 10066 area. Once this area is reached two things will have been accomplished. 1 price will be back below the key 10313 price that I have repeatedly mentioned and 2 we will have taken out the start of the bull trap low at 10201.
From the 10156 – 10066 area we probably get a final test of the 10313 price before selling and snapping the psychologically important 10,000 number. If we can sell below 10,000 and then have 10,000 give resistance it will be a good indication that we are on our way back to test the March 2009 lows and confirmation of the CIT will be in effect.
Please remember the paragraph in the original October post which is worth repeating here: Keep in mind that money in trading is made not by being right in your predictions but by being on the right side of the price action. This is just what I see happening. It could or could not happen. I will not try to force my will on the market. The best traders I know don't care what the market is going to do...they just know what THEY are going to do if the market does A or if the market does B. Much better to be prepared to act on what the market does than to try to predict what it is going to do. All that being said the above is my forecast of how I see price action playing out from here.
Below are the original 10/25/09 and 11/16/09 posts intact:
FROM NOVEMBER 16, 2009
On October 25th I wrote a blog post detailing my thoughts on the big pic. We have reached one of the two key areas I was focusing on for a major CIT. I am intently watching the current price area for signs of an imminent CIT. It may or may not happen here. Above is the updated chart of what price action has done since the October 25th blog post and below is the orignal post and chart intact.
FROM OCTOBER 25, 2009:
We are experiencing what could be described as topping action in the major indices. As I mentioned in a tweet on Friday we have had 3 months of negative divergence on the daily chart. I wouldn't be surprised to see the Dow make a swift drop down to about 9500 from here and then one final push to new highs around the 10468 area before doing the final CIT (change in trend) and heading back towards the March 2009 lows. I have been calling for 10313 - 10625 for some time now and I still think that this area, at a minimum, will be tested before we finally roll over. This is the overall price action I see playing out in the longer term.
Keep in mind that money in trading is made not by being right in your predictions but by being on the right side of the price action. This is just what I see happening. It could or could not happen. I will not try to force my will on the market. The best traders I know don't care what the market is going to do...they just know what THEY are going to do if the market does A or if the market does B. Much better to be prepared to act on what the market does than to try to predict what it is going to do. All that being said the above is my forecast of how I see price action playing out from here.
Note: The black line on the chart is the OVERALL price direction I am anticipating. I do not think we will go straight down like the black line in the chart. Obviously price will ebb and flow, the main point is that the 10313 - 10625 price area should be touched to the upside before we have a major CIT. By major CIT I mean that once price reaches this major CIT area the march lows should be in play before any new highs.
The other area I have been keying on for a major CIT is 11250 - 11875. So, in conclusion, I will be expecting a rather fast move down to 9500 or so from here, then a move back to 10468 or so. Once we are at the 10468 area I will reassess the situation and most likely either anticipate a major CIT is in the works or be on the lookout for 11250 - 11875 as the major CIT area and then a move back towards the March 2009 lows.
What do I expect from here? The answer is a fairly fast move down to the 10156 – 10066 area. Once this area is reached two things will have been accomplished. 1 price will be back below the key 10313 price that I have repeatedly mentioned and 2 we will have taken out the start of the bull trap low at 10201.
From the 10156 – 10066 area we probably get a final test of the 10313 price before selling and snapping the psychologically important 10,000 number. If we can sell below 10,000 and then have 10,000 give resistance it will be a good indication that we are on our way back to test the March 2009 lows and confirmation of the CIT will be in effect.
Please remember the paragraph in the original October post which is worth repeating here: Keep in mind that money in trading is made not by being right in your predictions but by being on the right side of the price action. This is just what I see happening. It could or could not happen. I will not try to force my will on the market. The best traders I know don't care what the market is going to do...they just know what THEY are going to do if the market does A or if the market does B. Much better to be prepared to act on what the market does than to try to predict what it is going to do. All that being said the above is my forecast of how I see price action playing out from here.
Below are the original 10/25/09 and 11/16/09 posts intact:
FROM NOVEMBER 16, 2009
On October 25th I wrote a blog post detailing my thoughts on the big pic. We have reached one of the two key areas I was focusing on for a major CIT. I am intently watching the current price area for signs of an imminent CIT. It may or may not happen here. Above is the updated chart of what price action has done since the October 25th blog post and below is the orignal post and chart intact.
FROM OCTOBER 25, 2009:
We are experiencing what could be described as topping action in the major indices. As I mentioned in a tweet on Friday we have had 3 months of negative divergence on the daily chart. I wouldn't be surprised to see the Dow make a swift drop down to about 9500 from here and then one final push to new highs around the 10468 area before doing the final CIT (change in trend) and heading back towards the March 2009 lows. I have been calling for 10313 - 10625 for some time now and I still think that this area, at a minimum, will be tested before we finally roll over. This is the overall price action I see playing out in the longer term.
Keep in mind that money in trading is made not by being right in your predictions but by being on the right side of the price action. This is just what I see happening. It could or could not happen. I will not try to force my will on the market. The best traders I know don't care what the market is going to do...they just know what THEY are going to do if the market does A or if the market does B. Much better to be prepared to act on what the market does than to try to predict what it is going to do. All that being said the above is my forecast of how I see price action playing out from here.
Note: The black line on the chart is the OVERALL price direction I am anticipating. I do not think we will go straight down like the black line in the chart. Obviously price will ebb and flow, the main point is that the 10313 - 10625 price area should be touched to the upside before we have a major CIT. By major CIT I mean that once price reaches this major CIT area the march lows should be in play before any new highs.
The other area I have been keying on for a major CIT is 11250 - 11875. So, in conclusion, I will be expecting a rather fast move down to 9500 or so from here, then a move back to 10468 or so. Once we are at the 10468 area I will reassess the situation and most likely either anticipate a major CIT is in the works or be on the lookout for 11250 - 11875 as the major CIT area and then a move back towards the March 2009 lows.
No comments:
Post a Comment