This blog post comes after a big down day for the market = 1.62%. We remained short going into the day even after yesterday's good rally. I closed VST/ ST short positions (read 5 under timeframes ). I still remain short on the IT position but took 1/3 off the table, following my scale out principle. The market basically boxed swing traders for the last 2-3 weeks, harassing us in the VST/ ST signals = all fail. One day like today compensates for the small losses we had in the last 2 - 3 weeks; actually not only compensates but makes the account positive for the last few weeks.
Anyway, what is next? What is the direction going forward? I don't know. All I do is to follow the trend. How long this downtrend lasts? I don't know again. However, I see signs of the last phase of this down trend. One of the signs is in the chart below. We are entering an area where this chart indicates bottoming of the market. The last time I posted this chart was then . Of course, the market did rally few days later. Unless the market structure changed (from bull market to bear market), this barometer should still do good. I am not just talking from this chart's point of view. I have few barometers which are showing the same signs of bottoming. Bottoming could take few days. There may be divergence sometimes. We don't know. What does it mean to us, traders? We don't have to buy everything like crazy. Why? Price still rules. If market swings wildly, if market takes you off the rider, if you have doubt that market is going to turn, if you think you have earned good profits = fine = remain in cash till the signals change again to buy. But, please do not start buying before the market turns, that is not how it works.
Resistance is SPX 1978. Support should be around 1940 area. More to come in the next post....
