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We spent the
whole day Friday watching the market debate whether or not it is going to
break the 1450 support level. The market closed the week without an answer.
At this
point, all longer term indicators point at a continuation of the down trend,
but short term indicators are starting to get pegged. The lack of conviction,
the fact that the market did not penetrate down on Friday, shows that the
market may be tired here. It may need a break. It may be ready for a bounce
back up to shake off the weak hands and re-evaluate.
But what do
we know? We can only guesstimate. The market is our boss and will do what
ever it chooses. 1450 is now our support level, if we break below it, we wont
argue with the market and we will stay on the short side. If the market
breaks the 1500 level, we wont argue with it, we will cancel all shorts and go
long. If we break the 1500 resistance, this may be the end of the long term
down trend.
So how does
all of this integrate with the situation in the middle east? It doesn't.
Frankly, I don't think the market is worried about the middle east. Why?
Because this war has existed for many years, not much is new. All traders
that were worried about terrorism, oil prices or instability, already have
those fears built in to their positions. If you took out the names of places
and dates from your news coverage, is anything different than the last few
years?
The market
is only worried about two forces, fear and greed. It's the only two forces
that exist. Fear of what will happen in the future (notice I said future) and
greed, the desire to capitalize on future events. Frankly, I think fear is a
lot more powerful than greed. Since the market trades based on fear of the
future, it is not reactive, it is preventive. The market trades today based
on what it fears will happen 6 months down the road, not tomorrow.
I suggest
turning off your TV when you trade, you will catch plenty of news coverage
afterwards. Make sure that you listen to the market, not the talking heads on
TV. Our job is to trade the market and it has all the information that you
need to trade. If it breaks support, it means that it wants to continue the
down trend. If it bounces off support and breaks short term resistance, it is
done with the long term down trend.
No new
trades for tomorrow, just managing the old trades. The trend is back on, we
are back in trades. Make sure that you are ready to exit the housing sector,
it looks ready for a bounce.
Hope this helps,
Shay Horowitz - ShogunTrading
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