Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18
The Value of Bitcoin - 11th Jul 18
America a Nation Built on Lies - 11th Jul 18
China, Asia and Emerging Markets Could Result In Chaos - 11th Jul 18
Bullish Gold Markets in the Big Picture? - 11th Jul 18
A Public Bank for Los Angeles? City Council Puts It to the Voters - 11th Jul 18
Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - 11th Jul 18
Argentina Should Scrap the Peso and Dollarize - 11th Jul 18
Can the Stock Market Close Higher For a Record 10th Year in a Row? - 11th Jul 18
Why Life Insurance Is A Must In Financial Planning - 9th Jul 18
Crude Oil Possibly Setting Up For A Big Downside Move - 9th Jul 18
BREAKING: New Tech Just Unlocked A Trillion Barrels Of Oil - 9th Jul 18
How Trade Wars Penalize Asian Currencies - 9th Jul 18
Another Stock Market Drop Next Week? - 9th Jul 18
Are the Stock Market Bulls Starting to Run? - 9th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

S&P Stock Index Charts Speak Loudest, Clearest, And Most Accurately

Stock-Markets / Stock Index Trading Jun 23, 2013 - 04:24 PM GMT

By: Michael_Noonan

Stock-Markets

Not that charts actually "speak," but the information taken from them can be the most reliable for anyone wanting to accumulate profits. Does not everyone want to accumulate profits? You would think that the answer would be an easy yes, but somewhere in the process of "investing" in the stock market, the answer is not as obvious as it would seem.

Why not?

Good question.

Lack of discipline is one of the more key answers. Ignorance comes to mind as a more widespread one. Too many people simply do not know what to do at the right time or at critical moments. When a stock or a futures contract is not going well, aka creating losses, the first question, it would seem, is what was the plan? What was the reason for entering into a position in the first place? What was the exit plan,[surely there was one]?


If there were no specific plan, a set of reasons for entering, and a plan of action for exiting, then ignorance becomes a primary factor. Ignorance is a noun meaning lack of knowledge or information. One can be somewhat lacking in knowledge, but with discipline and a plan, then the odds of success increase dramatically.

What does this have to do with charts? They provide a visual map for negotiating through the ups and downs in any market. Charts are the ultimate distillation of all available news and information. Everyone who makes a decision to buy or sell in the market leaves a mark. The culmination of all the "marks" left behind in the course of a trading day, [or any time frame], results in a high and low price, and eventually a closing price, forming a bar. Attendant with each bar is the amount of transactional volume, providing yet more info.

We may not be invited to learn the plans of moving a market by what can be called "smart money," the primary market influence[ers], but with price and volume, found in charts, but we can follow the "marks" they leave behind. To move any market requires strength in buying, and volume to provide price energy, [in an up market; the opposite in a down market]. The momentum developed in this process creates a trend. Solution? Follow the trend.

What we are seeing right now is a possible change in trend. The daily trend has turned down. The weekly trend has not. A conflict? Not really. One just needs to be aware of the primary trend under consideration.

The steeper a trend line, [TL], the more it is subject to a break, especially in the advanced stages of a trend. The poor close last month, 2nd bar from end, on low volume was a red flag for a lack of demand. In June, volume has picked up significantly, as price declined, another and bigger red flag.

A red flag is reason for caution and a clue to look at smaller time frames for change.

The sharper angle TL has been broken. The poor close on the high of this rally was a red flag, a clue that led to May's poor close for the month on above chart. It was followed by another down bar. The next bar, 3rd from the end, shows a rally effort, but results were weak, especially since volume, [effort] increased, yielding no payoff for the increased effort. You can see how a chain of trading days, since the red flag high, continues to show signs of weakness when the market should be strong, at highs.

There appears to be a momentum shift in progress. All we are doing is making factual observations that lead to logical conclusions. No guesswork is involved. It tells investors to take profits, certainly get rid of losers that can become bigger losers, and tighten stops on all other positions. For futures traders, it may be signaling shorting opportunities.

The weak rally lead to a lower high that was followed immediately by a wide range down bar on increased volume. The lower low confirms the change of trend. How the lower low is created give more information. The decline shows Ease of Downward Movement, [EDM], indicating a strong shift in momentum. Any rally that shows weakness can become a great shorting opportunity.

The NAS had been leading the S&P, in general, and it, too, is exhibiting weakness signs.

This larger chart of the weekly shows for how long it has been trending up. It takes time to turn a trend, so there is no reason to be panicking, but concern of longs can be heightened.

A closer look at the weekly shows how volume has increased dramatically as price began to decline, a significant change in market behavior, and a larger red flag.

We noted the last swing high, [arrow], was topped by a tiny range bar, a sure sign of a lack of demand. The trend did resume after a 8 week decline, and it is still possible that the current decline may yet lead to another leg up to new highs.

What is important is that we do not need to know what will develop/happen in advance. All we need do is focus on the smaller time frame developing activity and respond to the signs that determine how to position, based on facts, as mentioned on S&P daily.

By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2013 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Noonan Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules