11-24 comments

I hope everyone enjoys the down time on the Thanksgiving holiday.
The market is mired deeply into a correction and possibly making is second wave down in an overall bear market. If and when the neckline is broken the Head and Shoulders pattern will be complete. As to the possibility that there is an inverse heand and shoulders pattern, only price, volume and time will tell what will unfold. It doesn't matter what path the market will take. We will be ready in any event. The Market School trend following model impressively navigated the last rally and got us out right on schedule. We don't expect a new long opportunity for at least 4 days and it could be a long time. We wait for a rally attempt and then on day 4 of the advance or later we look for a day that closes up at least 1.25% on volume higher than the day before. This is our follow-through day signal to reenter long. I believe Pascal's 20-day money flow perhaps gives an earlier entry possibility when he can confirm that it is real buying and not primarily short covering. As far as playing the short side, I personnaly will wait for a rally attempt and possible failure before entering short.

This is one of those times where it does not pay for me to be in the market at all. I missed the short taking opportunity that presented itself last week. I was too focussed on the long side, a mistake.

[QUOTE=mscott;18827] I missed the short taking opportunity that presented itself last week. I was too focussed on the long side, a mistake.[/QUOTE]

Ditto, but...

... hindsight is 20/20.

It's difficult to go short when the underlying trends, specifically the longer ones, were still long. To whit my 5d/65d timer did not go to cash until 11/17, and the intermediate termed Elder Force Index timer didn't flip until 11/16. Both of these timers have been subject to whipsaws in the present market and waiting to "see what was going to happen" actually is prudent.

11/18 only was a "down" day as far as -0.07%, so it's hard to use that day as a compelling reason to move short.

11/21 was solidly down, only to see some attempt at a recovery on very light volume on Tuesday, 11/22. 11/23 was down, but not overly clear intraday. Again, making a case to go short was difficult, but certainly becoming easier.

My contra ETF index has solidly shown that there has been no opportunity to get in on the downside, but historically, with such strength down side (6 solid days of the GGT database strength falling), we are prime into oversold territory and prone to a bounce of unknown duration and magnitude.

While I agree completely that the macro, longer-termed trend is down, I expect to see a bounce here, especially with the rapidity that we approached these oversold levels. You'll get your opportunity to short, and for me, it will manifest itself in a rise in the markets, with my finger on the contra ETF triggers...

Happy Thanksgiving Mr. Scott. I appreciate what you teach here.

Regards,

pgd