Today I offer the hourly chart:
We remain outside of the channel and are migrating to the left. This remains a bearish sign - but is not the most important indicator on the chart. Again, the RSI shows a divergence.
For those of you who do not believe in using the RSI - please re-evaluate your thinking. RSI divergence is about the only leading indicator that actually works a high percentage of the time. For example, look at the low price points on the left of the chart. See how we were setting now lows in price? Now look at the RSI. The lows of the RSI started to rise. This simple divergence was an early warning that trend change was about to occur.
Now look at the reaction highs on the right side of the chart. See how we are setting new highs? Now look at the RSI. The highs of the RSI are dropping. This divergence is an early warning that the trend is about to change.
Does it work 100% of the time across all time periods? No - nothing is perfect. However, you need to watch the RSI in all time frames and note when it IS working. When it is working, you can leverage it to your advantage.
The chart also features support/resistance levels that must be broke if we are to change direction.
I recouped a decent portion of my loss today through non-emotional technical trading. Though the market stayed in a tight range (compared to days of late), I was able to extract 10 pts. by scalping the ES. This is a high stress activity, but then again so is being short the market.
Cheers.
13 comments:
Didn't RSI make news highs today on the daily. For the cash s&p.
David , I am glad you picked up some coin today , I was thinking you would ,as it was heart monitor type day. ( I dont really have the skills to play such days )
I can make a case for turning down hard on the open , I can make a case for a new double top , which is to say I have not a clue where it is headed :)
I hope you are Right, 1120 would be way to much drama, and as you pointed out, way back when , it could turn into a bear trap that takes us to 30s or 40s or 50s
My Best .
Hey Nica,
I show the RSI at a high of 65ish today. The prior reaction high (set over a 3 day period starting Oct. 15th) was just below 70. The prior reaction high (set around set around Sept. 22nd) was at around 74ish.
Remember, when you are viewing RSI on a chart, you must consider the time frame and proper points of comparison. On the Daily we must look at the main reaction highs and lows of the rally. On the hourly, we are looking at waves that make up those reactions.
Make sense?
Cheers.
Thanks Payline,
Let's hope that the RSI is true and we get some selling down below these resistance lines.
Though this market can be frustrating, I have to keep the emotions out of the equation. The fact of the matter is that this market is currently in an uptrend. That uptrend is being tested, more and more everyday. The evidence is in the technicals. The evidence is in the consolidation. I just need the evidence to start appearing in my accounts...
This dollar correlation is killing us. Unfortunately, the dollar index is in a down channel still (perhaps a wedge) and is "technically" headed to the lower line. I would not be surprised if we breach 75.000 again - possibly tomorrow.
Cheers.
Hi again David , yep the $ is really screwing up our party , Its certainly is in some kinda variation of a down triangle.
Take look at Gold on a monthly chart and look at inverse H$S, even I can see that one . S at 955ish and of the neck at 727.
I wonder if there are some $ clues in Gold. I would expect the Gold rush to go on for a bit when the $ turns , Cus it is a Gold rush ,
can we say Oil 2008
I hope those 2 legs off the high are first 2 of a Down , and not part of a yet to end 5 , But like you said, we are in an uptrend , so we should expect to go up , they something makes it clear we are not.
My Best , may some $ find there way home to us all.
that's really good david.. got a few points today but not *10*..
Hey Devon,
Glad you were able to profit today.
I'm usually happy extracting up to half the day's range. I had to work very hard to get today's yield. Lot's of fast decisions based on real time TA. Very, very stressful - but I needed to make up for such a bad day Monday.
One of my biggest problems is that I have a very high success rate on my setups. Meaning, more often than not, my trades move in my direction and I take profits (usually too soon). The problem of course is that I have a hard time exiting a setup when it has gone wrong. I want to give it a chance - loosen the stop, or add to the position. All of the wrong choices. Most of the time I wise up quickly and minimize the damage. Monday was a different story...
Anyway, when I get crushed the next several trading sessions are pretty hard core. I do not like being down in my futures account!
Good luck tomorrow!
bI didn't trade anything today, although i should have.
hey david,
are u a software engineer ? or you have your own ventures ?
glad that you made some profits today. the emotions are tough to take out sometime .... i shorted the market in october and ended the month in red :(
Hey Waca,
I started my career as a software developer. My first technology venture was launched in 1995. I currently manage (or maintain equity) in four ventures - however, once a developer always a developer.
Cheers.
The NHNL index is also diverging, and you can't continue a rally if stocks are not making new highs, the Mcclellan Oscillator and Summation Index are also divergining for some time... the problem is how much time, as the markets can stay irrational longer than we can stay solvent - I have to keep reminding myself to trade what I see cause price is still is king.
What period RSI are you using?
Dave,
Divergence appears on the Hourly and Daily charts. It also appears on the weekly, but that has been the case for quite some time.
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