the behavior of the beast

In the mind, as in life, it is always 20-20 looking back (hindsight is always clearer). In Trading the philosophy of this blog is always 20-20.

the closing price itself is the most significant. Why? yesterday (again 20-20) is a prime example. NASDAQ opened 106 points down – around 1.4 %. went down 124 points compared to the previous day’s close (1.73%) but then closed at 7085 about 12 points higher than it opened. Look at the following 5 min chart. It is range bound and closed at upper part of the range.

screen shot 2019-01-29 at 10.41.26 am

Now look at the chart below. It is S&P 500 Stocks Above 50-Day Average ($S5FI)

screen shot 2019-01-29 at 10.53.59 am

on 1/22/2018 this very reliable portent dropped by more than 11%. that was a good scare. Now on that day (Tuesday, right after MLK holiday) NASDAQ dropped by 136 points (1.9%)

screen shot 2019-01-29 at 11.05.50 am

Now look at the behavior – both days. the charts indicate the behavior. on 1/22 clear down trend and 136 point drop and $S5FI dropped 11 + % points. that is why IBD said on 1/23 day end – “Stock market bulls breathed a sigh of relief Wednesday as Wall Street endured another whipsaw session.”

Yesterday though the drop was significant. the volume was lower compared to 1/25 (Friday). it was a range bound day and closed at upper end of the range. and $S5FI dropped by only 1.6 % points.

and also both yesterday and on 1/22 the volume fell on both NASDAQ and NYSE exchanges.

another good sign for NASDAQ is that the candles are bouncing above their 10 days SMA.

as a side-note : NASDAQ volume is about 2.4 billion and the dollar volume is 120 Billion daily!! Now we let the Big dogs like pension funds, and mutual funds and Quant automatic computerized trading, ETF managers, hedge funds play it out in the day.

We are concerned only with end of the day price and the behavior during the day and psychological important Moving averages like 50 Days and 200 days. Somehow this along with major support and resistances. It gives us great relief and mental rigor when we avoid the fight during the day. 

I am continuing to be in the market. Long QLD.

Happy trading !

 

 

Lessons learnt in market crash

S&P 500 Stocks DAILY Above 50-Day Average BEFORE FALL

Price is the true north star and her sisters are a few – one particular one is how many stocks in S&P 500 are above their 50 days SMA ($S5FI)

The first big red candle and a drop of 10 percentage points in the number of stocks above their 50 days SMA happened 12 days  before the actual market crash!

Market lost its floor on October 10th and you see in the above chart that the big red candle appeared on 9/24.

Do you see the gradual descent in the above chart! It falls below all the Moving Averages (MA)..the green 10 Days Exponential MA and also the 22 days SMA and 55 days SMA.

It falls below 50 % on 10/04.

there are other signs that go along with this. More in the coming days posts.

now a drop of more than 10 points in $S5FI occurred  in 4 days by 02/01/2018 and NASDAQ dropped to the low 765 points in the next 6 days!

Similarly $S5FI dropped more than 10 points on 02/27/2018 and NASDAQ dropped to the low of 246 point in the next 3 days.

similarly in 4 days by 03/15/2018 it dropped by more than 10 points and then in next 11 days the NASDAQ dropped by 676 points!

and it dropped by more than 10 points in 4 days by 6/19/2018 and in the next few days NASDAQ dropped 362 points

and it falls by more than 10 points on 9/24/2018 and NASDAQ drops 1000 points in the next 18 days!

I am staying in cash