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Stock Charts VS Market Charts

November 14, 2008 7:47 PM

perplexed.jpgI generally look at market charts, obviously - the SP 500 and the Dow. Many also look at the NASDAQ, but my brain can only process so much information, possibly due to getting old or as Cramer likes to say “cheap scotch”. lol. Anyhow,  sometimes the stock tells the story and sometimes the market says otherwise, and sometimes they agree. If they agree, then the move will come.

Look at today’s high. Now look at SPY. The SP500 made essentially a Doji with a negative bias at the high while SPY clearly said if the high could not be cleared, we were going straight down.  What happened? Straight down. To make it a little more unclear, the Dow chart made a doji with no real bias at the high, or certainly was not clear. However, it was very clear that either those highs were going to clear into the close -  and shorts would likely scramble and make a replay of yeterday’s short covering close or it wouldn’t and the close was in big trouble.

The point is this, as i often say. Look for agreement and clarity. If there is none, leave it alone and let others guess. I have no interest in guessing. Either a high clears, or it doesn’t. Either a low holds, or it doesn’t. I may be wrong, but I am certainly NOT guessing. As I have said 10,000 times, possibly more, I believe in one thing and one thing only - a firm rejection of price where everyone with a heartbeat can see. As I said long ago, one trader said “if you have to squint, then it isn’t there”.  Good rule. Let other’s guess.

I have also mentioned that I am FAR different than others on this issue. I do not believe in support, I do not believe in moving averages, I do not believe in the MACD or any other indicator. I do not believe in double tops, double bottoms or any other alleged indications that areas have held. I believe in rejections of price and nothing more. Everything else I consider temporary. To the “indicator” believers, I say this - what do you think causes the indicators to “indicate” in the first place? Rejections in price. They are simply indicating after the fact, nothing more. Most people likely disagree with me on this issue, and so be it. That is why there is a two sided market. All i can say is this - post your comment and we will see who is right, and who is wrong. Simple as that. Oh, and i have long encouraged readers to disagree with my views, but they won’t. I would much prefer people saying i am wrong, because of X. I may have missed something, and would like to know. I care far more about making money than being right, trust me. I am “just a guy typing opinions in his garage” as I like to say.

Everyone has their own “rules” and I have mine. Clearing some highs or lows matters to me, other times I do not consider it important.  It depends. That’s why the markets are two sided. Everyone has their own rules and beliefs and many people do not agree. The only suggestion I can offer is this - know what “might happen IF X happens”.  This is why i believe people like Cramer have extreme difficulty in calling it correctly. It all depends. Once yesterday’s high was cleared, we were either going straight up at the close, or straight down. One or the other. It was that simple. And I said so. Technically, I would rather have had the market go beyond 918 and then reverse hard, but it is what it is.

This is why it is virtually impossible to say “buy XYZ at X, and sell at X. It all depends. I wish it were simple, but it isn’t. I am not trying to dodge being right or wrong, i am just telling you like it is. It is like me saying “be long ADI above X.”. X cleared. But could it once again reverse on a new low? Yes. It depends on when in the day it is cleared. if it clears it early in a day, it leaves the door open for a new reversal, and whipsaw the people that covered the long. If it clears late in the day, it makes it far less likely.

Have I made this more clear than mud yet?  Everything always depends. I have posted firm numbers to be long or short in the past….because that is the only method for people that do not watch intraday charts. My calls in the past were very correct, partly because the market used to have far less volatility. This volatility has made things far more complicated, and likely have caused 98% of traders to drink, lol.

Written by Tom@StockBlade.com · Filed Under General Investing/Trading Commentary 

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