In this episode of “bull or bear” we will discuss the ease at which members navigated the recent change in market sentiment. On the 23rd we broadcast LIVE via http://ticker.tv/cousin_vinny wherein we talked about the simplest method for being on the right side of any trade. You can view that episode below. Fast forward to the 2:30min mark.
The LIVE broadcast above was the Wednesday before Thanksgiving. Prior to Thanksgiving, we managed a 13 trading day bullish trend. From the Friday pre-election low on November the 4th, SPY assumed a trend change that lasted practically 3 weeks. Members capitalized on this shift, if they utilized the concepts presented herein.
Looking for a Pivot High
The change in “institutional sentiment” has been swift, yet few traders acknowledged the selling into strength. If you paid attention to price and the 60min chart, you managed this change successfully. On Monday of this week, we saw potential for a change in the short term trend. How did we anticipate this change? The answer is simple, if you reference the 60 minute SPY chart.
- TICK cumulative began to reflect a potential cross, as it started to move sideways
- Price action moved sideways as well, testing the 9/20ema
- RSI and stochastic were overbought – potential for downside was higher than upside
- Once price tested the 20ema more than once, RSI, STO and TICK cumulative gave a sell signal
- SAR sell signals began to appear
As TICK cumulative suggests, the downside move has not signaled a completion of the bearish trend. Until price moves back above the 9/20ema we remain bearish. Therefore, look for any rally to fail at the descending 9/20ema on this time frame.
Align blocks with your overhead resistance levels. As a side note few traders focus on block trades, however we do. It only makes sense to pay attention to the zones where institutions, the Armani’s, put money to work. If we are above large block zones we remain bullish. Now that we are below large block zones we are bearish. We look to these zones overhead to act as resistance. Additionally, these resistance levels is where we look for rejection and potential short trades. As you can see, there are approximately 30 million shares in block size trades above 220.20, therefore we should fail on any attempt to bounce through that area today. That is the line in the sand for now.
The Nasdaq Composite 60 minute chart reflects the same sentiment. Note the moving averages are declining faster, given their steep slope. This tells us to anticipate a higher degree of rejection on any bounce. TICKQ cumulative reflects the same bearish outlook. Until RSI, stochastic and TICKQ turn higher and price gets back above the 9/20ema you should be thinking bearish. Any long trades are counter trend and more susceptible to failure.
The #for_newbies channel in Slack has a synopsis of the change in the trade over the past several days. If you are a new trader I’d suggest you read what I have posted therein.
As a final note, watch list stocks should be viewed with more caution, now that institutions are clear in their sentiment. Tighten your stops and take profits if you have trouble sleeping at night.
Happy Fry-Day
Vinny
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