This business of trading is 100% about probabilities (and and risk). We can’t avoid being wrong, making mistakes. It needs to literally be factored into our trading plans. What is a stop for? Why do I (almost) always sell too early? We need to be prepared every single day. Why is that so hard for most people? It’s just work. Why be afraid of work? It’s the work (and the results of it) which give us the confidence, and that builds over time to (hopefully) NOT overconfidence.
I believe 100% in my work, right or wrong. And I also (biasedly) think that the quality of the work on this website is outstanding. The following premarkets from the past week will be posted in a few separate posts (with the same intro) to keep it shorter:
There is a new post here.
The stock indexes have continued their rally on light volume. And to this whole thing about “rallies on light volume are bearish”. That is absolutely not necessarily the case at all. The people who consistently spout this out have no idea how to work with price and volume. It is all about the context – time-frames, overall technical condition, where supp/res is, where the heaviest volume comes in, etc. For years I have “debated” the permabears about this. Years ago that was one of their incompetent arguments as the stocks kept plowing forward.
Several aspects to this. But one thing. On a bigger term basis, when an index or stock is at 100, the $ value of the same volume is much different than when it is 50. That is one part. And on a more trading basis, the light volume rallies within reaccum specifically, not unusual at all. It is just lower probability of that move sustaining, that is all I use it for. Another way to put it, a higher volume rally, without EA, is more of a confidence builder. But the overall situation does not change my view that this is reaccum within a secular uptrend, we will go to new highs this year, but a big pickup in volume at this point will be more of an ending action type of thing. And we are in resistance areas.
And again, there are plenty of reasons which the permabears can use to “support their case”, but a bull market does not end on bad news it ends on great news and lots of confidence and straight up bars on a chart. Also, to me this pause/reaccum in the uptrend is all about stocks getting acclimated to higher rates, everything else is noise.
Bonds, longer term bonds, are continuing to bounce off of yield res, but that resistance will give way later this year. TLT above 116.50, which is a huge supp area, are building the energy (redistribution) to blast thru that support and that supp break will really begin to convince people that a bear market is here in bonds. But you guys have known that for a long time, right?. And the 2 year yield is leading the way.
On Wednesday I wrote in on a chart my belief that a solid top trade setup was there for the USD. And to use the backside to short it.
That original chart:
And today’s chart. As I was writing that on the chart in real time, did not look that I knew what I was talking about right. It looks different in a rear view mirror now, and of course there will be rallies within this. A much bigger top needs more rallies. And notice the “backside” approach to shorting: