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Most of you born after 1985 or so know John Madden as the famous football announcer and the man behind that wildly popular eponymous video game series. However, for a long time was a very successful head football coach for the Oakland Raiders. One thing Madden used to tell his team before many games was that it did not matter how fancy the X’s and O’s of the plays they had drawn up during the week were–If his players did not block and tackle properly, and execute with intensity, then no amount of play-calling or play-design would help win the game.
Similarly, no amount of enticing setups and consolidations will automatically lead to a market breakout if buyers of size and at least some conviction do not step up to the plate. If there is one takeaway from this week in trading, it should be exactly that. I had stressed all week the idea of not taking anything for granted in this market, and that alone allowed me to outperform. That may sound weird from someone who is known as a chartist, but I do not drink the kool-aid. I am fully aware of the limitations of technical analysis, which is why I almost always abstain from holding positions through earnings and major headline events. In other words, even the prettiest bullish setup that looks like a sure thing is anything but. Trading the odds and probabilities is a far cry from trading the certain future.
The bulls failed to capitalize on a big opportunity this week, and as a result we saw the bears regain the initiative starting on Wednesday afternoon. We have a holiday-shortened trading week coming up with a major American holiday. Charts are basically mixed across the board, with some sloppier than others after the late-week selling. Let’s see if the bulls can regroup for the Christmas season.
Nice…
low volume can be an opportunity for the bulls OR the bears. Thanks for the level-headed insight through this crazy 2011.
Cheers
who is that girl in the pic?
God is she pretty or what?! But she looks like she has wooden arms…. hmmmm..
Short-term $RUT we have a bearish descending triangle on a daily chart. Horizontal baseline can be drawn along 712 from the 10/25 intra-day low which was acted as support late October/early November and was tested again this week. The hypotenuse can be drawn from the 7/7 intra-day high touching and extending from the 10/27 and 10/28 intra-day highs. We are still within that triangle and have room to remain within the this short-term triangle for a few more weeks.
Longer-term $RUT we are in a bullish rising triangle on a weekly chart. Horizontal baseline can be drawn along 855 from the July 2007 high to the July 2011 high. The hypotenuse can be drawn from the March 2009 low touching and extending from the October 2011 low. The $RUT can decline to the 620 area and still have the rising triangle be valid.
My assessment of the probabilities is that due to seasonal strength we break out from the short-term triangle to retest the 855 $RUT high.