As you know already, the 2 mechanisms that move the market- Accumulation and Distribution, occur in all timeframes. The lower timeframes work to achieve the higher timeframe’s agenda. It is that simple. The problem is when people disregard this relationship. This is when they don’t see the limits of an up move. Primarily the up move. Many still don’t know how to short the market. So many really lose their money because they are have the Johnny Come Lately disease.
Mental Midgetness Issues
I laugh at this term. I learned it initially from one of my favorite high school teacher. Only to come back to me as one of my mentor’s name, Mental Midget (levels master). There are many “experienced” traders out there that only go long. The concept of short is foreign to them. There are many “experienced” traders out there that deny the truth about technical analysis. There are many “experienced” traders out there that cannot grasp the possibility of being able to play every pop and drop in the intraday, but they on the other hand try to play them off the longer term charts. What is the issue? Mental Midgetness. The moon was once unreachable. These “experienced” traders don’t know how and therefore it must be impossible.
When people think of investing, they want growth in their accounts and growth in the stock that they invest in. The concept of making money when stock and markets goes down was impossible at one time and yet people get into their comfort zone and only see what is at the tip of their nose. This problem is prevalent to many “experienced” traders. They impose limits when logically there is none. They don’t want to use charts larger than 1yr daily, they don’t see the benefit. They don’t want to use historical data. They don’t even believe that what had happened back in 2008, 2001 was all predetermined, prior to their famous events. Chart wise and indicator wise. They learned to make some money and when they are wrong, they look for news to rationalize their mistakes or label it as a conspiracy. Why? Because they stopped learning.
Comparative Analysis
Many traders seem thoroughly circumspect prior to entering their trade. They consider many things all at once and when you talk with them they have many technical analysis, fundamental analysis, greeks analysis. Primary driving factor for their trade. News. Basis for their trade. News. What is it about the news? The fundamentals and the expectation of the news (earnings or what not). Basis of their technical analysis. It appears the stock is moving up and so it will move even higher due to the news. This is for 1 trade, for 1 play. A scalper makes many decisions on the fly in less time that many “experienced” traders take to sip their coffee. This demonstrates a level of skill that is needed. Somethings are simplified to the scalper vs the trader. No news. No fundamentals to consider.
Comparative analysis is not about fundamentals vs technicals. Comparative analysis is understanding the true trend. That means you know the near term, intermediate and longer term trend. When it comes to movement in the market, it is really all about the charts. What is technically possible is what will be the outcome once the news is released.
From the March lows, all people could think the market could do by June is to go up. Weee! We’re going back up to 1500 in no time. The economy is good says the news. By May 11th, you should now recognize something, as followers of this blog. Mental Midget says, its not what you do during the day that matters. We may have broken through it during the intraday, but based on the daily chart, you did not close there. It is where you open and close at the end of the day. I don’t recall what the government was doing back then, but I assure you, the funnymentalists were hot and mad. Market Manipulation!!! What was happening by May 11th, 09. Distribution of course. The error is framing. Piercing the price and closing are 2 different things. If you close at or above the level. That is more significant than just piercing.
What is the significance of that blue line?
A significant price level of course!!
Jan 6, 09, demarcates that price level. Since it was a significant level, in order to go higher we needed to close above it. Momentum was to the bears by May 11th. So there was no more gas to push it through by June 10th. Technically not possible. This is the first test of the price level since Jan. Generally, we always fail at the first attempt.
March Lows 09
Bear Side of the Story
They tried desperately to hold that 942.75 support, reclaimed it a few times. Until Nov 6, the bears took it over. But the bulls were not done yet and they took one more valiant surge come Jan 6, that is when they received that fatal blow that brought on the Mar 09 lows. This will be how the bears will remember this story.
The Bull Side of the Story
By Oct 27, 2008, the bulls started to take control. By Jan 21st, 09, we thought we had them. The bears have had their fill but there were still few who wanted to drive this back down and their last ditch effort was in March. That is where we took our stand and finished our accumulation. Weeeeeee! If you can identify this. You’re getting there.
Comparative Chart Reading
A picture is worth a thousand words. The chart above should get you at least 5000 words. If you can’t find the stories that are in your one single chart. You wont notice significant price levels. You wont notice points of accumulation and distribution. You wont notice what the market has to do to move higher and where it will close to move lower. You wont successfully read all the charts that help you make a decision.