Early this morning a lot of funny people were short to China. One maroon attributed the pop to some news about Greece. Another maroon talked about POMO. We all know news is late. And if POMO is going to “manipulate” as those who were expecting a drop declared, those of us who are technical, understand that if POMO is working on the market, we really don’t care. The reason is, if they buy or sell, it will propagate in our charts. There was this one guy who wished that someone would erect a large sign to tell people that today we will be manipulating the market, to let the tax payers know how their hard earned taxes they paid to the government is being wisely used. That last guy was being funny.
The problem with many traders is that they are trying to “predict” the market. What they fail to do, is follow the market. They will vigorously defend that they are not trying to predict the market. But in the end, because they did not follow the market, they often blame external sources. It couldn’t possibly be that they actually have no clue what technical trading is. But for the technical trader, the market does not do anything that it did not technically support to do. You don’t even care what is in the news and don’t care about economic events calendars. You just read the charts. So if you were wrong, then you didn’t really follow the market but used your bias help form your prediction.
How do you follow the market? It isn’t merely knowing what levels are. Not just knowing what support and resistance are. Not only being able to draw trend lines. It is understanding in context what the price action is doing based on larger and longer term progression. In many cases, once people draw their trend lines and wedges and patterns they no longer understand the whole move, just see what is compartmentalized by their drawing. So in this issue, we will discuss today’s pop.
First lets discuss that reaction to the news first thing this morning. Don’t ask me what it was. I have no clue because I don’t care to keep track of economic calendars. Just read the charts.
Some people think that that play was not possible to play. But as we know, in order for the market to sell, it must distribute. And when it distributes, it will go to the support that allowed it to pop. Or in legs terms, the leg start. By the time it went back there, guess what, it must pop at 7.5 because? First touch. Can it be more difficult than that?
So what was the pop today all about? Was it really pomo? Sure, if pomo help set this up over the last few days they deserve the credit. All I know is that it takes a lot of resources to be able to set things up. Market Makers and POMO sounds credible enough.
Suggestion: right click on the image above and open in a new browser or tab so you can reference the image while reading the description
As you can see, the accumulation has started 7:20 PM EST, back in 5/22/11. And then we progressed to a new low at 1302.25. From there, it worked to regain the last support it lost at about 12.25. The first thing on the agenda just before the open, was to reclaim the support at C. When it did that drop at the announcement of the news this morning, you set up a 1st and 2nd touch situation. By the time it made it back to C, it had to go straight to D. D is the the support lost that led to the selling to 11.25. The big red candle 5/24/11 at 4:00 PM EST. D at this point becomes a 1st touch situation and so must fail.
The Legs
The leg that we are working on is the off the primary leg that starts off at G. Now G, can be broken down to parts, consisting of F, A, B. From the 1302 lows, before you can get to A, you must reclaim B. The support at B is about 17.25-5. Now, reclaiming B high, will be 2nd touch. Why second touch, because, during the accumulation progression back to 5/22, we’ve already tested that level of resistance even though we were still progressing downward. Because we tested that, it cleared the way for us to reclaim the previous support we lost at A. After you reclaim A, you go to F then G. What you must understand is this 1st test 2nd test relationship. On first test, you should notice in the ticks especially that on 1st test situations, the momentum is changing long before it gets there. The draw down is to help build up momentum to the up side. Which many people don’t understand. Consider the news release this morning. People qualify that drop as negative reaction to the news. But how short lived was that bad news that was received? Over all at the end of the day, we rallied. This is where people’s understanding of news fails them. Their bias wants lower but the market’s progression goes against them. Because their chart reading is lacking, they can’t see, how momentum was set up against them.
Now, back to the action. After failing at D, when we go back up to D, we will continue higher on 2nd touch. And progress to the support at B. As soon as we get to that support, we should fail at 1st attempt. Shown in the 10:30/40 candles. Then we bounced back and cleared B. Taking us to the support of A producing E. Why? Because we’ve already tested B due to the progression based on when accumulation started. So any failure at previous support from when accumulation starts (5/22), becomes a failed test 1. Now why did we fail at E? Because it is the first time we tested A based on when that leg formed. We never revisited this previous support, when we lost it at A till now. Eventually we pass A and get to 24.5. Why did we fail there? Same reason as we failed at A, B, D ect. This time, our leg of reference is at F. Why? Because we passed A. Until you close above A, much like you did with B and C, you cannot pass to the next level leg part. But by the time we got up to 24.5, the selling has been setup with the negative divergence seen in the macd’s shows we have exhausted the buyers. So the failure at 24.5, produced a new leg down. Reclaiming 24.5 will take us up to F provided we have enough momentum.
This action is similar to why we failed at 1373.5. The market does the same thing over and over in the same manner. It doesn’t matter what time frame you are looking at. The best way I’ve figured how to read the action is to understand what the price action is doing based on the immediate left leg, and then relate that leg to the progression it represents to the primary leg to its left. This will help me understand if I am over all progressing upward or downward. And what my significant support and resistance is. This will give me an understanding where I will go if I break the limits of the leg..
I would like to add this chart. Because when I say accumulation, people always relate it to double bottom type play which I highlight as 2 stage accumulation.
The 4hr Chart
Does this look more familiar to you? You see the accumulation being in described in the 10min seems extended and not the normal accumulation. The extended view of what you see in this 10min chart is the progression that takes place to form this double bottom like formation in the 4hr.
The 10min Chart
The 10min is the description of how it got there. How the 4hr chart got there. This is why if you understand this, the charts provided could be tick charts or whatever time frame, you could easily extrapolate, why it is also the reason, if you understand these concepts, that makes scalping a lucrative venture. I love run-on sentences. Yes I failed grammar every year. It is how the market moves, and we just follow.
This is distribution but I just had to weeeeeeeeeeeeeeeee about it. 🙂
LOL some maroon just asked if this is a flash crash. Obviously doesn’t understand how to read charts and recognized progression. In this progression, the distribution started 12:45 pm est, 5/25/11. After you confirm the distribution on the new high on lower macd, each valley on the way up becomes, 1st test. So as we tanked today, and we revisit them, whooosh!! Flash crash setup would be the same. But no, this is not a flash crash. It is sad that people think that way.
And the Weiner is!? OWUDSHED!! It was a blessing indeed. Hmm…is Cramer and OWUDSHED, related? “A worldwide four-way rally is a difficult move to stop, as you can see from the market’s inability to be rocked too much by what now amounts to nothing more than local data,” . Ouch!! I hope he has a lot of preparationH.
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