It has been a while since I sent a milepost mailing out, one reason was my vacation to wine country to Sonoma and Napa Valley, which was awesome by the way. Great weather, great wine and great people.
I continued to work during what I termed workcation trading until about noon EST ever day and watching some of the indicators I had on the road with me. I mostly scalped BGU and BGZ using my tick entries with a goal of making enough money to pay for the current day. I was successful most days.
Now I have been back 3 days and am having a hard time finding the rhythm of the market. I was expecting a correction between 3% and 4%, even maybe a little bigger to put the fear of October into the bulls.
On Sept. 24th and 25th we got our correction and it was time to shift into bull mode, correct? Coming home and looking through the charts I am unsatisfied with this correction. The drop off of new 52 week highs was dramatic and much damage was done and our % above their 40 day moving average chart issued a sell signal, but the recovery on the 28th was very dramatic and our correction become runted.
Here is our 10 day h-l to illustrate my point.
Hopefully you can click on these pictures and get full resolution. You can see that those two down days on the 24th and 25th sent our 10day high-lows into negative territory, on the 28th we went positive again. I fully expected the 29th to also become higher than the 28th but instead we are heading back down. Yesterday our 10dayH-L value closed at –466. To compare to other recent pullbacks you can see that we usually apex around the –1000 number and we have not made it there yet.
So was the 24th and the 25th our correction? My symmetrical mind wants to throw out those two data points. I am going to blame those two data points on market shenanigans and pretend that those days were really the results of fund managers desperate to hold onto profits going into the day-3 of the quarter and that our pullback is yet to happen. That was my trading thesis going into yesterday.
Yesterday’s opening plunge to the 3% line had my head nodding as I thought “yes, here is our correction”, fully expecting to test the lows of the 25th or down to the 4% while giving me my –1000 reading on the 10dayh-l indicator. Instead we rallied all day back to green and then down again, although not as far and I only got to –466 on the 10dayh-l. Maybe that is all we are going to get this time.
So in my trading today I am still waiting for the “real” min-correction (i am talking about 4% type correction here to be clear) but knowing that this market can snap back at any moment. There are plenty of buyers out there waiting to jump in at the sign of a bottom, many of them confused like me.
Here is the Rut 52 week new highs. If you compare our new highs to the 24th and 25th we look as if we are re-building new high momentum, but if like our 10dayh-l you throw those two data points out you see we are still deteriorating in a pullback cycle. That last thrust up deserves a nice rest.
It truly might be over and we may be on our way to new highs. At the same time it is good for us to know that this pullback did not give us that flush that the others have done and has left our indicators in mixed states, even between markets, that I have not seen before. Ignoring the 24th and 25th straightens that out for me but choosing your data is a very dangerous thing.
If we do correct the ESz numbers to watch are 1035.75 which is the previous low set on the 25th and the 4% pullback number which is 1032.75. If not there than see you at the top!
Happy trading
Marlin aka Redliontrader
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