Technicals: Dow touching key levels

I know most of you here do not believe in technicals, but the Dow is very close to the April highs and this might be very strong resistence for the index.

I think that we could have a very nasty correction should the dow fail to break above these levels in the next couple of days.

Fundies are good since we just had some great earnings, but this really seems to be looking for a breather.

Any thoughts ?

 

Technicals? What Technicals?

The market has no reason to be trading with any sort of technical or fundemental basis, as it is now more machine (and Fed) than man. I expect that the manipulation will continue and we won't see a box and upper level resistance. While I am certain that there will be a modicum of resistance I expect us to pass this level without a problem on and push us into even thinner volume trading volume, furthering the melt up and biggest speculative crash that we can expect to see. .

*Note: Edited for readability. 3 uses of the expression "We will see" is poor form on my part.

 
Midas Mulligan Magoo:
chartistry is a dead art form

While I respect your opinion, I find it funny how easily people discard "chartistry," yet no one seems to say anything about the fact that had you followed only fundamentals, today you would have exactly the same amount of money you had over 10 years ago (less actually if you count inflation in).

There are plenty of companies that had amazing fundamentals before 2008, yet they crashed worst then the indexes did. Perfect example CTSH. The company has amazing fundamentals now, and had amazing fundamentals back in 2008, yet it dropped approx 50% in 08.

I believe a combination of both fundies and techs help you, but to say that one or the other is worthless....mmmm, not too sure about that.

 
ZicoTheGreat:
I second Mr. Future.

When fundamentals only account for 20 or 30% or a given stock's movement, it is obvious you can't depend solely on fundamentals. Combining both is effective, regardless what people think of the black magic (technical analysis)...

Agree. The reason most people are against technical analysis is that they have been burnt by it when they used it thinking it would have magically solved all their trading problems.

It is not a magic tool, but it is a very important tool when combined to other tools. Visually seeing where price is right now compared to the past is extremely important.

 
Best Response

The past does not indicate how to handle the present. I hate to break it to you, but Midas is right.

Chartistry, along with fundemental analysis, is a dead artform in this market, as no one can make a true heads or tails given the shift from humans as traders to machines and algorithms as liquidity providers. Machines do not create readable patterns, nor do they create any semblance of real indication of stock movement. When your liquidity providers do one of two things, either drive stock prices higher through the artifical creation of supposed liquidity or kill the prices of stocks with a random flash crash, and the Fed has no problem stepping in, you cant look at any sort of real analysis and throw it aside. If you really want to discuss the markets, then explain why the markets are not trading at something akin to 650-700 on the S&P, where the Bond Market has us priced at, because that is where we technically should be.

The moment you look at the markets and accept that they are being gamed, that is, there is direct manipulation being appropriated by the Fed and HFTs, there is no clear path to suggest any sort of fundemental or technical analysis would be even remotely usable to read the markets. Every flash crash that happens shifts the technical basis completely and every move made by HFTs, in the guise of liquidity, that slowly and incrementally pushes stocks up distorts the true state of the markets.

You're talking from the rational perspetive in saying they work. They don't. This is the new normal, and old school analysis is dead if you can't play the game in the sub-20 Milisecond space.

 
Frieds:
The past does not indicate how to handle the present. I hate to break it to you, but Midas is right.

Chartistry, along with fundemental analysis, is a dead artform in this market, as no one can make a true heads or tails given the shift from humans as traders to machines and algorithms as liquidity providers. Machines do not create readable patterns, nor do they create any semblance of real indication of stock movement. When your liquidity providers do one of two things, either drive stock prices higher through the artifical creation of supposed liquidity or kill the prices of stocks with a random flash crash, and the Fed has no problem stepping in, you cant look at any sort of real analysis and throw it aside. If you really want to discuss the markets, then explain why the markets are not trading at something akin to 650-700 on the S&P, where the Bond Market has us priced at, because that is where we technically should be.

The moment you look at the markets and accept that they are being gamed, that is, there is direct manipulation being appropriated by the Fed and HFTs, there is no clear path to suggest any sort of fundemental or technical analysis would be even remotely usable to read the markets. Every flash crash that happens shifts the technical basis completely and every move made by HFTs, in the guise of liquidity, that slowly and incrementally pushes stocks up distorts the true state of the markets.

You're talking from the rational perspetive in saying they work. They don't. This is the new normal, and old school analysis is dead if you can't play the game in the sub-20 Milisecond space.

I am not saying technicals are perfect, but they help me tremendously in my trading. I hate making statements about my trading style or performance or be a showoff, but since you bring up the flash crash, any simple trending following system using simple moving averages would have taken you out of the market a week before May 6th.

Problem is, markets do not always trend nicely, therefore technical analysis becomes useless when the markets stay flat for a long period of time. That is why part of being a trader is to have a list of stocks or instruments that tend to trend nicely and monitor them consantly.

Technical analysis cannot be used for any stock or any index, not at all. You have to be extremely selective.

But to say it is worthless, once again, based on my experience, I have to strongly disagree.

But hey, to each its own, I am not here to tell people what to do. But there is a huge amount of wealth to be made in the markets, even today, if you take the time to study and practice. Truth is, most people dedicate little time to study the markets and simply jump in it blind. Then they lose, and go to other people and tell them "it is impossible to make money in the markets today, it's all manipulated by powerful external forces."

Just sayin'.....

 
Frieds:
The past does not indicate how to handle the present.

True, but recent highs, lows and support levels are always taken into consideration, by both humans and HFT computers.

Don't forget that no matter how advanced the computer using HFT strategies is, it was always bulit and programmed by humans in the first place.

The humans input the instruction into the machine, and among many things, they input the command that the computer has to take into consideration of recent highs and lows, and act accordingly.

 

MrFuture,

You are misunderstanding my point. Technical Analysis is a great tool to use, but not when the entire system is being gamed and the only way to trade is in the sub-20ms space. I am not saying that it doesn't work, nor am I suggesting that it's an esoteric artform, but it's a tool that doesn't quite work in this market. Look at the Death Cross we had back in July as a perfect example and the Golden Cross we have now. Couple that with an increase in short sales in a constantly rising market, and you have to wonder why there has not been a a major decline governed by increased shorting preasure, or why the Fed has actively stepped into this market to help prop it up via currency manipulation. There is also the blatent effect of HFT trading to consider as well. At the end though, the more people that are not playing the game (25 Weeks of Retail Outflows don't help the cause by the way), the fewer sources of quality data there is to analyze when looking at technical trends and performance, especially when we are looking at much lighter volumes in the equity markets governing the degree in which the market moves.

Short,

See the incoming PM to answer your question.

 

Well you will recall from our PMs (for which I am extremely grateful) that I am not a prop trader like you, but I am the head trader for an investment advisory firm, and I engage mostly in swing trading.

But yeah, interesting to find out about the others who posted....... :)

 

Frieds,

I hear you. I think, however, that HFT mostly interferes with daytrading, rather than with swing trading. Intraday trends are extremely easy to manipulate, either byt HFT, or by big players. Longer term trends, however, cannot be manipulated by HFT.

HFT, as you said, involves being in and out in a split of a second, it takes advantage of mispricing and the profits are just cents.

As far as the Golden Cross and the Death Cross, any good book on technical analysis will tell you that it is one of the least successfull strategies ever, but because of its simplicity, the media loves to pick up on it and talk about it.

The truth about technical analysis is that it is complex, and you definitely need to read books about it to even attempt using it. It is not the holy grail, but it does help. Basic things like support and resistance can save you a lot of money if used properly.

I hate when it is used by "experts" who claim they can tell where the market will be in December or one year from now. That's not proper use of technical analysis, that's just showing off on TV.

The real use of technical analysis is to ride trends, period. You have no idea how long it will last, you have no idea where the price will be, you just ride it, long or short.

 

And I do not believe in the theory that the Fed comes in and buys stocks to manipulate the markets, but even if it did, I would not care, because I would just ride the trend along with it. I am not really concerned with why the market is going up or down, I leave that to the analysts.

 

This article on Zerohedge makes some very valid points.

Spam Filter being a pain about this link I think so obviously dont forget the syntax that goes in front.

zerohedge.com/article/guest-post-here%E2%80%99s-proof-day-trading-dead

The key point that I want to focus on is that HFT gaming has forced short term traders to step up in their timeframe. Yeah HFT will rule the short term but humans still control the long term. Part of why I struggled so much with prop trading is because I was using day trading type entries with swing trader type stops. I still think the major market makers at the banks that see a lot of flow can out trade the machines they just have the emotional risk component and the higher volatility.

Quickly getting off topic here, Im going to make a thread dedicated to everything about HFT.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
 

I'm hesitant to weigh in here since I respect the opinions of a lot of the people who already have but as to the idea that 'Chartistry is dead', every tech guy I've talked to (I'm a member of the MTA...yea I'm THAT fucking cool) has always said the same thing about guys who knock tech analysis. That they are closet chart freaks. I don't have a real basis for this as I haven't worked in an area where I would be exposed to something like this but I feel like it's all part and parcel of analysis in general. Just as you can't solely analyze charts, you can't solely use any form of analysis. It's all a matter of being able to incorporate different methods to get a more solid picture.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 
happypantsmcgee:
I'm hesitant to weigh in here since I respect the opinions of a lot of the people who already have but as to the idea that 'Chartistry is dead', every tech guy I've talked to (I'm a member of the MTA...yea I'm THAT fucking cool) has always said the same thing about guys who knock tech analysis. That they are closet chart freaks. I don't have a real basis for this as I haven't worked in an area where I would be exposed to something like this but I feel like it's all part and parcel of analysis in general. Just as you can't solely analyze charts, you can't solely use any form of analysis. It's all a matter of being able to incorporate different methods to get a more solid picture.

Are you really ???? I am taking Level 1 next week....are you chartered already ? Yes you are COOL !

 

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If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

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