The State of the Trend

By: George Krum | Sun, Sep 11, 2011
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Last week we observed that SPY and SPX are in the middle of a perfect bear flag, and cautioned to keep a close eye on 1140 and 1185, as areas of support and resistance. Both targets were hit, and the break below 1185 suggested that the lower flag line will come into play again.

This week we continue monitoring the bear flag for signs of strength or weakness:

SPX Bear Flag

Given the oversold nature of market internals, and the vicinity of flag support, the expectation once again is for a rebound within a day or two.

Buy Volume versus Percent Bulls

We know that the index will eventually break downward (more likely) or upward from the flag, and that is likely to occur from either oversold or overbought conditions. However, betting consistently on markets becoming even more oversold from already oversold levels is a low odds play, since market crashes don't occur that often. Therefore, keep that possibility in mind but also keep in check the urge to bet the house on it. Position sizing and money management are far more important than guessing what the market is going to do next.

In fact, one of the many unique features of our upcoming app is an original position sizing calculator coupled with a risk/reward indicator.

 


 

George Krum

Author: George Krum

George Krum
www.citdates.blogspot.com

George Krum is the author of the "CIT Dates" blog, and the following apps:

OddsTrader - combines the power of Hurst Channels with proper risk and position size management. For a web version see OT Signals below.

Gann 9 - the only financial app that allows users to effortlessly apply the legendary W.D. Gann's tools and methods for trading (including the Square of 9).

OT Trend - helps you quantify and forecast the seemingly random ebb and flow of stock, index or mutual fund movement.

OT Fibonacci - automates the process of applying Fibonacci numbers, ratios and time series to any security.

OT Seasonal - allows you to perform seasonal analysis on practically any security from around the world, and to build long-term forecasts and models.

OT Pairs - pairs trading, one of the most successful hedge fund trading strategies, is now available on your smart phone.

OT Pivots - combines the power of pivot lines with cycles to provide you with concise technical analysis and powerful trading signals.

OT Signals - a web app accessible from any browser, tablet or pc. It gives buy/sell/hold ratings for any instrument from around the world, and defines the trend and support/resistance levels.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/