The Week Ahead: Trading in the Present Tense With an Eye on the Future
Key Points
- Successful Day Trading is Mentally Challenging: Recognizing underlying structural deterioration is crucial.
- Momentum Traders' Focus on Price: Traders often advance price without realizing the risk, similar to driving while looking straight ahead only.
Market Observation
- Past Week Analysis:
- Two weeks ago: High odds of retracing the range from the previous week.
- Last week: Momentum traders took the market higher, delaying the retracement.
- Recent retracement: Finally occurred a week later than expected.
Trading Strategy
- Developing Value:
- Focus on what is occurring now.
- Odds eventually caught up with the market.
Two Observations:
- Less risk in being late rather than early during momentum markets.
- An external catalyst often needed to get traders' attention.
- Example: Nervousness from Republican National Convention rhetoric.
Market Indicators
- Excess:
- Lack of excess in aligned days suggests retracement likely.
- Observing the excess is key to understanding market movements.
Current Support Level
- 5500 Level:
- Next lower support level.
- Focus on whether the market finds acceptance or gets rejected at this level.
Long-term Basis
- Liquidating break likely rather than a full-scale route.
- Immediate aggressive selling is absent.
- Market might break before continuing to increase.
- Importance of excess in determining market continuation.
Summary
- Immediate focus on the 5500 level.
- Importance of patience and understanding market movements.
- Traders should watch for excess low indicators to adapt strategy.
Good trading! Have a great week