Trade, Live and Thrive: 05/19/12

Saturday, May 19, 2012

The Dow Jones - Ichimoku Study - Week: 14 May to 18 May, 2012 - Gravity and Equilibrium revisited..

Gravity and Equilibrium revisited - Bingo!

Exactly 2 months ago when the Dow was at its peak - our Ichimoku study threw up a gem titled 'Gravity & Equilibrium' - here is the link (click).

At that time, we saw the Dow gravitating down towards the Kumo.

Today, with half the journey done, we look back, and can repeat the last line of that post '..why else study?'

So here is this week's screen - do note that the Preamble now comes after the screen (and is for new readers).

Last 5 Signals seen on DJI 30 - Week Chart (EOW) as on chart below:

1. Chikou Span Cross: Strong Bullish Signal (C)

2. Tenkan Sen/Kijun Sen Cross: Neutral Bullish Signal (T)

3. Kumo Breakout: Bullish Signal (B)

4. The Flat Kumo: Bearish Signal (Ko)

5. Tenkan Sen Cross: Weak Bearish Signal (red line)

The Arrows point to...

1. The Purple line is the Chikou Span - this one looks like it would touch and cross the Price line soon - Bearish Signal, if that happens.

2. The Price has stopped short of the Kijun Sen - Dark Blue line - Support here is considered good and Bulls can take heart from that. Bullish signal that.

Conclusion:

Bears have done a good job of keeping the price below the Tenkan Sen (Red Line) for two weeks now.

Bulls now need to use the Kijun Sen support to move the price above the red line.

From being a Bullish screen this one has become a Neutral one, from the Ichimoku point of view.

DJI 30: Medium Term View (or) Week Chart (or) EOW with the Ichimoku Cloud:

DJI 30 - End of Week Chart - 18 May 2012

Preamble (for New Readers):

.....Regulars can skip this part......

Introduction:

We do a weekly Ichimoku study, to complement our 'Triple Screen Technical Analysis', of the markets that we track, in our quest to master Technical Analysis.

When taking the 'weekly' time frame, to use the Ichimoku Cloud, we need to consider the following..

The standard settings for an Ichimoku Kinko Hyo chart are 9, 26, 52 and are used on EOD charts.

When Ichimoku was created back in the 1930s, a trading week was 6 days long. So we have one and a half week(9), one month(26) and two months(52).

Now that the trading week is 5 days, we should actually use 7, 22 and 44 instead.

However, the majority of systems, worldwide, still use the old settings 9, 26, 52.

We need to study markets, on a weekly basis on this Blog.

How do we fit 52, 26 and 9 into that need? With one candle being one week?

There are 52 weeks in a year, 26 weeks form two quarters (or a half year) and 9 weeks equal about 2 months. Fits the old logic - albeit differently.

Presto, we have a longer term view with the same settings!

So, if you like to move off the beaten track, for a change... do read on...

Quick Reference :

Chikou Span - purple line,

Kijun Sen - blue line,

Senkou Span A - black line,

Senkou Span B - grey line,

Kumo - grey shaded area,

Tenkan Sen - red line.

Useful resources (free) from the Web:

http://www.freestockcharts.com/

https://www.ichimokutrade.com/articles/Ichimoku_Ebook.pdf

S&P 500 - Triple Screen 'Technical Analysis' - Week: 14 May to 18 May, 2012 - Midlife Crisis Point

Learnings from the Past Week:

Our short term view of the market turned Bearish last Monday (click).

The Bears then took it down to 1300 and lower by weekend.

After Thursday's Market action, we suggested that one support point would be the Weekly MVWAP 34 (click).

Bulls found support, exactly at this point, on Friday.

Would mid life (mid channel) crisis, affect the Bears at this stage - or are we in for more red?

S&P 500: Long Term View (or) Month Chart (each candle is 1 month's price move) (or) EOM Chart:

S&P 500 - End of Month Chart (EOM) - 18 May, 2012.

With Price above the MVWAP 34 - this screen is owned by Bulls.

With a weekly close below all our short term MAs - its a nervous owner indeed.

The 13 SMA and the Channel mid line - are support areas for the Bulls.

The astounding effect of the Three inside down (click) has been a gain of 100 points and counting for the alert Bear.

S&P 500: Medium Term View (or) Week Chart (each candle is 1 week's price move) (or) EOW Chart:

S&P 500 - End of Week Chart (EOW) - 18 May, 2012.

The Weekly channels (white lines) have had a reduction in their angle of inclination, due to recent Price action.

Support for Bulls is exactly at the MVWAP 34 as suggested.

The Stochastic indicator has gone into oversold territory.

We saw this screen, scream 'Bear' in last last week's EOW (click) - we expect a pause for breath at the MVWAP 34 (arrow).

S&P 500: Short Term View (or) Day Chart (each candle is 1 day's price move) (or) EOD Chart:

S&P 500 - End of Day Chart (EOD) - 18 May, 2012.

Our Day Channel (yellow lines) just got steeper - after the channel break.

The Positive divergence, seen last week, is still apparent (yellow arrow).

An all red week is rare - but with Price below all MAs and a channel break as pointed out last Monday - this too has happened.

Looking forward into next week:

Bears are on top.

They have almost all Indicators on their side.

Support at the Weekly MVWAP34 should lead to some consolidation.

Positive Divergences are a precursor to some ranging moves or trend reversal.

Bulls have the above two, and hope on their side.

Welcome Read

The Trading methods used here are suitable for those who (like me) are always Learners in the World Market (never presuming Mastery).

One learns with 'Technical Analysis' using Moving Averages, Channels, Time frames, Pattern & Candlestick Analysis, Fibonacci, Ichimoku Cloud, Oscillators & other Technical Indicators.

To comprehend the Dynamics of any Market, Peer Wisdom suggests, that we show plenty of Patience, keep it real Simple and adopt tons of Discipline.

We therefore use the same framework 'Patiently' every week - 'Simple' Technical Analysis Tools are repeated - The 'Discipline' of keeping a Neutral view is maintained.

So welcome to my notes - posted here for my Friends and Family.

Some Quotes..

There are times when playing the stock market that your money should be inactive - waiting on the sidelines in cash - waiting to come into play. In the stockmarket - time is not money - time is time and money is money. Often money that is just sitting can later be moved into the right situation at the right time and make a vast fortune – patience – patience. Patience is the key to success not speed.

Jesse Livermore.

That's been one of my mantras - focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains.

Steve Jobs.

Discipline is the bridge between goals and accomplishment.

Jim Rohn.

Favorite Quote

"Why do we trade?

To be sure, trading allows us independence, the opportunity to work for ourselves. Trading also offers the prospects of a lifestyle in which evenings and weekends need not be consumed by work. Some of us crave the competitive aspect of trading, doing fresh battle each day. Others approach trading as a puzzle to be solved, deriving a sense of intellectual achievement. Finally, there is income. A successful trader can make seven figures in a year—and many of the traders I work with are living proof of that.

So why do they trade? Once you have the money, all of trading’s lifestyle advantages could easily be yours. Needs for competition and intellectual stimulation could be met in so many other ways. Why do traders remain traders long after they’ve won the game?

The great professions are those that serve as personal playing fields. They are the arenas we choose to express and develop ourselves. In mastering a discipline, we cultivate self-mastery. In writing a poem or placing a large trade, we capture—in a single act—our vision of how we see the world at that moment.

The great occupations are great precisely because they are such meaningful playing fields. Long after we’ve earned fame and fortune, the calling remains to be more than we are, to return to the arena and do battle with our limitations. The profound urge to extend the human grasp is common to all the great callings. To run faster, to capture more beauty, to predict ever better: in no small measure, our work is our pursuit of the godlike, however fleeting.

Maybe it is our different images of the godlike that animate our career choices.In work we find something divine within ourselves. Whether as scientists, monks, or traders, we strive for those moments when we are just a little closer to perfection, a little nearer to immortality. That is why we trade"

.... Brett N. Steenbarger

Inspiration

The Parable of Talents...

14 For the kingdom of heaven is as a man travelling into a far country, who called his own servants, and delivered unto them his goods. 15 And unto one he gave five talents, to another two, and to another one; to every man according to his several ability; and straightway took his journey. 16 Then he that had received the five talents went and traded with the same, and made them other five talents. 17 And likewise he that had received two, he also gained other two. 18 But he that had received one went and digged in the earth, and hid his lord's money. 19 After a long time the lord of those servants cometh, and reckoneth with them. 20 And so he that had received five talents came and brought other five talents, saying, Lord, thou deliveredst unto me five talents: behold, I have gained beside them five talents more. 21 His lord said unto him, Well done, thou good and faithful servant: thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord. 22 He also that had received two talents came and said, Lord, thou deliveredst unto me two talents: behold, I have gained two other talents beside them. 23 His lord said unto him, Well done, good and faithful servant; thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord. 24 Then he which had received the one talent came and said, Lord, I knew thee that thou art an hard man, reaping where thou hast not sown, and gathering where thou hast not strawed: 25 And I was afraid, and went and hid thy talent in the earth: lo, there thou hast that is thine. 26 His lord answered and said unto him, Thou wicked and slothful servant, thou knewest that I reap where I sowed not, and gather where I have not strawed: 27 Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury. 28 Take therefore the talent from him, and give it unto him which hath ten talents. 29 For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath. 30 And cast ye the unprofitable servant into outer darkness: there shall be weeping and gnashing of teeth.

The Holy Bible: Matthew - Chapter 25.