Starting again....

It has been far longer than I would have liked, letting this blog sit idle. I don't know why- perhaps I just lost interest for a while. In any case, I am re-motivated to keep at it. Part of my renewed interest is due more in part to re-focusing on my trading, and really staying committed to running it as a business. The blog posts will be more oriented towards trade set ups, macro commentary, and miscellaneous issues that will, I am sure, crop up from time to time.

On to the above chart-

There are 3 trade patterns setting up here, and these are all based on the work of Linda Raschke, from her Street Smarts book, and material from her TAG conference in 1995 on 5 patterns using a modified MACD momentum indicator. These trade set ups on BGZ are-

1. Turtle soup plus one
2. 3 day unfilled gap reversal
3. 10 day divergence (where price makes a lower low and the indicator makes a higher low over a 10 day period)

I have placed a stop limit buy order for BGZ which is a triple leveraged ETF for the what is basically shorting the S&P 500. The order is placed just above Friday's high, indicating a move to fill the gap. If filled, a protective sell stop will be put under Friday's low. Keep in mind that I am a short term trader, unless I see a change in trend coming, such as at the beginning of March of last year. Also note, March 10 of 2009 was a reversal based on the 10 day divergence pattern. Look at a chart of AAPL, and you will see it clearly.

A chart is below-

Count back to the last low on 2/23, and you will see that it is 9 days to the most recent low on 3/9. So, to be correct, we are looking at an 9 day divergence, but this pattern occurs nearly always over a 10 day period.

My market bias right now is bearish, despite the recent strong rally over the past month. There are a lot of reasons for this, that I will not go into on this post, other than to point at the increasing debt levels, and dependence on consumer spending to pull us out of this recession. I am also looking to see if the Dow can rise above the 10725.43 level set on 1/19. This is the 50% level from the 2002 low to the 2007 high. While I will not claim to be an expert in Dow theory, this is a critical resistance level, and I want to see if we can get back above it. Until it does, I will continue to trade 3-5 day price swings and manage risk tightly.

Until next time...