Rhody Trader

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This blog is driven by WordPress. I’ve been using that platform for my blogging and generally for content management on some of my other site for a while now and have found it extremely useful all along. My only gripe is that they have a tendency to upgrade very frequently, but that’s the nature of an open source type of package.

Over the weekend, WordPress 2.5 was released. Tonight I upgraded this blog, since it’s still small and any problems would have been relatively minor. The idea was that if things went smoothly I would do my Essentials site later in the week. There definitely were no problems. Quite the opposite. I’m loving the upgraded platform. It both looks and works better.

If you’re running a WordPress blog, I definitely encourage you to do the upgrade for your site.

Today ended up being pretty straighforward. The reference points were clear - Friday’s point of control at 1329, and the 1314 low from Friday, which was also the point of control from March 20th

So the best results would have been to buy at 1314 shortly after the open and sell 1329 later in the day. In fact, one could have played the general range a couple of times..

I wrote last week in Did the Leverage Really Come out of Gold? about how lots of market commentators attributed deleveraging to the major drop in gold and other commodities about a week and a half ago. At that point I said if there really was a big reduction of leverage in gold, etc. it would show up in the Commitment of Traders data.

Well, that data through last Tuesday (March 25) is available and it does show a reduction in open interest. It fell from 489,000 contracts to 452,000 contracts, somewhat less than 10%. Personally, I wouldn’t call that a huge deleveraging. Sure, there were quite a few positions closed, but it’s not like there was a mass departure from the market and net positions didn’t drop by very much.

Sorry. I’m just not buying it, especially since the drop in Gold hasn’t continued.

Oh my! Check out this spike in headline activity BlogBurst shows for yesterday on my other site, www.TheEssentialsOfTrading.com.

While it certainly looks that way, I can’t really tell specifically if that’s from picking up yesterday’s post (Calculating Relative Strength) or whether it was carryover activity from the previous day, or something like that. It does, however, look as though FoxNews is responsible. Before yesterday, Reuters was showing far and away the most activity for my content. Fox hadn’t even been on the radar, now I’m seeing this for the last seven days:

FoxNews - 73,657
Reuters - 36,031
Palm Beach Post - 7,361
Chicago Sun Times - 57

Come on. Relative Strength is interesting, but not that interesting.

Today was a day that required a fair amount of calm and patience. As the early part was very slow moving.

The critical initial level of interest was yesterday’s point of control at 1336.  The next really meaningful one was 1314, last Friday’s point of control. I’ve also included a line at 1323, which was where there was an area of low value formed during last Friday’s afternoon rally.

As you can see, the market opened lower, but did rally up to Thursday’s point of control to provide a good short entry. As has been the case a few times this week, the market then formed a low during C period, after which the market went sideways for some time in a tight balancing area. Eventually, it did break down. There was a stall around the 1323 area where some profits could have been taken. The really money, though, was in waiting for that 1314 level to get approached, which eventually happened.

I’ve just received notice from Sharky at Trade2Win that my submission for acceptance into the ranks of Advisors has been accepted with enthusiasm. Cool!

Of course I can’t help but feel a bit slighted at not be invited to become an Advisor months ago when the group was first started. I mean I used to work on the site. What’s up with that?

I’m now just 20 posts away from becoming a Legendary Member and a few points away from getting my first orange (or whatever that color is) button on my reputation.

Does this make me sad? 

Today’s action present several challenges. First of all, it opened above yesterday’s point of control, then dropped down to it, which is normally a decent buy entry. It didn’t work out this time. Then is broke down without providing any strong entry points for a short. 

As the day progressed, though, a distribution became apparent with extremes in C and G periods, which offered opportunities to do fade trades.

During the sharp drop in gold and other commodities there was a large amount of chatter about de-leveraging in that arena. If that was really the case it will be apparent in the Commitment of Traders (COT) report. The data through last Tuesday (18th) showed no such thing, but then the big selling didn’t happen until later in the week. It’s going to be interesting to see what the figures from this week’s data look like. My guess is open interest in gold won’t have dropped off the way “de-leveraging” would imply.

The calmness of the last couple of days made for very easy reference points going into today. The 1354 was yesterday’s point of control and the 1334 level was the one from last Wednesday. 

Unfortunately, neither of those levels were really even meaningfully approached until the 1334 level was broken at the very end of the session. The market did, though provide a nice balancing day in which opportunities to see the day’s highs and buy the day’s lows, which had been put in by C period, were provided later on.

Maybe I’m just a bit more sensitive to it than others, but it seems like right about now we have a really large number of people calling for a bottom in the stock market. The only place I’m really fully exposed on the long side is in my 401k account, so I really can’t say this worries me, per se.  Given that bottoms usually happen rather unexpectedly, I do have some real concerns that we are in for another drop.

The whole sentiment discussion aside, the fact that the charts show a clear pattern of lower highs and lower lows (and I’m looking at closes, not intraday points) tells me that we’re in a downtrend. Until that pattern is broken, I still consider this a bear market and will operate with that bias in mind.

It’s worth saying, however, that while the market overall may not have ended its downtrend, there are area of the market which may have. Some of the homebuilder charts are showing those indications.