We Have Kissed the Channel Goodbye~

4:27 PM

A car can't run on fumes for long and the market can't run on rumors forever. Sooner or later you need to pony up and put in some gas, or see the rumors come to fruition. Today the rumors weren't there to keep things moving up. And there was no hard, positive market moving news either. So as the chart predicted, we "kissed the channel goodbye" and began the nosedive. Perhaps if Germany votes for he bailout of Greece tomorrow, we might see a change in sentiment. But until that happens, we're going down and dirty.

In this world liars abound, as do opinions from talking heads and politicians. But the chart NEVER lies. In it's purest form it talks of price and volume. The only two things that really matter. Price giving the obvious info and volume telling us if the buyers are coming in by the droves or running for the exits. Often charts remind me of the time honored question........"Which came first, the chicken or the egg"

Take the Bear Flag and the Dead Cat Bounce. At various points, like today, the chart told us where it was headed before any news (or lack thereof) moved the market. So often one wonders......did the chart predict the news or did the news make the chart? The answer is...... both. More often than not, the chart gives us the setup.   And then it just waits for the right catalyst.  Once the catalyst arrives on the scene, the market makes it's move, just as the chart predicted....... in most cases!  There are times when unexpected news changes everything on a moments notice.

Let's look at the recent Bear Flag. Chugging along we knew the odds were that price would eventually tank. And we even knew where price was likely to end once it tanked. So armed with this knowledge we played our trades and waited, being cautious, keeping our powder dry, knowing we would be ready for the downside move. So when it came, and it did, we capitalized!

Yesterday I pointed out the high probability that we would reverse and kiss the channel goodbye, heading for the downside. The chart gave us that info. It was a classic dead cat bounce. And sure enough, we tanked. Again ready, we were short and capitalized on the move. But still, the news (or lack thereof) could have changed things dramatically. The chart set-ups just give us better information and allow us to be better prepared. Set-ups are not always in abundance. You need to be the big game hunter, waiting in the bush until the prey comes along. Then and only then do you pull the trigger.  In the meantime patience is demanded!

Uncle Ben is speaking at 5 pm. Germany is voting on the Greek bailout tomorrow Officially called EFSF (European Financial Stability Facility), a bailout fund on steroids.  Both can be game changers. But as of now, the chart is telling us we are headed down to DOW 10,600.  See previous posts for support levels below that number.  No changes in the Trend Table below.  Now, text your Dad and let him know you're thinking about him.  

CURRENT MARKET TRENDS

Long Term (Weekly Chart) - Down

Medium Term (3 day chart) - Down

Short Term (Daily Chart) – Down