Last Chance for Chart Reading Mastery

CRM ExampleChart Read­ing Mas­tery starts this Tues­day, Sep­tem­ber 16. We haven’t held this highly acclaimed course in two years. It is suit­able for every­one from traders work­ing to become prof­itable to pros. This will be the only time it is offer this year. There are still a cou­ple of slots left, if you are inter­ested. You can learn more at: Chart Read­ing Mastery

Free Webinar — Chart Reading Mastery

After two+ years, we are once again teach­ing the highly acclaimed Chart Read­ing Mas­tery course in Sep­tem­ber.  To see what we will be teach­ing and to see how some of the prin­ci­ples apply in the cur­rent mar­kets, check out our free webi­nar.  Reg­is­ter to the right for easy access to the webinar.

2014-07-08 Daily Chart 3The webi­nar runs about an hour.  I show how sev­eral Wyck­off prin­ci­ples taught in the course apply to Crude Oil (Daily), Crude Oil (intra­day), the Dow futures (intra­day) and the USD-Yen FX mar­ket (intra­day).  In the FX mar­ket, I explain and show how we get intra­day vol­ume to read price and vol­ume on a 10-minute chart along with sev­eral nice trades.

The Free webi­nar also details all the infor­ma­tion you need about 8-week, Chart Read­ing Mas­tery course, includ­ing what is cov­ered, dates, etc.  Do your­self a favor and see how Wyck­off works so well in the mar­kets.  Reg­is­ter up at the right side of the website.

When Your Analysis is Wrong — A Lesson in Trading Psychology

Last night, I was look­ing for the mar­ket to react and begin to head lower today (see last post below).  That analy­sis turned out to be wrong. How do you sal­vage a trad­ing day when your analy­sis turns our to be flawed?

In truth, there are many days that my nightly analy­sis turns out to be wrong, or, more cor­rectly, the mar­ket doesn’t do what I antic­i­pated the night before. It took me a while to learn this, but the fact that my analy­sis turns our to be wrong is okay. Marty Schwartz was instru­men­tal in teach­ing me about wrong analy­sis. He had been a net los­ing trader for about a decade. When he turned the cor­ner and became one of the most prof­itable com­modi­ties trader of the 1980s, he attrib­uted his turn-around to accept­ing the times when he is wrong. He said,

Before, admit­ting I was wrong was more upset­ting than los­ing the money. I used to try to will things to hap­pen. I fig­ured it out, there­fore it can’t be wrong. When I became a win­ner, I said, “I fig­ured it out, but if I’m wrong I’m get­ting the hell out, because I want to save my money and go on to the next trade.” By liv­ing the phi­los­o­phy that my win­ners are always in front of me, it is not so painful to take a loss. If I make a mis­take, so what!”  – from Mar­ket Wizards

This is an excel­lent atti­tude and one I try to adopt.

2014-08-18 ES 9 & 3K TickSo, let’s see how to do this in the con­text of today’s trad­ing. Clearly, the mar­ket ral­lied strongly in the Asian and Euro­pean ses­sions break­ing yesterday’s high on siz­able vol­ume. You can see this on the 9,000 Tick Chart. Look at the vol­ume on the wave up at A. I cir­cled it in blue. This was a big clue that the mar­ket was not going to be weak today. There is no sense in stand­ing in front of a train.

So, we shift our gears. One of the great val­ues of hav­ing a game plan com­ing into the mar­ket is that if the mar­ket is doing what you expected, it’s great. But if it isn’t, that’s great, too, because you also know what the mar­ket is doing. Think about that. This is the real value of a game plan.

The mar­ket dri­ves up through yesterday’s high on strong demand. Shortly after the US ses­sion opens, the mar­ket is still hold­ing gains, shows a lack of sup­ply, and has a spring (3,000 Tick chart at green arrow).  That’s our cue to go long.  Nice trade.

The take-away mes­sage is to remain men­tally flex­i­ble. If we have to be right, we wind up fight­ing the mar­ket on days like today. That’s no way to trade.

The Coming Week & Free Webinar

The com­ing week should be an inter­est­ing one.  We have a fair amount of reports com­ing out (Hous­ing, CPI, FOMC Min­uets, Job­less Claims) that can cause increased volatility.

2014-08-17 Daily ESTwo weeks ago the US Stock Mar­ket (rep­re­sented by the S&P e-minis) fell hard.  There was fol­low through to the down­side in the early part of the next week, and then the mar­ket hit sup­port and began to turn around.  Last week, the mar­ket con­tin­ued the upside momen­tum and ral­lied into resis­tance at 1960.  We high­lighted this resis­tance in Thursday’s Deep Prac­tice.  You can see the red box I drew to sig­nify an area where the mar­ket would likely hit selling.

Note the vol­ume and the erratic behav­ior on Fri­day (last day on the chart).  There was quite a bit of sell­ing seen on Fri­day morn­ing after four days of light vol­ume on the rally (check your hourly chart, not shown).

After sell­ing off, the mar­ket did rally on Fri­day after­noon, but like most sum­mer­time Fri­day after­noons, the vol­ume was light.

Next Week

The key ques­tion for early next week is: Can the mar­ket push sig­nif­i­cantly up above the 1960 level?  If it does, it has sev­eral weeks of side­ways price action to over­come (high­lighted in orange).  While the mar­ket may shoot through this area, more typ­i­cally, these areas act as resis­tance.  Friday’s increased vol­ume and swift morn­ing down­draft sug­gests sell­ing is active around the 1960 level.

For early next week, watch the area between 1960 and about 1965–67 if price can rally above Friday’s high (1961).  Resis­tance could enter in this area.  Sell­ing could also come in ear­lier, pre­vent­ing any push up above Friday’s high.  Sell­ing com­ing in below Friday’s high would indi­cate a lower intra­day high an an oppor­tu­nity to catch a poten­tial down move early.  Push­ing through 1960 and grind­ing up would obvi­ously negate the neg­a­tives for the market.

If we do start sell­ing down early next week, I would expect some ini­tial sup­port to come in around 1930 to 1925.  A break of this later in the week could see the mar­ket return to the 1905–1910 level.

Free Webi­nar

We will be doing a free webi­nar to pre­view Chart Read­ing Mas­tery and some of the prin­ci­ples taught in the course as seen in cur­rent mar­kets.  If you have been wait­ing for Chart Read­ing Mas­tery (it’s been over two years since I last taught this highly acclaimed course) or you just want to see Wyck­off prin­ci­ples in cur­rent mar­kets, you can reg­is­ter here: Free Webi­nar: Chart Read­ing Mas­tery Returns

Webinar Today

T & BI just fin­ished the slides for today’s webi­nar on Tops & Bot­toms. There are 60 slides cov­er­ing how to read a top and how to read a bot­tom.  I think you will like them.  We will have a thor­ough dis­cus­sion on mar­ket tops and bot­toms, includ­ing the all impor­tant struc­tural char­ac­ter­is­tics, how mar­kets behave in these loca­tions, entries, use of the Weis Wave, bar-by-bar read­ing of tops and bot­toms, recent major tops and bot­toms, and much more.

Join us tonight at 5:00 East­ern time (New York time zone).  We will run about two hours, maybe a lit­tle more.  Every­thing will be recorded.  Come learn how to read the next top or bot­tom by click­ing on this link: Tops & Bottoms

Trading Losses

Accept Your LossesTrad­ing losses are tough to han­dle for many traders.  Not only do many try hard to avoid them, we may even try hard to avoid think­ing about them!  In my arti­cle pub­lished on, I explain why not think­ing about our losses is a poor psy­cho­log­i­cal play.  You can read the arti­cle at the link that fol­lows.  Below the arti­cle there is a sec­tion where you can make com­ments and add to the dis­cus­sion.  Here’s the link:

Accept Your Losses and Be A Bet­ter Trader


Follow-Up in the S&Ps

Yes­ter­day, resis­tance was iden­ti­fied in the area of 1965 — 1970.  Today, the mar­ket stopped it’s upward move­ment at 1968.25.

2014-07-09 Daily ESToday–marked A on the chart–was an up day.  Although it was up, it also traded inside the range of the pre­vi­ous day.  We had good vol­ume, but the mar­ket remained largely range-bound.  We could be see­ing the mar­ket accu­mu­lat­ing around sup­port as we have seen on sev­eral pre­vi­ous swift dips down.  That is entirely pos­si­ble.  We could also be see­ing the start of a larger pull­back. Frankly, it is dif­fi­cult to tell.  There cer­tainly has been some weak­ness, but we are also sit­ting on top of sup­port, hold­ing that sup­port, and in an over­all strong uptrend.

The key level to me is the 1970–1975 area.  I’ve high­lighted this area with a small red rec­tan­gle.  For tomor­row, I would expect con­tin­ued fol­low through to the upside from today’s action.  Nonethe­less, the area around 1970–75 is likely to be dif­fi­cult for the mar­ket to over­come.  Watch this area care­fully, espe­cially if price reaches this level early tomor­row morn­ing (US ses­sion) assum­ing the mar­ket goes up there.  Push­ing through this area will indi­cate the buy­ers remain in con­trol. Fail­ure at this point will indi­cate sell­ers want to try for another push down.

Should the mar­ket pull back overnight (Asian & Euro­pean ses­sions) or dur­ing the US ses­sion, pay atten­tion to the 1965 to 1960 area.  We can see intra­day sup­port develop in here.  Push­ing below this level indi­cates sell­ing has resumed.  Hold­ing this area (again, if it comes down to here) sug­gests buy­ers are act­ing on their con­vic­tions and higher prices are likely.



Progression of a Top

2014-07-07 Daily Chart 1I showed Daily Chart 1 of the S&P e-mini futures in a free webi­nar held by TradeGuider yes­ter­day (Mon­day) morn­ing. You can see that Monday’s bar C was still in progress. We noted that we were likely cre­at­ing a top and could expect at least a mod­est pull­back. Here was the rationale:

The daily chart had reached the Weekly Sup­ply Line (red trend line) on Thurs­day last week (B).  We noted that the vol­ume had less­ened con­sid­er­ably at B indi­cat­ing lack of buy­ing on the highs and that this was the last day pre­ced­ing the Fourth of July hol­i­day, which is typ­i­cally a bull­ish week.  Ear­lier on Tues­day at A, the mar­ket broke above the 1960 resis­tance level on good vol­ume, but the close and the sus­tained vol­ume gave the tell­tale sign of sell­ing into the rally.  This added to the story of a poten­tial pull­back.  At the time of the webi­nar, we dis­cussed a move down towards 1964, if the mar­ket could push below 1971.75.

2014-07-08 Daily Chart 2Later that night in a make-up ses­sion for the weekly Deep Prac­tice group, we dis­cussed the S&Ps and the next likely move in Daily Chart 2.  I added a lit­tle more detail.

We noted that sup­ply clearly came into the mar­ket as seen by the poor close and increased down­side vol­ume at C.  We dis­cussed how the next day or two would likely see a run down into the 1960 to 1954 area.  This is high­lighted by the large rec­tan­gle. Because of the  close under the top of A on Mon­day, the odds of much of a rally the next day (today) were low, and the small rec­tan­gle high­lighted the area where we would look for any rally up to die out.  The short term daily trend chan­nel was also added, giv­ing us an ini­tial tar­get for the reaction.

2014-07-08 Daily Chart 3You can see the result in today’s (D) price action.

Although today stopped at the antic­i­pated sup­port level, some dam­age has been done to this mar­ket.  Any rally up tomor­row is likely to have dif­fi­culty between 1965 and 1970.  If the mar­ket shows some unex­pected resilience and is able to get above that level, stiff resis­tance will be met around 1975.  Because we have had two days down in a row and today had heavy sell­ing, sup­port is likely to come in a lit­tle lower, around the 1950 level. Should the mar­ket want to sell off again tomor­row, and push through 1950 deci­sively, it could eas­ily slide down to the 1940–35 area.

Under­stand­ing tops like this (and bot­toms, too) is the sub­ject of a new webi­nar we will be hold­ing on July 22nd.  Learn how to read tops & bot­toms and dra­mat­i­cally improve your trad­ing.   You can learn more about the webinar—including the cur­rent dis­count offer—by click­ing on the Trad­ing Tops & Bot­toms but­ton at the upper left of the web­site or here:

Trade Tops & Bot­toms



Happy Fourth of July!

Happy Fourth of July everyone!

Helen and I wish every­one a won­der­ful and safe hol­i­day weekend.  

Declaration of IndependenceFor read­ers who may not know, the Fourth is our national hol­i­day cel­e­brat­ing our adop­tion of the Dec­la­ra­tion of Inde­pen­dence from Great Britain.  This occurred in 1776. We actu­ally sev­ered ties from Eng­land two days ear­lier, on July 2, 1776.  On the 4th, our gov­ern­ment adopted the Dec­la­ra­tion of Inde­pen­dence, which explains why we sep­a­rated.   The Dec­la­ra­tion is one of my country’s most impor­tant and mean­ing­ful doc­u­ments, next to the Con­sti­tu­tion.  It was the actions behind the Dec­la­ra­tion that cre­ated this coun­try and all of its ideals.


Fourth of JulyToday, the Fourth of July also marks the begin­ning of sum­mer in the US.  Many fam­i­lies take off for he beach or moun­tains, enjoy pic­nics, hot dogs, etc.  Lots of fun and a nice way to cel­e­brate our country’s found­ing.  Have a great Fourth!

Brain Freeze

I was inter­viewed recently by Kira Brecht on the topic of Brain Freeze.  Kira was act­ing as a free-lance jour­nal­ist for this arti­cle, but is also the Edi­tor of and a very good writer.

Brain FreezeBrain Freeze” isn’t a tech­ni­cal term, and it’s not what kids get when eat­ing ice cream too fast–it’s what some describe as becom­ing immo­bi­lized by fear.  It’s actu­ally a part of our genetic cod­ing and forms a por­tion of the fight-flight response.  (Sci­en­tists view the full response as the fight-flight-freeze response.)  The freeze is eas­ily seen in prey ani­mals who have been cap­tured by a preda­tor (say a gazelle and a lion), who freeze and appear dead caus­ing the preda­tor to lose inter­est and walk away.  Moments later the gazelle stands up, shakes her­self off, and runs away. It’s a last-ditch effort at sur­vival used when flee­ing or fight­ing have failed.  Think of play­ing dead if con­fronted by a bear.

Traders mean some­thing dif­fer­ent than an adapt­able sur­vival response when they refer to brain freeze.  Per­haps the best exam­ple is a trader deeply under­wa­ter as the mar­ket swiftly falls.  Rather than being able to close the posi­tion, the per­son freezes, unable to act–not very adap­tive.  This is dis­cussed in the arti­cle and at the end, I give a few sug­ges­tions on how to release one­self from being frozen.

The arti­cle is in TD Ameritrade’s Ticker Tape Monthly and can be read here: