My last post mentioned conditions under which I would short the Dow, which have now manifested themselves. However, prices are close to the 15 minute EMA (left chart), so I am anticipating that prices will find support near here, at least temporarily. If prices move through that EMA and remain below the previous highs, I will plan to go short again. This conflict will probably result in consolidation in this range until this conflict is resolved by either the bulls or the bears. This is hinted at on the tick chart (right) as well as potential dynamic support by the Bollinger Bands on the 3 minute chart (middle). This would be a likely place for prices to rebound higher to resume today's uptrend, or to merely consolidate.From my experience, however, one never knows which side will win out. With all the worry troubling the stock markets these last few days, there has been a somewhat bearish sentiment lately, as manifested on the daily charts (not shown). However, with Bernanke's statements yesterday and bullish economic data today, the bulls might very well win out. I must be prepared for anything!
I have noticed that stock index traders tend to have very short memories. Morose sentiment one day often gives way to ecstatic sentiment the next day, resulting in manic-depressive movements in the stock indexes. And that's fine with me, because it provides the momentum, liquidity, and volatility needed for profits in the futures markets.
I will continue to buy and sell based upon Phantom's Rule #1 and Rule #2, using my entry, add-on, and exit points, as long as these charts continue to trade with smooth, clean trading conditions. I suppose that only a trader could view this apparent chaos as a thing of artistic beauty! But to me, that's what they are!
