In the comments on ‘Day Trade?”, I posted a question Gadi e-mailed me. In this blog, I’ll answer what I meant in my Dec 29 Blog.
The Dec 29 blog had to be taken within the context of the blogs I had been writing, including my comments on the Xmas rally. This is a setup I use and its component parts are made up of:
- Comparing the close of the Friday before Options Expiration with Dec 23. A lower Dec 23 close is bearish; a higher Dec 23 close is bullish.
- Comparing the close of the first Friday in Jan whose three prior trading days are not a holiday (usually the 2nd Friday in Jan). This year Jan 9 was such a Friday. For this close, I also need to see a bull or bear bar to confirm the closing direction.
- If both (1) and (2) confirm the direction, then I expect to see Jan 31st’s close (when compared to Dec 31 close) to be in the same direction. If the Jan monthly bar shows conviction, I would then expect the Jan Effect to come into effect: ‘where goeth Jan goes the year’.
This year, I did not receive any indication from the Xmas rally. Figure 1 shows the signals were mixed.
FIGURE 1 S&P Daily
A couple of concluding comments:
- For those that have purchased the Nature of Trends, I draw your attention to the 5-day RePo sell signal triggered on Jan 9; for those that attended the webinar, note that the RePo sell came within the time and price window for the sell signal to occur.
- Finally, Ana Wang sent me an interesting read on ‘the Stone Age Brain’ and Trading http://awanginvest.com/?p=1030#comment-7499