Stalking Major Moves: Looking for Signs of Where the Market is Headed (Part 4)
10/16/2008 12:01 am EST
I know most of you want to know where the Dow is going, where this will all end, and when it is time to start buying stocks again. But remember, I am in the trading business. I don’t predict the weather—I don’t predict where things will start and stop; instead, I look for signs of a change of behavior and work with Median Lines—and Median Lines are leading indicators. This gives me an edge on the majority of other retail and professional traders, because I am already stalking the markets I trade for turns before they occur. Then I look for high probability trade entries in those markets, to take advantage of the moves, and what the charts tell me are likely to happen.
You can see I have circled a number of areas on the chart above. Those are Energy Points or areas of confluence, where two or more tested lines cross. I am proud to say this is one of the innovate indicators I have brought to the world of trading, and I teach traders how to use these areas to greatly improve their trading results in their trading, in my seminars, and one-on-one mentoring. Energy Points act as price attractors, so when I see one on my charts, I automatically draw a circle around the area.
By looking at the circled areas, you can see the various areas where price may be drawn to. The red down sloping Median Line set is still ‘calling the tune’ in this market, more than a year after it was drawn. It’s too early yet to know if the new blue down sloping Median Line set will work.
But to me, one thing was clear as I sat down to be interviewed for MoneyShow.com in September: The Dow was about to head much lower. If price broke below the 10,827 low made in July, the fall would be swift and brutal. And the week before I left for the September Forex Trading Expo, price changed behavior and began making lower highs and lower lows. I told Tim that the Dow was in real trouble, the United States was in real economic trouble—and this was before Lehman and AIG failed or were bailed out. The charts were telling me all I needed to know. The Dow was going to test, and likely significantly break the prior 7300 lows. And it was looking more and more like the sell off was coming soon.
More tomorrow in Part 5.