#13 September 2, 2011 REBOUND AFTER BREAKOUT AND SAUCER CONSOLIDATION

The market had witnessed a sharp downtrend from a record high followed by an extended, narrow consolidation. This consolidation led to the implied downside breakout. However, market then rebounded back into the consolidation and formed a small saucer pattern near the top of the rebound and well within the prior consolidation. The ability of the market to rebound back into the consolidation and then form a narrow saucer consolidation suggested the potential for a near-term upswing. Went long the consolidation at night. The market rallied sharply the next morning. Raised stopped by 200 points...

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#12 August 26, 2011 MARKET REVERSES ON SAME NEWS ITEM

On the day in question, the market set a new low on the move as Bernanke’s address, was initially viewed as bearish. He was not expected to announce any new action and he didn’t. Subsequently, the market rallied sharply, finishing the day strong, as the address was supposedly considered constructive because Bernanke made a mildly optimistic comment about the longer-term economic outlook. The market continued sharply higher into the following week. Lesson: When a news event is initially considered bearish (bullish) and on the same day the market reverses, look for a continuation...

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#11 August 26, 2011 MARKET DEFIES CORRELATION AS INDICATOR

During this period, gold had been acting as a safe haven alternative investment to equities, moving in almost inverse lockstep fashion to equities. The correlation between the two markets was running out – 0.9. Preceding the day in question, it can be seen that the downswing and upswing in gold corresponded to an upswing and downswing (moderate) in the NASDAQ. On this particular day, equities reversed sharply from lower to higher. The strong reversal to the upside should have resulted in a decline in gold. Instead, gold rallied sharply as well. This ability of gold to shrug off a...

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#10 August 18, 2011 TIGHT FLAG AFTER SHARP DOWNSWING

This is same trade on same day as chart in entry #9. When tight flag pattern formed after downswing (red lines) suggested strong chance of another downswing. Lightened partially on this formation, which was right thing to do. Lightening more would have been even better. Lesson: Tight flags after near-vertical swings usually result in continuation of...

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#9 August 18, 2011 ROUNDING PATTERN, FALSE BREAKOUT & DECLINE WITHOUT NEWS

I was long on weekly contrarian signal. Initially started working, but then after red circle ignored following negative indicators: Rounding top False breakout (red circle) No news—When market sold off late in day and into night session, checked for news item, but there was nothing. Market moves (especially, off hours) that occur in absence of news signal likely continuation of move. The market collapsed right after this combined pattern—the sharp downswing in above chart occurred in one-half day.  Lesson: Although, I had reason for trade, I should have lightened up because of the...

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#8 AUGUST 1, 2011 FAILURE TO HOLD BULLISH RESPONSE TO BULLISH NEWS

The impasse against raising the dept ceiling and risking the inability of US to pay all its bills was within days of the deadline (August 2). On Friday’s close, the Republicans and Democrats seemed as far apart as ever. Over the weekend a deal was negotiated, very sharply reducing the chance of a default. On Sunday’s opening the NQ index gapped about 30 points higher and consolidated (see oval on chart). By early Monday morning, rather than following through on upside, the market started to break down. This price response had potentially negative implications, which were quickly realized...

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