#7 July 31, 2011 FAILURE TO HOLD BULLISH RESPONSE TO BULLISH NEWS

On Sunday evening huge gap and rally after debt ceiling bill negotiated over the weekend with threat of default only days away and after at close on Friday two sides wide apart. The market surrendered much of its gain on Sunday night and started consolidating only moderately higher. This initial big response to surprise news and resolution into a muted response suggested failure. Short order I placed missed by 30 basis points. Ironically, my original selected point was 50 points lower, but then decided to push entry and exit points 50 points higher and missed the trade for $125 difference in...

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#6 JULY 8, 2011 FLAG PATTERN NEAR TOP OF TRADING RANGE AS BUY SIGNAL

A narrow flag pattern formed near top of trading range suggest potential for upside breakout. Added to dollar long in red oval area for this reason.

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#5 JULY 11, 2011 SCHWARTZ’S DICTUM: WHEN MARKET LETS YOU OFF THE HOOK TOO EASILY, DON’T GET OUT

Marty Schwartz said that if you are really worried about a position and the market let’s you off the hook too easily, don’t get out. This market provided a perfect example. At the high in above chart, Nasdaq was close to the multiyear high. The big decline from this high was triggered by an extremely bearish employment report. The market, however, rebounded strongly on same day, recovering 75% of loss. The shrugging off of very bearish news and the strong close with price near high of move looked like extremely bullish price action (see Trade #4). I had expected the market to open higher on...

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#4 July 11, 2011. MARKET SHRUGS OFF BEARISH NEWS

Situation–NASDAQ had been in a sharp rally off the recent lows to near the highs of the entire long-term upmove, with the market making a high on a very strong up day (the recent high day on chart) on evidence suggesting the following day’s monthly unemployment report was likely to be bullish. The actual report released the next day (last day on chart) was extremely bearish basis expectations. The market gapped sharply lower on the opening in response to the report and continued to sell off to the lows of the day. Thereafter, the market steadily trended back up, finishing with a rally near...

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#3 JULY 7, 2011 FLAG PATTERN FORMED AFTER VERTICAL RALLY AS BULLISH SIGNAL

A tight flag pattern formed after a near vertical move usually tends to result in a continuation of the move. In this case there were two successive flag patterns.  I was long XME puts and thought about buying copper as a hedge, but couldn’t bring myself to do the trade, even though I know this is a reliable pattern. The market immediately rallied. Have to pay more attention to this pattern in future.  

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#2 JULY 5, 2011 FALSE SIGNAL FLAG BREAKOUT

  The market had a sharp downside breakout of a flag pattern (low day at beginning of July). The very next day the market more than recovered the entire loss rallying back to the top of the flag pattern. The false breakout of the flag, as confirmed by this rebound day, provided a bullish signal, as the market continued higher for the remainder of the week.  The illustrated failed signal proved to be a major turning point. The market subsequently skyrocketed, gaining nearly $400 in two months..  

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