It’s important to know when to change your bias

I’ve recorded a number of chart.ly videos where I outlines where on the my opinion would shift from bullish to bearish on the $ES_F. Hanging onto an opinion past it’s validity point is how accounts are gutted but it’s important to wait for the market to “prove you right” before shifting.

The sentiment was increasingly bearish even as I held my bullish opinion on the #ES_F. I had bought into two pullbacks and was expecting a push to higher highs as long as the uptrend hung on but congestion and a triangle pattern dimmed those hopes.

However there was no reason to abandon my trade until the support was gone. If I always jumped ship on news that was contrary to my opinion I would seldom put on a trade. At some point – as a chartist – you simply have to trust price action. This is the same trust I had to have when I reversed my position, realizing a loss as price broke 1228 and the uptrend line of the pattern which I expected would quickly usher the contract to the major psychological level.

 The daily chart of the #ES_F broke lower through the Triangle pattern which begun what I view as the acceleration to the downside.

The support of the pattern was the “decision level” for me since it was my expectation that IF price traded through this level that the #ES_F would accelerate to the downside. The break of 1200 is psychologically significant but less so because the daily chart is likely transitioning into a sideways chop.

 This sell-off has indeed taken the wind out of the bulls’ sail and it has effectively ended the short-lived uptrend however this does not mean that this is now a downtrend. This is a transitional market and one that could be faded if prices can find a floor. So where could the possible floor be waiting?

Interestingly enough, today’s low reached for the 50% Fibonacci Retracement level from the October 4 low to the October 27 high. Was today’s rally into the close the near-term floor? If so I am viewing this as nothing more than the $ES_F re-entering the range-bound chop that it will likely remain within through the end of the year. Certainly there could be a rally that could carry the index to the prior 1289 high but as long as Europe is an unknown look for 1300 to elude the bulls. Super Committee “$1.2 trillion issues” aside, I think Europe is still the driver of this market.

If the $AUDJPY can find a floor it will be stronger confirmation of equities strength but for now the $AUDJPY is still firmly in bearish territory if not quite yet a downtrend on the daily. The $AUDJPY’s break through the 34 period Exponential Moving Average low occurred on November 11 with an acceleration lower through 78.00.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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