This is uncharted territory/circumstance. Nobody has a crystal ball so all I can do is give my 2 cents.

Now that said I can begin to make a bull case but I’ll let the chart speak for itself because there more bear$hit on the chart than bull$hit.

Of course the last candle is 1 week in and hasn’t printed so we can sort of rule that out, although it HAS made a new low so don’t totally discard it. Macd histo has NO divergence in this monthly timeframe. In fact it’s just straight down with no flinching. Also there is room to move down to fully test support. I’d put absolute make or break support in the mid-high 9700’s myself. That’s all the bear case, added to the current trend you have a strong case for continuation down.

As for the bullish side it’s mainly the fact that there was buying pressure on both the last tests of the channel lows. BUT buying pressure does not equal a reversal 9/10 times. If we slide to lows at/or above that support on dried up volume with histo divergence that would show me the selling pressure has dried up. The fact that there was heavy buying pressure doesn’t discount the fact that for every buyer there was a seller. The selling pressure though somewhat offset was undeniable and panic like that won’t likely turn on a dime.

Big volume is a warning sign of a possible flush though most often there is more price action left where the market probes further for buying/selling pressure (unfinished business). I have yet to see a convincing case of bottoming action. I’m pretty fond of this setup…If we were in a bull trend and I saw the reverse action I just described I’d say look out below…in fact this was how I picked the 14k top on the Dow a year ago.

People are on edge…based on my Volume Based Price chart put yourself in the auction along with the majority of the volume in this range. What would you feel if you just had 4 years of profits turn even or slightly red?

Still a bear bias for me, won’t effect my daytrades though thank god.

I gave warning on a possible silver short setup on the 18th and then on the 25th I gave confirmation. I just had to go back and toot the ole horn because I got alot of flack from the silver bulls.

While the paper markets are in breakdown mode…commod’s should bounce.
Silver looks prime for a bounce IMO. Tight stop and quite a bit of potential upside off this divergent test of the last lows, this is an excellent trade opportunity as I see it.

Remember you’re counter trend if you’re long, the 50ma has crossed below the 200ma already. Pay extra attention to the red dots as they are double backed resistance (by ma and structure). The best trades (with the trend) would be to look for rejection at those levels and get short. Those could also be used for long targets which is classic textbook support and resistance.

I LOVE this chart example for TA…it just is clean and clear. I see too many people out there trying so hard to make sense of a shitty chart when there are TONS of other plays. If the chart doesn’t hit you quickly don’t bother trying TA. If you cant see a clear line in the sand where bulls and bears will interact don’t play it cause it will be hard to gauge risk/reward ratios. Trending plays are MUCH easier to work TA with as the side winning is already evident and of high probability to continue. Choppy sideways action is often like betting on red at the roulette table IMO…unless you wait for the breakout that is. The consolidation plays do tend to be more violent and can provide quicker profit if you are patient and quick enough to enter on the break.

Good luck.

Check it out via the link below.
MC

http://www.tradersbase.com/forum/technical-analysis/743-some-thoughts-volume.html#post4342

The market doesn’t sell goods nor services. It runs on hopes and dreams of profit

We’re trading/investing in a pretend slice of a company or contract with the hope that enough people will be joining us on our side of the see saw to profit.

The issue with this see saw theory though, is there really are 2 supply & demand chains at work in these non tangible markets. Since there are no hard goods, the scales can be tipped or manipulated by those with deep pockets. Maybe to a lesser extent on futures with no real limitations on open interest. But certainly heavily with stocks where there’s a set amount of shares to soak up before you’re in relative control.

So instead of this…

We have this…

I’m not saying it’s a must we over complicate things as a daytrader or even short term swing trader. But in general it’s very beneficial to learn to read the accumulation and distribution patterns of big smart money. I’m sure since this dual S&D chain is nothing I’ve seen talked about, many will think I’m a bit crazy. I won’t argue that, but I will argue that there is absolutely 2 chains at work in the speculative markets.

Chain 1 (Smart Money)…
1) Smart/big money accumulates low (Chain 2, step 2), in gradual increments in the downtrend (once they start to see a value imbalance and the dumb money begin to throw in the towel).
2) A large portion of the float is now in strong hands and an uptrend ensues with the occasional balancing period or correction.
3) Once they’re done with the uptrend, they then distribute (Chain 2, step 1) at the top. This causes a lack of significant, sizable interest which is needed to keep the ship afloat.

Chain 2 (Dumb Money)…
1) Retail/Dumb money accumulates high (Chain 1, step 2) often all at once due to the emotion of the newly advertised high prices which appears to be a big bullish push.
2) Some realize the gig is up quickly and promptly head for the exits causing a sharp move down, setting off a new downtrend.
3) The remainder become bag holders and will gradually exit until their individual pain threshold is hit and they finally begin selling to smart money (Chain 1, step 1).

Rinse N’ Repeat.

All JMHO, but this is how I look at the market at this stage of my learning.
To me thinking there is only one S&D chain is like thinking the markets operate in a vacuum and that they are tamper free and pure.
I feel the better I get at reading the volume based disparities the closer I am to riding the trends on the coattails of smart money.

Disclaimers:

There are many additional nuances, like deep corrections with no distribution or where a breakaway gap is used to turn weak hands into strong hands, to name a few.

I’m not saying all retail is “dumb money”. There clearly are many smaller traders that know how to read the writing on the wall.

Well folks…I had a light bulb moment on Friday. For the first 9 months I had a horrible “mentor” that had no clue, though I still respect that he helped me the best he could. From then it has been mainly allot of self learning (with help from some TB members of course ) and I’m finally getting to see things properly now. Thursday and Friday I wasn’t at work and was able to devote 100% attention to the markets movement which proved to be what I needed.

Looking at the market as a slighted auction driven by the big money and chopping it into waves is crucial IMO. So the lightbulb went on when my mind saw volume and price action in the proper fashion, much clearer than I had before using volume and trends alone, kind of a mixup of what all I’ve seen in probably 10-12 hours of screen time daily.

Another thought that clicked is that trending moves are emotional, and congestion is a balancing/thinking slice in time. Of course the consolidation is needed for a breather and gives us supply and demand zones for entry and stop triggers. I also added the use of fibs to my arsenal as well, for retracement purposes of course.

I had been trading in congestion zones for some time without really seeing the bigger picture or knowing it. Good traders prey on the emotions of others, in chop there isn’t enough emotion to exploit beside scalping. Let the congestion break and take the emotional slice of price action to the next level of congestion and so on. This defines trend trading at its core, and though I “knew” it, I didn’t quite see it properly.

Anyhow…enough rambling. Thanks Chan, Cire, Simon and others that have helped me, sometimes without even knowing you were doing so.
Good week for myself and TB guys, let’s keep up the great work.

Chan provided us with a link on this setup in the chat some time ago. It came up again today and I wanted to touch on one possible use for this comparison tool.

I also wanted to touch on this, if you were in chat today you should have caught some of this action. Cire, Chan and myself were very active in the forums live chat and had great results with 3 sets of eyes on the market working together. This is teamwork at its best, and I view TB members as a team. Please don’t hesitate to join the team, it’s free and you can then work with us on deciphering the market each day.

Here’s my view, we closed above that down channel pretty convincingly. As expected it’s stalling at overhead resistance on low volume, it’s time to base or pullback to test support most likely.

Now ideally we should get a test of the new support on the top down trend line.
Even better would be if it kind of hangs here for a few days and lets that channel line meet with the structure support below. There would be the king of entries if you want odds in your favor, double support for a long.

Note the red arrow, that’s your signal if your less aggressive and maybe the smartest entry of all. The channels/trendlines break and fake out often but a legit breakout of range followed by a test of that same level is a prime entry. Let’s see if we can get that smarter entry on a long here. You could play it short in anticipation of that test though it could rally with no warning and now I would look for long setups.

With premarket we are a hair over the rangebound resistance.
Not going to be easy to hold that, not to mention we have that 2nd area of structure resistance with the 50ma backing it so if we break it shouldn’t go far at right away.

Given this weekly chart, barring a disaster we will close above the downtrend. A pullback test of that new support and/or consolidation under the 50ma will probably be needed if this is the real deal. Disregard the volume, it’s not accurate since this is a TOS continuous chart and they have bugs to work out.

That’s my take anyhow