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DeanSTrader: What is the market most likely to do first? 1/23/13

Picking up from the last report I published (on January 11, 2013) I stated the following:

what I am looking for short-term is simple: Either, (1)  an S&P 500 hold above 1450, while breaking out to new yearly-highs right away. Or (2) an S&P 500 hold above 1450, and trading in-between the 1460-1470 range before breaking out to new yearly-highs.

As long as one of the two scenarios play out, the bullish bias is intact short-term and a potential move to 1500 is possible.

SPX January 23rd. 2013 500x342 DeanSTrader: What is the market most likely to do first? 1/23/13

As you can see, scenario (2) clearly played out which reaffirms and strengthens the conviction even more that $SPX (S&P 500) is heading to 1500 and more. 

In trading, especially when a market is trending it should really be simple … As a trader, over-complicating the situation and worrying about the fundamentals, media opinions, etc. to determine where the market is heading next is a BIG and unrewarding distraction. The market is not this complex deep thing, when it comes down to it is just a machine that is run by supply/demand. I know it seems as if I am over-simplifying it, but that is because I really believe you have to narrow it down as a trader and not allow emotions to get in the way.

If you have read my previous report, you have probably noticed in my writings, the constant attempt to simplify things. The reasoning behind this is because I truly believe that simplifying things make any complex scenario seem clear and concise. Using the simplifying method, a question that allows a trader to determine the direction of a market, a particular stock, etc. is: What is that market, stock, etc. most likely to do first? And, to answer this question, in any situation, there are really only two answers; either go higher, or lower. And, to answer this question, in any situation, there are really only two answers; either go higher, or lower.There is sideways as well, but eventually that will result in a higher or lower move. Narrowing trading down like that, helps to clear the mind from all the b.s. in the news and  the opinions being given by the media every second of the day. Applying this question (what is the market most likely to do first?) to the $SPX leads to a simple answer and that is; based on the activity it has most recently shown is go higher and break above 1500. There is no reason not to be bullish as it has shown nothing other than “the ability to move higher”.

Arguing with the tape is the biggest cause for losing money in the markets! As a market participant, one has to look at the market’s activity and try to determine one thing; what is the market most likely to do first? Too often and I have been a victim of this in the past, traders look for a specific reason for why the market is going higher. Rather than caring about the reason,  simply focusing on the activity will allow one to determine whether the market is set to head higher, vice versa. Take AAPL for example, Apple Inc. is a company known to almost every person in the U.S. Therefore, a person buying it or selling it can have thousands of different reasons for doing so. It could be because they decided they liked the new I-phone. Or it could be for a foolish a reason as they had a dream about buying AAPL stock. The point is, you as a participant by looking at the tape, does not know and should not know exactly why every print is being taken place. As a trader I could careless why it is being taken place because all I care about is: What is the market, stock, etc. most likely to do first? To answer this, I do not need the “why’s” behind the buying or selling, but the “how”. In other words, the reasons behind why the activity is being taken place the way it is are meaningless, but the manner in which the activity is being taken place is key as it paints the picture for the future activity. I apologize if I sound monotonous about the importance of asking, what is the market most likely to … ?, but I could not stress more how profound it is in trading to get the bottom of things and look at the big picture. The following can only be reached by asking certain questions.

Finishing off, is a review of my outlook on the S&P 500 in the near-term:

  1. Based on the activity that it has shown most recently, it is clearly bullish!
  2. I am looking for a breakout above 1500 to take place VERY soon.
  3. To change my outlook on the $SPX breaking 1500, it would have to go below the 1475 – 1460 level before breaking above 1500. If it does that, then the next level the $SPX would need to hold is 1450. But as long as it holds above the 1475 – 1460 level, I see no problem breaking out above 1500. This may even be an impressive breakout that people will not expect IMO.

 

 

 

 

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