Price is king !

I always wondered what that cliche really meant. To me it means one thing, which is increasingly becoming clear as i watch the markets more and more. Nothing defines a trend better than price itself. All other measures are subservient to the trend and are used to guage the direction of the trend and the strength or maturity of the trend. Look at the NYSE Vol or Breadth MCO kickoffs. We have had at least 3 kickoff moves since the bear started in Oct 07 on the MCOs. Now they all turned out to be buying panics or short covering rallies. I think this one is no different. With that huge spike in the MCO, SPX could not even take out 1044, the 10/14 highs. Now the gurus can speculate or proclaim that we have seen the lows. But price the king, needs to confirm yet by at least displaying a series of higher lows and higher highs on the daily charts. While the former has happened, the latter needs to happen, failing which, this would look as another bear flag in hindsight. Some of my own work point to SPX 740-60 in the next 1-2 months to complete the price pattern. But one thing is clear. The daily trend is down, no ifs and buts there. 10/28 lows saw a higher low on the MCO but not a lower low in price. That smacks of panic buying by folks who did not want to wait for a lower low with divergence, for the fear of missing the next bull market. My strategy is to keep shorting the market either on weakness or strength as long as SPX stays below 1044. I missed the initiation move to the downside yesterday, as i was busy with some personal matters. Will try to get short tommorow.

Edited by NAV, 05 November 2008 - 11:16 PM.

couldn't agree more...nice post

Unless SPX break thru recent lows around 850, IMO the market may be trying to build a bottom. This opinion is based on LT prognosis, not ST prediction. I will be adding to longs between 850 & 900. I see no reason to rush in on the long side at near 950.

I posted this on Swing Waves for reference but since this board has more visitiors and this is relevant and to me obvious (no matter how hard it is to believe) I'm going to drop in here too.

How simple is this?

For traders:

If the McClellan Oscillator has lows above lows and the Summation Index is rising, be long.
If the McClellan Oscillator has highs below highs and the Summation Index is falling, be short or flat.

For investors:

If the Summation Index has lows above lows and the price and 50-day moving average are above the 200-day moving average, be long.
If the Summation Index has highs below highs and the price and 50-day moving average is below the 200-day moving average be short or flat.

As for the the beginnings of Bull and Bear Markets see the chart.

Good trading to everyone.

http://stockcharts.com/c-sc/sc?s=$SPX&p=D&yr=8&mn=0&dy=0&i=p08842762876&a=154490513&r=3548.png

Good post. And to add a fundamental twist to it, if we can get over the news du jour, it gets really simple: Housing bust, mortage deliquences, foreclosures, credit crunch, bankruptcies, credit freeze, CDS exposure, forced liquidation, deflationary forces, election jitters, blah blah blah.....it's all media noise, which can simply be summed up by 1 phrase: "It's the economy stupid" DOOHHHH

nice wrap-up of the situation and i completely agree. we had a high volume, gap-down, emotional low on 10/10/08 with the lower volume but scarier (i say scarier because we knew where the floor was and it looked as if it was going to open up into a chasm) re-test on 10/27/08. i believe we also had a higher VIX reading on 10/27/08. i view that as an important Price/Sentiment divergence. this is elegantly classic bottom formation, but it is only a *possibility*. now the market (Price) must prove or disprove the case. imho, the bulls need for yesterday or today to mark a higher low and then get moving up again. both 10/10/08 and 11/5/08 had important Astro ingredients. my ideal bull scenario is to gap up and preserve that chart-cleaning-up spx950 so magnificently projected by red. regards and good luck to all serious traders here no matter what time frame you trade or what system you use ... H1

Edited by humble1, 06 November 2008 - 02:31 AM.

Price is the ultimate indicator. I have a price projection model that does a very good job of indicating trend and support and resistance levels for the trend. For the week if price is above down cycle high 977 the bias is up toward weekly up cycle high 1046. The week made a run toward 1046 failing at 1007 and dropped back below 977 the next day. For the week price is now between 977 and 907 support so on a weekly basis price is very weak toward the low 900s. Looking at today for clues the market is positive above 977 and since yesterday closed at the low we only get three projections so odds are we will drop toward 925 today. The closer we get to 925 the weaker the market is toward 907 areas. Looking at charts we can clearly see the market is in a sideways low level consolidation. The new monthly projections have 1232 and 1068 as the up bias limits and 904 to 741 as the down bias limits. Price is testing the new monthly support at 904 and if it holds into next week its a buy for the run at 1068 later in the month. Below 904 its a buy below 800. These projection spreads are historic high due to the VIX being above 40. The spreads expand and contract as volatility increases or decreases. Best, Larry