Institutional investors have targeted trade the trend traders like us. In icy, evil, fashion, Institutional investors are selling into the up swings and buying to cover shorts into the down swings to squash the swing range too narrow for most of us. This has spawned head fakes both to the upside and to the downside over the last few days.
Something that has scared bears like myself is that a certified higher low is now in place with confirmation on today’s chart.
Like I wrote about last week, the life cycle of the previous downtrend channel has come to an end. We are now in no-man’s land where a new channel is being created. We do not have enough information as of the close today to determine if we are moving into a sideways trading channel, or an uptrend channel.
While there is no apparent trend, then what must trade the trend stock traders do? Walk to the sidelines and the safety of cash.
Now we have been in cash twice over the past couple of weeks and when we thought a new trend had been recognized making us move back in, it turns out we were head faked and slaughtered. I do not know about you but I’m weary of getting my butt kicked by the better prepared and armed Institutional traders.
One day we may have a Traders Bill Of Rights where the battleground is made just, but for now, inequalities continue to exist between institutional and amateur traders such as Institutional traders have access to all limit orders, they go to lunch with market makers and can make non-open market trades, they have access to a faster stock data feed and can use high frequency trading schemes against us, and they use the media groups to control public opinion about a corporation or the economy as a whole.
What is additionally significant is that on the daily chart of SPY, bulls have re-taken the 50 day MA although we still want verification of the break.
The gaffe I made was jumping back in this stock market twice now and being wrong both times. This suggests that I must raise the bar for what I view to be a new trend forming. This means that I need to find more bullish or bearish indicators on the stock charts than I have in the past. Even a Bearish Head and Shoulders Top and a Burial Cross was not enough to place my money on the short side. Not even a Bullish Downtrend Channel break was sufficient to bet my money on the long side. All these indicators have meant nothing over the last few weeks. The only thing that these indicators have done is to lure us trade the trend traders from off the sidelines and into a trap where we have been slaughtered by the thousands.
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