indu daily chart
The Dow Now
Looks like the long positons have done well. If you look at my previous post, you will see that I was looking to give long positions a chance and establish new ones (using options of course). So the Dow Jones Industrials Index has blown through the 8600 resistance area and has made it up to the 200 day moving average. This is big. The whole world including the media robots are watching this. And so far, buying has been getting lighter and lighter. Take a look at the doji candle that has been painted on our chart on Friday’s close. A sign of some selling. A resistance point established. Can it break through? It is possible since market momentum is still pointed up. The problem here is not only are we dealing with the 200 day moving average, but also the 9000 psychological number. Two reasons for price action to get choppy and possibly reverse. With that being said, I am out of long positions at this point. You may ask, “Why? You just said momentum is still up?” And my answer is I will not argue with a profit, especially in an area where there is significant resistance. For those people still holding long positions, this may be a good area to tighten stops and become very cautious. How about shorts? I am not going to short anything until I see some signficant confirmation.
Today I want to mention the importance of the proper mindset when participating in any kind of speculative market. I speak to people often who are focussed on how much money they can make. This of course is important, otherwise we would all just be playing video games here. At the same time though, being focussed on the money aspect of trading is what I think causes problems in trading behavior. Especially if you are inexperienced and are not aware of your emotions.
By focussing on the money, you invite your emotions to take over your decision making. Greed and fear. These are the two that will wipe out your accounts. You have some profit, you want more. That is greed. The market is making new highs and you don’t want to miss this party any more so you jump in – at the top. That is fear. If you want to make money in the trading business, you need to be in tune with your emotions at all times.
One way to help minimize the effects of these emotions is to focus on good trades, not the money. For example, if you are trading in the forex market, and you are making 15 pips a day on average, that is pretty good. The novice will say, “15 pips, on 1 mini lot, thats only 15 dollars a day, I can barely buy lunch with that.”. The professional on the otherhand will say, “It adds up, if I can do this on the average, then I will begin to see significant results as I carefully begin to trade larger positions with confidence.” Good trades require a trading plan and alot of discipline. Both of these requirements can be developed, but it takes time and you need patience.
This game is mostly about you wrestling with your own psychology. If you have no idea or no awareness in regards to your emotional state, or can’t control it, then find a professional to do the trading for you.
Upcoming Market Event Highlights
These are upcoming reports worth keeping an eye on.
USA – Click here for details.
Tuesday – wholesale inventories
Wednesday – weekly oil reserves and Baige book
Thursday – retail sales
Friday – consumer sentiment index and Geithner speaking at G8 conference
WORLD (Important for forex traders) Click here for details.
EU – finance ministers meet on Monday, industrial data throughout week and Trichet speaks on Friday
UK – industrial data throughout week not very important but watch for political drama unfolding here
JP – mostly industrial data and revised Q1 GDP on Wednesday
CAD – Some industrial data very quiet here
Pacific Rim – New Zealand has interest rate decision on Wednesday
China – Some important industrial numbers coming from here may be worth watching
So keep an eye on this market because we can be at a serious point here. Sentiment is up, but things can change quickly. Be patient and flexible. Join us in the chat room and we will help you be
more patient. We will help you see through all the market noise. See you in the chat room.