Spy Trends

anyone else been having a bad week?

Time to make some decisions.

When I traded into SH at 791, I stated the following:

What invalidates your assumptions? Breaking back into the last up-channel would signal another trend-change. There is high possibility of sideways action, fake-outs. We’ve seen one lower high, and have now broken the downside too. To shift this trend, we’d need both a higher high and lower low.

here is a look at my market trends in the S&P when I bought it, then (3/30/09):

Well, based on the assumptions I made when I bought it, this trade has gone kaput. However, I’m tempted to hold on to see it test the prior up-trend from Feb 9, around 870. If it passes this, then that’s a good case that the bull market could end. That would be a higher high, and to confirm the uptrend, we’d see a higher low.

This was, primarily, a channel trend, and the price action has broken out of the channel. I need to look and see how hard I should hold to the trend integrity principle: If it breaks out of the trend, the trend is likely to fail. So I look and see : How much has it broken out by? Has it broken out and re-entered before? Did I draw the channel incorrectly?

I redrew the channel. It actually works nicely and makes me sort of want to keep holding onto the short. This could be the exact pivot point for getting short:

Here is one of my lessons learned.

To restate what I said in the picture, incase the graphic is lost ever:

“The ‘channel’ trade is good as long as the price pattern stays inside the channel. There are a few things I’ve learned to keep in mind from now on: The upper and lower limit of channel trades is dynamic. Prior to each day, or each week, determine what price level invalidates your price range. Today, it was around 830. I mistakenly had 845 in my head as a sell point, but that’s the limit from a few DAYS ago. Had I sold at 835, I would have saved myself from a 23 point short squeeze, as we ended today at 858. “

I’m going to hold onto my position. The downward trend hasn’t been broken yet, and we’re at the top of the upward channel I drew. I think selling right now might possibly be the worst thing I could do.

I’ll review this in a week to see how it went.

On a separate note, keeping charts and blog posts of my trades and market outlooks has pointed out nearly half a dozen serious mistakes I commonly make. Many of them, when they’re pointed out (by myself through reflection, usually) seem obvious and glaring, but they never were until I attempted to explain my thought process. I’m definitely getting better at this. It’s just taking some time!