(Click On Chart To Enlarge)
From Friday's "QLD: Nested Bearish Patterns" post:
"It's interesting how the market often tells a story, if we can follow along. Yesterday's trading in the QLD, is an example."
Friday's trading was another example.
If our opinion of the brutal jobs report was bearish, that was correct at the open, but the market's initial response to news often is a head fake. LOOK at the story Ms. Market told us after the market's initial reaction Friday morning: a very well-defined channel with a number of "hits" to both the top and the bottom that broke out to the UPSIDE. That "didn't make sense," based on the bearish news. But, when the QLD broke out of the channel, LOOK at the next few candles: rip...rip..rip to the upside, just as we had crater..crater...crater to the downside on Thursday when the triple nested patterns broke in anticipation of the bad jobs report.
On Friday's channel breakout to the upside, the jobs report was old news, and was irrelevant as far as what was happening in the market, which was technically-driven buying on bad news. Bears were getting squeezed and covering their shorts; bulls were buying the technical breakout of the channel.
After the channel breakout, a Symmetrical Triangle formed (pattern in red), which was a bullish continuation pattern. LOOK at what happened when it broke out. Rip...rip...rip to the upside again. More Bears were covering shorts; more Bulls were buying the continuation breakout.
Late afternoon, a third pattern broke out to the upside, and Thursday's high was taken out on the heels of a horrible jobs report. That doesn't make sense on the face of it, but if we don't learn that the market doesn't necessarily trade in tandem with the fundamentals, we're going to get caught looking the wrong way, as many players did on Friday.
Why would anyone BUY on a horrible jobs report? We can speculate about that based on the fundamentals, but we'll probably end up saying, "That doesn't make sense!" But, based on the technicals, it does make sense. Players were buying and buying to cover the technical breakouts, solidly confirmed by the rip...rip...rips to the upside after the pattern breakouts.
4 comments:
Good stuff. I was actually one of the people who was too caught on the idea that we would fall based on the bad fundamental jobs data so I appreciate this post a lot.
I came here via your link on slope of hope. I actually was aware of your blog about 1 year ago via the QXM and XING yahoo message boards. I never posted there myself and am still a trapped QXM "investor". Man, are there some freaks on those yahoo boards!!!
I'd be interested to see your current analysis of QXM.
Anyway, I like your work. Keep it up!
Good Morning, Ian,
I posted here on XING at the weekend, in case you missed it. It has broken out, but I'd like to see more volume come in.
QXM is lagging XING as far as the breakout is concerned. It needs to print 3.00 for a breakout and then, obviously, get above its recent high of 3.18.
I sure agree with you about the "freak show" aspect of the Yahoo XING Message Board. It's a shame that people act so cowardly hiding behind their screens, saying things that they never would say in "real life." Sigh...
Good luck to you!
Read your post on xtrends this morning. Great charting. It also agreed with my general market direction for the day with my charts showing MACD breakout on 20 min. SPY and ES charts. Went long on the 1:30 afternoon pullback and bagged 30+% trading the NDXDec1350c. Could have been more if I didn't have to p/u my kids from school.
Sailor Joe,
Boy, you nailed that 1:30PM low, prior to the Bullish Falling Wedge breakout. That's great!
Enjoy your children, especially at this time of year. They grow up so quickly. Be sure to tell them that Melf Elf said to be extra good so that he can bring them something nice ;)
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