Do You See What I See

Do You See What I See

Courtesy of David at All About Trends

In the spirit of the holiday season the old Holiday carol of "Do You See What I See" comes to mind.

We say this because a big part of being technically oriented is all about line of sight and trading what we see based upon technical analysis.

We Trade What We See Not Think Hear Or Fear

That said, let’s start with the short term index charts and this nauseating trading range for the last two weeks.

As you can see each of the above indexes in the daily chart frequency are showing the same thing, consolidations, base building etc. The OTC is more of a bullish Pullback Off Highs (POH) and the S&P 500 more of a flat base going sideways.

Like it or not the market is consolidating at the highs and digesting its gains. Call it what ever you want, a breakout of resistance is a breakout of a base, and that needs to be honored.

It would not suprise me to see it happen as it is "Tis The Season" in the states and the last thing that they want to happen is for the markets to get killed here. Why? Think herd psychology 101. If you kill the market then how is that going to affect sheeplike spending habits during the holiday season. Can’t have that now can we? I’ve seen it before all too many times into year end.

First of the year is another story as then it’s all about FAS 167. But that’s all an opinion and thinking. We have a phrase here and that is:

"It’s ok to think but let the market confirm your thinking first"

That’s why we trade what we see not THINK.

As for risk? There is always risk and the risk of a breakout is that it breaks out and fails- we have no control over that except to know and understand it’s a potential. Knowing and understanding this allows you trade your plan and plan accordingly should a breakout fail. Better to be aware than a deer in the headlights.

If the market wants to break higher and go for a sleigh ride we are all for it, we want to be in synch with the maket and let’s face it the last two to three weeks the market has been tracking sideways with no clear discernable trend except just that- sideways.

This is also why we try to stick to position sizing of 6-7% of the whole portfolio so that should things go the other way, it does not impact your account to any great degree. It’s another form of risk management.

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