Martket Club Trade Triangle Analysis

We're seeing a lot of red again, this morning. The market actually opened to the upside, but it did not take long for the mood to turn bearish. The DJIA has been down more than 200 points during the first half hour of trading, but has eased off of the morning low...

The above chart is a daily chart of the S&P 500, displaying intra-day data from this morning. You can see that we still have a green trade triangle, which is the active signal. Another thing to make note of is the downward slope of the moving averages, which suggests that the market is in a downward trend.

Now, to fully appreciate the overall trend, you'll want to look at a weekly chart. Nonetheless, the point here is to take a look at the prevailing market trend.

The trend is your friend, except at the end...

Remember that old adage, because it is very easy to see an entry signal like that green triangle and jump into a directional trade. I have been cautioning about doing so, suggesting that you wait for a follow through day to confirm a change in trend.

A "buy" signal in a down trending market is really much more a signal to cover your short positions, take the profits off the table, and wait to see what opportunity presents next. You might be more aggressive with your entry when it favors the trend.

Trade well...

Christopher Smith
TheOptionClub.com