Sam Seiden
Independent Analyst
The chart below is an income trade in the S&P that I took on 5/31/17. The S&P declined into one of my strong demand zones and then proceeded to rally for a couple days. As you can see on the chart below, I followed the simple rules I have been sharing and bought near the low, into a clear demand zone where banks were buying also. Then, I took a profit of $1,200 when price reached my target (blue circle). What surprised me was seeing many traders sell short in that red circle area, when price broke below those prior pivot lows. Watching the markets, I saw this happening and know why it happens so I wanted to talk about it here to help others not make this novice mistake.
People who shorted the S&P just below that 2408 level (red line) did so because conventional technical analysis rules tell them to short there. Bearish engulfing candles and a break of pivot lows is a clear sell signal for traders to follow the rules of technical analysis. The reason you don’t see people making a consistent low risk living from the markets with this school of thought is because there is a major flaw in it. The flaw is that all the chart patterns, indicators, oscillators and so on never take one thing into consideration – where are the buy orders (demand) and sell orders (supply). Yes, believe it or not, conventional technical analysis which is what dominates the trading/investing books and the internet IGNORES the only thing that matters when making a proper buy and sell decision, demand and supply! In the S&P here, this group was selling just above a price point where banks, and I, were buying, which is a very novice mistake.
S&P Income Trade 5/31/17 – Profit: $1,200.00
It’s simply a matter of how you “think the markets” that separates those who make a living in the markets from those who don’t. To be successful at trading and investing, you must focus on what is real, not what you feel. What’s real is that price movement in any and all markets is a simple function of an ongoing supply and demand relationship. Prices turn at levels where this simple and straight forward equation is out of balance, like my demand zone and entry into the S&P trade. There are only two groups at play in the markets, those who achieve consistent profits and those who provide those profits. So, before you put your hard – earned money at risk in the markets, make sure your trading and investing strategy is reality based and focused on how you make money buying and selling anything in life. This is the key financial mindset that allows you to produce the income and wealth needed to start living the life you choose to live.
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Editors’ Picks
EUR/USD keeps the rangebound trade near 1.1850
EUR/USD is still under pressure, drifting back towards the 1.1850 area as Monday’s session draws to a close. The modest decline in spot comes as the US Dollar picks up a bit of support, while thin liquidity and muted volatility, thanks to the US market holiday, are exaggerating price swings and keeping trading conditions choppy.
GBP/USD flirts with daily lows near 1.3630
GBP/USD has quickly given back Friday’s solid gains, turning lower at the start of the week and drifting back towards the 1.3630 area. The focus now shifts squarely to Tuesday’s UK labour market report, which is likely to keep the quid firmly in the spotlight and could set the tone for Cable’s next move.
USD/JPY advances on weak Japanese GDP, holiday-thinned trading
USD/JPY rises while US and Japanese markets remain closed for holidays. Weak Japanese Gross Domestic Product figures curb tightening expectations. Investors await speeches from Federal Reserve Vice Chair for Supervision.
Editors’ Picks
AUD/USD retargets 0.7100 ahead of RBA Minutes
AUD/USD keeps the slightly bid bias around 0.7070 ahead of the opening bell in Asia. Indeed, the pair reverses two daily pullbacks in a row, meeting some initial contention around 0.7050 while investors gear up for the release of the RBA Minutes early on Tuesday.
EUR/USD keeps the rangebound trade near 1.1850
EUR/USD is still under pressure, drifting back towards the 1.1850 area as Monday’s session draws to a close. The modest decline in spot comes as the US Dollar picks up a bit of support, while thin liquidity and muted volatility, thanks to the US market holiday, are exaggerating price swings and keeping trading conditions choppy.
Gold battle around $5,000 continues
Gold is giving back part of Friday’s sharp rebound, deflating below the key $5,000 mark per troy ounce as the new week gets underway. Modest gains in the US Dollar are keeping the metal in check, while thin trading conditions, due to the Presidents Day holiday in the US, are adding to the choppy and hesitant tone across markets.
AI Crypto Update: Bittensor eyes breakout as AI tokens falter
The artificial intelligence (AI) cryptocurrency segment is witnessing heightened volatility, with top tokens such as Near Protocol (NEAR) struggling to gain traction amid the persistent decline in January and February.
The week ahead: Key inflation readings and why the AI trade could be overdone
It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.
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