I Shouldn't, But I Can't Resist... A Look Back

Do you imagine it is hard, difficult, impossible for the market to bounce hard in this area as we have been preparing for and expecting?

We have a 30 min positive divergence, leading positive in the QQQ right now!

Before this range started, this market could have done anything, up down, sideways, we said sideways before it had even stopped going down and were right, in fact we predicted a range. One of our concepts is that before any reversal, 80% of the time (and if the price pattern is obvious it's even more likely) we get a head fake move in the opposite direction first just before the reversal (in this case a shakeout of shorts to the upside).

We have a 30 min leading positive divergence at the head fake area (yellow), we watch for positive divergences to tell whether it's a head fake or the real deal.

Well imagine or recall this and I caught a lot of flack for this at the time...

Going back to Sept. 13, 2012 when the F_E_D announced QE3, this is what CNBC had to say...

"Buy everything that's not nailed down... as bearish as I want to be, you cannot fight the Fed. You buy everything. Buy copper, which i did today, FCX which i mentioned last night. Anything else? Emerging markets! everything! Just buy it. Buy it all. You never have to short again. Buy it. I had a guy call me today trying to sell me research on the short side, and I said I'm sorry, I think you're going to go out of business. You shouldn't short anymore."

Not that I'm smarter than anyone else, I just like to think for myself.

Initial reaction that day...

Conventionally my first instinct is to cut short exposure, but I think I'm going to wait just a bit and see how things shape up, see if this announcement was fully priced in.

This post after QE3 was announced on the 13th...

Right now the IWM, QQQ, and SPY/DIA to a lesser degree are showing negative divergences that I believe will bring them down as sure as the AAPL positive 5 min sent it up.

Here's a chart from the 13th and we had a lot worse in every average.

I use this chart of the SPY on Sept. 13th because it's sort of close to the QQQ chart above, a 15 min negative divergence in to the QE3 announcement. I continued that post saying...


"There are some other markets too that I have pointed out, but the main point is I'm not making any drastic changes on a 4 hour move, which is almost always a knee jerk reaction and against the bulk of the evidence without decent evidence to support that change."

To wit, that same day was this post again after the QE3 announcement...Adding SQQQ Long This is a 3x leveraged short on the QQQ, but this was all based on facts we could observe.

Here's what happened since, not that I'm making any predictions with this chart, I'm just pointing out how gathering hard evidence and thinking for yourself can pay off.

The yellow arrow is the 13th, not so great since then. So why can't we bounce from here on a strong move?

If this post is worth anything to you, I hope it is that there's no replacement for gathering hard evidence, thinking for yourself and not being afraid to go against the crowd or CNBC if you have the data to support your view.