EURO/DOLLAR 5-3-2007
The E/D is shakin and bakin more than Barry Sanders.
Lest you are deceived I want to tell you that most people are thinking that this pair is showing weakness yesterday and today. As I said many times, just because a market is moving down doesn't mean it's showing weakness and just because a market is moving up doesn't mean it's showing strength.
It is how it's moving up and down that signals weakness or strength, as in momentum.
If you jump up and you start to rise, that first impulse that got you rising, got you rising at a certain speed. As long as you rise at the same rate of speed or faster you are showing rising strength. But what if your rate of ascent, your upward momentum starts to slow. Yeah, you may be still rising but are you still showing upward strength? Then, if you get an extra push up you should rise even faster, and higher doesn't that make sense?
The same holds true if you are falling down and you get an extra push down. Your downward flight should accelerate and you should fall lower don't you agree?
Now look at the chart for the last two days. On Tuesday we had a bear pivot but...LOWER VOLUME. Not a valid pivot is it? I told you what to expect in pivot lesson 4-A what to expect from a low volume (invalid) pivot.
Then today we had an attempt at a follow through on a bar that closed lower than yesterday's close, but could not close below the low of of yesterday's bar. It should have. I mean it had higher volume. It had a larger push. INSIGHT...
These last two bars are not showing weakness as that might appear from mere sight. Vision (inner sight/the mind/reasoning) tells us that it is falling at a decelerating pace. If you are running and you are slowing down you are not showing strength in the direction you are running, you are showing weakness in that direction.
We know just from living that before something turns it slows down. This current E/D down swing is slowing down not speeding up.
Then we have to consider that it is slowing down at an area of support (a wall). That area of support is The bull pivot marked by the Red (S) for swing bar on the chart. Yes, it was not a valid pivot bar that created that swing bar because of lower volume, but this current bear pivot also has lower volume, and that means balance.
Consider also that the low of our red swing bar happens to be at 3 bar Resistance for this current bear pivot. Yes, you calculate it the same way I showed you for a bull pivot. Remember, the things I show you going up work the same way falling down. Add all this with the fact that this market is in an uptrend, not a down trend, and the deception starts to reveal itself even more.
Now add this to the equation. This is something I have yet to cover in our 3 bar series but I will, even though I've mentioned this in several lesson prior.
But, just remember that the open price and the closing price are the 2 most important areas of any single bar. These areas are support and resistance within themselves. This is of even more significance when the direction is counter trend.
Look at our red (S)swing bar. When you use the term top or bottom of any single bar, what that means is a range. This swing bar is a down bar right? See the yellow and green lines I have drawn. Those lines are drawn at the close and low of that bar. That space between the lines, that difference between the close and the low, that is the bottom. I usually will make my entry decisions at the lower range and make my exit decisions at the upper range when the move is down. As I say...USUALLY. There are exceptions to everything but you can't understand the exceptions for anything until you learn the rules.
So again...THE BOTTOM IS A RANGE. The bottom of this bar is serving as two areas of support right now.
First,the red swing bar is a pivot bar in the direction of the uptrend (the fact that it came on lower volume is balanced out by the lower volume on this down move). And it is in the range of 3 bar equilibrium.
It is still in play (still support)because there has been no close below it.
Since the bottom of the swing bar is a range, if price bounces off anywhere within this range, it qualifies as a touch/bounce off 3 bar support. This is what I mean when I say you cannot look for absolute exactness in where a market might go you can only calculate a reasonable range.
Between those yellow and green lines is the range that momentum can carry the market. A train rarely stops on a dime but you can calculate the probability of the range of it's stop.
So here is where I'm coming from. If you tell me to run through a wall and I start running towards it, don't you think I should speed up before I crash into it? If you see me slowing down just before I hit the wall you can come to the reasonable conclusion that I really don't want to go through that wall. Am I right?
If I'm slowing down going into the wall am I displaying strength or weakness? This is exactly what the E/D is doing. It is slowing down going into the wall.
So, can we say with absolute certainty that the E/D will bounce back up off this range? Of course not! But we can say that the probability is very good and that's what we trade. PROBABILITY...
See how we are discussing the market right now. I'm really not telling you things you don't already know. This is what I mean when I say release the mind of separation and you will see more. Market reactions are not separate from the things you see and do in your every day life.
When we look at the market according to every day reactions of cause and effect we see a different picture than if we look at the market as simply a bunch of numbers and bars. The picture takes a different shape. It becomes an image. A visual.
Am I saying the E/D will go up from here? No...I'm saying that if I were going to risk a trade I would go long on an intraday bull pivot above the range.
Because the picture is constantly moving in time all I can give you are odds. I don't try that the intraday bull pivot will occur above the range. I am just aware of it and if it happens I'm ready to make a move. My plan of action is already prepared for the (IF EVENT).
But I also remember that there are two arms on the scales of balance so here is the other side. Sitting on top of our lines like a heavy weight we have two bearish pivots. However, both are on lower volume. But...Since there are two of them side by side, the down move does have some internal possibilities. But, in order to make the break it needs some news in it's downward favor. So, I am at this moment scouring my sources for possible pending new that my provide the artificial Punch needed to make E/D fall further down. Until then, questions are resolved in the direction of the trend because the trend is your friend.
I cannot predict some breaking, surprise news event that may happen far across the waters that may give this market an extra push down. But right now, in this moment in time, this market is showing upward strength not downward weakness. So the way I do it, I search for possible news announcements for today's trading that may give a down push and if I find such a possibility, I will wait for the news.
Only if it should close below the range (green line) on higher volume has weakness been displayed. Then the ball carrier has made a move down field.
And even then I will not chase him, I'll just wait for him to pull back.
THE UNIVERSAL LAWS OF NATURE
JERRY
P.S. This is not to be considered a trading reccomendation. Only a lesson on the mental process of filtering trades.
Lest you are deceived I want to tell you that most people are thinking that this pair is showing weakness yesterday and today. As I said many times, just because a market is moving down doesn't mean it's showing weakness and just because a market is moving up doesn't mean it's showing strength.
It is how it's moving up and down that signals weakness or strength, as in momentum.
If you jump up and you start to rise, that first impulse that got you rising, got you rising at a certain speed. As long as you rise at the same rate of speed or faster you are showing rising strength. But what if your rate of ascent, your upward momentum starts to slow. Yeah, you may be still rising but are you still showing upward strength? Then, if you get an extra push up you should rise even faster, and higher doesn't that make sense?
The same holds true if you are falling down and you get an extra push down. Your downward flight should accelerate and you should fall lower don't you agree?
Now look at the chart for the last two days. On Tuesday we had a bear pivot but...LOWER VOLUME. Not a valid pivot is it? I told you what to expect in pivot lesson 4-A what to expect from a low volume (invalid) pivot.
Then today we had an attempt at a follow through on a bar that closed lower than yesterday's close, but could not close below the low of of yesterday's bar. It should have. I mean it had higher volume. It had a larger push. INSIGHT...
These last two bars are not showing weakness as that might appear from mere sight. Vision (inner sight/the mind/reasoning) tells us that it is falling at a decelerating pace. If you are running and you are slowing down you are not showing strength in the direction you are running, you are showing weakness in that direction.
We know just from living that before something turns it slows down. This current E/D down swing is slowing down not speeding up.
Then we have to consider that it is slowing down at an area of support (a wall). That area of support is The bull pivot marked by the Red (S) for swing bar on the chart. Yes, it was not a valid pivot bar that created that swing bar because of lower volume, but this current bear pivot also has lower volume, and that means balance.
Consider also that the low of our red swing bar happens to be at 3 bar Resistance for this current bear pivot. Yes, you calculate it the same way I showed you for a bull pivot. Remember, the things I show you going up work the same way falling down. Add all this with the fact that this market is in an uptrend, not a down trend, and the deception starts to reveal itself even more.
Now add this to the equation. This is something I have yet to cover in our 3 bar series but I will, even though I've mentioned this in several lesson prior.
But, just remember that the open price and the closing price are the 2 most important areas of any single bar. These areas are support and resistance within themselves. This is of even more significance when the direction is counter trend.
Look at our red (S)swing bar. When you use the term top or bottom of any single bar, what that means is a range. This swing bar is a down bar right? See the yellow and green lines I have drawn. Those lines are drawn at the close and low of that bar. That space between the lines, that difference between the close and the low, that is the bottom. I usually will make my entry decisions at the lower range and make my exit decisions at the upper range when the move is down. As I say...USUALLY. There are exceptions to everything but you can't understand the exceptions for anything until you learn the rules.
So again...THE BOTTOM IS A RANGE. The bottom of this bar is serving as two areas of support right now.
First,the red swing bar is a pivot bar in the direction of the uptrend (the fact that it came on lower volume is balanced out by the lower volume on this down move). And it is in the range of 3 bar equilibrium.
It is still in play (still support)because there has been no close below it.
Since the bottom of the swing bar is a range, if price bounces off anywhere within this range, it qualifies as a touch/bounce off 3 bar support. This is what I mean when I say you cannot look for absolute exactness in where a market might go you can only calculate a reasonable range.
Between those yellow and green lines is the range that momentum can carry the market. A train rarely stops on a dime but you can calculate the probability of the range of it's stop.
So here is where I'm coming from. If you tell me to run through a wall and I start running towards it, don't you think I should speed up before I crash into it? If you see me slowing down just before I hit the wall you can come to the reasonable conclusion that I really don't want to go through that wall. Am I right?
If I'm slowing down going into the wall am I displaying strength or weakness? This is exactly what the E/D is doing. It is slowing down going into the wall.
So, can we say with absolute certainty that the E/D will bounce back up off this range? Of course not! But we can say that the probability is very good and that's what we trade. PROBABILITY...
See how we are discussing the market right now. I'm really not telling you things you don't already know. This is what I mean when I say release the mind of separation and you will see more. Market reactions are not separate from the things you see and do in your every day life.
When we look at the market according to every day reactions of cause and effect we see a different picture than if we look at the market as simply a bunch of numbers and bars. The picture takes a different shape. It becomes an image. A visual.
Am I saying the E/D will go up from here? No...I'm saying that if I were going to risk a trade I would go long on an intraday bull pivot above the range.
Because the picture is constantly moving in time all I can give you are odds. I don't try that the intraday bull pivot will occur above the range. I am just aware of it and if it happens I'm ready to make a move. My plan of action is already prepared for the (IF EVENT).
But I also remember that there are two arms on the scales of balance so here is the other side. Sitting on top of our lines like a heavy weight we have two bearish pivots. However, both are on lower volume. But...Since there are two of them side by side, the down move does have some internal possibilities. But, in order to make the break it needs some news in it's downward favor. So, I am at this moment scouring my sources for possible pending new that my provide the artificial Punch needed to make E/D fall further down. Until then, questions are resolved in the direction of the trend because the trend is your friend.
I cannot predict some breaking, surprise news event that may happen far across the waters that may give this market an extra push down. But right now, in this moment in time, this market is showing upward strength not downward weakness. So the way I do it, I search for possible news announcements for today's trading that may give a down push and if I find such a possibility, I will wait for the news.
Only if it should close below the range (green line) on higher volume has weakness been displayed. Then the ball carrier has made a move down field.
And even then I will not chase him, I'll just wait for him to pull back.
THE UNIVERSAL LAWS OF NATURE
JERRY
P.S. This is not to be considered a trading reccomendation. Only a lesson on the mental process of filtering trades.
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