Do you ever look at the motion of the market and automatically understand what is going on in the minds of traders? This is market psychology. The more in tune you get with the market, the more skills you will develop to help you read the minds of millions. I trade price pattern breakouts quite a bit, and in my experience the more you watch these patterns form, the easier it is to know what move will be made next. A classic example is the market today. Today's range was very short and occurred equipped with weak volume. Why?

Tomorrow will bring the patiently awaited CPI results. If results are up, confirming the likelihood that the Fed will pause next week, this ought to spark a rally. September is normally a dreaded month for traders, but thus far has proven to be quite profitable. We've seen a wild drop in the price of oil, jobless claims continue to fall, and retail is already starting to heat up. However, tomorrow can change this in an instant, so make sure you are paying attention tomorrow.

Today's hesitation means there is still an unsettling fear of inflation. Declines outpaced advances by a slim margin. Had you seen a big rise or big fall in the averages today, it would have confirmed traders had placed their bets with a more certain conviction on what tomorrow will bring. Truth be told, no "professional" can completely foresee the future. Anything is subject to change. Take all their opinions with a grain of salt, and watch the price movements. This is going to be the closest you are going to get to seeing the future. Remember, the market discounts EVERYTHING.

In follow up news...CTSH hesitated a little today, which still offers a low risk entry on a trend continuation. AAPL stalled, and so did everything else. I need to go prep for a session on credit spreads that kicks off in an hour. I will try to post again later tonight or first thing tomorrow.

Posted by Option Addict on 9/14/2006 at 4:10 PM | Permalink