Not so fast

Hey Market Pilots,

Last week, I wrote about how the market reacted to the Fed news and Jerome Powell speaking, saying that the market was satisfied with the pullback leading up to that news. What I didn’t do was wait a day for confirmation. The other piece I wrote (Market at New Highs, but Wait), is also more relevant than ever now that more time has passed so go check it out. 

On the day Powell spoke, the markets shot up afterward which seemed to indicate that they were happy with the news and course of things. I went along with the exuberance and stepped in long on a few names which I had been following closely, only to have to back track the very next day. One of my rules for entering a trade is to have price close over the 15 min 50 SMA, which occurred that day with the indexes and many tickers. But what I didn’t do was wait for price to test support of that moving average the next day, and so, as the market fell back through the support, my long thesis was invalidated.

In the screenshot below of the SPY, you can see the arrows which mark the day following the Fed news and you can see that price oscillated through the 15 min 50 SMA, then ultimately dropped below. The fact that price could not hold that MA told me that the markets were not ready to move to the upside, which then took some of the tickers I entered, down with it.

It’s a fresh reminder of why I have the rules I have and why, for my style of trading, details like this matter. I am human and therefore am prone to overlooking such details even though they are spelled out in my Moxie Indicator rules and the Moxie Indicator classes I teach. At least I am able to identify the error, which actually reinforces the crucial importance of the rules I have created and defined because they work. So with this reminder, I make sure I examine the details of the market and how they mesh with my rules, to make sure this stays a rare experience.

Over and Out,

Your Profit Pilot.


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