Price Action: What it Means to ME

The ideologues of success faithfully believe that enlightened self-interest is the greatest virtue. I think Elvis Costello asked the right question, however, during the tenure of Maggie Thatcher: “What’s so funny about peace, love and understanding?” A quick run down of my thought and actions qua libertarians might be: naive and romantically inclined. Perhaps so.

But I’ve learned a thing or two from the Rand school about the stock market– namely, price action can only be interpreted relative to my positions, once I have opened them. For while a person can’t know the truth about the future movement of price, one can detect when the possibilities of exit with profit begin to diminish. Two weeks ago, I had the best moment to exit at the top. But one doesn’t know at the time. The next time I had a very good chance occurred a week or so later, and the window closed faster. When the window for exit begins to close, the opportunity to close a position start to recede into the past. When the opportunity sinks to a few hours or even minutes, I have come to the conclusion that a whole lot of people are trying to get out while they can. The more they/we try to leave, the narrower the opportunity until it dissolves.

Opportunities depend on one’s time frame. Long-term players have longer to exit. Short term traders better be fast and decisive by the minute. When short-term traders don’t exit at their moment, they either become longer-term holders or they close at a loss.

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S and P 500 daily, 6-month chart

Above, we can see that the S and P 500 closed at or just above a long term channel line that has served as support and resistance over the past four months. I would consider this objective and unrelated to my subjective experience.

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One never knows, of course. The market could rocket tomorrow.  And for me, another opportunity may or may not present itself. But what is crucial for the subject is that over time the opportunities have either begun to increase or dissipate. The degree to which one acts upon this subjective sense of the market can fairly be called enlightened self-interest. It is also a good means to judge partially the market. When one’s window is closing or opening, there is a near 100% chance that others with similar positions are also noticing the moment. Peace, love and understanding don’t help a bit. Save these key virtues for when the position is closed. When positions are closed, objective judgment can return.

We're not enemies but allies who face each other.

We’re not enemies but allies who face each other. Credit: Antrhopoliteia

 

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