The XJO finished up again today, offering some signs of encouragement, but I was reminded of a clip I found which in hindsight offers a very salient lesson about trading (note the date, circled):
I can only wonder what those 10 stocks were and how much cheaper they got later that year. The salient point:
Taking a look at the XJO daily as it looks after today's trading, we finished up into the close, although just shy of that band of resistance 5200-5220 that saw supply enter and push the index back down yesterday. Encouragingly, today saw an increase in volume, looking like buyers stepping in just below that range. The key question is, will we see them prepared to pay more tomorrow and chew into that region of pent-up supply - the OOH price on IG at the moment (5240) suggests they will - we can only wait till tomorrow and see what transpires. We've had 5 positive days in the last 6, so it looks like sentiment is picking up (more on that in a sec), but we don't have a confirmed trend change yet, and I personally will only be confident once we see a pull-back and a decent higher low put in before becoming bullish myself:
One final thought for the day, regarding sentiment. I had a couple of hours to spare this evening while the wife went to the movies with some friends to see The Intern (to see what Maxi's like), so I thought I would use the time and put together and chart the correlation that RB has referred to on several occasions about the number of posts on the XJO thread versus the movement on the XJO. I've charted the daily number of posts (and weekend threads too) and plotted them against the XJO daily closing price to form what I call the XJO Forum Vix sentiment chart (see below). While not a 100% correlation, there is certainly a very strong correspondence - note in particular the spike in posts during the week beginning 24th August sentiment when during which the XJO dropped from 5200 to 4950 before recovering and then again in following weeks on the days that it hit the low of the week (all circled in red). To me it looks as if there is a line at around 50 (posts) per day below which sentiment seems relatively positive or at least benign, and above which it appears there is more discussion in response to the fall in the market (I was tempted to do further correlation to the number of Martis' posts, but ran out of time ):
):
(20min delay)