11. Big Loss Risk if you Don't Understand Hidden Divergences

[750nutcase]

what settings are you using with macd?? thanks

[DayTradersWin]

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[DayTradersWin]

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[goldwing25]

After researching this even more:

The first example of hidden divergence you show is text book, but the second one you show is not, price low in the spx on Feb 8th was 1056.74, price low on June 7th was 1050.47. So June 7th is a lower low, that should not be if it was a hidden divergence. It's looking more like a classic H&S pattern IMO, we will see.

[TheAppleInvestor]

@goldwing25 I was actually looking at Feb 8 to May 21 for the hidden divergence, and I wasn't really looking at the long tails, more like the close. I definitely didn't clarify that in the video. But I was really more interested in the relative divergence. In either case you are technically correct, however from a relative point of view I think the divergence still holds, and it's clear that the following continuation then uptrend proves that out. Not the best example for sure.

[goldwing25]

@TheAppleInvestor Yes, I understand you there and see that hidden divergence to May 21, my only problem is price quickly found a lower low, within a week or so it's a tough call, As this plays out we all stand to learn more about market behavior, like you have said the learning never ends. A good video you have here, gets one thinking.

[goldwing25]

I want to add that both you and PSAadmin make great points and I'm still bearish when looking at the similarities between july 09 to present as compared to july 06 to December 07, lots of headwinds moving forward from here.

[TheAppleInvestor]

@goldwing25 I think there's a possibility for a flash crash, like we had on May 6, but the big one won't happen until later this year in my opinion

[goldwing25]

To you credit I listened to you and went searching for an example, I found a significant example:

DJIA:

Oct. 13th 2005, 10,216, RSI=32.79, MACD= -79.24

to

June 13th 2006, 10,706, RSI=27.71, MACD= -127.27

Then the hidden divergence shows up from June 13th, 2006 to June 18th, 2006, a positive div. the markets track up for a long term.

[TheAppleInvestor]

@goldwing25 Yes, I believe the markets will track up through the summer.

[2525Maybach]

Great job getting into it with Christian (PSAadmin) re: divergences. A couple of weeks ago he had asked for folks to post videos of stocks etc. of their own. I did one and posted a video response (bearish tech stocks) but he didn't acknowledge it for some reason. Last Monday I posted a "Bullish Tech Stocks" video, featuring AAPL. You being the "AppleInvestor" were all over it as you stated yesterday at the PSA channel. Nice!

[TheAppleInvestor]

@2525Maybach Hopefully my next video, where I reflect on the decisions and actions we take, will help people like Christian. It has certainly helped me.

[gauravcomm]

Thanks for sharing your analysis; I think it makes sense, but same Hidden Divergence you said caused this bounce is now present @ current level and can cause a drop. If you look at the bounce just after flash crash 10900, RSI(14) was 45.39, the current level is 10470 and RSI(14) is 61.70.

Isn't this a hidden divergence with higher-high on oscillator and lower-high on price and trigger a SELL??

[TheAppleInvestor]

@gauravcomm I can see that but it's a little sketchy because there are other oscillator patterns that either go against that, like the MACD expanding and about to cross the zero line and the RSI sitting at a neutral point. In any case I think it will have some downside affect because the Stochastic is very overbought.

[gauravcomm]

@TheAppleInvestor I agree other indicators are not all pointing a drop, or atleast a big drop, expanding MACD is a one of them but the zero line on MACD is more like a resistance to me than anything. In any case I really appreciate you putting these video and your analysis.

[TheAppleInvestor]

@gauravcomm Thank you. And thanks for pointing out that divergence, I never would have seen it.

[ytdufy]

I heard about negative divergence before, but never really paid attention to it until you explained it. Good job!

[TheRezingo]

Fine. I understand this. Let's hear your predictions, then. Your business will skyrocket, when you show the world what you're paid the big bucks for. But morphing from admonishing us lesser technical analysts not to make "stupid mistakes," we therefore stupid, to "maybe I'm just lucky" isn't advancing your case, nor "maybe I don't know what the hell I'm talking about" either. If you deign to criticize PSAadmin, there's an old saying, when you slam the other guy, "Put up, or shutup."

[TheAppleInvestor]

@TheRezingo I also posted a video that gave him kudos as well on June 8, with a Buddhist lesson. I go both ways.

[TheRezingo]

You must understand, you're so sure, and, pointing out the error of other analysts' ways, a simple demonstration of your special market prescience, drawing the future chart, would simply make your case. That you know the error of everybody else’s ways, drawing the future chart would seem so simple. One would wonder, as sure as you are, why you wouldn’t simply prove how much superior your analysis is and engender the gratitude of all of us, heretofore making "stupid mistakes."

[TheAppleInvestor]

@TheRezingo I make mistakes just like everyone else. And I admit to them when I make them. I'm not prescient, I'm human. But I'm also much more accurate in my predictions and analysis than most. Maybe I'm just lucky, maybe I don't know what the hell I'm talking about. But people pay me good money to tell them stuff, so by definition my predictions are worth something.

[TheRezingo]

I appreciate this. So, it would be a piece of cake for you to draw the up and coming chart. This would help a lot of us out here avoid mistakes.

[TheRezingo]

Technical analysis is a matter of probabilities, and so many technical dissertations are based on 20/20 hindsight. The Elliot Wave people do this all the time, stuff history into their technical theory and biases. While technical analysis can go a long ways to assessing probabilities on your side for short term trading, I would challenge all of you making videos to draw the future chart, then.

[TheAppleInvestor]

@TheRezingo I've done it many times. I called the S&P low of 666 to the dollar 5 months in advance, I called the start of the current correction to the day, I called the flash drop on March 6 several days before then again issued a warning the morning the Dow dropped 1000 points. I called the current near-term pop we're in right now. What else do you want? No 20/20 hindsight here.

[iharrison30]

Another fantastic video mate, excellent advice.

[MrVocalBaby]

This was a very interesting video! Thanks!!

[eatandtravel]

Who is #1, Boston?

[eatandtravel]

MVP!  MVP! MVP! I love LA! I love LA!

[goldwing25]

I'll also add that the price/ rsi divergence continuing since july 09 lows to present lows should be viewed as compounding and at some point will play out.

[goldwing25]

I think all this shows and confirms is the bounce,  and in no way indicates that price will break through the April highs. Now the gorilla in the room is the continuing price to rsi divergence from July 09 low to our most recent low, a biggie IMO.

All in all you're vid here shows good insight and good detective work.

[TheAppleInvestor]

@goldwing25 Thank you.

[goldwing25]

@TheAppleInvestor You're welcome, you're a good thinker and I like the way you back test you're own possible conclusions.

[scorpio3949]

I will apply this concept and see how I do; thank you so much.

[TheAppleInvestor]

@scorpio3949 You're welcome. I plan a follow up to provide more examples and clarification.

[bohemianh]

How about the end of tourism, fishing, in the gulf states? How much of the economy does this represent? How many cities will lose millions in revenue from loss in sales tax? Hotel tax, fuel tax? an already weak housing market, foreclosures are currently running at 3 years, have a bad tenet? about 9 months to get rid of them? This is the situationin Tampa Bay area. Businesses are failing everywhere! Small businesses, car dealerships, light manufacting, strip mall vancancies?

[TheAppleInvestor]

@bohemianh All good fundamental issues to consider. I covered some of those points in a previous video as I walked through the woods.

[johnmilan]

are you a millionaire?

[TheAppleInvestor]

@johnmilan I can neither confirm nor deny.