Pullbacks and trending markets.

Not a system more of a strategy, but when a market is trending well and the trend is more mature do you think the counter trend pull backs get larger or smaller toward the end of the move (Point wise)? Its is my opinion that they become quicker and larger on a daily and weekly time frame, do ya'll agree?

I am no wave expert but it seems to me on a longer term time frame stocks, indices and currency's will make a large counter trend move, trend counter to the predominate trend-then box tight in price, then trend again with large fast pull backs typical to 10-20 EMA's and then resume trend. I'll post some charts later as I have never read anything on the style of pullbacks. Only from gann and he said that they are smaller pullbacks toward the end of the trend, which it may have back in the day but I don't think it does anymore.

Hey Joe,

I've come back to this post several times and read and re-read it. Actually, I'm surprised no follow-up responses have posted yet. But for whatever reason, this is a brain-bender for me. It's good observation and description, but (and I've really been thinking about it) it makes some sense. I'm trying to match it to my memory/experiences trading the markets for the past couple of decades.

I think you've hit on a very key aspect of price/market behavior ... primarily because it addresses the issue of what to expect on a given day or few days to approach trading as a TRENDING day intraday ... or as a mixed or RANGE type day. If one can, with a decently high probability, know the odds of what to expect for a day trading session, and the character of the market action, it has a huge impact on how one would trade that session successfully (or otherwise).

I'd like to hear from other folks on this ... on what you've described in your observations. This is, in my own trading, the most important thing that affects my profits and losses.

quote:

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Originally posted by CharterJoe

Its is my opinion that they become quicker and larger on a daily and weekly time frame, do ya'll agree?

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Yes I agree, generally.

At the peak the blow-off in today's markets the swings usually get bigger and the chart more "spikey". Oil spike, ect with a spin-on-a-dime top.

However, I think it all depends on the run-ups and the participants. For oil and sometimes gold and some commodities (remember the wheat run up?) the hedge funds get in big and leave big - so yes for these markets.

On others the range gets volatile and see-saws at topping formations such as the S&P right now with many opinions on both sides.

I think Gann made a difference in the markets as well and on his book on commodities he talks about how a market can make really big moves once it is past the 200% level (double the last rise).

Perhaps the reference you are thinking of is in connection with stocks. For widely held stocks I would agree with smaller pull-backs as it struggles up to the peak.

The difference is, in my view, that in a widely held stock many early participants are taking profits as the level moves to peaks and easing out of their positions, as the stock shifts to smaller newer retail who buy at the top and are left to ride it down.

Is there a reason behind your question?