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Hey all,
The things I learned about MM vs Exhaustion is:
The basic difference between exhaustion or mm BO is whether it happens after 20 bars into a trend or at the beginning. And even if it happens in the beginning of trend it could still be a second leg trap. So that makes the difference already hard to decypher.
And now I see Al talking in 30D (at the end) about the improving math of staying in a trade when BOs keep stacking. However it happens late in a trend. You could argue that there wasnt any bull activity in the first part of the bear trend, so exhaustion was less likely?
On top of that, I see 3 consequetive sell climaxes (parabolic wedge?) and Al still sees a 60% chance for a MM down.
Can someone please clarify?
As a bonus question. Yesterday the Emini on the 5 min had a Bull BO out of the open that was also very strong. Out of a trading range, without any bearish signs. But it still reversed down. So this was an exhaustion. But looked like it could have been a MM...I know that the open has alot of reversal chance btw, so that might be an extra counter argument here.
Im having trouble to discern if im reading it wrong or if these failures simply fall under the 40% failure chance.
Help is much appreciated!
About yesterday, if it can help, I had drawn 2 MMs: one was the entire Thursday range, and the other one was the spike started with the last bar of Thursday (I draw lines on the spy which closes 15 minutes earlier compared to the E-Mini so that spike MM could have been seen differently by others). Both were pointing higher , and I was also looking for a reason for the market to go up and test the ATH. So i saw that move that you mentioned as the second part of a MM and not as BO and a potential start of a MM, considering that it was also Friday and the last day of the month, when the market can produce big moves up and down to test weekly and monthly levels. In facts, it worked its way down to the open of the week.
I think drawing every possible MM and LEG1=LEG2 is always good because it might help to distinguish a BO from what could be "just" an acceleration to conclude a MM
Hi Jeffrey,
I agree it's hard to sell after so much down. Some things I can think of to support further bear strength instead of exhaustion are:
1) When there's a tight bear CH (red circle) and it breaks to the downside, it's actually 50% chance this BO will succeed and continue lower, because it's a tight channel. This is different from what we usually see with bear channels eventually breaking to the upside.
2) A break out of a channel usually fails within 5 bars, but here it had BO+FT and at (A) I would be watching for bulls to start appearing with strong reversal bars but they didn't, instead got further bear BOs so it didn't look like exhaustion but bears selling closes and adding on.
Hope this helps,
CH
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Thanks for your response. So a tight bear channel is not a 75/25 chance of upside breakout? But more like 50/50? I must have missed that one.
About yesterday, if it can help, I had drawn 2 MMs: one was the entire Thursday range, and the other one was the spike started with the last bar of Thursday (I draw lines on the spy which closes 15 minutes earlier compared to the E-Mini so that spike MM could have been seen differently by others). Both were pointing higher , and I was also looking for a reason for the market to go up and test the ATH. So i saw that move that you mentioned as the second part of a MM and not as BO and a potential start of a MM, considering that it was also Friday and the last day of the month, when the market can produce big moves up and down to test weekly and monthly levels. In facts, it worked its way down to the open of the week.
I think drawing every possible MM and LEG1=LEG2 is always good because it might help to distinguish a BO from what could be "just" an acceleration to conclude a MM
Thanks for these extra clues, indeed last of the month/friday was something I didnt consider.
Sorry, I said it wrong. I was thinking of video 16E @ 19:49 where Al talks about stops being hit below bottoms (like wedge bottoms) it becomes 50% chance to go down for a swing and 50% chance the BO will fail and the market will reverse up.
But in general you're right, it's only 25% chance for a successful bear BO below a bear channel so betting on such before it happens is low. But after it does happen, and there's good FT and it doesn't reverse back up within 5 bars the probability jumps to 50% or better so can start looking for a minimum of TBTL and targets with 1:1 RR.
