The S&P 500 (ETF Proxy – AMEX:SPY) has been grinding higher on a “flight to quality” sparked I believe by the Greek exit crisis. Overseas investors are hedging against the Eurozone by bringing funds into the US Equity universe.
The fund flows continue to remain mixed and therefore the odds are hard to define clearly for this index. My long term measurements are all solidly bearish, but the bears don’t seem willing to step up in any way and use these ramps back to the highs to unload positions.
I remain a bystander in the overall index, and a cautious intraday scalper for now…
In the absence of any qualified setups this week, let us take some time to explore the concept of “Predictive Failure Technology™”.
Most traders spend all their time looking for ways to find winning trades. What if you focused not on winners, but on valid trades that had hidden flaws that would likely make them losers?
Everything shifts from that perspective, and gets a lot more fun and more profitable…
If you can correctly identify the trade patterns that are likely to lose, you can skip taking these and RADICALLY increase your win rates (Which lowers stress and emotional discomfort while trading).
Freeport-McMoran (NYSE:FCX) is an example of Predictive Failure Technology™ in action…As you can see from the chart, this stock is extended to the downside, and has formed a reverse head and shoulders on its daily chart.
This will be seen by most everybody as a screaming buy signal and confirmation of reversal. I would expect to see a surge of buying in the stock next week as it reacts to this technical signal.
HOWEVER, there are what I believe to be some fatal flaws in this price pattern that means it is extremely likely to setup, then fail (I think it will top out near $22.50 per share).
So, by choosing to pass on this pattern, I can outperform by avoiding a frustrating pattern failure that many of my peers will take and get stuck in. We can watch this scenario unfold together and at least get some educational value out of a quiet and choppy market!