My Favorite False Move of All Time

I’ve been getting a lot of feedback on yesterday’s post about Treasury Yields. Much more than usual. And that’s cool. What’s better than talking about charts, specifically my favorite ‘false move‘ setup?

The truth is that I haven’t found any evidence that false moves, or whipsaws, show up more frequently than they used to. If anyone has data on that, I’d love to see it. But this is a more subjective approach to the market so it’s tough to quantify.

Anyway, I wanted to share with you guys what might be my favorite false move of all time. I’m only 30 years old and have been in this business for just a decade so I have a small sample size. But to me, the US Dollar Index False Breakout in early 2009 was the very best. Think about what was going on back then. The world was literally about to come to and end (but it wasn’t). Money was flowing out of stocks and into what seemed then to be the safest haven of them all – the United States Dollar.

As the S&P500 and Dow Jones Industrial Average were making new lows into February and early March, the US Dollar Index was breaking out to new highs. But by then, momentum (RSI) had already turned up in $SPX & $DJIA and had turned down in the Dollar Index. Take a look at this chart. Is there anything more beautiful?

From False Moves Come Fast Ones In The Opposite Direction. And this is one of the best examples I’ve ever seen.

*also notice the monster move that came off the December lows going into that former resistance. There wasn’t any consolidation that took place before the “breakout”. Alex Tarhini @tarhinitrades reminded me of this phenomenon that increases the likelihood of a move like this being a fake-out. And he’s absolutely right. Brian Shannon over at Alphatrends.net talks about this all the time as well. Two guys that you better be following on StockTwits.

 

Related Posts:

Was That A False Breakdown in Treasury Yields? (August 9, 2012)

Was That A False Move in Precious Metals? (January 3, 2012)

Tags: $USDX $DX_F $UUP $DJIA $SPX


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