Choppy waters in the Channel

Today's chart (click to enlarge or right click and open in new window to see chart and text at the same time - back to return) showing the S&P 500 over the past 6 months, is useful since it illustrates how I attempt to read the market.

1. The thick red line is the 200 day moving average. I pulled out of the market as it flattened off and as the price action lost upward momentum. I also built short positions as the series of sharp drops occurred. (I foolishly closed these out as the really big drop began and did not return. (I listened to the news instead of watching the charts) I hope I have learned something from that.) Now that the market is well below that line there are two possibilities: either we have entered a new big down phase (the red line should start to point downwards to confirm that); or it will act as a magnate for price action and we will see a seasonal winter rally.
2. When prices shot up at the end of the sharp fall (brown arrow) I worked on the principal that we were in for a V shaped recovery I had a huge bottom fishing campaign in US, UK and HK. Initially I made a lot of money. But when it reached the top of its movement and retraced (blue arrow). I lost it all and then some. (another lesson learned. I hope).
3. Prices then started to move violently inside a channel (Yellow parallel lines). I have attempted to make money on the down movements inside that channel by taking out short ETFs and so far this has worked but it has required trading that was quick off the mark.
4. I have spotted an alternative interpretation of price action (grey lines forming a triangle) I now need to be aware that these lines may be the places to buy and sell.

When the US market opened today I bought more shorts and made some money. But it has been another roller coaster day. The indices have moved erratically as have precious metals. Silver in particular has been a frightening ride. The very high volumes show that a big shift in share ownership is occurring. It is not yet clear whether it is the bulls stocking up for a rally or the bears clearing out ready for the fall. Small investors are bound to suffer either way.
My Current portfolio position is precious metals 25%, short positions 11%, cash 64%. I am making slow progress in recovering the losses described above. But at least I am outperforming my benchmark, the FTSE, which is down 13.2% since April (the start of my trading year). I am down just 3.5%.

This post is late since I was at the theatre in Bath last night. Not a brilliant outing. The play was a Chichester Festival Theatre production of The Syndicate by Eduardo de Filipo It is a piece, from an earlier age and a different culture (Neapolitan commedia del arte). It has a huge cast, many of whom added little or nothing to the plot, and long wordy speeches. It is an amoral examination of a top Neapolitan Mafia family. 
Eduardo de Filipo was Italy's major dramatist for much of his life which covered three quarters of the twentieth century, and was a friend of greats like Frederico Fellini. He is extremely well regarded.
Ian McKellen did his best to hold the play together, though he did lack the menace one might expect of a Mafia boss. He was not helped by a dismal set. At its worst it seemed to use cardigans to hide the pictures on the wall. The same background obscured by long see-through curtains was supposed to move the action from one location to another. But the real disaster was Oliver Cotton who failed dismally in a pivotal two handed scene with McKellen. From that moment the play lost all credibility and interest. Michael Pennington soldiered on bravely as the second lead (as McKellen's hard done by doctor) but he could do little to rescue a sinking ship.