August 21, 2012 - the concept of commitment

Generally, as the SPX commits beyond an important level, an inflection point is created. Here is how this principle has worked lately.

By commitment I understand a close or a strong move far enough beyond a certain level.

This concept of commitment is nothing else than the general contrarian approach so indispensable to any trader, applied for the short term. If detecting the crowd commitment over the long term is easier, doing it over the short term is a bit challenging. The method illustrated above is an answer to this challenge and it provides an interesting way of looking at market action.