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Devils In The Detail

Major Indexes drastically changed their character last week when they went into a one-day plunge called Black Friday for Nasdaq.

Obviously, the telltale signs have already been forming on Intraday Chart Patterns before the vertical drop happened including that of the IBM making a 1-2-3-4-5 run down as of Oct 10 and AAPL unable to rally the next 2 days as illustrated in Comments:

Let's look at Dow Jones and YM:

- DJ Oct 10:

- YM Oct 10:

DJ and YM were already acceptable A-B-C patterns with the C-wave the 'Key' part as of Oct 10. But instead of going rally mode immediately, they added some more price patterns in Oct 12 substantial enough that changed the price structure from i-ii-iii-iv-v to abc-X-abc thus changing the whole structure on higher degree wavecount quite different from Oct 10's analysis:

- DJ Oct 12:


And the SnP500 Daily Chart is NOW:

Trading Potential Complex Flats and/or Potential Triangles can become very hard and tedious with lots of potential whipsaws

For Day-Traders; the usual entry is above today's high IF SnP500 does not go into meltdown mode today. For Intraday Traders; they may be able can fine tune entries using the 15min chart or using a Divergence Buy Signal with the 30min Chart to reduce whipsaws.

The v-th wave for the C-wave has a Nominal Target of 1424 at current form with 1417 the Maximum Allowed Run Rate. Thus using those Run Rate Parameters; SnP500 could go into a Spiral Meltdown IF it keeps going down below 1417. Likewise, Intraday Chart iii-rd wave is already highly extended thus the possibility of a Truncated v-th wave is very high and a rally might suddenly happen (see Friday's Comment for 15min Intraday wavecounts).


Trading Strategies:

I sold half the NQ and YM buys last Thursday and 1/3 the SSO Day-Trade as a Defensive Play. Bought them back today near the open with protective stops below their v-th wave Maximum Allowed Run Rates.

With the Fiscal Cliff looming and the Elections in less than 2 weeks the possibility of the wealthy unloading their long-term equity holdings before the elections is starting to be discussed extensively among investors and their financial advisors. At any rate, even IF Romney wins, Obama will still be in office until Jan 20, 2013 thus any move by congress (if Romney wins) to extend the Bush Tax Cuts for the wealthy can easily be blocked while Obama is still in power. That makes investing right now a definite NO-NO strategy. Likewise, trading the upside is so fraught with peril I prefer to use the Futures YM and NQ for the long trades and possibly use ES shorts (on an A-B-C rally Intraday) to protect my portfolio in the next few days.

There is also the possibility that this consolidation range may extend for a few more months thus whipsaws are very hard to avoid in many cases. Definitely not suitable for Neophyte Traders.