Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

The Grand Bargain

Congress is supposed to re-convene next week (I can't find exact date) to discuss the Grand Bargain.

This could provide some fodder for the stock markets. Some breathing room before either another rally OR a catastrophic meltdown happens:

For the Bulls:


For the Bears:


This is a very Tricky Situation for both Bulls and Bears.

For the Bulls: a failed recovery above the Double Top Resistance usually result in a prolonged meltdown that can go way past the last low which is the June 4th low of 1267. Thus trying to buy the Potential W-x-Y is fraught with peril.

For the Bears: The Head and Shoulders Neckline is too close with SnP500 testing the 200ma Major Support on the Daily Chart and a Major Support of 1370 on the Weekly Chart which is the May 2011 Top. A strong Reactive Rally can easily penetrate the Neckline Resistance and thus cause a Short-Squeeze among the bears. Head and Shoulders Failure usually result in a rally with 2x the Right Shoulder run down the target to the upside - or approximately 1491 at current form. Lower if SnP500 goes down a little lower than today's bottom of 1377.


Trading Strategies:

I will be buying some SSO again possibly today if either the 200ma or the 1370 Major Support works. Will also try to get another YM Long Position today or Monday then go short ES near the Double Top and/or 50ma resistances if SnP500 goes into an A-B-C Corrective Rally. The ES will be used to protect my Portfolio just-in-case we go into the ABYSS. The ES Shorts will have no stops while the YM Longs will have Trailing Stops.

IF a rally happens instead then the ES Shorts will be counter-balanced by the YM Longs thus no losses will be incurred on the ES Hedge. If a Meltdown happens; then the Trailing Stops for the YM will trigger protecting some YM profits while the ES Shorts will be in the money. When the latter happens, that is the time I will start using Trailing Stops for the ES Shorts.

* I still hold 1/3 SSO Swing Trade bought in Oct/Nov bottoms and 1/3 SSO Day-Trades bought near the June and July bottoms. Will keep holding the 1/3 Swing but will sell the 1/3 Day-Trade on an A-B-C Corrective Rally.

* Will also try to make another AAPL Buy again since it is now an acceptable 1-2-3-4-5 on Intraday Charts with $533 the Nominal Target for the v-th wave of the 5th wave down. On the 5min Chart; the sub-waves of the v-th wave is still indicating possible $524 target so very hard to know if AAPL will Spiral Down or not since the v-th wave is supposed to have Maximum Allowed Run Rate of $529 when viewed on the 30min Chart. A 'safer' buying strategy is to buy after AAPL makes an attempted rally and reach at least $552 - or better still be able to re-mount the Weekly 50ma at above $560 with the Daily 200ma still at $593 as the Major Resistance.


** All my attempted buys since September proved to be Failed Day-Trades with maximum 3 days bounce up. Entries were good buying the bottom runs but the bounces failed to become a rally and instead were used by the bears to sell some more or to add more shorts. That's part of Trading with winners and losers to be expected. The important part is the Trading Strategies employed to minimize losses on failed trades and try to maximize profits on successful trades. Trend Trading is much harder to accomplish than Contrarian Trading - since finding tops is much harder than finding bottoms.