Capitulation sentiment was almost palpable mid-week last week as the Fiscal Cliff Crisis became the numero uno concern among traders and investors not only in the US but across the world.
Relief rally came right in time on Friday with positive results from the Lame Duck Congress and Obama White House Session - to prevent a possible Black Monday (similar to Black Monday of Black October of 1987) to happen this week as the Fiscal Cliff Crisis went into high gear Wednesday and Thursday.
SnP500 is now in the process of forming a 1-2-3-4-5 Rally on Intraday Charts:
With a very strong tape yesterday; highest probability is that the rally yesterday will be sustained early today before an a-b-c Pullback is expected late today and/or Wednesday as traders start to pare down their positions - in preparation for the long holidays.
For the Bulls:
For Medium- to Long-term Traders and Investors these are the Potential Bullish Scenarios on the Weekly Chart:
The Monthly Chart Scenario remains the same as it is since it was first published in October 2011:
For the Bears:
Since the price structure on the daily chart (since June 2012) have become very confusing; there are many other scenarios for both bulls and bears that had been created by the meltdown of Sept to Nov 2012. Finding the highest probability scenario becomes more a 'game of chess' possibly in the Grandmaster Level at this moment in time since the rally has started from the March 2009 bottom. Thus there are lots of opportunities for both bulls and bears. What matters most is how to formulate Trading and/or Investing Strategies in order to take advantage of the opportunities presented - to minimize potential loss and possibly maximize profits in the months and years ahead.
I bought SSO again using the Inverted Head and Shoulders right shoulder support as a Day-Trade. Also bought YM and NQ when SnP500 tested the 1344 Major Support on the Weekly Chart. Bought some more AAPL when Apple touched the Monthly 20ema Support for a Holy Grail Trade (see latest Comment on AAPL Trade). Still holding 1/3 of SSO Day-Trade bought in June and July bottoms (Trailing Stop was below 1344 that did not trigger). Will sell the 1/3 on an a-b-c run up on Daily Chart possibly near the 1422 Major Resistance and/or the Daily 50ma Resistance.
Short Term: Will use the SSO Day-Trade for the short-term. Sell 1/2 position at the v-th wave Intraday run to cover the small losses incurred in Sept and October Failed Day-Trades. Then buy back the 1/2 at or near the Major Intraday Supports.
Medium-Term: Will use the half NQ as a potential Swing Trade just in case any of the Bullish Scenarios on the Weekly Charts happens. Half will be used in conjunction with the AAPL Holy Grail Trade with $705 target for the Apple Trade. Will try to go short ES near the 1422 Major Resistance and/or the Daily 50ma Resistance as a Hedge to protect my portfolio against possible Bearish Scenarios happening on the Weekly and/or Monthly Charts. Will use the YM as counter-balance just in case we rally. See previous Instablog for this particular ES/YM Hedging Strategy.
Long-Term: Still holding 90% of Account as Long-Term Portfolio and will just try to use the ES/YM Hedge instead of paring down positions.
* I am still 125% longs at the moment. 135% as of Oct 2011; 155% as of Dec 2011 then pared down to 101% in March 2012. Then become 125% in June + July Buys. Got whipsawed in September and October thus Account kept going ups and downs 110% to 125%. 125% again as of yesterday buys.
** Futures positions not included in Account since it only takes about $2,500 deposit/contract for $66,000 worth per contract. They are tightly controlled with maximum $1,000 allowable loss per contract in many occasions. Do not use Futures if you are not well versed on how to trade them.