Seeking Alpha

aarc's  Instablog

aarc
Send Message
  • 1H2013 = Trick Or Treat 0 comments
    Jan 8, 2013 2:45 AM

    * Go down to last section to access the charts.

    ----------------

    November Presidential Election has come and gone together with the in-evitable Fiscal Cliff Crisis ... yet the market is still in a Do-or-Die stage as regards to the extended 5th wave rally from the Oct 4, 2011 bottom illustrated numerous times on the Weekly Charts last year.

    -----------------

    Let's re-visit the SnP500 medium- to long-term charts:

    - Weekly: g14.picoodle.com/ltd/img14/5/1/7/aarc/f_....png

    - Monthly: g14.picoodle.com/ltd/img14/5/1/7/aarc/f_....png

    The struggle between the bulls vs. bears for either a Secular Bull Market Rally or a Prolonged Secular Bear Market Correction is now coming to a penultimate test. Thus, we are looking forward to finding out which side will win and which side is going to lose - within this year or within the first half of 2013 - at the least.

    SnP500 failed to break the 2-4 TestLine convincingly and now is presumably headed toward the new upper Trendline Resistance which is in the 1500 area. A hard break above the Neckline Resistance usually results in another rally and thus can be considered as the initial signal for the bulls of an impending success - with 1573 to 1600 area the next Major Resistance Level (draw a continuous Trendline from 1573 to 1576. 1600 area is the upper Trendline Resistance if SnP500 is able to rally above 1576 within 1H2013).

    On the Monthly Chart it has been speculated a Super-Cycle Correction A-B-C would be needed in order to support a new Super-Cycle Rally. That A-B-C pattern has been satisfactorily completed as of March 2009. Now the next qualifying factor for SnP500 to start a new Super-Cycle Rally is for it to recover back the 1573/76 Triple Top on or before September 2013. Right now the Spx is within striking distance of that critically important level. A hard break above the 1576 level will obviously convince the majority of market participants that another Secular Bull Market Rally is already at hand. Whether that break will happen right into the Triple Top Test or during a Quadruple Top Test is still speculative. The 1-2-3-4-5 Extended Rally and the Complex Inverted Head and Shoulders Pattern on the weekly chart can support a hard rally well above the 1576 level - if the bulls win.

    For the Bears:

    - Weekly: g14.picoodle.com/ltd/img14/5/1/8/aarc/f_....png

    For the Bears, they will have to break the October 2011 bottom in order to have a decisive edge over the bulls. A breakdown of the lower channel support is the earliest indication the bears have a good chance to win. It is still unknown whether the bears will enter right now or wait until either at the new upper trendline resistance or at the 1573/76 levels before they do enter with full force.

    Short-Term Analysis:

    - Daily: g14.picoodle.com/ltd/img14/5/1/7/aarc/f_....png

    - Intraday: g15.picoodle.com/ltd/img15/5/1/8/aarc/f_....png

    Clearly, the pattern forming is either an a-b-c up or a 1-2-i/3 up. The perennial struggle between the bulls and bears to gain an upper hand.

    I use the SPY Intraday since the Gap Up is a significant support that may prevent SPY to go down toward the usual initial 38.2% Retracement of $143.53. 1607 is the Nominal 1-2-3-4-5 Target for SnP500 measured from the Nov 16 bottom. The bears will have to touch or break the Nov 16 bottom of 1343 in order for them to have the initial confidence to support further run downs. A run down toward or below 1343, however, does not mean the bears have already won. The pattern could also become an A-B-C down OR a 1-2-3 run down on the daily chart - of a higher degree (than what is shown on the Daily Chart).

    * For short-term traders; a retrace of more than 61.8% of the latest intraday run up is the earliest indication of more run downs. Up here, retracements tend to become shallower as the bulls keep gaining ground against the bears thus a deep retracement is considered a major setback for the bulls.

    --------------------

    Trading Strategies:

    Trading strategies for bulls and bears are clearly stated in the Intraday Chart. How far down the pullback (or sell-off) happens is the one extremely hard to speculate right now due to the highly bi-polar patterns the charts were able to form on the daily and intraday charts.

    For me: I sold 10% of long positions near the open last Dec 19 satisfying the initial objective of reducing the risk factor while the Fiscal Cliff Crisis was undergoing a critical stage at that time. Another 5% was sold when the tight Trailing Stops got hit as the selloff progresses from the Dec 19 top. Thus, I was holding 115% long positions before the Bush Tax Cuts decision was reached in Dec 31.

    Unfortunately, I was not trading in Dec 31 when Spx reached it's higher low bottom on the short-term charts and thus was not able to buy back the SSO longs. So far, waiting for a minor Pullback Down is the better course of action before buying some more SSO for a Day-Trade to minimize potential loss OR to initiate new ES Shorts to protect my portfolio just-in-case Spx decides to undergo a major run down.

    Trading plan for me, at least, is to buy half position on the minor run down with tight stops and buy the other half on a break above yesterday's or Friday's high(s). IF the markets decide to churn round and around within this week (or possibly up to next week); then the possibility of several whipsaws can easily happen and very hard to prevent unless I decide to slacken the trailing stops to give the markets sufficient room to maneuver - and thus can result in significant Day-Trade losses if the markets decide to sustain the downside in the weeks and/or months ahead.

    * YM and NQ long positions (bought at the Nov 16 bottom) were also stopped out during the Dec 19 to 31 sell-off. Will try to initial new positions depending on how shallow or how deep the expected intraday pullback happens.

    ** More often than not; high-confidence entry point(s) for Trend Trading is much harder to accomplish than buying the bottom of a sell-off using contrarian trading techniques such as the Divergence Buy Signal on the 60min chart. Thus for those who wanted to chase this rally from the Dec 31 bottom; buying the exact bottom of the expected a-b-c pullback down on Intraday Charts is more a hit-or-miss endeavor. A stop buy above $146.61 for SPY is usually a last resort if they failed to buy at prices below $146.61 and above $138.55. For Neophyte Traders, better to just watch and study the markets in this highly unpredictable stage where numerous whipsaws can become the norm in the weeks and/or months ahead.

    =================

    SA Instablog Editor is having a problem of correctly accepting the ImageFrame.com weblinks for the charts. Perhaps the latter made the links too long for SA Editor thus resulting in 404 Error.

    These are the links:

    - Bull Weekly: g14.picoodle.com/ltd/img14/5/1/7/aarc/f_141u_80f_ubk5c.png

    - Bull Monthly: g14.picoodle.com/ltd/img14/5/1/7/aarc/f_141u_8cd_ubk5c.png

    - Bear Weekly: g14.picoodle.com/ltd/img14/5/1/8/aarc/f_141u_24a_ubk5c.png

    - Daily: g14.picoodle.com/ltd/img14/5/1/7/aarc/f_141u_469_ubk5c.png

    - Intraday: img14.imagefra.me/i518/aarc/141u_b8c_ubk5c.png

    Copy the link(s) to a new browser tab. Add http:// at the beginning to make it work. Copy and paste works for me using Firefox or IE9 without adding the http://.

Back To aarc's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Most Commented
  1. Merry Santa Claus Rally ( Comments)
  2. The Acid Tests ( Comments)
  3. Sticks And Stones Part III ( Comments)
  4. Back to Sept 2008 ( Comments)
  5. Global Outlook ( Comments)
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.