OK, I started with the potential Extended v-th Wave Rally Scenario and end up with the Last Line of Defence for the Short-Term Trend Traders:
- img37.imagefra.me/i53f/aarc/141u_7c1_ubk...
We have 3 potential Short-Term Scenarios before the start of the Elimination Process. The Alternative Short-Term Scenario is now the highest probability (see Scenarios Galore Instablog).
It is worth trying to trend trade the potential Short-Term Scenarios. But trend trading needs a lot of discipline and hard work for most traders. Hard stop loss and/or trailing stops are a necessity just in case the trend suddenly reverses in every Trend Trade Setup.
I used the 'Guerilla Trades' or 'Hit and Run Trading' in conjunction with the attempted Trend Trades for the Extended v-th and Extended 5th Rally Scenarios (both of which failed) in order to build a profit buffer that would cushion the Trend Trade failures. Without them, successive failures in trend trading setups can cause small losses that can pile up to a big one. Fortunately (for me at least), most of the trend trade attempts made tiny profits instead of making small losses and the Guerilla Trades proved very successful.
If all Short-Term Scenarios fail, then the Medium-Term Scenarios (more than 6 possible scenarios) may start kicking in and if the Medium Term Scenarios fail, then we have to consider the two Meltdown Scenarios.
Knowing what the markets can possibly do seems easy on paper. The hard part is how to trade what the markets actually do - and be successful with it.
So far, we have been in a trend since the bottom of March 2009 and I have been successful, most of the time, trading the trend with successive swing trades from Oct 1, 2009 up to Feb 18, 2011. As expected, my luck will start to run out - and like the 1-2-3-4-5 wavecount, it will have to suffer an A-B-C pullback one way or the other. So, extreme caution (being a Wolf) is now the norm rather than trying to be a Bull or a Bear at this stage.
This is now the most challenging part since there are now a plethora of potential bullish and bearish scenarios, each one of which is much harder to anticipate than what happened in the early stages of the rally, due mostly to the price structure of the weekly chart which is either a 1-2-3 impulsive rally ; an A-B-C sucker rally; or an X-wave up - with so many possible permutations that were created by the sustained rally for 24 months with one Major Pullback and a series of Minor Pullbacks along the way.
As the rally starts to mature, analyzing the price structure successfully becomes much harder to accomplish.
Hopefully, the markets will give a small or a big twist (or even a series of twists) that will make it easier to analyze (and trade/invest) in the near to medium term future.
The Long-Term Scenario (of at least 4-1/2 years to 15-20 years rally from March 2009 bottom) remains the same since there is no price action that has happened to date that compromises it's validity.
- img40.imagefra.me/i52a/aarc/141u_af2_ubk...
- img37.imagefra.me/i52a/aarc/141u_6c1_ubk...
- img40.imagefra.me/i533/aarc/141u_c6d_ubk...
Good Luck.
Last Line of Defence
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