I was partially hoping the Jobs Report Friday would be the saving grace for the stock markets but it turned out to be the worst so far in a long run with only 88K new jobs created. The amazing grace was that when the internals were scrutinized it turned out that despite more Americans stopped looking for jobs the Aggregate Income/Profits of those gainfully employed ticked up last March 2013 to new all-time high. Meaning is that Americans as a whole is richer today than at any other time in the past. That is an indication that consumers (at least the 30% upper bracket who comprise 70% of total spending) need not deleverage nor save money since they are earning more income/profits from their professions/businesses and/or investments today than they ever did before.
SnP500 likewise produced a Potential Running Correction on the Intraday Chart published last Monday on my Comments:
<< Double Combination Flat: http://g15.picoodle.com/ltd/img15/5/4/8/aarc/f_141u_183_ubk5c.png
Running Corrections seldom happen but when they do appear on the radar screen it could be an Amazing Grace that is worth a thorough re-thinking of current positions.
On the Daily Chart these are the Conservative and Aggressive price targeting methods:
>> SnP500 Conservative EWA #1: http://img15.imagefra.me/i54b/aarc/141u_63d_ubk5c.png
>> SnP500 Conservative EWA #2: http://img15.imagefra.me/i54b/aarc/141u_672_ubk5c.png
>> SnP500 Aggressive EWA: http://img15.imagefra.me/i54b/aarc/141u_3b1_ubk5c.png
Elliott Wave Analysis is not an exact science so there is no way anybody can achieve 100% accuracy all the time in counting the seemingly crazy waves that kept changing on a moment to moment basis. In my case, I try to accommodate both the purist and the practical applications of EWA. In this particular case; my inclination is that the seemingly strong breakout above 1576 today (and Dow Jones strong breakout above 14,200 since March 05) are the harbingers of panic buying yet to come. Thus, the Aggressive EWA has a better chance of success against the two Conservative EWAs.
It is always a folly to assume that a 5th wave will rally into it's extended target range since extended fifths seldom happen. However, with the QE3 and the potential strong breakouts of Dow Jones and SnP500 bodes well for a strong 5th wave rally on the Daily Charts. Thus, the better course of action is just go with the flow (que-sera-sera as the Spanish song goes). But as a trader, always use Protective Trailing Stops on long positions since we do not know what the future will actually bring.
I sold some more SSO and some MSFT last week near the 1573 SnP500 level thus was able to sell right at the top before a potential Instant Meltdown Scenario happens. Unfortunately for the bears; their wet dream is derailed for the second time (or perhaps delayed). 1600 area remains the Significant Resistance as innumerated on previous Instablogs and Comments but the Major Potential Breakout Resistances on the Monthly Chart are the 127.2% and 138.2% Fibonacci Extensions which are at 1823 and 1923 levels. They are considered as Reversal Resistances by Contrarian Traders and are very effective in arresting a strong breakout rally in many cases.
The Potential Running Corrections that has formed for the SnP500 and Dow Jones indicate a high probability of a strong vertical rally. Compq retraced more than 50% of it's last rally which is also presumed to be the ii-nd wave of the 5th wave thus a i-ii-iii-iv-v rally for the 5th wave has a nominal target of 3479 with an extended target of 3575. I don't have a high-confidence wavecount for Russell2000.
It is now more practical for me not to be too defensive and just trail at least 12% of my remaining 112% long positions with protective stops (I failed to reduce my long positions from 117.5% to 110% last week. Too many stocks I still want to keep specially those bought last Oct 4 and Dec 27, 2011 and some of those bought last June 2012).
Note: For those who may want to Day-Trade or Trend Trade this rally; the vertical run that follows a Running Correction usually will not retrace more than 38.2% of any wave in significant way and should not come near a 50% retrace in vast majority of cases. Thus the 2'-wave (of the pink iii-rd) should not retrace more than 38.2% of the 1'-wave. Eyeballing the Daily Chart's current bar-by-bar run up from Friday's run down or from 1539.50 bottom, there is still a potential rally for 1-1/2 to 2 trading days before SnP500 should start making a shallow pullback down. It is extremely hard to analyze the Intraday Run Up so better use yesterday's Wide-Range-Bar as the median bar with 1618 as a rough estimate target IF SnP500 rallies for two more trading days.
Most of the time buying a shallow pullback can be very taxing on many traders specially during a melt-up rally; thus for those with less patience nor have honed capabilities in finding the bottom of a shallow pullback down, the next best option of chasing a vertical rally is to use breakout buys instead of pullback buys. But then tight Trailing Stops is a MUST since an unexpected sudden Trend Reversal is the most painful way to trade a trend.