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  • Buy In May? 0 comments
    Apr 30, 2013 8:39 PM

    For the last four years SnP500 started selling in April and May period albeit with the 2009 sell-off too shallow to be remembered (a-b-c correction in May to July 2009 resulted in an Expanded Flat thus SnP500 made a higher high b-wave up in June then the c-wave down in July).

    Four in a row. What is the probability 5 in a row will actually happen? I don't know how to calculate the odds. What I know is that this type of sequence becomes highly improbable as the success rate goes up. I would definitely bet it can't go 10/10.

    Price is KING.

    So let's get over to how SnP500 performed over the most recent past:

    << SnP500 Daily: http://g15.picoodle.com/ltd/img15/5/4/17/aarc/f_141u_81f_ubk5c.png

    << SnP500 Intraday: http://g15.picoodle.com/ltd/img15/5/4/25/aarc/f_141u_977_ubk5c.png

    Those were the last study still un-answered to Today.

    Problem is: Trading is the art of anticipating the future and making speculative bets based on one's highest probability study or studies. We cannot trade the past.

    > Dow Jones Daily: http://img15.imagefra.me/i54u/aarc/141u_507_ubk5c.png

    > SnP500 Intraday: http://img15.imagefra.me/i54u/aarc/141u_d32_ubk5c.png

    I use some of the strict supplementary or advanced 'rules' by Glenn Nelly on Mastering Elliott Waves on how to measure and qualify each sub-rally and sub-correction as they appear on the chart(s). So it is very hard for me to have a high-confidence wavecount for SnP500 - which violates some of those rules during the more recent upper portion of the rally on the Daily Chart - if SnP500 rallies tomorrow and keeps on rallying. The Dow Jones Daily qualified for the most part. The SnP500 Intraday Chart is very much within the 'rules' thus providing better gauge for the immediate future - for Intraday Trading purposes. Elliott Wave does not dictate what the market must do. The market will do as it wishes so we better exercise some flexibility but avoid highly improbable (silly) wavecounts.

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

    Trading Strategies:

    Upper Target Ranges and Limits are well defined for the Dow Jones Daily and the SnP500 Intraday Charts IF they start rallying tomorrow May 1st, 2013. A rally tomorrow should give the bulls initial moral boost against the 'Sell in May' being sold by the persistent bears. On the Intraday Chart; Conventional Technical Analysis calls the pattern the Cup and Handle Trade Setup - which has proven to have high probability of success (but no statistical probability studies that I know of). Usual buy strategy is to put a Market Buy above 1597 - preferably above 159.71 for SPY. The Futures Markets (ES and YM) 120min charts are well poised for further rallies in the next several days with i and ii already completed. Thus it is high probability they will actually execute their iii-iv-v run up with 1621 the Nominal Target for ES. SnP500 is about 4 points higher than ES on closing price today.

    Thus, for those who would like to take the chance that Buy in May is going to happen this time around; the above analysis can be considered high probability without considering what date they are happening. EWA and TA do not depend on calendar dates. It is the price action(s) that matters the most.

    * When Trend Trading (Buy High Sell Higher) be sure to have Hard Stop Loss. Below 1577 should be the conservative Hard Stop Loss in many cases to minimize potential loss. Rewards vs. Risk should prove more than satisfactory for this particular intraday trading strategy.

    ** For myself: I lost the IBM trade when it gaped down due to bad Earnings Report - with tiny profits. Then bought some CAF as a medium to long-term hold. My account is now reduced to 110% from 112% of last. With too many uncertainties I would rather avoid being aggressive on very short-term trades - unless something happens too compelling for me to ignore (if ES makes a tiny a-b-c down tomorrow towards the 1587 area with 1581 stop loss. Then the reward vs. risk becomes 5.67 = very good but not great).

    Addendum: May 1st 6:46pm.

    Bad news from 8:30 am resulted in a meltdown before the open and thus the Cup and Handle Trade Setup did not trigger. The sell-off continued up to the closing time:

    >> ES Intraday EWA: http://img10.imagefra.me/i551/aarc/141u_dac_ubk5c.png

    >> SnP500 Intraday EWA: http://g10.picoodle.com/ltd/img10/5/5/1/aarc/f_141u_b20_ubk5c.png

    The ES despite being on the move 24-hours a day basically has similar pattern to the SnP500 (and SPY) on Intraday Charts. ES is easier to interpret in this particular case so I decided to post it. If ES rallies during the over-night session; SPY will gap up tomorrow. IF ES suffers a meltdown over-night; SPY will gap down.

    C-wave vertical meltdowns are my favorite Buy Setups. So I bought the v-th wave of the 5th wave of a 1-2-3-4-5 run down using the 15min and 3min charts (buying YM at 14,638 near the closing time with about 50 points stop loss allowance). Don't try trading the futures if you cannot control your emotions. It is a deadly trading instrument for neophyte traders. When trying to buy SSO I usually wait for the 8:30 am news before doing so. Good news usually result in gap ups at the 9:30 open. For bad news, I usually wait for a C-wave down to happen and buy at or near the closing time depending on the severity of the bad news.

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