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  • Lost In Translation 0 comments
    Oct 11, 2013 11:49 AM

    With the highly divided Congress; trading the markets proved to be like trying to out-maneuver a deadly snake.

    Likewise the divergence between the major averages became more pronounced that can result in many different interpretations of their potential future price actions:

    >> SnP500 Bearish View: http://img15.imagefra.me/i5ab/aarc/141u_1e4_ubk5c.png

    SnP500 remains bearish and is now partially qualified as a potential Terminal Triangle. e:3 is usually an a-b-c up based on textbook examples but in actual practice some EW'ers count the Ending Diagonal as 1-2-3-4-5 instead of a-b-c-d-e thus the last rally can be a i-ii-iii-iv-v instead of an a-b-c before a vertical meltdown happens. A breakdown that touches or breaks below the 4th wave bottom is needed in order to confirm a Trend Reversal. Otherwise, nothing is written in stone (yet).

    >> Dow Jones Bullish View: http://g15.picoodle.com/ltd/img15/5/10/10/aarc/f_141u_245_ubk5c.png

    >> GDow Bullish View: http://img15.imagefra.me/i5ab/aarc/141u_9e0_ubk5c.png

    Against the bearish backdrop of SnP500; Dow Jones and Russell2000 remains bullish on their daily charts. Global Dow is definitely bullish - until proven wrong. Compq is open to multiple interpretations either bullish or bearish thus better leave it alone until it produced a more credible price pattern.

    ==========

    Trading Strategies:

    SnP500 intraday and/or daily charts' trade setups since January 8, 2013 (see prvous Instablogs) have proven to be very effective in buying the dips and selling (or shorting) the rips.

    However, since May 2013 the short-term chart patterns of SnP500, Dow Jones, Compq, and Russell2000 started to diverge from each other thus severely compromising having a high-confidence analysis of the medium-term prospects.

    It is well known (at least to Expert and Master Traders) that the markets will almost always go from certainty to uncertainty. Thus, most of time, watching and waiting for the markets to provide high-probability entries become more important than the desire to make money in order to avoid suffering several whipsaws as the market whips itself up and down in unrecognizable patterns.

    In that regard I started using YM instead of SSO for upside trades to avoid potential large losses against over-night gap downs. The last YM Trades proved to be a losing trade and my first failed Swing Trade this year.

    - Right now, the better course of action is to wait for a minor a-b-c pullback down on intraday chart that may last 2 to 3 days for those who were not able to buy the Dow Jones 200ma Swing Trade Buy Setup mentioned in my Comment last Tuesday for the more aggressive traders. Upside targets remained in the 16,300 to 17,150 for Dow Jones and 1823 to 1923 for SnP500

    - GDow is the high-confidence EWA for the moment. Thus profit taking strategy is to sell when (or rather IF) GDow actually rallies toward it's 5th wave target.

    * I bought back the YM Swing Trade as Dow Jones tested the Daily 200ma support and is now using Trailing Stops to possibly prevent incurring any losses.

    ** Will try to initiate another Day-Trade on the expected 2 to 3 days a-b-c down then sell half on an intraday i-ii-iii-iv-v rally that is supposed to retrace at least 61.8% of the last run down (of the d:3 on daily). The other half will become a 'Free Trade' if SnP500 keeps rallying and it's Trailing Stops will be taken out if Spx decides to go vertical down.

    >> SPY Trade Setup: http://img10.imagefra.me/i5ab/aarc/141u_58f_ubk5c.png

    SPY is now presumably a i-ii-iii-iv-v intraday rally with an a-b-c expected to happen sooner rather than later. However, IF and only IF SPY goes into a Spiral Meltup; then perhaps chasing it with smaller positions can be initiated (smaller positions since chasing a Spiral Meltup is very hard to manage). The v-th must be shorter than the iii-rd in order for the above setup to work. IF the v-th goes much longer than the iii-rd as illustrated then SPY can go into a Spiral Meltup.

    Since we are in an extremely hard to trade markets, right now. The better course of action for the less nimble traders is to reduce trade positions to manageable levels in order to prevent getting whipsawed multiple times and/or to avoid suffering major losses.

    UP HERE... Contrarian short-term to medium-term Bears are starting to lick their chops in expectation of 10% to 20% correction at the least. However, the current 4+ months of consolidation range for SnP500 and Dow Jones is considered as another opportunity for the bulls to support another major relief rally on the medium-term basis - that may last more than 2 months and perhaps into Q1/2014.

    Right now, majority of traders and investors are in the holding pattern as the Government Closure and Debt Limit Debates rages on.

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