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  • Back To Fog Of War 0 comments
    Oct 25, 2013 11:12 AM

    We've got a good sizable rally from the Oct 9 minor bottom as Dow Jones tested it's Daily 200ma Support.

    The question now is whether the bullish Russell2000 rally will continue; or are we due for another a-b-c pullback down; or will the bearish SnP500 start to materialize with it's Daily 200ma Support the initial target for the bears?

    >> Russell2000 Bullish View: http://img15.imagefra.me/i5ap/aarc/141u_d70_ubk5c.png

    >> SnP500 Bearish View: http://img15.imagefra.me/i5ap/aarc/141u_8c5_ubk5c.png

    >> Dow Jones Wishy Washy: http://img15.imagefra.me/i5ap/aarc/141u_bb6_ubk5c.png

    >> GDow 1-2-3-4-5 Rally: http://img15.imagefra.me/i5ap/aarc/141u_13b_ubk5c.png

    Russell2000 remains the most bullish pattern. But a failure to rally for the short-term can result into catastrophic consequences for R2K for the medium- to long-term basis since there is definitely no completed impulsive wavecount yet on it's weekly chart:

    >> Russell2K Super Duper Scenario: http://img15.imagefra.me/i5ap/aarc/141u_b32_ubk5c.png

    SnP500 short-term bearish price pattern can accept either an a-b-c down or a i-ii-iii-iv-v run down on the daily chart without materially damaging it's medium- to long-term upside potential on the weekly chart:

    >> SnP500 Conservative Scenario: http://g10.picoodle.com/ltd/img10/5/10/25/aarc/f_141u_859_ubk5c.png

    Dow Jones remains the aggressive medium-term scenario of the weekly chart with or without an immediate pullback a-b-c down or a i-ii-iii-iv-v run down on the daily chart:

    >> Dow Jones Aggressive Scenario: http://img10.imagefra.me/i5ap/aarc/141u_c26_ubk5c.png

    Compq is a potential Super-Aggressive Scenario on the weekly chart but it's short-term performance will spell the difference for the medium-term as it approaches the Upper Upside Limit:

    >> Compq Bull vs. Bear Scenario: http://img15.imagefra.me/i5ap/aarc/141u_d99_ubk5c.png

    For GDow; it is definitely a high-probability basic 1-2-3-4-5 rally on the Daily Chat - which once completed should result in a major pullback or a correction to the downside. However, there is a good possibility it can transform into a complex 9-waves or 13-waves rally if it makes an a-b-c down that may last less then 3 weeks then rally again.

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

    Trading Strategies

    This is another critical stage for the medium-term bulls vs. the medium- to long-term bears.

    Right now; the possiblity of a +/- 20% Correction is starting to become a good probability based on the Conservative Scenario for the SnP500. Thus, the better course of action for Medium-Term Traders is to stand down and let the markets decide which direction they will pursue.

    For Short-Term Trades; the better course of action is to sell some short-term longs in this area and protect the rest with tight Trailing Stops. If Russell2000 goes i-ii-iii-iv-v rally on intraday; then either close the trade or keep some just-in-case it goes into a Spiral Meltup.

    For SnP500 and Dow Jones: There are two (2) major potential scenarios for the short-term to medium-term:

    1.) IF the markets go with an a-b-c down that may last a few weeks; then that will be an opportunity to go long for the medium-term with a Swing Trade;

    2.) IF the markets go with a i-ii-iii-iv-v run down that may last a few weeks to several weeks; it is conditional as follows:

    - If the major averages successfully completed an intraday i-ii-iii-iv-v rally from the October 9 bottom; then a i-ii-iii-iv-v run down can become a C-wave down and is therefore another Swing Trade Up bottom buy opportunity;

    - If the current potential a-b-c rally from Oct 9 immediately results in a i-ii-iii-iv-v run down; then it can become the A-wave of an A-B-C down that can result in +/- 20% Correction that may last 6 to 9 months comparable to the W-X-Y Correction of Feb to Oct 2011 ... OR ... it can be the start of another Cycle-Degree Meltdown being envisioned by the Long-Term Armageddon Bears.

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

    At any rate my present course of action was to trade the markets short-term buying the dips of August 28 selling SSO Day-Trade into the rips toward the September 19 top.

    - For the Oct 9 YM Day-Trade, I sold it yesterday as I am not willing to take the risk the intraday rally (either a-b-c up or i-ii-iii up) might not finalize into a i-ii-iii-iv-v next week but instead immediately starts in either an a-b-c down or a i-ii-iii-iv-v run down. Note that I am using GDow 1-2-3-4-5 pattern as the primary guide for this most recent rally from the Oct 9 bottom buy = GDow is now a fully qualified 5th wave thus it calls for profit taking procedure to commence immediately;

    - Also sold half of the SSO Swing Trade bought near the June 24, 2013 bottom (the remaining 1/3 positions of the Day-Trade + Swing Trade wherein I leveraged my account to 135% near the June 2013 bottom buying lots of SSO). Will keep the other half just-in-case Russell2000 Super Duper Scenario actually pans out;

    - Will still keep the remaining 25% of long positions bought near the June 4, 2012 bottom and just use wide Trailing Stops just-in-case the Armageddon Scenario actually pans out;

    - Most likely keep the remaining 1/3-rd of long positions bought in Oct 4, Nov 27, and Dec 19, 2011 as long-term holds.

    For the moment I am back to 'Wait and Watch' mode or 'Hunting Mode' passively waiting for a high-probability trade to come my way in the next few weeks.

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

    Notes:

    This is an update to the 'The Big Bad Guessing Game Continues' Instablog of Sept 20 which was the update for the 'Long-Live the Queen Part II' Instablog of May 22, 2013 = For the Medium-Term Basis.

    The short-term price actions in the next several weeks should be able to provide us with high-confidence wavecount for the Intermediate- to Primary-Degree Scenarios.

    Intermediate Degree = a few months to several months. Primary Degree = several months to a few years. Cycle-Degree = a few years to several years. Super-Cycle Degree = several years to a few decades.

    - The rally from March 2009 is considered already a Cycle-Degree;

    - The rally from October 2011 is already a Primary Degree;

    - For Dow Jones; the rally from November 2012 is already an Intermediate Degree with the consolidation range from August 2 top to the Present possibly an Intermediate Correction either as a W-X-Y or may transform itself into a Triangle or an Expanded Flat.

    - For SnP500; the rally from November 2012 to May 2012 can be considered Intermediate 3-rd wave with the potential Ascending Wedge pattern as the Terminal 5th wave Triangle.

    Russell2000 is the Long Ranger with very different price patterns on the weekly chart.

    >> Obviously, the divergences among the major averages (The Big Bad Guessing Game) on the weekly chart have become much more pronounced in the last few months of price actions - and the Process of Elimination, as first envisioned in May 2013, should be at it's final stages.

    For the more aggressive traders; the better course of action is to trade the markets on short-term basis either going long on dips and selling at rips OR shorting the rips and covering at the dips.

    I prefer buying dips over shorting the rips, on short-term basis, while the trend is still to the upside. When the right time has come; I will be trying to short the markets (using ES) in order to protect at least 1/3 of my Long-Term Portfolio against a possible +/- 20% Correction.

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

    Addendum: October 28, 2013

    For those getting more confused either by the market price actions or by my Instablogs and/or Comments these are the primary scenarios I highlighted in May 2013 (updated today):

    >> SnP500 Monthly Chart Conservative Scenario: http://img15.imagefra.me/i5at/aarc/141u_3f6_ubk5c.png

    >> SnP500 Monthly Chart Aggressive Scenario: http://img15.imagefra.me/i5at/aarc/141u_c94_ubk5c.png

    The Conservative Scenario assumes that a Primary-Degree A-B-C Correction should happen sooner possibly starting in late 2015 with 30% to 40% run down (or consolidation range) and may last 3 to 4 years.

    The Aggressive Scenario is the higher probability that may enable SnP500 to make a 2x rally toward the 2485 target. The Cycle-Degree Correction should start to happen in 2017 with 30% to 50% run down (or consolidation range) that may take 3 to 6 years. As we know; the stronger/longer the rally, the deeper/longer the correction should be in most cases.

    * The blue iv-th wave is the expected Intermediate Degree +/- 20% Correction comparable to the Feb-Oct 2011 meltdown that resulted in 21.53% loss for the SnP500.

    I still use the above as my primary guide to trade for the medium-term to long-term.

    - What can greatly affect the monthly scenarios is either the SnP500 Weekly Chart Conservative Scenario or the Russell2000 Super-Duper Scenario. Right now, we definitely do not know if a +/- 20% Intermediate Correction is going to start happening immediately for the bearish SnP500 or we rally vertical up if the extremely bullish Russell2000 starts to kick in hard within the next several weeks.

    Note that with the Dow Jones, SnP500, Russell2000, and Compq are having very different and contradictory price patterns on their daily and weekly charts thus it is not possible to come up with high-confidence TA and/or EWA - practically since May 2013. But that did not stop me from making a Swing Trade and several Day-Trades since then = by using the daily and intraday charts to minimize potential losses by being able to anticipate bottoms and tops immediately before/after they happened.

    As I have commented a few times in the past months: When at least 2 major averages are against each other (example is if Dow Jones extremely bearish and Nasdaq extremely bullish) then SnP500 resolved the conflict by either going vertically up or vertically down. That's where Trading Strategies matter the most in order to avoid potential multiple whipsaws and/or massive losses AND possibly to maximize profits on winning trades - in the months and years ahead.

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