Small warts turned into bigger moles more difficult to remove as Taper Tantrum goes into high gear. Will it turn into a Wall of Worry we still don't know:
>> SnP500 Daily: http://img10.imagefra.me/i5cb/aarc/141u_f16_ubk5c.png
>> SnP500 Intraday: http://img10.imagefra.me/i5cb/aarc/141u_903_ubk5c.png
The daily chart for SnP500 has a minor support @34ma. Sometimes it works but most of the time does not. Major Support remains 1775 with 1772 the critical 61.8% retrace of the 3rd. Most of the time, UP HERE ..., a breakdown below 61.8% should result in either a major pullback or a correction.
The intraday chart shows the Potential Head and Shoulders with the 1813.55 the possible head and 1811 the right shoulder. Neckline Support is as indicated being tested at today's low. Also indicated is a possible formation of a Triangle Pattern every time a failed i-ii-iii has formed (labeled as a-b-c up in this particular case).
For now, the most critical part is the current i-ii-iii-iv-v run down with maximum limit of 1776 as indicated on the intraday chart. Much further run rate can result in a Spiral Meltdown of indeterminate downside targets. But as indicated on intraday, the vertical iii-rds have no discernible sub-divisions and are therefore good indication of potential Double Zigzags a-b-c x a-b-c (with compacted or invisible x-wave connector) that can easily result in an over-extended v-th for the i-ii-iii-iv-v; as what happened during the Dec 4th's v-th wave run down. Double Zigzag (or double combination such as Zigzag + Flat or Flat + Zigzag) can masquerade as a i-ii-iii-iv-v very hard to confirm until it got fully retraced (during consolidation ranges or A-B-C or a-b-c-d-e runs).
SnP500 has potential Divergence Buy Signals when viewed on the 5min to 30min charts. Thus, for the more aggressive traders, this is just another SOP Buy Strategy countertrading a i-ii-iii-iv-v run down or the C-wave down on intraday. OR wait for a strong intraday bounce before buying a minor a-b-c down that should last as much time (but can be 1.27x to 1.62x = the more common occurrences) as the strong bounce. OR wait for an Inverted Head and Shoulders using either the 5min or 15min charts if the bounce is not too strong.
For the Bears: Obviously, the Double Divergence Sell Signals is still working with a potential 'Kiss of Death' on intraday. Thus, it is more a process of SOP Trade Management in order to minimize potential loss if the markets decide to rally some more and possibly maximize profits if they decide to keep going down.
For me: I bought YM near the Dec 4th's bottom run down. Sold half during the Jobs Report (using limit sell order) just-in-case it forms a minor a-b-c up using equal move targeting method for the a- and c- waves. Then sold the other half, near the top, when a potential intraday i-ii-iii-iv-v rally has formed (for YM).
Bought YM today, very early in the morning, near the 15,950 range, using an a-b-c down pattern on 24-hour 60min intraday chart. But as the day progresses, the initial run up was met with a strong run down before the cash markets opened at 9:30 a.m. caused by another fear of QE Tapering a.k.a. Taper Tantrum. A losing trade and a very hard trade to execute since I have to remain awake overnight waiting for that darn a-b-c down pattern to form slowly. Already sleeping, before 9:30 am, when a vertical meltdown tripped the SOP Hard Stops.
Bought YM again, after the closing time, as an Intrepid Trade - with tight stops.
* I hesitated in shorting a possible a-b-c intraday run up since SnP500 rallied hard after the Jobs Report with the iii-rd of a possible i-ii-iii already extended at 1811 level (90% probability of i-i-iii-iv-v to finalize). Obviously, this one proved to be the 10% failure rate.
Note (again and again) that my recent Instablogs were/are designed more for Day-Trading and/or Scalping the Trend while the trend is still a friend. Not suitable for the less nimble or less experienced traders - who can easily get whipsawed by the violent price actions of SnP500 since late May 2013 (on the daily and intraday charts). Thus, the emphasis on tight Hard Stops and tighter Trailing Stops once the market rallies.
** For TRADERS protecting Trading Capital, against catastrophic drawdowns, is the most important part of their profession; specially for the neophyte traders (but then vast majority of neophyte traders do not know this = thus, they become the source of income for seasoned traders. The cycle goes on and on). Once trade entries and exits become a habit or almost automatic; achieved by hundreds or even thousands of repetitive similar trade setups thru the years (or decades); then making profits become the primary goal later on. Invest in knowledge and experience first before gunning for get-rich-quick strategy (the opposite of investing that invests in time/fundamentally sound companies then get-rich-slowly). Otherwise ....
UP HERE ... shallow pullbacks on the daily chart (major pullback to minor correction on weekly chart) is still the expectation as the rally tries to reach escape velocity (irrational exuberance or momentum trade) against the persistent contrarian traders and/or those taking at least partial profits from their medium- to long-term positions (sell the rips for trend traders such as day-traders and scalpers).
Deep pullback after initial bounce on intraday, then followed by shallow pullbacks as the intraday rally progresses is the general norm. For the downsides, more often than not, shallow pullback up on initial run down, after a top had been reached. Shallower pullbacks up near the bottom as panic selling reigns. Gravity (or rather fear) working against the bulls - and benefits the bears.