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  • In The Eyes Of The Beholders 0 comments
    May 28, 2014 8:07 AM

    The markets can be bullish or bearish depending on one's perception most of the time. There are a multitude of tools used by analysts and traders thus it is very common they will have many different ways of interpreting the market price actions at any given moment in time.

    For us traders we try to be neutral most of the time and wait for run-of-the-mill setups and high-probability entries using basic TA such as supports/resistances and/or momentum divergences. For many successful traders; their major assets are 1.) Patience and 2.) Discipline. Patience until a high probability trade is offered to them; and discipline to execute the trades according to well tested trading strategies.

    Others use more complex methods such as Fibonacci Sequences or confluence of supports/resistances to improve the odds of success.

    One Master Trader (I used to subscribe in the past) can determine confluence of supports/resistances within one (1) or two (2) ES points days, and sometimes weeks, before at least a strong bounce/pullback happens. Often times before a trend reversal happens using Gann Method, Fibonacci Sequences, and EWA as primary tools.

    To each his/r own.

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

    For EW'ers it is almost always price structure that matters.

    >> Dow Jones Breakout Mode: img15.imagefra.me/i25s/jquint84/10v3_dc3...

    >> SnP500 Potential Terminal Triangle: img15.imagefra.me/i15r/jquint84/10v3_a78...

    >> Compq Potential Bear Flag: http://img15.imagefra.me/i55s/jquint84/10v3_983_udqtd.png

    >> Russell2000 Divergence Buy Setup: http://g15.picoodle.com/ltd/img15/6/5/28/jquint84/f_10v3_632_udqtd.png

    We have four major indexes each of which have different patterns and can be interpreted numerous ways depending on what type of analysis is employed.

    With the help of TA, Swing Traders were able to make precision entries in October 9 and Feb 6 for the Dow Jones. SnP500 presented a viable buy setup in April 13 that proved to be high precession entry. High confidence entries were also presented by Compq and Russell2000 in Oct April 15 and in May 16, 2014.

    - With correct entries half the battle is already won.

    - What's needed now is a follow-thru impulsive rally for the next stages of 1-2-3-4-5 rally to materialize for Dow Jones (or i-iii-iii-iv-v for Compq on the Daily Chart). See previous Instablog for SnP500 upside targets.

    For conventional TA: Dow Jones Triple Top Breakout should prove to be strong and sustainable for quite some time since it was able to consolidate for quite some time as well.

    For EW'ers: SnP500 is a Potential Ending Diagonal or a Terminal Triangle thus it can either be the termination of a iii-rd or the 3-rd when viewed on the weekly and/or monthly charts and a corrective fourth wave is expected with a 10-20% correction expected to happen sooner or later.

    Compq is two faced: It can be another successful Swing Trade using the daily 200ma Support for the bulls OR a potential Head and Shoulders as well as a Bear Flag for the Bears.

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

    Intraday charts for Dow Jones, SnP500 and Compq also have some minor to major differences thus it is not possible to have a high degree of confidence on the final rally outcome.

    For now, Compq intraday pattern has a higher probability to be the correct wavecount:

    >> Compq Intraday EWA: img15.imagefra.me/i85s/jquint84/10v3_335...

    Compq has a bearish equal move target of 4267 on the daily chart from the April 15 bottom. Intraday targets for the most recent i-ii-iii-iv-v run up are as specified. Whether it will become a C-wave up or a 3rd wave up on the daily remains to be seen.

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

    For swing traders and medium-term traders; it is almost always practical to try an entry when the major averages test their daily 200ma supports. More often than not, they will result successful trades.

    However:

    There were three major potential scenarios I was able to come up with last November 20, 2012 (see Fiscal Cliff Crisis = Opportunity Instablog). As of May 22, 2013 a Super-Duper Scenario for Russell2000 was included (see Long-live the Queen Part II Instablog).

    For now, it is better to concentrate on the two highest probability scenarios to reduce the possibility of 'Analysis Paralysis'.

    >> SnP500 Weekly Bullish View: http://img15.imagefra.me/i15s/jquint84/10v3_685_udqtd.png

    >> SnP500 Weekly Bearish View: http://g15.picoodle.com/ltd/img15/3/5/28/jquint84/f_10v3_f4a_udqtd.png

    For the SnP500; the medium-term EWAs of April 13, 2014 remain viable after two months of fits and starts with extremely complex patterns forming on the intraday charts.

    Nothing has changed for the weekly charts thus the daily 200ma buys of Oct 9, 2014 and Feb 5, 2014 for Dow Jones and possibly the May 15, 2015 by for Compq remains viable swing trades or medium-term trades to the upside (until proven wrong). Likewise, Russell2000 is a 'better late than never' potential Swing Trade or practically a Medium-term trade as Divergence Buy Signals signals seldom happens during a bull run and thus are enthusiastically bought by majority of swing traders and medium-term traders as another trend trade to the upside with potential week/months of holding periods.

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

    For the Medium-term Bears:

    When analyzing price patterns using Fibonacci Sequences, there are very important resistance levels to consider:

    >> SnP500 Monthly Bearish View: g15.picoodle.com/ltd/img15/5/4/13/jquint...

    The 127.2% and 138.2% are considered Contrarian's Entry Levels that in many cases result in a trend reversal.

    However, since the supposedly New Super-Cycle Degree Rally has just started from the March 2009 bottom; those levels may prove to be 'Profit Taking' levels which in many cases can result in a re-test of the breakout level which in this particular case is the 1576 for the SnP500. A strong rally above the 138.2% usually is considered an 'Escape Velocity' thus we have to closely monitor how SnP500 performs in the next few months.

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

    Trading Strategies:

    Four Major Indexes = Four Different Patterns = Four Trading Strategies?

    For many traders; analyzing one major pattern alone can be extremely hard at times. With four divergent patterns, it can be a nightmare.

    For me, I use what I have trained for in the past. Thus, when SnP500 and Dow Jones presented a potential C-wave down in April 13, 2014; I bought YM and SSO as Daytrades and Swing Trades. Likewise, when Compq offered a high probability entry in April 15; I bought NQ as a potential Swing Trade. When Russell2000 gave a 'yummy' Divergence Buy Signal in May 15; who am I to refuse such a very good offer for another Swing Trade to the upside.

    However, since I kept using the 127.2% and 138.2% Fibonacci Extensions to countertrade a prolonged sell-off in the past on intraday and daily charts (and in many cases to take at least some profits off the table after a good run up on daytrades and swing trades). Thus, I developed a healthy respect for those levels over the years.

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

    For me, at least, these are my trading strategies:

    1.) Compq is either a i-ii-iii up or an a-b-c up on the daily chart with the A-B-C up having an edge. Thus, I will be selling the NQ buy of April 15, 2014 at or near the Compq's equal move target of 4267 in the next few days as illustrated on the Daily and Intraday Charts. Will use tighter trailing stops just in case it fails to finalize a i-ii-iii-iv-v on the intraday.

    2.) Since Dow Jones is a typical bullish breakout pattern that trend traders love to buy; then I would rather use trailing stops for the Swing Trade buy of April 14, 2014 but will tighten it in order not to lose more than 50% of paper profits (just in case DJ decides to collapse instead of rallying);

    3.) SnP500 is a potential bearish ascending wedge or a 3-push ups for TA traders on the daily chart - otherwise known as Terminal Triangle or Ending Diagonal for EW'ers. It is a 'yummy' countertrade for the bears. Thus, it is advisable to at least try shorting SPY or SSO at or near the upper resistance level of 1920 to 1925 if SnP500 decides to keep rallying in the next few days.

    - I am still holding 25% of SSO Swing Trade bought in June 24, 2013. It is already a year old swing trade and should have been terminated long ago but I simply can't find an ideal exit as SnP500 kept producing bullish patterns in at the last several months - till now. The 1915 to 1930 intraday target range seems to be the most appropriate to close this trade;

    - Will still keep the Swing Trade Buy of April 14, 2014 but will trail it accordingly in order to make at least some profits if SnP500 decides to collapse.

    - Will try to go short ES at or near the Daily Upper Resistance to protect at least 1/3 of of long-term portfolio against a possible 10-20% correction.

    4.) I bought TNA at $62.02 as a potential Swing Trade in May 16 intraday a-b-c pullback down (using the 5min chart). But if Compq decides to go into a sell-off on the daily; then highest probability Russell2000 is going to collapse. Thus, I will be using a trailing stop at break-even + some tiny profits.

    For those who made bottom fishing buys in October 2011 and/or June/November 2012 as medium-term trades; I have stated in my Instablogs that if SnP500 produce a i-ii-iii-iv-v cycle-degree rally on the monthly chart, then highest probability is that we will never see those higher low bottoms again within our lifetimes.

    >> SnP500 Long-Term EWA + TA: g15.picoodle.com/ltd/img15/9/5/16/jquint...

    Thus, it is highly recommendable to keep at least a major portion of those positions as long-term investments. Right now, SnP500 has at least 90% probability it will actually result in a Cycle-Degree Impulsive Rally = the first requirement in order to execute a Super-Cycle Degree Rally that may last 17 to 26 years from the March 2009 Significant Bottom. What's needed is a iv-th wave correction in order to finalize the i-ii-iii-iv-v rally on the monthly chart.

    Note: My web links for charts kept getting 'trashed' for sometime now with warning errors (backup errors?). I don't know what's causing this since the files in Imagefra.me remain intact. I use IE and FF with same results. Could be SA's server trashing the files. I kept uploading the files and reposting the charts but they kept being trashed.

    Print the charts (whatever are available online) if you want to keep them rather than depend on on-line storage. Or save them as .png files.

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