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The Balanced Approach

The potential Nested Intraday Rally for SnP500 remains the highest probability with 2023 conservative nominal target and an aggressive 2060 target as of August 20. Upper Range for the uber-bulls is 2097.

>> Spx Intraday EWA:

For now, fine-tuning upper targets can be speculated by monitoring each squiggle as the rally progresses. A major intraday breakdown that retraces more than 61.8% of the supposedly 3rd wave will invalidate this very short-term analysis.

The daily and weekly charts analyses remain as highly contestable as they can be ... with several different interpretations very much possible each of which cannot be proven right or wrong - in advance - since the run ups and run downs are highly indistinguishable from each other = = = typical of a complex spiral meltup as speculated in November 20, 2012.

>> Daily Bullish vs. Bearish:

>> Weekly Conservative Scenario:

>> Weekly Aggressive:

2,143 remains the Nominal Target until proven wrong.


Dow Jones remains the hardest to analyze on the daily and weekly charts obviously with different interpretations as it kept producing highly recognizable marginal higher highs higher lows since May 2013:

>> Dow Jones Potential Running Correction:

The potential running correction is the higher probability if strict interpretation of what constitute running corrections is applied to the Dow Jones' daily and/or weekly charts.

Compq has a nominal target of 4553 for the v-th wave. An alternate wavecount can be speculated if the upper limit is exceeded:

>> Compq Daily:

Comp i-ii-iii-iv-v rally remains on track with an Upper Limit of 4696 if it over-performs. Obviously, if rally exceeds the maximum limit either the v-the is over-extending that can result in a sudden vertical drop OR it can transform itself into a possible Complex Spiral Meltup Rally with conservative target range of 4862/5195 and an aggressive target of 5402/5735. The basic rally is the highest probability to date - until proven wrong.

Russell2000 MUST retrace a minimum of 61.8% if the last run down is truly an a-b-c on the daily chart. If it is a Double Zigzag down or a-b-c -X- a-b-c then I don't know what should or should not happen.

>> Russell2000 Daily:

For now, better to stay with what is known but better use protective stops for those medium-term traders who decided to keep holding on to their positions based on my recommendation of buying TNA in May 15, 2014. The Triangle Scenario remains valid until proven wrong.

Trading Strategies:

Well ... we have four major indexes with 4 distinctly different patterns that can be highly divergent to each other. But unlike April 15/May 15 Buy Setups; those who might want to start shorting SnP500 may prove to be the right strategy as the probability of 10-20% becomes much more palatable for the contrarian bears at this stage.

UP HERE ... Dow Jones and Compq are also actionable for the more nimble traders who wanted to go short high and cover low with well defined parameters that many traders can use to trigger a sell-short order such as the Divergence Sell Signal for Compq and/or the Upper Trendline for Dow Jones.

For those who bought stocks/ETFs/futures as per Instablog recommendations of August 5, 2014 (or for those who still kept holding on to their bottom buys of April 15 and/or May 15) SOP Trading Strategy is to use Protective Trailing Stops if they want to speculate the markets are going to rally some more or anticipate an Irrational Exuberance Rally might just happen on the daily and/or weekly charts.

After all, the Zweig Breadth Thrust of Feb 2014 still has 4+ months to go before it's average 25% gain should be realized, if not exceeded. Likewise, the Wide-Range-Bar of year 2013 might just result in another WRB for 2014. If SnP500 produced a rally this year comparable to the 30% last year; then higher probability a Three White Knights would form on the yearly chart with the third knight scheduled for next year.

Anything is possible with the stock markets.

It is how Trading Strategies are formulated that will spell the difference, most of the time, whether a trader will make money or lose money. Obviously, training and experience will win over the long run on how to navigate the seemingly infinitely different types of turbulent waves that usually will whipsaw majority of market participants - specially the newbie traders and investors.

For me:

I will be buying time up to Friday and will sell another 1/3 of the August 5 SSO buys. It is going to be a very long holiday weekend and traders will be more than itchy to reduce their positions before Labor Day next week. Tighter trailing stops, of course, just in case something unexpected happens.

For now there are several potential future scenarios:

- If an a-b-c down on the daily happens; then as a trend trader that will be another Buy the Dip Trade Setup for daytraders.

- If a +/- four weeks run down comparable to the pink ii-nd wave on the weekly chart happens; then that is also another opportunity to swing buy the dip for another potential 4 or more weeks of rally for the pink v-th wave for the SnP500.

- If a 10-20% correction happens, which was being expected by many market participants to happen since May 2013; then that should prove a great buying opportunity for the medium-term traders.

- If an Irrational Exuberance Rally for this year (and next year) actually happens; then those positions bought earlier this year can become high-probability long-term investments for the more aggressive traders/investors even if a Black Swan correction, comparable to that of August/October 1987, happens in 2015/2016.

The important part is how to formulate trading strategies in order to minimize losses, if not gain some profits, if and when those trade setup(s) do come by either one or all may prove to be wrong after all. We just have to learn how to 'roll with the punches' if any or all our analyses proved wrong.


I might try to go short ES in this run up - to partially protect my long-term portfolio against a possible 10-20% correction as the probability of that scenario becomes much more palatable at this stage.

Not confident it will work but then a fire usually starts with a spark.

Problem is - just like trying to start a fire; the stock markets usually will levitate before finally succumbing to gravity. It can mean a lot of trials and errors might be needed just like the way several sparks may fail to start a fire immediately.

> For the early contrarian bears; they suffered a lot for more than a year now without any of those numerous Divergence Sell Signals producing a spark strong enough to start a fire to the downside.

> For us trend traders; it has been a very good two+ years of buying the dips while the trend remains a friend.

Someday, somehow, a correction is going to happen none of us knows for sure (yet). We can always speculate either to the upside or downside at any given moment of time. Just make sure viable trading strategies are formulated to minimize potential losses and/or to maximize profits.

It is not necessarily the analytical process that matters the most for the more advanced traders; it is how they navigate the turbulent waters that spells the difference between success and failure.