SnP500 started rallying December 14.
Today is 11th day. Tomorrow 12th. December 31 the 13th day.
<< Swing Trade Entry: drive.google.com/file/d/0B9dBZPXNckXYS0Q...
>> SnP500 Now: drive.google.com/file/d/0B9dBZPXNckXYREJ...
Spx is now approaching the upper downtrendline for the 'Bull Flag'. Will it go straight up or makes a pullback down or starts collapsing is still up for grabs.
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We have many different scenarios that kept creeping up for months on ends. Among them are these:
1.) Blue v-th wave rally on the monthly chart:
>> Aggressive View: drive.google.com/file/d/0B9dBZPXNckXYbll...
>> Supportive View: drive.google.com/file/d/0B9dBZPXNckXYdER...
>> Short-Term Interpretation: drive.google.com/file/d/0B9dBZPXNckXYZU1...
Pro-active aggressive view is that the blue v-th wave is now in progress for the SnP500. With NYSE the less hard to interpret. Thus, hopefully, we have 10 months or so of rally to expect from the September 29, 2015 low.
2.) Pink v'-th wave in progress on monthly chart:
>> Blue iv-th Next: drive.google.com/file/d/0B9dBZPXNckXYcXF...
>> Short-Term Interpretation: drive.google.com/file/d/0B9dBZPXNckXYNl9...
If the August 24, 2015 bottom is actually the start of a 1-2-3-4-5 rally on the short-term basis; then it is possible, albeit a low probability, that the minor pink v'-th on the monthly will result in a 15-20% intermediate correction for the blue iv-th wave next year - that may last 6 to 9 months (or more).
3.) Huge inverted Head and Shoulders:
>> Medium-Term Whipsaws: drive.google.com/file/d/0B9dBZPXNckXYcFJ...
>> Mitigating Factor: drive.google.com/file/d/0B9dBZPXNckXYbFN...
>> DAX Long-Term EWA: drive.google.com/file/d/0B9dBZPXNckXYY3J...
We might as well suffer another 6 months or so of whipsaw mania if the potential HUGE Inverted Head and Shoulders come into fruition.
However, since the SnP500 is much more correlated with DAX, then hopefully we don't suffer much since the EU QE is still intact - albeit not as gong-ho as many have initially expected from Mr. Draghi. A little disappointment last early December 2015 can go a long way if suddenly Draghi announced a stronger/bigger QE later on early next year that can suddenly propel DAX to new all-time-highs. Nobody really knows what the future might bring thus we have to incorporate some surprises as well into the equation.
4.) Black Swan Trade:
>> Weekly 200ma Trade: drive.google.com/file/d/0B9dBZPXNckXYYVh...
Not an ideal trade since only DIA was able to re-test the weekly 200ma. If SnP500 plunge and re-tests it's own; then DIA should collapse below the 200ma. Thus, this trade is more for the pro-active traders in the absence of better alternative(s).
5.) Compq Conundrum:
>> Compq Double Top Test: drive.google.com/file/d/0B9dBZPXNckXYdFR...
>> Compq Holy Grail Trade: drive.google.com/file/d/0B9dBZPXNckXYVnd...
Compq, right now, is the biggest conundrum long-term traders have to tackle.
Firstly, it is testing the Double Top Resistance which is among the most feared by the bulls.
But Compq is not backing away and starts re-testing the resistance after a minor drop last June/August 2015. A sign of strength in majority of cases.
If history is to keep repeating itself; Compq was able to execute 12 Holy Grail Trades during the 1974 to 2000 secular rally with 9 of them profitable for 75% probability of success. Thus, for long-term trend traders; each and every HG Setup is another opportunity to make profits 75% of the time.
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Trading Strategies:
With SnP500 now approaching the Downtrendline Resistance of the 'Bull Flag'; it is prudent that traders take some profits off the table either tomorrow - the 12-th day of rally or by the last trading day of the year December 31, 2015.
- For the medium-term traders who bought positions last August 24/25; better take profits on at least 1/3-rd positions just for 'Peace of Mind' purpose that should go a long way to holding positions with less hardship in the months/years ahead. Then hold on to core positions until such time that the weekly 200ma or the monthly 50ma got broken decisively. Tighten trailing stops as the rally progresses.
- For those who believe in the HUGE Inverted Head and Shoulders to pan out for 6 months more or less next year; perhaps selling at least 2/3-rd positions is the more appropriate course of action. Then buy them back later if and when SnP500 re-tests the Major Support.
- For short-term swing traders who bought positions last December 14/15; then selling 1/3 to 1/2 positions tomorrow or by end of year for partial profit taking procedure should be the better course of action. Profit taking took hold early for the last two years (January 2014 and January 2015) thus it is better to be cautious 'again' this time rather than try to buck the early January profit taking trend.
As a general rule: If the last vertical rally (from December 21) got retraced by more than 61.8%; then higher probability the lows of that date will be re-tested. If not, then scenario #1 can become the primary trading vehicle. How to trade the 10 months or so of rally - from Sept 29, 2015 bottom - is the challenge swing traders will just have to take in stride. One step at a time.
Good luck and have a happy new year.
* This is a heads up. I'll provide the charts later. Can take time to finalize them.
** Done. Dec. 30 5:25am. Got Google Drive problems that delayed updating this Instablog late last night. I'm going back to sleep.