Note: This is a heads up for daytraders and swing traders who might want to take some profits off the table with today being a Friday.
>> Intraday NQ: drive.google.com/file/d/0B9dBZPXNckXYMGF...
That was yesterday. NQ is going down today thus adjust the iv-th wave bottom if NQ rallies. The v-th wave MUST be the shortest. Minimum required run rate is 61.8%.
If it underperforms, prepare for a big backlash. If it goes over-board, then the probability of a Spiral Meltup goes higher. If it keeps collapsing, sorry, blame the markets.
Check the Trading Strategies.
I will provide the charts and refine the instablog at the end of the day or tomorrow. Note that SnP500 is still not near the daily 200ma. Lots more room to go that may require another week of rally. But then YM is now testing it's 200ma Resistance with ES not far behind.
E.O.D Prognosis: SnP500 was able to rally into a potential pink i-ii-iii-iv-v illustrated at Intraday Running Correction and reached $2009 weekly Head and Shoulders Resistance. ES almost touched the 200ma Resistance. NQ failed to rally but remains qualified to rally for the v-th wave. A major breakdown for NQ is required to invalidate the illustrated i-ii-iii-iv-v above. Adjust the iv-th wave bottom if NQ rallies again.
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Another day, another time, another critical juncture.
Very good performance thus far from the February 11 bottom.
>> SnP500 Bull Flag: drive.google.com/file/d/0B9dBZPXNckXYX3k...
>> SnP500 Head and shoulders: drive.google.com/file/d/0B9dBZPXNckXYNGJ...
The bull flag is now kicking in hard and now testing the 20ema resistance. With the ADX now > 30, it is supposed to be trending down. But the Holy Grail was designed for trends outside trading range - when the markets are already in a definitive uptrend or downtrend, not inside a trading range which in this case is a Bull Flag. But then early birds can possibly get the fattest worms too - or are they picking fat worm baits inside a trap? Nobody knows for sure until that trap door closed down.
But then, a Head and Shoulders is a head and shoulders. Most appropriate entry is the right shoulder for discretionary bear traders. As far as they are concerned it is NOT a bull flag. And they are going to trap the bulls with that Right Shoulder Resistance at or near the $2009 area.
>> SnP500 Daily Bearish: drive.google.com/file/d/0B9dBZPXNckXYQVF...
>> SnP500 Daily Bullish: drive.google.com/file/d/0B9dBZPXNckXYYm9...
So far, it remains a potential i-ii-iii rally or a-b-c pullback up. Toss coin. The only redeeming factor is that the Advanced Stochastic Strategy is still working. So don't fix it until it's broken.
>> Russell2000: drive.google.com/file/d/0B9dBZPXNckXYM1N...
R2K is by far the one that suffered the most during this downturn. And the one that has lots to catch up. So far so good. But unless and until it is able to reach the B-wave top; the possiblity of a 1-2-3-4-5 or a complex Spiral Meltdown remains a distinct possiblity.
>> Intraday Running Correction: drive.google.com/file/d/0B9dBZPXNckXYY20...
>> Intraday Conservative View: Use NQ Intraday Above
US cash markets are sporting possible Running Corrections for a 2nd wave. However, the eminis are not that bullish. Thus, unless and until any of them got confirmation which one is correct, the game remains in a state of Fog of War. Meaning is that nobody really knows which way the wind will blow later on.
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Trading Strategies:
Time now to change trading strategies from being a Contrarian Bull to Defensive Bull. What type of defensive posture is approapriate depends on one's inclination - Proactive, Reactive, or the Balanced Approach.
Proactive Approach:
- I would suggest to start taking most, if not all, profits in this area for the daytrade. There will be more opportunities (and risks) ahead. We just don't know (yet) when they will come to us and offer those opportunities (risk).
- For swing traders, take at least 2/3 positions off the table as SnP500 starts testing the 20ema and/or the Head and Shoulders Resistance. Keep some positions we usually call 'Free Trade' and see if a i-ii-iii-iv-v rally or even a Spiral Meltup might just happen. Stop lost for typical EW'er is at the bottom of the potential ii-nd wave. Or if they are feeling lucky, follow the usual b/e stop loss setup for Free Trades.
- For medium-term traders, it is not advisable to reduce positions here while the rally is just at it's infancy. Objective remains more or less 8 months of rally and we're just warming up. But for the less aggressive types, perhaps taking 1/5 to 1/4 positions might prove a wise decision. Again, the markets will decide if that is a wise decision or not.
Reactive Approach:
- For the swing trade, might as well take 1/3 positions just for keep sake. Then let the 2/3 positions run it's course OR be stopped out using trailing stop. There are many methods that can be used. Some use the daily 10ma, daily 20ma, or whatever they choose. Many TA traders prefer using Trendlines. Some use Three Point Break wherein the stop loss is set below the most recent 3 days. Or follow the general observation that IF the most recent rally is retraced by more than 61.8%, then most probably the lows of the most recent run up will be tested. Or follow EWA general principle that if the ii-nd wave bottom got tested or broken, then the bullish view becomes moot and academic.
- For the medium-term trade; the weekly 200ma or monthly 50ma Supports remain the viable supports. Typical trading strategy is to use them as either hard stop loss or to add more positions. That's how they can possibly minimize potential losses if the trade fails and maximize potential profits on a successful rally.
Balanced Approach:
- Not hard to conceptualize what a balanced approach should be. Implementation is the hard part. Perhaps use the proactive vs. reactive approaches as guides instead. Somewhere in between.
For the bears, hybernation is over? Start shorting the markets or what? I prefer not to make recommendation since I'm biased to the upside right now. Unlike in May 2015 and during the reactive rally in September to November when the Bull Flag has not formed yet.
* I closed the YM daytrade when SnP500 reached $2009 Resistance. No need to worry the whole weekend even if YM was not able to reach the $17,072 minimum target (29 points short of today's 17,043 high). YM swing trade remains active with trailing stops. No need to take partial profits on swing since I've made substantial profits already on daytrades (not hungry at all).