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  • To 5th or Not To 5th? 2 comments
    May 14, 2010 10:45 AM

    We have a second day selloff today.

    Since we are inside a potential massive expanding triangle on the daily (alternatve scenario):

    -   img37.imagefra.me/img/img37/6/5/10/aarc/...

    And ....  we have an over-extended selloff Thursday of last week;

    -   img38.imagefra.me/img/img38/6/5/6/aarc/f...

    It is basically very hard to have a high confidence wavecount.

    One possible wavecount is this:

    -   img40.imagefra.me/img/img40/6/5/11/aarc/...

    Or This:

    img37.imagefra.me/img/img37/6/5/14/aarc/...

    I have seen truncated 5ths on daily and weekly charts before;  but this was the first time I have been given the opportunity to trade it at the daily chart timeframe.  Most of the time;  I trade only intraday over-extended runs by NQ.  Spx and Indu seldom go into an over-extended run even on intraday charts.

    I bought ES and YM when they hit their nominal targets today using divergence buy technique on their 5min 24-hr charts.  Tight stop loss since I cannot tolerate providing a stop loss that spans more than 5 points for ES.

    If you want to speculate on this;  be sure you can tolerate the heavy stress this type of run can create on your psychology not to mention the potential massive loss on P/L in a very short period of time if this wavecount is wrong.

    Addendum:

    The first trade early this morning failed with a minor loss.

    I bought back ES and YM using their daily 200wma supports.  Also bought some SSO since I can afford to hold SSO much longer than ES or YM.

    -    img37.imagefra.me/img/img37/6/5/14/aarc/...

    IF this thing just keeps wafling around;  then the fibo levels on the daily chart will be the next potential ping-pong indicators.  For now;  the fibo levels are not being respected or not kicking in, so to speak.  The fibo confluence at 1132 is not working (at least not yet). 

    The weekly 27.2% fibo retrace support at 1069, which is a minor one, is still active.  The 38.2% support at 1008 is the major one for Spx.

    This is a trader's market.  Almost every trader is being given an opportunity to either buy long or sell short using their favorite TA indicators. 


    Post-Mortem 4:37pm.   :)

    Good closing time if not an extremely bad day similar to April 27 when GS was accused of illegal trading. 

    On that particular date;  Spx made a green bar on the last half hour of trading that was followed by 2 days of pullback to the upside.  Today; same happened from 3:30 to 4:00 pm despite the extremely bearish $ADD reading of -2367 and $UVOL/$DVOL of -21.07.  Less than -1000 and -3 are normal but going way below is extreme panic or simply over-shooting the downside and therefore is good for fading on a day like this.  Lowest reading today were -2629  and -43.38.

    $Tick was already printing a divergence buy by 12:00 noon while ES was still going lower on 5min chart.  That was my trade signal to try go long ES and YM again after the first buy trade early in the morning proved a failure.

    I sold 1/3 of SDS and FAZ before the open when they reached their supposedly c-wave target (limit sell set last night).  The day proved out to be a 1-2-3-4-5 with the 5th wave over-extended (or at least a 1-2-i-ii-iii on the 30min 24-hr charts.  Monday's price actions will validate which wavecount is correct). 

    Watch XLF:

    -   img37.imagefra.me/img/img37/6/5/14/aarc/...

    My stop loss for ES and YM are a little below today's low just in case the intraday wavecount is a double zigzag down instead of a 1-2-3-4-5 down.

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Comments (2)
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  • jmcaule
    , contributor
    Comments (22) | Send Message
     
    aarc, why do you believe we are heading into an ABC corrective period based off of the rally starting in March 09 when Prechter believes the rally off of March 09 was an ABC corrective period (bear market rally) and we are headed below the March lows?
    16 May 2010, 01:11 AM Reply Like
  • aarc
    , contributor
    Comments (3753) | Send Message
     
    Author’s reply » We have the same A-B-C analysis starting from March 2009; then SnP500 was supposed to go down to 550 area.

     

    But since Sept 11, 2009; that one particular day changed the whole structure of the daily and weekly charts of SnP500 from bearish into bullish.

     

    I was shorting ES full blast before Sept 11, 2009. After that date (and losing lots of money); I became bullish and kept buying the dips and selling the rips.

     

    Prechter kept shorting the markets.

     

    I don't follow Prechter; but I think he must have realized by May-April 2010 that a 1-2-3-4-5 on the weekly chart has already happened. In his last interview at CNBC last month; he advised to wait for at least 1 year before buying because share prices will be lower at that time as compared to April/May 2010.

     

    That is exactly my analysis if you look at my previous comments since Feb 5, 2010. We should be headed for an A-B-C correction on the weekly chart, presummably near SnP1,000 level but preferably at 990 that should last a year or two. But after a rally from 1044 to 1228 nominal target for a 1-2-3-4-5 wavecount on the weekly chart. SnP was able to reach 1220 before going down but the 1-2-3-4-5 minimum wavecount requirements have already been satisfied.

     

    But the events of the last 3 weeks have drastically changed the price structure on the daily chart. Now, there is a possibility we might be forming a triangle or a running correction instead that started happening since August 2009 and may end by early Oct 2010 or late Dec 2010 but should not go way past early 2011. See my Alternative Scenario.

     

    There is also a potential for the running correction abc-X-abc instead of a supposedly triange a-b-c-d-e that started August 2009 to have completed 7 days ago (Black Swan Thursday) at SnP 1066. But since election is coming; I doubt if investors will be buying now when they do not have firm idea what will happen before and after the elections.

     

    Wait and watch is my strategy now.
    17 May 2010, 07:56 AM Reply Like
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