QE Unlimited is upon us which made the short-term, medium-term, and long-term Bullish Scenarios higher probabilities.
These were the EW Analysis posted in the past:
- July 2012: g14.picoodle.com/ltd/img14/5/7/30/aarc/f...
- May 2012: g15.picoodle.com/ltd/img15/5/5/24/aarc/f...
- Oct 2011: g38.picoodle.com/ltd/img38/5/10/21/aarc/...
Except for the weekly chart which I decided not to update until much later; the monthly and daily charts are still as valid since the first time they were published.
For the Weekly Chart: Targets are as indicated on Notes.
For the Daily Chart: 1460.32 is the Nominal Target for a 1-2-3-4-5 for the iii-rd wave rally and 1545 the Final Nominal Target for a Complex 1-2-i-ii-1-2-3-4-5-iii-iv-v-3-4-5 Spiral Meltup as indicated on 'The Test of Time' Instablog. I forgot to write the Possible Extended Run Rate of 1612.
For the Monthly Chart: Targets remained as first speculated in Oct 2011 which has a Nominal Target of 1794 for the Intermediate Cycle i-ii-iii-iv-v which is the 1-st wave of the supposedly Super-Cycle Rally. Extended Target is 2016.
Of special importance to note is that the Monthly Chart Run Rates Performance in the PAST had FAR EXCEEDED the Run Rates I normally used for the Daily and Intraday Charts. Particularly during the Super-Cycle Rally of SnP500 from Oct 1974 bottom to March 2000 Top. This is probability because the Major Indexes are practically Vampires over the long-term wherein they remove stocks that underperformed and replaced them with strong stocks (New/Fresh Blood). If you look at the historical composition of Dow Jones since it's early years in the late 19th Century; a vast majority of listed companies are no longer included today. GE was among the longest member of the Dow 30. I have not done extensive measurements on the weekly charts so I can't make a conclusive remark for the weekly.
For the Short-Term to Medium-Term: These are some possible scenarios:
Daily Chart Scenarios:
QE Unlimited opened many possibilities for the Bulls including a possible Vertical Meltup that may consume several 2 to 5 days minor shallow pullbacks before it exhausts itself. But then again, it is far better to use the Weekly Chart Targets as the primary guide since it is the high-confidence EW Analysis. It is simply very hard to analyze the daily chart from the get go from it's June 4th bottom - added to the simple fact that Extended 5ths seldom happen thus a majority of EW Practitioners (including me) have very limited experience on this particular type or rally.
Since it is very hard to find a highest-probability wavecount up to now ... my strategy is simply to Hold On Tight and use Trailing Stops on long positions. The possible Failure Points are as indicated on the lower portion of the Notes on the Daily Charts. Basically, once price retraces more than 61.8% of the last run up; it becomes a major warning of either a Bigger Pullback or a possible Trend Reversal. Usually, I give a little more than 79% retrace to give the price some wiggle room and avoid potentially being whipsawed when the chart pattern morphs from simple 1-2-3-4-5 to a Complex 1-2-i-ii-iii-iv-v-3-4-5 or sometime Very Complex Spirals.
I was 115% Longs loaded before the Fed Meeting last week and added another 5%. 90% is Long-term Portfolio with total 30% for Swing Trade with additional Short-term Trend Trades.
* For the moment, I can't find plausible bearish scenario. But then again, as a Trend Trader, it is SOP Trading Strategy to always look for possible Monkey Wrench that may wreck havoc to the Bullish Scenarios.
** Every time price goes into vertical run, many neophyte traders have the tendency to start Contrarian Trades (going short on vertical run up). It can take years before they learn not to enter a Contrarian Trade when a Vertical Rally (or vertical drop) happens. The only times I went Contrarian on Vertical Drops was in August 2011 because the iii-rd wave was already over-extended and higher probability the v-th and/or the 5th would truncate. The v-th actually truncated but the 5th made a tiny bit lower low in Oct 4, 2011. I added a lot more long trades in Oct 4th and the Nov 25/Dec 19 Pullbacks. Also I entered early in late May 2012 for the 3-rd wave highly extended vertical drop using the Dip Trip Buy Setup (on the Weekly Chart) for fear that the Dip Trip might just work and a vertical rally could follow. Then added some more when SnP500 went down lower to test the daily 200ma support. But most of the time; I prefer to enter using Divergence Buy Signals as illustrated on many occasions in my Instablogs and Comments.
*** Don't Fight The Maestro (the FED).