Reading tea leaves is not easy.
But as a trader, it is far better to use experience and judgement rather than fully rely on technical analysis or fundamental analysis (for that matter). What the market says at the moment is far more important than what TA or FA says for the far future.
There are two ways to read the YM Futures for the bulls:
ES is practically the same as YM while NQ is a potential 1-2-i-ii-iii-iv-v-3 with the 4th and 5th waves still missing.
For the bears, the wavecount is a simple a-b-c or a double zigzag up.
With the ADP report less than expected; it is far better to play caution now rather than wait for the Friday's Jobs Report before making a decision.
I sold the YM (bought yesterday) early this morning and sold 1/3 of SSO swing trade holdings (bought in March 16 bottom) as a precautionary trade management decision.
I will also sell the remaining 1/3 SSO 'Hit-n-Run' Free Trade (bought at $50.08) at or near the $53.79 Nominal Target for the supposedly 5th wave run on the 60min chart.
Risk vs. reward now leans more toward risk of SnP500 going for an Inverted Head and Shoulders Pattern (on the 240-min chart) after it completes a 1-2-3-4-5 rally on 60min chart with Minimum 1327; Nominal 1333; and 1340 Maximum Allowed Targets for the 5th wave (using the 60min chart). SnP500 is either a 1-2-3-4-5 with 5th in progress OR a 1-2-i-ii-1'-2'-3'-4' with the 5' of iii in progress for the bulls. For the bears; it is a simple a-b-c up, a double zigzag up, or a triple combination in progress. Time will tell what is the real story.
------------------ For the YM Trades:
IF the wavecount is an impulsive 1-2-3; then expected pullback will be 38.2% to 50% of the 3rd wave but no more than 61.8%.
IF the wavecount is a 1-2-3-4-5 with the 4th and 5th underperforming; then expect a pullback that should retrace more than half the rally from March 16, with a good probability it will retrace at least 61.8% of the whole run up.
IF the wavecount is either an a-b-c or a double zigzag up; then it is either the B:3 of an A-B-C-D-E Triangle on the daily chart; an a-b-c run down will retrace more than 61.8% of the a-b-c run up; the a-b-c- up is an X-wave to be followed by either a Flat, a Zigzag, or a Triangle (small a-b-c-d-e); or a 1-2-3-4-5 run down will follow the a-b-c run up - in that order of probability. There are many other possibilities but the 4 scenarios cited are the higher probability scenarios based on what have actually transpired since the Feb 18 top.
I will sell the YM Swing Trade (bought after the closing time of March 16) as soon as it makes a high probability divergence sell indication on shorter time frames (to maximize profit). YM Swing Trades have far shorter timeframes than the SSO Swing Trades.
Like what they say, the proof of the pudding is in the eating. Today is a good time to eat while the Main Indexes are possibly near the end of their best performance since March 16.
A 38.2%-50% or even a little more than 50% pullback of the whole rally from March 16 will be very welcome for the short-term traders while giving the swing traders some breathing room to re-strategize their positions and possibly make some Trade Management changes to minimize potential losses to existing paper profits.
I will just buy back the 1/3 SSO Swing Trade and/or make another YM Swing Trade (either to the upside or downside for YM) depending on how the markets will perform in the near future.
Reading tea leaves is not easy.