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Welcome Aboard ... Abandon Ship

Apr. 14, 2011 9:57 AM ET
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Seeking Alpha Analyst Since 2008

ES futures is now testing the potential InvHnS upper support level and the 1300 confluence of supports:

-    img814.imageshack.us/img814/5784/snapsho...

The v-th wave looks like it is still missing a 4' and 5' sub-waves that the support area may or may not allow to form.

There are at least 3 different wavecount interpretations of the price structure.  Which one (or none) is correct only time will tell.  What is important for me as a trader is that there is a Confluence of Supports at the 1300 level.

Confluence of Supports for the SnP500 is the 1305 area.  The potential InvHnS Right Shoulder Support is at 1301.

This is an opportunity to start a new Swing Trade in expectation that the wavecount is 1-2 with the 2nd wave still in progress together with the Potential Inverted Head and Shoulders Scenario.

However, the i-ii-iii-iv-v run down bodes well for the bears and they will be waiting for an a-b-c pullback up to add more shorts or to start new ones.

Welcome Aboard = I bought 1/3 SSO before the open at $51.48 as initial position for a New Swing Trade.  This new trade has stop loss provisions appropriate for it's entry point which is at today's LOD (the previous Swing Trade still has stop loss provisions below 50% and 61.8% retrace of the whole rally from March 16).  Will try to buy YM again once it makes a 1-2-3-4-5 wavecount on the 5min chart.  The YM Intrepid buys yesterday got stopped out overnight will less than 20 points per contract loss. 

Abandon Ship = I will be selling the remaining 2/3 SSO Swing Trade bought last March 16 at the $47 area on an a-b-c pullback up.

This Trading Strategy is to force myself not to cling to hope that the Swing Trade of March 16 will succeed achieving it's targets - while it is very clear that Dow Jones and SnP500 (also ES and YM) are already forming a i-i-iii-iiv-v sell-off which is the earliest indicator that makes the potential Major Pullback or Meltdown Scenarios high probability.

The Permanent Senate Investigation Committee has submitted their report to Congress and Congress will submit the report to DOJ for possible case action.  IF the DOJ files criminal charges against Goldman Sachs = WELCOME GREAT DEPRESSION Part II.  No company will survive a criminal investigation.

In lieu of the above scenario;  I will be trying tor raise at least 25% cash and will try to short ES on an a-b-c pullback up to protect my portfolio.   IF the DOJ files criminal charges against GS (and/or the other banks);  I will go 100% cash and wait for SnP500 to go down to the 500 to 200 area before trying to invest again.

Hope for the best but prepare for the worst.

3:30 pm Update:

I was able to buy YM at 12,117 and 12,140 when it melted down on 5min with a 1-2-3-4-5 pattern.  Immediately sold half load at 12,177 resistance as a 'Hit and Run' trade to recoup losses in yesterday's Intrepid Trade of less than 20 pts/contract.

Indu is now an acceptable 1-2-3-4-5 rally on the 5min chart but has a good chance to morph into a 1-2-i-ii-iii-iv since SnP500 is still either an a-b-c; 1-2-3; or a 1-2-i-ii-iii up.

$TRAN rally is stretched out on the daily and will be needing some more pullback down to reduce the over-bought condition before it tries testing it's all time high of 5536 on the monthly chart, it is now making an attempted pullback to the upside on intraday.   XLF is still in bad shape and may either attempt another run up or simply just slide down.   IYR, RTL, ITB, XRT, UTY, etc. mostly are still ok with some of them making bullish engulfing bars today.   $SOX was the albatros for the Compq for the last 2 weeks but is is now sporting an expanded flat pattern as either a b-wave or a 2nd wave, high probability $SOX will be able to break above the 444.60 major resistance with ease and morph the extended 1-2-3 impuslive sell-off into an a-b-c corrective with a c-wave extended.  Russell2000 got kicked down by it's monthly double top resistance and was the one responsible for the 5 days meltdown (most traders are wondering why the SnP500 just keeps going down with no reason and are blaming the financials sector;  but it was Rut who is facing it's all-time high resistance of 856),  Russell major resistance is not the monthly double top per se but the equal move target resistance of 874 since it is a higher high pattern on the monthly chart and thus has 70-80% chance of breaking above the double top resistance without going for a major pullback first.

Unless something very bad happen at the newsfront for the next several days;  I believe a major pullback up on the intraday charts (30min) is just starting after 5 days of i-ii-iii-iv-v meltdown/

IF the SnP500 120min Cont InvHnS (and Compq 120min Bull Flag) works as expected;  then the (adjusted) target for the SPX is the 1391 to 1415 area using the 120min chart potential 1-2 wavecount.  1419 is the maximum allowed 1-2-3-4-5 rally for the Daily Chart Alternative Short-Term Scenario.  So far, so good.

Indu should be the one in big trouble now since the $TRAN may suddenly break down without being able to retrace at least 32.8% of the intraday run down better viewed on the 60min chart.  $TRAN is consolidating at the bottom of the run down for 4 days already and is the one most susceptible to a sudden breakdown.  So far, Indu is showing considerable strenght today as compared to SPX and Compq.

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