Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Yellen Sings

It was very noisy down there when the Crickets Sung. That was one clue some traders used to make counter-trade bottom buys.

Up here; the soothing voice of Janet Yellen still reverberates but many market participants are full of skepticism the last pullback of 6% was good enough to support another strong rally.

SnP500 for the more skeptical traders/investors:

>> Daily Chart Bearish View:

>> Weekly Chart Bearish View:

>> Monthly Chart Bearish View:

SnP500 MUST NOT rally far above 1905, on the daily chart, if the Conservative Scenario, for the weekly chart, is to be proven right thus eliminating the other less bearish or more bullish scenarios such as the Dow Jones Aggressive Scenario and/or the Russell2000 Super-Duper Scenario = Process of Elimination.

As usual we defer to the monthly chart; which may still need a correction in order to produce a minor Divergence Sell Signal, on a higher high rally, as it rallied vertically from the Nov 2012 higher low bottom.

* Note that the last time SnP500 produced minor Divergence Sell Signals was from April 2011 to Nov 2012 that failed to produce a lower low run down = so far so good.


Trading Strategies:

UP HERE .... the potential for a Major Correction of +/- 20% or 295 SnP Points remains an imminent and present danger against the super bulls. For the super bears, this is one of the topping patterns they have been trying to predict since May last year = to no avail (yet).

Thus, the better trading strategy for the more conservative medium-term traders and investors is simply to stand down either by taking some profits off medium to long term positions or simply try not to trade the markets to the long side.

For short-term traders: The Trend is still a Friend until no more. Thus, SnP500 might still be able to use the 50ma support.

>> SnP500 Intraday Conservative:

>> SnP500 Intraday Aggressive:

SnP500 made a strong vertical rally off the last W-X-Y bottom and thus momentum is on the side of the bulls. A Continuation Inverted Head and Shoulders (also called a Bull Face) is the next most anticipated pattern to form with an A-B-C down for the short-term basis.

The intraday aggressive scenario is obviously for those who believe SnP500's last intraday high of 1850.84 of Jan 15 should be tested (it serves as a strong magnet) while Spx is not yet producing a Divergence Sell Signal from the Feb 5 bottom = no incentive for them to sell (yet).


For me:

- I raised 10% cash from my long-term investment as SnP500 rallied toward the Major Fibonacci Extension Resistances of 1823 to 1923 = As a precautionary investment strategy.

- Kept trading the markets on short-term basis buying YM on dips since June 2013 = 7 successful Day-trades so far. 2 to 4 failed trades some of which made tiny profits and the others small losses as their hard stops and/or trailing stops got taken during failed attempted rallies on intraday that proved to be minor bounces up on daily.

- Will sell the YM buys of Feb 05, 2014 on a minor a-b-c pullback up using intraday charts.

- Will try to short ES on a minor a-b-c pullback up using intraday charts and/or if SnP500 rallies toward the 1905 Upper Limit on the daily chart.

- Will try to buy YM again if it makes a minor A-B-C down on intraday charts. That is; if SnP500 makes a good test of the daily 50ma and bounces back up.

Trading the trend at these levels is far harder than it used to be. Thus, some hedged trading can be a better strategy for the more nimble traders: Buying positions on minor dips then building short positions on minor rallies as a hedge can be less risky for medium-term traders but not necessarily more profitable for short-term traders.

See the other weekly chart scenarios illustrated on previous Instablogs for those who still prefer to trade these markets to the upside - medium term basis.