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Fight Or Flight

Part III of June 29 proved a disaster as the media kept harping all the bad news for Greece with no mention of any of the good news all day long. Predictably, the markets just kept plunging all day similar to May 6, 2010 Flash Crash when the media kept airing the Greek Riots with no let up.

So, I decided to make a follow-up analysis in July 8 together with recommendations for both intraday and daily chart traders (see July 8 aarc Comments):

<< SnP500 200ma Test and Bounce:

>> SnP500 Bullish View:

>> Spx Bearish View:

Daily 200ma Support was the most awaited test and bounce SnP500 specialists have been waiting for since October 2013. Unfortunately for them, it never happened till now since whenever a test and bounce of the Dow Jones happened, a strong rally happened. The October 2014 test decidedly did not bounce at all and instead broke through like hot knife to soft butter. Definitely a don't trade, for the more conservative traders, until Dow Jones and SnP500 recovered above their 200ma broken support in October 20, 2014.

There are many ways of analyzing markets most of the time. And the Bullish View is not one of the exceptions. Read the notes carefully.

Similarly, pain in the ass as it may seems for the uber-bears; majority of run-of-the-mill bears can't get enough Complex Head and Shoulders Patterns. Addicted or what only time can tell.

Only a break above 2137 will invalidate the Head and Shoulders. But then there looms the dreaded Three Push Ups that a master trader have learned to view with utmost respect (and trade accordingly). Thus, the bulls will never be out of the woods until that strong trendline resistance got taken out decisively for the pink uber-bullish scenario. Otherwise, it's a bearish child born once the dark blue 1-2-3-4-5 rally has completed and a collapse the next expected scenario - back toward the 200ma support.

>> Intraday Analysis:

Easy does it, isn't it? But not that easy. There is still some kinks and we certainly do not know if this thing will transform into something else. Conservatively, default is 9-waves intraday rally. Everything else comes second fiddle until proven wrong.


Trading Strategies:

It is extremely hard to control emotions when we suffered so much for several months with this crappy tight trading range that seems to go nowhere. They say salt water erodes steel and that seems what the majority of traders have been undergoing through. Not if the steel hull is protected against erosion :).

And that's what I've been trying to do since January this year despite massive skepticism among the majority. Swing Trade Part I of Feb 3 was a successful trade if not a very good one. Parts II and IIa proved much more of contact struggle but we made some money selling partial position in May 18th. That's how trading strategies work most of the time sometimes even against all odds. We just have to learn how to roll with the punches.

Right now, it is either fight or flight with these extremely crappy doggy bones thrown to us starving traders. Take it or leave it.

For me at least, I believe in trading the trend until it is no more even though I am starting to recommend shorting SnP500 since May 18th for the most nimble traders. The Three Push Ups have worked wonders for a master trader I've admired (and for me too when shorting the markets).

But then there is Tom Lee who's very unconventional methods that seem to work wonders. I've been following some of his 'predictions' for at least a few years and they seem extra-ordinarily effective compared to run-of-the-mill financial analysts. Check his 93% probability of strong rally at BI (Business Intelligence).

With those two massively strong opposing scenarios at hand, I would rather recommend SOP Trading Strategy of selling at least 1/3 positions today or early tomorrow. Trail the other 1/3 at levels most comfortable to each individual's character traits; and the last 1/3 below the July 8th low as the standard EWA method.

For the more advanced traders, there is nothing wrong with speculating either the Head and Shoulders or the Three Push Ups. Up here rewards vs. risk analysis reigns supreme for shorting the markets. Same way that buying the dips reign supreme down there with favorable rewards vs. risks. If timing is done correctly, it is not considered a failed trade if we lose some money as long as we keep trying to reduce our losses to the bare minimum. Let the markets maximize our profits when our trades turned out right. Most of the time markets would make either pullbacks down or ups and we take partial profits as soon as possible to mitigate unpredictable events from turning profitable trades into disasters.

Since we know to count from 1 to 5, or 1 to 9, or even 1 to 13 waves, trading the markets can't be that hard. Only that we need lots of patience waiting for those patterns to form before acting.

* For me: I sold the YM buys of June 29 when the media concentrated on bad news after the open for small profits. Bought back when SnP500 tested it's 200ma and immediately recovered. Sold it early today before the open. Will wait again for a possible a-b-c pullback down on the 60min chart in the days ahead. If SnP500 goes down in more or less 6 days without breaking the July 8th low, then I'll re-position for a bigger rally. I might start shorting ES using the 3 Push Ups to protect at least half of my portfolio. Will cross the bridge if and when we get there.