This is Heads UP for swing traders. Will finalize all charts later.
>> Heads UP Swingers: drive.google.com/file/d/0B9dBZPXNckXYRFU...
Dreams can come true. As long as they are not nightmares, I like to have them once in a while ... more so during troubled times.
Good for those who bravely counter-traded the end-of-the world barrage of so-called catastrophic bad news by sensationalist financial analysts and media pundits.
<< SnP500 Swing Trade Buy: drive.google.com/file/d/0B9dBZPXNckXYSUM...
>> Performance Review: drive.google.com/file/d/0B9dBZPXNckXYNVY...
>> Medium-Term Trend Trade: drive.google.com/file/d/0B9dBZPXNckXYdTF...
Time can run fast with fast markets. Time can run out for many investors who cashed out during and after the mini-Black Swans of August and Jan/Feb panic selling. But not us contrarian trend traders who prefer to Buy the Dips and Sell on the Rips.
On the Stochastic side; very strong rallies do not immediately go into Cycle Downs but rather give a warning or two. Sometimes even more than two warnings before the Stoch goes cycle down. In this particular case, it is a 'Grave or Big Warning' right out the box. Thus, CAUTION is being called for on this new stochastic ramp up above the 80% mark.
- Bulls are now enjoying several minor to major supports as SnP500 rallies above the major 200ma Support on the daily. For now, the minor 20ma/ema supports are still working fine with scalpers still using the 10ma for buying micro-dips and selling on micro-rips.
The medium-term trade remains highly viable as price goes above the weekly 200ma/ema Support. And Spx is also able to re-mount the 50ma. But after a major breakdown; more often than not, the 50ma would prove the whipsawer on minor to major pullbacks and the 200ma/ema the major support. Not until SnP500 can rally far above the 50ma can it become a viable support later - on a major pullback down.
There were/are three scenarios or green shoots that cropped out early during this rally specifically:
1.) Type Two Rally (Done): drive.google.com/file/d/0B9dBZPXNckXYNE1...
2.) Spiral Meltup Rally (important): drive.google.com/file/d/0B9dBZPXNckXYRFU...
3.) Running Correction Type: drive.google.com/file/d/0B9dBZPXNckXYT1l...
If rallies are to be classified into three basic types; the most common wherein the 2nd wave would retrace far more than 38.2% and the 3rd becomes extended should be the first category. Second would be the one with shallow 2nd-wave pullback and hence the 3rd becomes shorter and the 5th shortest. Third and least common is when the 3rd wave becomes longer but failed to become extended (either with shallow or deep pullbacks for 2nd wave); and hence, the 5th wave is qualified to become longest and/or the extended wave. By far, extended fifths is the rarest.
Likewise, there are much more different types of Spirals including 9-waves and 13-waves I call Complex Spirals with overlapping waves the more common and far less hard to recognize early in the game. The more complex Spirals are the ones with almost indistinguishable pullback waves including 5 waves, 9 waves, and 13 waves. Most of the time they are practically almost impossible to anticipate ahead of time.
Type Two Rally: Spx was initially fully qualified as high probability shorter 3rd wave and shortest 5th. But since it kept spiraling upwards with almost indistinguishable pullbacks down; then it qualified for 5-waves spiral with the 3rd longer but not extended. And hence, we still have to consider the possibility, although remote as it is, that the 5th can become the longest and extended wave with 2,350 maximum allowed run rate. For now, Spx is approaching 5 = 1 as nominal target.
Also, since Spx produced what is usually called a potential Running Correction of 2nd wave; then the 3rd wave MUST, if it is truly a fully qualified running correction scenario, rally at least 2.618x of the 1-st. Unfortunately, if extended 5ths are rare, then running correction scenarios panned out much rarer than the former. Thus, conservatively, just set the 2nd wave to a higher low then provide a 2x Target to the upside toward xxx nominal target for a complete 1-2-3-4-5 rally.
Which scenario is going to pan out is again better entertained with the 'Process of Elimination' I initially concocted, for public consumption, starting May 2013 for the initial possible three (3) scenarios that started to crop out in November 20, 2012 for the medium-term trade of July/November 2012. This time around, we have more a swing trade that can transform into a full-fledged medium-term trade if the extended 5th scenario or running correction scenario comes into play.
But for now, be my guest for any guesswork.
I've discussed those three scenarios in previous instablogs. Thus, it should be of no surprise for those who might have spent a modicum of time trying to understand them.
They are extremely hard to trade. For example; the expected (or hoped for) Extended iii-rd Wave Rally from October 2011, on the monthly chart, took me more than a year toward May 2013 before I became confident a blue i-ii-iii-iv-v cyclical rally would happen with 90% probability. And several more months before Scenario #2 or Complex Spiral Meltup Scenario of November 20, 2012 became the highest probability using the 'Process of Elimination' on the initial three that cropped out in Nov2012 and additional two or more scenarios cropping out later on. But achievable by basically using the weekly 50ma as a do-or-die support back then with basic TA instead of relying on extremely complex EWA patterns that kept forming from November 2012 to May 2015. This time around, perhaps we should use the daily 20ma/ema? I don't know since from my experience, the daily 20ma/ema are too fragile.
- At any rate, now that the Type Two Rally or Conservative Scenario has been eliminated; then the Spiral Meltup Scenario is now in play with 2,132 nominal target measured from the 2nd wave and 2154 measured from the lower low 4th wave bottom (2160.58 aggressive 5th nominal target using higher low). And hence, the 1-5 Testline is the target objective for major profit taking and the 2-4 Testline as typical EWA hard stop to close the February 11 swing trade whether Spx goes toward and tests the 1-5 testline objective, or not.
For me at least, I have already closed the YM Swing Trade of February 11 back when Spx was testing the potential HnS Resistance and daily 200ma Rainbow Resistance as primary targets. To date, I was able to perform at least 4 successful daytrades in addition to the swing as the rally spiraled upward. And have one position initiated lately as a Free Trade.
- Also, I am planning to take partial profits off the 3xETFs GUSH, UWTI, and LABU bought last February 11 as well. And perhaps some RUSL and BRZU too which are approaching their 5th wave targets on the daily together with the EEM. They rallied almost/more than 3x already I should be more protective now than risk a major pullback down.
For others, they will have to decide what to do with their swing trades whether to close them down or keep some as either free trades or convert some toward a medium-term trade just in case the markets execute weeks of too-shallow pullbacks (instead of deep pullbacks) common during irrationally bullish market sentiments. SnP500 can rally for 8 weeks straight without a minor to major pullback down and sometimes up to 10 weeks. Rarer still were 12 to 18 weeks but they did happen in the past during bull runs. For now, counting bars from February lows, we are at the 10th week.
For the medium-term trade with more or less 8 months of expected rally; the more irrationally exuberant the markets, the better. Likewise, this rally might end up as more or less two years without a correction, minor or otherwise, if the older DAX of Germany be our guide and the Spx is still outperforming DAX on run rates short-term basis:
>> DAX Medium-Term: drive.google.com/file/d/0B9dBZPXNckXYMlB...
I just don't know with certainty how they would pan out. That's why I monitor markets all the time instead of going to sleep for weeks and months and possibly years on ends. To keep myself from over-analyzing the markets that can result in Analysis Paralysis; I do daytrades and some 'irresistible' scalps instead - just to keep the juice flowing and prevent me from becoming obsolete over time.
>> Spx Monthly: drive.google.com/file/d/0B9dBZPXNckXYUG1...
At any rate; SnP500 produced a Wide-Range-Bar last month. Thus, for those who might want to speculate Balance and Symmetry Method; then expect April to be more or less comparable to February performance. Thus, using the March W.R.B midpoint as median, then upside quick and dirty target is 2200 - before two to three months of major pullback down should follow (avoid selling if April turned out to be a solid bar which usually turns out to be continuation bar). On shorter timeframes such as intraday and daily charts; markets tend to spend 2/3-rd of the time making pullbacks or consolidation ranges. On longer timeframes such as the monthly and quarterly charts; those pullbacks and consolidation ranges usually got compacted and become parts of rallies instead; and hence corrective processes on longer timeframes tend to look like they spent much less time than the rallies.
Somewhere over the rainbows, there would be a ceiling the markets would not be able to break easily. Or some unforeseen bad events might happen sooner than expected. Thus, using Trailing Stops is the SOP Trading Strategy at this time as the rally goes more up up, and away - for short-term traders. I've already enumerated some of the more aggressive techniques in previous instablogs including general guidelines for the more passive types. They are mostly discretionary depending on one's character traits and/or trade objectives. Daily 20ma/ema is among the 'frontline' defences for short-term swing traders but it is too fragile. The daily 50ma support is still too far away.
- Thus, perhaps using the 34ma may prove the right choice for those who expect the markets to keep spiraling upwards and accomplish either the Running Correction Scenario or the hallelujah Extended 5th Wave Rally. In which case I expect SnP500 will be able to produce at least one more Holy Grail Trade on the 240min chart, if not on daily chart, along the way and the 34ma would become the default Hard Stop (see previous instablogs for the 240min Holy Grail Trade for SnP500. To date, the 240min 50ma Support remains unbroken and might as well be the one to choose as a Major Support for intraday traders).
As a general guideline; more than 61.8% retrace of the most recent vertical rally, using intraday charts for short-term traders, usually results in a re-test of the most recent higher low. Which in many cases, also result in a minor to major pullback downs on the daily chart.
For the less technical-oriented traders or short-term investors for that matter; Dow Jones' daily 50ma is now starting to re-test the 200ma and might as well produce a 'Golden Cross' if it keeps rallying. None of the expert and master traders I know ever used that method because it requires Buy High Sell Higher Strategy - which practically they don't need when since they usually execute Buy Low Sell High Strategies as an SOP Trading Strategy.
- During the secular rally of 1982 to 2000; Death Crosses and Golden Crosses proved prescient as Sell Low Buy High against the bears and Buy High Sell Higher for short-term investors.
- To date, Golden Crosses proved very good, if not excellent, buy entries for those who got left behind by strong rallies off minor to major corrections in this cyclical rally off the March 2009 Significant Bottom.
I've illustrated how Death Cross/Golden Cross sequence worked in my Comments back in the last few months on articles heralding the most recent Death Cross using the 50/200 and the 200/500 moving averages. They resulted in Sell Low Buy High and became launching pads for more rallies for weeks and months after the Golden Cross got triggered. Thus, who knows, the potential Golden Cross, for Dow Jones, might as well work over-time for prolonged periods of time (again) this time around before another Death Cross happens again into the Not Near Future far above current prices.
<< PIIGS Crisis: drive.google.com/file/d/0B9dBZPXNckXYdnR...
<< EU Debt Crisis: drive.google.com/file/d/0B9dBZPXNckXYQjN...
A death cross occurred during the PIIGS Crisis. The golden cross sustained a strong rally from October 2010 to August 2011 before another death cross happened again.
During and after the EU Debt Crisis; the death cross of August 2011 again resulted in Sell Low for many investors with a Buy High golden cross in January 2012. The golden cross sustained a rally for more than 3 years - far far above that January 31, 2012 buy trigger before another death cross happened (triggered) again in August 31, 2015. Way to go!
That's just the way things go during major rallies - specially Momentum Rallies: Bearish signals tend to be short-lived while bullish signals got favored and in many cases follow-thru rallies tend to last much longer. That's why I love Trend Trading the markets for as long as the trend remains a very good friend indeed.
--> But for now, UP HERE, try to follow SOP Trading Strategies either by taking major profits off targets and/or using tighter trailing stops to protect major portion(s) of paper profits.
Leaving some positions, 1/4 to 1/3 portion(s) of swing trades as a 'Free Trade' is one method I've learned in order to prevent me from becoming a FOMO victim in past cases when the markets just kept spiraling upwards for weeks and months with only minor pullbacks down. The best swing performer I've got, with at least 1/3 positions as free trade, was the one initiated in January 10th, 2013 - it lasted more than a year before I decided enough was enough and finally closed that swing trade in Feb/March 2014 (see the January 8, 2013 instablog for that swing trade). Way To GO!
Good luck and happy trend trading.
* completed April 20, 3:54pm
(Dow Jones Golden Cross triggered today).