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Game On!

Hard Fight (slugfest) is On between the bulls and the bears.

Head and Shoulders on the weekly chart is now potentially to be challenged by
an Inverted Head and Shoulders on the daily chart:



But since the HnS appeared at the heels of a 1-2-3-4-5 rally;  it has a low-probability of success at the present stage.


Likewise, the InvHnS on the daily chart appeared at the most in-appropriate place on the weekly chart and therefore is also a low probability setup at it's current form:


My take is that neither of them will succeed to reach their targets or will fail immediately as is more often the case when a higher degree 1-2-3-4-5 rally off a significant bottom has occured (March 2009 to April 2010 in this case).  They are run-of-the-mill gameplay among bulls and bears in any timeframe that I have analyzed.  But then, it is unwise to dismiss them at this moment since their success rate is in the 30-45 percent (guess-timate based on my observations).  So, either of them may succeed at those potential rates.  Not something to be taken lightly or seriously but always with a heavy dose of salt.



For the Bears:

Not much problems for the bears.  Just follow the wavecount.


These are some weekend analyses for the next few weeks trade(s):





Good chance the major sectors will at least try a reactive rally next week.


$Rut is the leading index as far as the Potential Complex HnS is concerned and is now forming a scissor type of bar pattern for the last two weeks.  Scissors indicate a major struggle between the bulls and the bears with both camps now gearing for a resolution of the pattern that is currently unfolding.

All major indeces and sectors are still well above their major 38.2% fibo retrace supports on their weekly charts except for $Rut which is double bottoming at the 38.2% support (bearish).  $BKX and $SOX were able to test their 38.2% fibo supports and are reacting positively but still not close to being bullish weekly bars last week by being red inverted hammer bars.  Lower section price resistances for $SOX and $BKX on their daily charts are well defined and highly identifiable making it very good for the bulls to suddenly upset the bears while their prices are still not too far away from those resistances.

Unless a sudden breakdown happens next week;  the best course of action for trading purposes is to buy the daily Bullish Engulfing Bars that had formed last Wednesday and Friday on most of the indeces and sectors (Indu, Compq, Rut, ES, YM, $BKX, $Rifin).


Last chance for the bulls, for practically all major indeces and sectors, to make do with a rally this time on their daily charts.  They are now more or less synchronized with each other to possibly make at least a  potential reactive rally with less hiccups.  They were so out of synch early last week that repeated attempts by Spx and Indu to produce bullish intraday setups failed to materialize.

Major factor against a sustained rally is the fast approaching September and October which are considered bearish months by many traders and investors.

I am now 115% long positions last Thursday with 25% allocated for a swing trade.  Will try to raise total 20% or more Cash (from my portfolio) on a reactive rally. 

Normally, I would take 125-155% long positions on trade setups with high-probability multiple upsides potential (that could sustain for many weeks or at least for a few months).  This time, most patterns are leaning more to the bearish side rather than for sustainable bullish runs on the daily charts ($BKX and $SOX in particular).  Unless, of course, the major indeces are able to break hard above their weekly chart HnS Right Shoulder resistances. 

$SOX, however, looks more like a stable a-b-c down on the weekly chart unlike all the other sectors and the major indeces that looked somewhat "incomplete" or "hasty" a-b-c downs when they printed their last lows in July 1st (but then, these days, it is the suspect sector that could probably be the first to break down hard and pull the others down).  A good explanation for this time differential is that the major indeces were a-b-c Zigzag downs in July 1st requiring less time to complete while $SOX is an a-b-c Flat down last Friday (Flats do need more time to finalize than Zigzags).

Watch out for daily bars to start contracting, from their Wide Range Bars "prolific" production since April 28, for the possible onset of the Grinder Scenario that will make swing trading perilous and daytrading or scalping techniques to become the norm.  Daily bars are starting to contract (interspaced by WRBs) but are not consistent enought (at least not yet).