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Elliott Wave Theory Advises Caution For Stock Trading The Week Of August 18-22, 2014

|Includes: DUST, JDST, JNUG, NUGT, SEAS, VelocityShares 3x Long Natural Gas ETN (UGAZ)

I am in nearly all cash and almost exclusively relying on quick scalps in various markets for now, keeping almost no positions overnight. This is what I see for the week of August 18-22, 2014:

Stock Indexes

Gregor Horvat of Elliott Wave Financial Service, using Elliott Wave Theory, indicates that the Nasdaq 100 (tech stocks) and other stock indexes, are in the 5th wave of a recent uptrend, click here. Being within a few points from significant resistance, thanks to today's strong rally, he is looking for the stock indexes to roll over shortly.

Now, if you want to see something really scary, check out this article by Sid from, found here. Sid shows how, on a very long-term basis, the bullish stock market could be on borrowed time. If you have trouble following the commentary, just click onto the charts to see projections of how far the stock market could correct, based on Elliott Wave Theory, taking a longer-term perspective.

I remain cautious chasing the stock market higher, and prefer to find special situations to play, such as stocks that have been beaten down. Many call it "catching falling knives" but I like to pick up stocks trading at bargain prices when most other stocks look quite expensive. My last article was about SEAS, click here, where I was calling for a bottom formation on Friday. I did not get the exact bottom formation I was hoping for, but the stock did in fact bottom around $18, and now has moved above $19 today. I believe that all dips in SEAS below $19 are a buy, and expect to see the stock bottom shortly and rally towards an initial target of $21. I will briefly cover other markets such as gold and natural gas.

Gold Market & Miners

Gold continues to oscillate back and forth in a very tight range. Due to bullish seasonal influences, I prefer scalping from the long side, but one can play both sides successfully, if one is cautious and gets good prices. I continue to like buying dips in triple leveraged bearish miner ETF (NYSEARCA:DUST) under $15, as well as Junior Miners JDST under $10, but feel it is prudent to have some bullish leveraged NUGT or JNUG to balance out the trades, especially if we do get a pop in gold towards $1380, as predicted by Gary Wagner, click here. In the short run, I favor scalping gold from the long side, especially on dips below $1300 in December Gold, and will be scalping NUGT/JNUG as well, at least for the next 2 to 6 weeks. If gold does rally to the $1380s, it may top out there, or gain steam to blow up through $1400. Gary Wagner appears to be more bullish on gold than I am looking at a long-term prospective, but in the short-term, we both see support in gold holding and the potential for higher prices.

Natural Gas

Natural Gas has been virtually untradeable if one was trying to play the futures market as the market swings wildly up and down on a daily basis, and sometimes on an intraday basis as well. However, I do believe that one can successfully buy the leveraged Natural Gas ETF (NYSEARCA:UGAZ), if one buys under $14 and spaces into the trade. I feel that the downside is limited for now, and Nat Gas should trade back above $400, towards $450 going into the winter. Presently September Natural Gas is caught in a trading range between $372 to $402, with the current price at $483 as I type today. I don't see Nat Gas going below $350 while Natural Gas searches for a bottom over the next couple months. Mild summer temperatures have reduced demand for natural gas on the spot, and producers have been putting plenty of natural gas in storage to prepare us for next winter. However, thanks to the cold spell we had last winter, excess supplies have been eliminated and we should see nice swings higher in natural gas, when temperatures cool in the fall and winter. If there is any hint that we will have cold temperatures next winter, similar to last year, one could anticipate panic buying with the potential to move substantially higher than we did last winter.


The thoughts and opinions in this article, along with all stock talk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.