Saturday, April 18, 2009

I'm Fully Short

A lot came together on Friday. The 8 SMA held early in the day and the indices went for a new high (which was predicted). The high came in at 875.67, which was in the 870 zone that was forecasted and less than the 880 number, which I added as the maximum if the ED scenario was right. It came in as a slight overthrow to the trendline, which is picture perfect. We got a nice reversal at the close.

One of the things about EW is that it can give you areas where resistance will be extra strong as opposed to just random support and resistance lines. The ending of the previous w4 is one of those areas. The previous w4 ended at 875.16. Friday's high was 875.67.

Now, these next pictures are some technical signals that I use that are highly accurate in identifying short term reversals. Since we got a short term reversal signal in an area where the larger wave 'A' should end, I'm taking it as a signal for wave 'B' to begin. Wave 'B' should, at a minimum, take us to 780, but certainly it could go a lot lower.

If we break Friday's high on Monday, then the market is much stronger than the picture I'm painting and we could go quite a bit higher from here. So, I'm short at ES 868 (stop above Friday's high) with IWM May 38 Puts at an average price of .54. Have a great weekend, and best of luck to your trading.


  1. Nice work, but to assert that we will see "780 at a minimum" seems a tad dangerous. The move up has been approximately 209 points, SPX 666 to 875. A .382 retrace of that move takes the market to just under 800. It sounds like you are assuming that the retrace will be at least .50. It could, but it's far from guaranteed.

  2. edwardo, the target for any break of a rising wedge is the base of the wedge. That is 780. I know you think that this market has been so strong that a .382 is all we'll get, but it would actually make the possibility of hitting my upside target (1000-1100) more likely with a bigger correction. We could actually do quite a bit more than 780 (770 is the 50% rl), so I think that is not being overly ambitious.

  3. Nice Rich. Nice Work. Thanks
    What I think. Enjoy.
    These levels of compliance were never very good for the market. We are already extreme levels. I believe a short term top is supported also on indicators of current sentiment. At this level I say we are between a yellow and red alert.
    Only three graphics to explain better.

    We should be very close of top. Mybe monday a high residual above the last friday.
    If no break in the closing 885 this is an area of Top.
    Below 885 should expect a visit to 780 mybe 750.
    835 important to break the pattern of recent weeks.
    Forming a rising wedge (bearish) in recent weeks confirming loss of momentum.

    Close above 885 next level 905-920.
    Close above 945 (MM200) should see a visit to 985-1010.
    In the graph are represented the major area of resistance for the next sessions.

    The short that open and published on Thursday.

    Maintain all open positions on Thursday. I opne more last friday between [870-880] as had published . I am currently sold at 80%. The other 20% just above the high of last friday or with new sell signal of hourly MACD.
    Stops is placed between 887 and 890.

  4. By the way the Pi Cycle turn date, with a minor cycle 2.15 yrs long, is today.

    This model, developed in 1999 nailed the following dates as major turning points: September 2000 (S&P and DOW market top), November 2002 (S&P and DOW market bottom) and, most recently, February 27th, 2007 (the credit bubble popped). We are now exactly 2.15 yrs later, and about to likely take another turn.

    Hmmm ....

  5. Carlos, thanks for the comments. Keep up the hardwork in your neck of the woods.

    Schweizer, yes, we definitely have all the ingredients of a ST market top. Next week should be our confirmation if the market is going to comply.

  6. Good job rich. I followed you with the puts on IWM, and I'm long SDS, QID, and FAZ. Isn't it interesting how, after two weeks of "good" news from banks, the stories are now poring forth again about how nobody believes it.

    So what will drive the next wave up? Suddenly they are solvent again? Curious as to your thoughts.

    Keep up the great work. I follow you every day.


  7. press man, good job on getting in your positions. So far so good...let's see if the market continues to work in our favor. As for the next wave up, essentially it will be a lot choppier this next time. The easy money for the bulls has already been made (if you can call it easy money). Essentially, the market should move up on the 'hope' that the recession will end by Q3. When that hope never materializes at the end of the year, that is when we will really go down.