Monday, December 27, 2010

Holiday Cheer....

...I hope everyone has had some this special time of year. Even if you're not a Christian it is a special time of year to think of others and spread some cheer.

I've been pretty quiet this past week, but so has the market. Today put in a nice subminuette wave 4, and I expect our 5th wave to top out some time this week. Look for a move below the 55 hourly SMA to confirm it.

Tuesday, December 21, 2010

Quick update

Sorry for the lack of posts. My previous post should tell you where I'm at on this: 5th wave extention. The market bias for a year-end rally has kicked in and we have our next 5th wave target right over head. This should be an ED 5th, but we'll see how it plays out.

Confirmation is a break below our subminuette wave 2.

Best of luck!

Friday, December 17, 2010

Correction started...but how far?

We had a confirmed completed wave 5 pattern on Wed. Yesterday gave us a rally back to the 786 retracement, and it looks like the market is rolling over from here. We need a complete bar below the 8 SMA to confirm.

Now, this doesn't mean the bears are in control...yet. If the bulls can hold the 1220 area, then they are in a great position to really push this market higher. If the market drops to the 1200, then the bulls are hanging on a cliff with the bears ready to snap their fingers. A close below 1170, and we should have a more prolonged down move if not the return of the bear.

Best of luck!

Wednesday, December 15, 2010

Quick update

Sorry, busy times....

The run down is this. We got our first full hourly bar below the 8 SMA, and we hit our first wave 5 target and tested it. I'm expecting, at a minimum, a move to the 1220 zone. If this gets bigger, and moves to 1200, then this should be the last stand for the bulls. Otherwise, we're looking at a much larger correction if not the return of the bear.

Monday, December 13, 2010

Resistance up ahead

With the strong showing last week, the RSI(5) being in sell off territory and our wave 5 target directly overhead, I'm expecting a strong selling reaction to that level this morning. But until price gets below 1220, we can have a subdivision, so that is the 1st level that needs to fall for the bears.

Other than that, let's see where the market takes us.

Friday, December 10, 2010

Morning update...

Sorry for no post last night...busy times...

There are 3 wave 5 targets. The first one is obtainable without a 5th wave subdivision. The others are not. Due to the gap up this morning, the RSI resistance line will likely be broken unless we get another sell off at the opening bell. So where do I start on a subdivision? The hourly 8 SMA. A full bar under that, means we've reached the end of a wave structure. Any short can use the high of that structure as a stop. I would not short except on a pullback once prices move that far.

Wednesday, December 8, 2010

Still grinding up...

The move off the highs doesn't look impulsive. In addition, it is the same length as our minuette wave 2 and tested nicely our 34 SMA. That makes it the most likely candidate for a minuette wave 4. This means we should see one more test of the highs before we complete our 5 waves. The overnight futures appear to be supporting this count. Be prepared for a potential gap up accompanied by a reversal.

Tuesday, December 7, 2010

5th wave complete??

So far we got the reaction we would expect at the completion of a 5th wave. While it popped higher out of the gate, it died right in my target zone of spx 1234 (the high was 1235.22), which was based on a 5:1*.786 relationship. Of course to get really excited we'll need an impulsive move down that takes out some key pivots.

Ideally, we start tomorrow with a gap down that runs. Regardless, as long as prices don't move above 1233 tomorrow, bears should be able to take this to the next key buy zone.

Here are the key zones to watch:
- 1220/1224 (the breakout of consolidation pivot)
- 1198/1202 (the middle of the last consolidation)
- 1172/1176 (the bottom of the consolidation range)

If the middle pivot falls, then the bulls likely face a very steep retracement (assuming primary wave 3 hasn't begun).

Monday, December 6, 2010

A small subdivision??

We'll we got our sell signal, but the market didn't want to follow through. From the looks of the divergence and the waves, another small 4th wave does fit into the pattern, so I'll go with that. The only other option is a larger subdivision, which means another nasty breakout is coming...

Sunday, December 5, 2010

Weekend Update

We have a potential 5 wave completion pattern with Friday's price action. The RSI(5) is in a vulnerable position, so if Monday morning's price action pushes it back below 70, then that would be a confirmation that we've completed a wave structure. Now if it is just a bullish wave 1, then we'll see price hold in the 1200 zone. Much more than that and the bears will come hungry and should get their fill with prices breaking down to the 1120 area. This would be the next bullish support area. If prices move below 1100 then look out.

My Automated System

On an unrelated note, I've been working on a fully automated system for many months now. I just finished it at the end of November and back tested it from 5/15 - 11/22. Because of the changes in the futures contract, it made it difficult to get good data before then. I'm excited with the results as you can see, but I know it is only 50 trades, and that is not enough to get solid statistics on it. I'm testing it in a simulated account through the end of the year before I put real money into it.

Here's what it has done since. It seems to average 7 trades a month. Hopefully it is even half as good as those back test results...

Thursday, December 2, 2010

Bulls keep it pushing... the area they need to. The wave pattern is setting up that wave 5 should not subdivide. With that said, we are currently in subminuette wave 3. Once this wave is over, I would expect a consolidation wave 4 and a pop and drop wave 5. This will complete a minor wave. It will either be wave 1 of primary wave 3 (if this is a bull market) or wave C of primary wave 2 (if this is a bear market). You know how I lean, but the market should make things clear enough for us.

Wednesday, December 1, 2010

Bulls need to keep pushing...

...if they want this move to stick. Any drop below the 34 SMA at this point will likely keep minute wave 4 in play: either a triangle or complex zigzag. If, however, the bulls can keep the pressure on until we get to the 1220 zone, then we will have a confirmed minute wave 5. Targets for this wave are:

1. 1247
2. 1265
3. 1290

Be aware that if we reach any of those targets on this first impulsive wave, then we may have a fully complete 5 minute waves and will be ready for either another minor wave correction or the return of the bear.