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Friday, April 30, 2010

Friday 4/30/10 wrap up

2nd excellent trade this week, short ES from 1203 Thursday, closing price today was1185.75.  Love it. Exit plan on this trade will be keying on the upper channel trendline drawn from Thursday's high.  A breach above that line will lead to a close of position.  A note on channels and trendlines:  they need to be adjusted as a move unfolds, the current channel placement might be somewhat different when the time comes for an exit.  The V Stoch has curled up, but the experience from the bull market in Feb/Mar says to only use the V Stoch to ENTER a position that's in the direction of the primary trend, so at this point it will be ignored until such time as it moves above a reading of 75.  Sell line moved back above Buy line today confirming the bear market.
On Elliott Wave, I've labeled the move down from Mon into Wed as "1" and Wed up into Thur as "2".  They could also be "A" and "B' of a corrective formation.  If this is in fact a correction to the rally from Feb 5 (or to the whole move from Mar '09), expectations would be for more than just a couple days of selling, so I favor the "1 - 2" count which implies a lot more to come.  Either way we currently are in a 3rd or C wave, which typically are quite strong, and if true we should see a drop below Wednesday's lows at the very least.

The 5 minute V Stoch once again provided a great day trade entry at 12:55 PM CST when the V Stoch topped and ticked down.  A short at that point covered at the close would have led to a gain of around 10 points.  However, once again, it looks like day trades geared on this index need two things: a trade in the direction of the primary trend of that day, and a strong primary trend.

Short ES

2:45 pm MOVED STOP LOSS TO 1203.00

Thursday, April 29, 2010

Thursday 4/29/10 wrap up

2nd waves are typically sharp and deep retracements of the preceding move. Today's rally, if it's a 2nd wave, is characteristic.  However, market technicals today contradict the 2nd wave thought, volume was quite good with up/down volume at ~4/1 and the A/D ratio at ~5/1.  So it's possible the selloff earlier this week was another two day wonder and we're back to bull mode.  Booo hisss!
The Vindicator gave a sell signal around 11:30 AM (CST) today when the V Stoch topped a reading of 75 and rolled over.  Went short ES @ 1203 as a result.  What's interesting is the sell line on the Buy/Sell Vindicator has plunged.  If it approaches the zero level, and it looks like it will, that would also be a sell signal.  That condition led to the short sale Monday which did so well.  If today's short ES still exists whenever that happens it might make sense to add more short ES, or possibly a lower risk options put spread.

The 5 minute chart sported a V Stoch divergence almost all day which really didn't pan out.  Only value here is to highlight the need to always trade with stop losses - nothing is 100%.

Short ES

Went short ES a few minutes ago @1203

Wednesday, April 28, 2010

Wednesday 4/28/10 wrap up

SPX broke above sell off trendline about mid day today, so closed Monday's short ES @ 1187 around 1 PM - gain of 25 points. Lots of choppy and sloppy sideways stuff today, yes we closed up but it wasn't motive, much more corrective in nature.  Also, the move down from Monday is impulsive and easily counted as 5 waves.  Meanwhile the Sell line remains solidly above the Buy line, so indications are that more selling is to come.  At this point the odds are that we are at the beginning of a strong move down, so the pattern to trade off of is the V Stoch.  That indicator moved steadily toward a 75 reading today, if we keep drifting up it should get there tomorrow at which point we will have a sell signal when it rolls over.  Not putting an EW count on the pattern down as of yet, more needs to unfold before determining wave labels.
5 minute chart didn't offer any really good trading opportunities today, hard to make money on sideways stuff like this.

Vindicator updates


Tuesday, April 27, 2010

Tuesday 4/27/10 wrap up

I feel better now about the wave count posted yesterday.  Very strong selloff today and clearly impulsive, looks pretty certain that the rally from Feb 5 did in fact terminate yesterday.  Declines over advances at 5/1 and down volume to up volume at almost 18/1 on NYSE today.  Bear market anyone?
On the Vindicator the bottoming on the sell line yesterday has proven to have been an excellent short entry.  The problem now is when to exit.  In the few months the Vindicator has been tracked it has shown that it apparently needs to be used differently in different market conditions.  In a strongly trending market such as the bull run we had in February through mid-March, the V Stoch was the thing to watch for trade timing.  The Buy/Sell line showed a dominance of the Buy line, as would be expected, and never crossed below the Sell line.  However, in all but one instance, a bottoming of the V Stoch below a reading of 25 signaled a successful long entry.  Since mid-March we've had a much choppier market, more of a sideways affair with an upward bias.  Under those conditions the Buy/Sell line is the one to watch.  With one possible exception, going long whenever the Buy line bounced off "trend support" at a reading of 1000 AND/OR going short whenever the Sell line bottomed out close to zero would have resulted in successful trades.  That strategy is what led to the short trade yesterday.
Turning to the current situation, you'll notice in the below chart that the Buy line is very near that 1000 trend support level as of today's close.  If we are embarking on a strongly trending down market, then the Buy line should be ignored as per the Feb/Mar experience.  If not, then reversing from short to long if the Buy line bounces up off that 1000 level would be the thing to do. A lot will depend on the action early tomorrow.  The Elliott pattern looks like we might be "extending", which means there is some distance to go before bottoming.  In that case, the Buy line might just plunge through that 1000 level and make the whole discussion moot. 

The 5 minute V Stoch looks like it might be a useful day trading tool, especially in a strong move like today's.  A trader could have banked some serious coin today by going short at the two times where the V Stoch peaked and rolled over. 
The 5 minute V Stoch also often lays down diverging patterns which can be useful in timing turns.

Just sayin.........

So why a sell off now?  Here's something for you to chew on.
Assumption #1 - there is a PPT (Plunge Protection Team) consisting of large banks, etc tasked by the Feds with preventing another large meltdown
Assumption #2 - Goldman is a major player on that team, in fact, if Goldman doesn't participate the team is not nearly as effective
Fact #1 - The Obama administration sued Goldman a couple weeks ago
Fact #2 - The Democrats are in obvious trouble coming into this years elections and are desperate to prevent another meltdown between now and then

Now, if you're Goldman, what strategy might you be able to employ to deal with the SEC suit?  Hmmmmmm?

Monday, April 26, 2010

Monday 4/26/10 wrap up

Almost hated to put the wave count on the chart below, bear meat has been on the menu for a year now.  But if the count is correct, we saw the termination of the rally which started Feb 5 at today's highs.  And that is a big IF - there are plenty of alternate Elliott counts.
Went short ES about 11 AM today for several reasons.  First and foremost, the sell line on the Buy/Sell Vindicator bottomed and was ticking up.  That event has led to a dip of one sort or another the last 4 times it's appeared.  Also, prices had bounced down from the short term (red) upper channel line.  And finally,  the wave count appeared to be complete.  This position will need close attention tomorrow. 

Saturday, April 24, 2010

Weekend Update 4/24/10

Looks to me like "ramp up" Monday could very well give us an important top.  EW pattern is playing out as anticipated, my read is we're in "c" leg of the 5th wave of an ending diagonal which is terminating the bull run that started Feb 5.  I'll be looking for the sell line on the Vindicator Buy/Sell to make a bottom to dictate a short ES trade.

Thursday, April 22, 2010

Thursday 4/22/10 wrap up

Check out Vindicator (addendum) in side bar for some thoughts on Vindicator usage.

Not much new to add to yesterday's comments. If the alternate wave count marked on the chart is correct, we are now in the final c leg of the 5th wave of an ending expanding diagonal terminating the rally that started on Feb 5.  The "a" leg ran 27 points, "a" = "c" at approximately SPX 1217, so that is an initial target. Gonna be interesting.  

Wednesday, April 21, 2010

Wednesday 4/21/10 wrap up

If we're in an expanding diagonal 5th wave starting with the low a few weeks ago, then the 4th subwave of that can be marked as ending with the low Monday and the "a" leg of the 5th and final subwave done at the high this morning and the "b" leg complete at the low this afternoon.  That would put us in the final "c" leg of the 5th of the 5th, i.e. sell the pants off the next new high if it occurs.
The Vindicator Sell line bottomed today but the market already had moved down prior to that event and the V Stoch did not put in a divergent top, so a short position was not entered.  Still looking for that pattern, we may yet see it.  In contradiction, the V stoch moved down close to the 25 area, if it had crossed below that it would have been a buy signal, but here again no trade as it appears to be turning up without crossing into buy territory. 

One final note, I'm adding a 5 min Vindicator stochastic which looks like it may be of some use.  I'm not including a buy/sell vindicator, that study doesn't seem to generate useable information on a 5 minute chart.

Tuesday, April 20, 2010

Tuesday 4/20/10 wrap-up

V Stoch peaked this AM and rolled over this PM.  Also, sell line seems to be bottoming at the trend support line.  Those two factors combined led to selling the long ES's from yesterday @ 1202 (for a gain of +18) and establishing a short position at the same level..  Stop is set @ 1208 (6 points, about 1/2 %).  If this read is correct, it will be interesting to see if we have a sustained down market where the sell line respects the trend support and the buy line drops below that trend support, which would be the reverse of the pattern seen in the rally up from the Feb 5 lows.  If however we rally from here and get taken out at the stop level, a pattern to look for would be a drop towards zero on the sell line accompanied by a divergent peak in the V stoch, where a short trade can once again be attempted.  As I write this, ES is strong after hours, looks like short ES will get stopped out.
From an Elliott perspective, this is either wave 2 against a wave 1 down from last Thur into Mon, or it's wave 5 of a broadening wedge top (the count labeled "alt" below.)  Either of these alternates mean a serious correction of some sort is in the offing, it's just a matter of whether it's immediate or a week or so out.

Monday, April 19, 2010

Monday 4/19/10 wrap up

Went long about mid day when Buy Line was at trend support and  V Stoch curling up.  Changed stop at EOD to trailing stop of 12.50 points (= 1 ATR).  Not much else to say at this point, Elliott count is still an open question as per weekend posts.

Sunday, April 18, 2010

On second thought.......

On Friday the strong sell off accompanied by the break in the lower channel trendline from Feb 5 was strong evidence that the rally from Feb 5 was done and a selling trend was starting.  However, one thing to be noted is an apparent 5 waves down on the SPX was accompanied by only a 3 wave pattern on the ES.  Also, two highly regarded analysts, Daneric and Tony Caldaro (links in the right hand sidebar) both are of the opinion that at least one final push up is necessary.  If that's the case, what we will most likely see is a broadening top formation as per the "alt" wave counts in the chart below.  Under this scenario we are actually in a 4th wave with one more A-B-C push up to go, probably topping in the SPX 1220-1230 area.  If anything, we're due for some sort of bounce here to alleviate the oversold conditions generated Friday.

Friday, April 16, 2010

Friday 4/16/10 wrap up

Vindicator buy/sell crossed into sell mode today on the strong downswing.   If you'll note, the sell line bottomed out yesterday AM close to the highs, which is a repeat of the pattern seen before and was an excellent spot to establish shorts.  The V Stoch bottomed out today right at LOD and has trended up since, but prices have only bounced a little - looks like the proverbial "dead cat bounce".  If this truly marks the onset of a significant correction we should see the buy line drop convincingly below the Trend Support line @ 1,000 on the buy/sell chart and should see the sell line maintain above that 1,000 level.  I will be watching the V Stoch near term to establish a short position.

From an Elliott perspective 5 waves up from the Feb 5 low can be counted.  That plus the strong swoop down today leading to a break of the lower channel line from that Feb 5 low makes a pretty convincing case that we are starting a significant correction.  Oneitem of note today was that on the hourly chart 5 waves down can be clearly counted from yesterdays high into today's low on the SPX, but only three are evident on the ES.  That situation may resolve itself in Globex trading Sunday night.  Volume today was almost double what it has been in recent weeks, of course part of that increase was OPX but not all of it IMHO.  Also another reason to think we've seen the top on the run from Feb 5 at the very least.

Vindicator 9:00 AM 4/16/10

Note the dashed black line on the buy/sell Vindicator marked "Trend Support".  It's placed @ the 1,000 level on the scale, note how the buy line has bounced off that level repeatedly in the last few weeks.  I saw this pattern in January during that sell off but it was the sell line at the time.  I think this has value from a couple of standpoints, 1st as a trade signal, 2nd as way of judging whether bulls or bears are retaining upper hand.

Thursday, April 15, 2010

Thursday 4/15/10 wrap up

We continue to grind higher, buy/sell line solidly in buy territory.  If my EW count is correct, we have three wave 4 -5 sequences to go before a top, and we are currently in wave 4 of the first of those.

Wednesday, April 14, 2010

Wednesday 4/14/10 wrap up

Buy line soared on buy/sell Vindicator today, this move has some push behind it.  Party like its nineteen ninety nine.  Extreme frustration for me, as the little buy/sell dipsy-doodle at yesterday's close led me to close longs put on earlier in the day.  Need to spend some time reviewing trading rules, one thing that occurs to me here is that a more appropriate action in that situation would be to tighten stop so that profit is locked in rather than immediately close the position.  On Elliott count, note that IF the labeling is correct we have a ways to go.

Tuesday, April 13, 2010

Tuesday 4/13/10 wrap up

Vindicator buy signal (buy line above sell, V stoch ticked up from reading below 25) mid morning led to a long entry which was sold at the close today when the sell line crossed back below the buy.  Short lived trade, but it was a profit.  As I write this, the E-mini has gapped up on the night session open on Intel earnings.  That gap will probably get filled.  The Vindicator has moved to sell mode on the buy/sell and the V Stoch rolled over this PM, strong indications that the bias is to the downside over the very near term.
I took down the EW count on the rally from last Thursdays lows, that count is not correct as the downstroke this morning overlapped what had been marked as a W1 on Friday. There are a number of alternates here so further action is needed to zero in on the correct one.  The E minis continue to be even less clear. 
There is a second chart below that has a longer time frame, it's included so you can see two things on the buy/sell line:  continued oscillating pattern, and divergences in the peaks of the buy line.  Maybe the bulls are running out of ammo?

Monday, April 12, 2010

Monday 4/12/10 wrap up

Vindicator pattern right here is very similar to that of last Tue-Wed, with buy line trending down and sell line up towards a potential crossover, and V stoch working it's way downwards to buy territory.  Last week's pattern triggered an unsuccessful long entry according to the trading rules, that trade was mid-morning  Wednesday.  As it turns out, long was the right trade on Thursday morning.  But rules is rules, and one thing to be very careful about is changing the rules in response to what may be a one time occurrence.  
The Elliott pattern on the SPX is much clearer than that of the ES, so no ES chart at this point.  On the SPX, it looks like we're in the 3rd wave up off the low of 3/31.  Internal count of this 3rd wave is still developing, the 3 marking today's high is a tentative count, there's always the possibility that it's only a subwave 1 of 3.

Saturday, April 10, 2010

Weekend Update 4/10/10

The Vindicator Buy/Sell line crossed into buy mode after the 1st half hour on Friday.  It continues to lay down the oscillating pattern that started in mid March.  This is telling me that there is a real bull/bear struggle going on.  Obviously the bulls have been winning the battle, prices have worked there way higher over that period.  The $64 dollar question is when the bears will succeed in overcoming the bulls.  I say when, not if, as this run has had no significant corrective activity since it's onset in early February and also because the Elliott Wave count almost certainly stands at 4 waves complete since Feb 5th with a 5th wave in progress.
Another thing to note on the Vindicator charts is the V Stochastic which peaked towards the end of day on Thursday and fell away until towards the end of day Friday where it started to curl up.  If the market stalls next week and the V Stoch also rolls over it could lay down a divergent pattern.
Finally please notice the "v" bottoms evident on the sell line in the buy/sell Vindicator, which has shown up three times in the last few weeks, the most recent being last Tuesday at the peak of wave 1. All three times led to a sell off.  This caught my eye this week, so I went through my limited archives on the Vindicator to see if it's a pattern which has any reliability.  The answer is "yes" - at times.  If the market is in a sustained trend the buy/sell line that is not in play (i.e. sell line in an up market, buy line in down market) will drop to almost zero and just stay there and isn't particularly useful as a trade signal on it's own.  However, when the buy/sell lines are oscillating it does seem to generate useful entry points.  The key is whether it forms a "v" bottom, which should be evident within an hour or so of a low point.  I'm planning on trading this pattern in the next week or two if it shows itself, particularly if the V Stoch appears to be peaking and most especially if we appear to have a five wave pattern completed from the low of 3/31 (marked wave 4 on the chart).

 Below is the Elliott count on the E-mini S&P as I see it.  The pattern since the low of wave 4 on 3/31 is pretty sloppy, but I do believe it is a wave 1 - 2 sequence as it is much cleaner and pretty apparent on the cash S&P (see the Vindicator chart above).  A daily chart follows the hourly chart.
This market is still notable by it's steadily declining volume, which has been the case going all the way back to the major low of March, '09.  What this means is that there appears to be an ever narrowing base of buyers supporting the rally.  I'm not an adherent of the P3 scenario of some folks, but I believe that participation has to improve at some point to sustain this bull market over the long haul.  
Finally, I have a series of daily statistics that I've been keeping up and charting for years which are starting to scream SELL.  We are certainly due for a correction of the run up since early February.  Next week being OPX week would seem to say we're a week away, but time will tell.

Thursday, April 8, 2010

Thursday 4/8/10 wrap up

V Stoch almost reached 75 at about 2:30 PM and started rolling over while sell line remained above buy line so shorted ES @ 1183.75.  Original trading rules look for a reading above 75 but it was awfully close (72.8) so I went with it.  Strong run up since this morning's lows with an apparent 5 wave count and overbought conditions on my 5 minute charts, if anything we should see a retrace of that run to make the short ES profitable.  However, on Buy/Sell Vindicator the sell line dropped towards an ascending buy line at end of day.  If the buy line crosses above the sell tomorrow I will either cover the short ES or move the stop to a breakeven or better position.


From an EW standpoint, the drop from Tuesday's high into this morning's lows looks very much like 5 waves, although a tad sloppy.  Same pattern is evident on the SPX and looks much cleaner.  However, the move up today looks very impulsive (and also much cleaner) which confuses matters.  Supporting the argument for today's rally being a 2nd wave is the underlying market statistics: on the NYSE volume dropped off a tad and, more to the point, advances and declines were almost even.  So not a lot of real strength in the underlying technicals.  We should know the answer early tomorrow. 

Wednesday, April 7, 2010

Wednesday 4/7/10 wrap up

Sell line crossed above Buy line at the close today.
Still learning how to use the Vindicator.
My plan on using the Vindicators has been to buy when Buy line is above Sell and the V Stoch has dropped below 25 and ticked up from that low. A sell would be the opposite, i.e. Sell line above Buy and V Stoch one tick down from a high over 75. That strategy worked well in February and early March, but hasn't given any viable trades since. Went long today under those conditions @ 1183.25 and was stopped out @ 1178.25 for a loss of 5 points.
However, in looking at the recent Vindicator activity, I spotted something interesting which you can see in the chart below.  Three times in the last month the sell line has approached zero (3/17, 3/23 & yesterday) and all three times have marked the onset of some decent selling.  I have to think it through, but I believe that pattern should be incorporated into my trade plan for the Vindicator.

Tuesday, April 6, 2010

Tuesday 4/6/10 wrap up

Buy/Sell line still in buy mode, V Stoch meandering around mid range, go long or be wrong.......
Price pattern on ES since low last Wed (end of W4 I believe) is tough, lots of overlapping waves and no alternation in correction patterns, so on this chart we've either had a whole bunch of 1-2's which means there's a looong way to go on the upside or it's some kind of ending diagonal.  SPX chart (below ES chart) however shows a much clearer Elliott Wave pattern since last Wed with clear alternation and no overlaps, also shows real possibility of us being in 5th of 5th.  I lean towards that latter interpretation, we've been chugging away now for weeks (8 I think) with no real break.

Monday, April 5, 2010

Monday 4/5/10 Wrap up

Sell line on V Buy/Sell has declined almost to zero.  V Stoch also declining from high today, currently at mid range, if it declines below 25 it will issue a buy signal at 1 tick up from the low IF buy line still is above sell.
EW count over recent couple of weeks has been difficult, here are two possible interpretations:

Friday, April 2, 2010

Friday 4/2/10

Do we have a 5th wave?

Thursday, April 1, 2010

Thursday 4/1 wrap-up

Still flopping around on the buy/sell, possibly indicative of a top.  We haven't had a trade signal on the
V Buy/Sell + V Stoch since 3/22, from the standpoint of the Vindicator it's been like a deer in headlights.  However, the fact is the market has pretty much tracked sideways over this period so there hasn't been much opportunity lost.
From an EW standpoint, still very difficult to get a wave count that is clear and satisfactory.  There have been no sustained clear impulsive moves during the sideways track of the last two weeks.  Lots of 3 count A-B-C's in both directions.  Here's my idea of where we might be at, but it's certainly not 100% certain:

Daily EW chart shows prices still in the channel from the 2/5 low, but we've moved sideways across the channel so that bottom trendline isn't far away: