Toesday 5/11/10 wrap up

Leading off with the Elliott wave count to lay out the background for today's trades.  In yesterday's update it was noted that the action yesterday typified a 4th wave with a 5th wave in progress at the close.  The 4th wave part of the analysis was correct, but the 5th wave had actually not yet commenced as of yesterday, rather it started after a gap down open this morning.  Prices then moved steadily up through the day until peaking almost exactly at the spot where the market started its collapse last week.   It also happens to be the price where the 4th wave of that sell off terminated, which is classic Elliott.  If the drop of 4/26 through last Thursday is indeed a 1st wave, then the activity of the rally since then fits Elliott parameters to a tee.    

So coming into today, it appeared that we were terminating the rally up from last Friday's lows at the very least, and quite possibly from the crash lows of last Thursday.  As you can see below, the Buy line moved solidly above the Sell line at the opening this morning, but a decision was made to trade the short side of the equation given the Elliott count.  Thus two short trades were executed today, both geared off the V Stochs.  The first one was this morning when the 5 minute V Stoch rolled over, that trade was stopped out at a loss at the high of the day.  Frustrating.  Hindsight is 20-20, and looking at the Elliott chart above it's now obvious that the stop should have been set a little higher.

The second trade was made when the 30 minute V Stoch rolled over this afternoon. That trade was short at ES 1154.00 and is still open.  After hours market is dropping steadily and is at 1145.00 as I write this, so the short ES's are looking good.