Wednesday 6/30/10 wrap up

This down move does, in fact, look like it's extending.  An extended version of the Elliott count would look as below.  If we are not extending, then today's action would have to be read as finishing up of the 5th wave as per yesterday's chart.

The Sell line continues to strengthen in the Buy/Sell Vindicator so the down trend does net yet appear to be losing steam.  The 30 minute V Stoch  offered a short entry signal today which would have been profitable into the close.  It had been moving up since 11 AM yesterday and tagged the overbought line and started rolling over about noon today. 

On the trendline/oscillator system prices are well below the down trend line and the oscillator is pegged to the bottom of it's range, no sign as of yet of any counter trend rally.

One of the advantages of trading as a sideline as opposed to trading for a living is the ability to sit things out at times without a lot of pressure to perform.  That's what I've been doing since being stopped out yesterday, mainly to wait for a (hopefully) high probability entry point.   Would like to see a little bit stronger counter trend rally then what we had today to consider a short trade, or, depending on the situation, a long entry.

A final note: my old trading approach calls for stop and REVERSE rather than simple stop losses, i.e. in the case yesterday when stopped out of the long at ES 1053 the order would have been for a quantity twice that of the long position with the result of being short at ES 1053.  On the initial trade I decided to ignore that rule because it can and will lead to whipsaw situations, which would have been a poor way to start things off.  As they say, hindsight is 20/20 and it obviously was the wrong decision.
I do plan a detailed explanation of the system, I will try to get something put together this weekend, may not be comprehensive but will try to provide the essentials and fill out the finer points over time.

Tuesday 6/29/10 wrap up

Looks like DOOR #1 was the correct count.   There is a distinct possibility that today was a Wave 3 instead of Wave 5 as labeled, which would mean we will see an extended count and obviously much further downside. 

Monday 6/28/10 wrap up

Sloppy and choppy day, no real pattern has been established since Friday's lows.  Alternate Elliott counts from last week are still both possible.  Today's meanderings didn't rule out either one, although the action since Friday definitely has a corrective look which favors the 5 wave down count.  Since we are in the last few days of the quarter it wouldn't be surprising to see the same meanderings through Wednesday.

Vindicator Buy line still above Sell line, so the indication there is bullish.

I've not been happy with my ES trading since I began basing it on the Vindicator so I'm reverting to my old tried and true system. I plan on using the Vindicator as a pyramiding tool, i.e. will use it to add to base positions established by the older system.  The old system is a relatively simple one from the standpoint of TA, it's based on trendlines and another proprietary indicator called the Dynamic Oscillator.  The Dynamic Oscillator is essentially a price momentum study that adjusts for perceived time cycles.  It sounds more complicated than it is, but it is proprietary.  Anyway, the system has a number of trading rules which won't be outlined here in their entirety due to time constraints, at some point I'll put them up in a sidebar.  The basic entry/exit points require a break in an established trendline accompanied by an appropriate move out of an overbought/oversold situation on the Oscillator.  The system, if the trading rules are adhered to, runs about 58% winners to losers, but makes money because it cuts losses short and lets profits run. It IS NOT  a day trade system, I've held a base position for as long as six weeks with this approach.

Went long last night based on this system:

We broke above the down trend line from last Monday's highs about mid afternoon Friday, which is the first condition for an entry point.  The second condition was met last night when the Dyn Osc (Dynamic Oscillator) moved above a reading of 20.0 from an oversold condition, at which point a long position was established.  Initial Stop Loss in the system is set at 1 daily ATR from entry, ES ATR as of Friday was 24.00, so with a long entry @ 1077.00 the stop loss is set at 1053.00.

Friday 6/25/10 wrap up

Not much change in the wave count today, although it does appear that we've put in some type of short term low.
DOOR #1

DOOR #2

Please note that technically Door #2 is still in play until and unless the lows of 6/8 are taken out.

Vindicator Buy line crossed above the Sell line today accompanied by a solid break up out of the well defined down channel from Monday.  Very bullish for the near term.

Thursday 6/24/10 wrap up

One thing about markets is there ain't no hiding when you're wrong.  
The follow through selling today has shown the near term bullish case to be wrong, or at the very least highly questionable.  We've now retraced around 75% of the rally from 6/8 through this Monday, really pretty deep for a correction to that rally.  Further, the move today now gives the pattern down from Monday's highs a distinct 5 wave look, although some of the labeling is a bit awkward.  The message with this count is that the direction of the market is down in the near future, as a 5 wave pattern occurs in the direction of the underlying trend. However, we should see a partial retrace of the selloff starting quite soon.  So that's DOOR #1:

In the alternative, the count shown yesterday is still in play but it's likelihood has diminished considerably.  So that's DOOR #2:

The Sell line on the Vindicator shows selling pressure waning into today's lows while the Buy line is starting to perk up.  Whatever the Elliott count, the Vindicator is signaling a relief rally at the very least.  It's interesting to note that the 5 wave count shown in Door #1 is verified by the Vindicator.  In Elliott the 3rd wave of a 5 wave sequence is typically the strongest, and the Sell line shows the strongest selling pressure to have occurred during what is labeled as subwave 3 (black) of Wave 3 (green) with selling pressure declining since then.  Pretty slick.

Wednesday 6/23/10 wrap up

What a mess today, feel like I've been in the washer on spin cycle.  We did bounce some, but definitely not in an impulsive manner.  Most likely Elliott count currently looks as follows:

TODAY'S SPIN CYCLE

Went long ES today around mid-morning but bailed at breakeven 1/2 hour before the close due to the lack of impulsive bull pattern and also because the 30 minute V Stoch rolled over.  Still like the long side at some point relatively soon but prudence said go to cash for now.  The Buy line in the Buy/Sell Vindicator is bottoming which indicates bull capitulation and thus a setup for a rally.

Tuesday 6/22/10 wrap up

Summer doldrums have been temporarily suspended.  Nice selling action today, but there's a distinct possibility that we'll move up for a while from here.  So far the drop from yesterday's highs is only 3 waves, and the complicating factor is that the 2nd counter trend wave looks very much like a triangle.  In Elliott rules a triangle is never a 2nd wave, it can only be a B wave or a 4th wave, in this case obviously it would be a B.

The A (green) leg of the sell off is ES 26.25 points, the C (green) leg is 26.25 points at ES 1086.50, the low today was 1089.50.  Pretty close to equal.  The alternate to this count would have wave d (black) actually as a subwave 1 with wave e (black) subwave 2 and subwave 3 probably complete at today's low.  Note that we stopped right at the lower channel line from the lows of 6/8.
Another thing of note here is that if we do rally from here up to and past yesterdays highs then in all likelihood the rally from 6/8 to yesterday was a three wave A-B-C.  This is because in Elliott waves 2 and 4 of a 5 wave sequence need to alternate, and the Wave "2 or B" (red) is a zig-zag as is the selloff yesterday and today. Of course if we continue selling off from here to below the lows of 6/8 then the rally from there is obviously an A-B-C.  One final option if we rally from here is that the market is putting in an extended 5 wave bull pattern, but that seems highly unlikely.

The Vindicator patterns lead me to lean bullish at this point.  Note the similarity in the Vindicator Buy/Sell and Stochastic between the low of 6/8 (gray shaded area on chart) and the current pattern.  Specifically, on 6/8 the Buy line bottomed which indicated short term bull capitulation and the V Stoch put in a nice bullish divergence.

Monday 6/21/10 wrap up

This morning we got the final push envisioned in the weekend update and the SPX/ES promptly and obediently rolled over and dived.  Looks like the end of a Wave C or 3 today, which one remains to be seen.  Trendlines are important in my analysis, on the chart note the ascending trendline from the 6/8 lows.  A close below that trendline will put us in near term bear mode.

However, the 30 minute V Stoch bottomed and curled up today which is the first part of a buy signal, if the SPX breaks above the downtrend line from this morning's highs then the buy signal is confirmed.  So which will it be? Long or short?  Going to wait for a trendline break one way or the other to decide. 

Two interesting sidebars: first, for all the price action today volume was very weak; second, the last five closes on the ES have all been within a couple points of each other and the 200 day MA.   So in the final analysis we've made very little net progress in either direction for a week now.  Summer doldrums?  

Weekend Update 6/19/10

STASIS - A state of stability, in which all forces are equal and opposing, therefore they cancel out each other.
-Wikipedia
Which certainly describes where we're at.  You can see it on the Vindicator, the Buy/Sell line shows an almost total lack of push one way or the other and the V Stoch is muddling around in mid-range.  Markets can and do behave this way, far too often for most traders.  But they always break out one way or another, the question is when and which way.

The Elliott count on ES looks like a 5th wave is either done or close to done, as per the next two charts.

Alternate count:

I lean towards the alternate count for two reasons: the Vindicators showed signs of a possible push up towards the close Friday, and the SPX looks like it needs one final small push to complete a 5th of a 5th wave up from the low of 6/9.

Thursday 6/17/10 wrap up

Not much to say about today, lot of back and forth and no net change in the end.  Good market for a very nimble swing trader, but tough otherwise.  30 minute V Stoch did get into buy territory today, chose to pass on signal at the time, it seemed to lack conviction.  But nice ramp up into the close, so signal maybe was an opportunity missed.  Elliott picture a bit muddy here so no new wave count today.

Wednesday 6/16/10 wrap up

Current EW count, slightly modified from yesterday:

Closed long ES today @ 1108.25, gain of  +17.25 points. 
30 minute V Stoch is approaching buy territory with Buy/Sell Vindicator still solidly bullish.  If that V Stoch bottoms out below a reading of 25 AND the SPX is still in the up channel from 6/8 it will be a decent place to try another long entry.  The Sell line is bottoming out again which is a contradictory signal.  However, in the first part of the rally last winter from early February to mid-March the Sell line went to the bottom of the chart and just stayed there, while during the same period long entries based on the 30 minute V Stoch bottoming worked quite well.  So if this is a similar period the Sell line signal should be ignored.  That was part of the thinking with the long ES entered Monday and closed today, and that trade worked out well.

Tuesday 6/15/10 wrap up

Dinged the bell today on the ES/SPX.  Moved to the top of the channel drawn from the lows of 6/8 and are moving towards overbought territory on the 30 minute V Stoch.  Buy line on Buy/Sell Vindicator still solidly in Buy territory.  Still holding long ES @ 1091.00 from yesterday afternoon.

Two events worthy of note between yesterday and today.  First, we broke decisively above the downtrend line from the 4/26 highs, and second we breached above the 200 day MA. Although I don't trade off moving averages there are a lot of folks who do, and breaching the 200 day MA will attract buyers.
4 waves can be counted up from the low marked Wave 2 (red) with a 5th in progress.  In this count wave 1 (black) is ES 32.25 points and wave 3 (black) is 31.50 points, thus wave 3 is shorter than wave 1.   According to Elliott rules, wave 3 can't be the shortest wave so with wave 4 bottoming at 1084.25 then wave 5 can't travel farther than ES 1115.75  (31.50 + 1084.25).  If that should happen we are either going to see an extension of the move or the wave labeling has to be reconfigured.  Also, the 1115 area, if achieved, needs to be watched closely as a spot to possibly close the long ES.

Monday 6/14/10 wrap up

Went long today on a bottoming of the 30 minute V Stoch accompanied by a bullish divergence in the 5 minute V Stoch.  Decision and trade were made in a hurry while dealing with non trading business issues, sometimes I wonder whether I'm doing justice to either one (trading and apple business).  Anyway, the Sell line bottomed as well about the same time as the action on the V Stochs, so we have entirely contradictory signals.  In retrospect the best course of action would have been no action.  At this point will probably sell longs during night session and may go short.

Weekend Update 6/12/10

A little recent history to put things in perspective.  Here's a comment from the "Wednesday 5/26/10 wrap up" :
 "The more I look at current charts and some daily indicators I follow, the more I think that yesterday morning's lows were a significant turning point."
The market see sawed it's way up from that point for a week and a half, price pattern was choppy to say the least, and then topped and rolled over on Friday, 6/4.  The ES minis lost around 55 points in a matter of hours, and by the morning of Tuesday, 6/8 were down by almost 80 points from the prior Friday's highs.  So the comments of 5/26 looked off the mark at that point.  However, prices bounced off the lows of 5/25 on the morning of 6/8, and have been trending upwards ever since.
Once again the price pattern since 6/8 is choppy with a lot of wave overlaps and very difficult to label in an impulsive fashion, but it is definitely up.  We're either seeing an extended series of wave 1 - wave 2 sequences or a series of a-b-c zig zags.  But the main point to be made here is that 5/25 IS looking more and more like a significant turning point, and the selling into 6/8 being turned away at the same level as that of 5/25 only confirms that low, although it did serve to raise doubts about that observation.  Typical market behavior - one's convictions are always being tested.  The big question is HOW significant, i.e. are we just in a bounce limited to the amount of time necessary to work off the oversold conditions evident coming into the 5/25 low, or are we going to settle in to an extended bull move? My crystal ball isn't good enough to know the answer.  However, some pertinent observations can be made for the near term. The daily indicators that were showing oversold coming into 5/25 have not yet moved to overbought readings, so from that standpoint we have a ways to go.   From an Elliott standpoint, the lows of 6/8 can be labeled as the end of wave c of the 2nd A-B-C sequence down from the highs of 4/26 and still adhere to Elliott rules, and thus that entire move from 4/26 can be considered complete.  Here's what the chart from the 4/26 highs look like with that count applied:

 Note: for some reason TOS has "lost" over a half days worth of ES price activity from the evening of 6/8 into late morning of 6/9, so the chart is incomplete for that time period.

The pattern from the 6/8 low is currently labeled "a-b" with "c" in progress, but it needs to be emphasized that count is tentative at best.  Takeaway message here is that the likelihood is that the bull move off the 6/8 lows needs some time yet to reach a conclusion.
You'll note in the chart that the 6/8 low has been labeled as a major wave A (blue).  The reason can best be explained by a daily chart of prices from the lows of Mar'09:

This is the "X" wave scenario, where the thought is that the move off the Mar '09 lows will unfold in the form of a three leg a-b-c type "X" wave.  In that scenario the highs of  4/26 are currently labeled as the termination of Primary Wave A of the first of those three legs.  Primary Wave A thus lasted almost 14 months (roughly 60 weeks).  It would seem unlikely that Primary Wave B, which is a corrective wave to Primary A, would only last 6 weeks.  Thus the lows of 6/8 are labeled Major Wave A of an expected three wave Primary Wave B. 

For the "P3" view at this juncture and some excellent current market observations I suggest reading Daneric's posts from Friday and over the weekend (http://danericselliottwaves.blogspot.com/).

On the Vindicator, a short trade was established Friday based on an apparent divergence in both the 30 and 5 minute V Stoch, however the market overcame those divergences and the position was stopped out during the rally into the close.
However, the Sell line in the Buy/Sell Vindicator is bottoming which sets up another potential short sale. The entry signal would be the first tick up from whatever low it reaches.  Going long on Buy line bottoming and short on Sell line bottoming has been one of the more reliable trading strategies with the Vindicators.

Thursday 6/10/10 wrap up

Picture has come more into focus with today's action.  The previous count has changed some from yesterday's post with respect to the action from last Friday's high.

If this is correct, wave 1 of C ended at Tuesday's low and we've been in a zig zag correction since, and currently in the final stages of that move.  There's a lot of resistance in the SPX/ES 1090 area, and I suspect that's where we'll turn.

I'm looking for the 30 minute V Stoch to top in buy territory and roll over hopefully accompanied by a nice divergence in the 5 minute V Stoch.  As of now (2:55 PM CST) that is shaping up quite nicely. Quite interestingly the Buy line on the Buy/Sell Vindicator has ticked down into the close and may be diverging against the highs.

Wednesday 6/9/10 wrap up

Looks like wave 3 of C started today.  Wave C = Wave A at ES 969.75.

Went short ES this morning based on an apparent divergence in the 5 minute V Stoch, market immediately moved sharply higher and took me out at my stop loss point, and it also overrode the apparent divergence.
ES sold off steadily this afternoon.  The 30 minute V Stoch is in buy territory signaling the approaching end of subwave 1 of 3, hopefully we get a wave 2 bounce that provides a decent entry for a short play.  

Tuesday 6/8/10 wrap up

Went long ES today based on positive divergence in both 30 and 5 minute V Stoch as well as Buy line bottoming out in Buy/Sell Vindicator.  Sold 1/2 of longs when 5 minute V Stoch went way overbought and started rolling over, unfortunately was stopped out of balance of longs at breakeven about 90 minutes later.  Very choppy and see-saw today.

     
The fact that the 30 minute V Stoch showed a bullish divergence and the Buy line bottomed, both followed by a (very choppy) upmove indicate a more long term rally, but not that long term in all likelihood, maybe 1 to 3 days.  The reason is this looks very much like a corrective sequence.  On the ES all the moves since the low Sunday night are 3 wave formations, both up and down, with the exception of the rally from the lows of mid afternoon today which has not yet concluded.  The SPX is much cleaner with an obvious 5 waves complete at this morning's lows (see 30 minute Vindicator chart above).  Thus the odds are that wave 1 of  C down is done and we are in wave 2.  Wave 1 took a day on ES and around 3 on the SPX, so wave 2 shouldn't last more than a few days at most.  I'm considering re-entering long ES overnight, I'll post in the "Current Position" section of this site if I do.

  

Late update 6/7/10

11:00 PM - ES moving steadily up since about 5 PM, could actually see gap UP open tomorrow so moved stop loss down to 1059.75 to lock in some profit in that eventuality

Monday 6/7/10 wrap up

Couldn't post to blog all day today until now, apparently technical problems at site host (Google).
Went short ES @ 1064.75 at 12:45 PM (CST).  At that time the 5 minute V Stoch showed a bearish divergence and was rolling over, and the 30 minute V Stoch was rolling over as well.  Stop has been lowered to a breakeven since then and position is being held overnight.  Exit (barring stop loss being triggered) will be either a bullish divergence on the 5 minute V Stoch or a solid break and close above the downtrend line from last Thursday's high.

Weekend Update 6/5/10

Talk about being blindsided.  The sell off yesterday, although possible in my analysis, was a lot stronger than anticipated.  And yet there were warning signs from the Vindicator which will be addressed in a little bit. Elliott Wave is up first. The "P3" scenario has certainly risen in probability as a result of yesterday, but no updated chart today of that as it's relatively simple: two successive W1 - W2 series down from the highs of 4/26 ended at this week's highs and we're now in a 3 of 3. Lookout below. Rather, I'd like to deal with the "X" wave scenario.  The 1st chart is a slight revision of the count that's been presented.  This count retains the assumption that the lows of 5/25 are it for quite a while, but now instead of two W1-W2 sequences there is just one with Friday's low either the end or close to the end of W2.  This count has a low probability but it is a possibility.

 
 To explain the 2nd X wave count it's necessary to back out to a longer view first.

 This is Daneric's count (http://danericselliottwaves.blogspot.com/)  through the high of 4/26/10 and is one version of P3, with the difference from the X wave count being the low of Mar '09 labeled as Cycle Wave I and the high of 4/26/10 labeled as Cycle Wave II.  That period is labeled as three successive zig-zags and can just as appropriately be considered to be the major wave A of an A-B-C type X wave sequence.  Since 4/26 we've had the A-B legs of the major wave B of X, and are currently in the C leg of that sequence.  That C leg is itself unfolding in an a-b-c fashion, and we are currently in the c leg of that final sell-off.  Thus by this count we are in the final stages of the major wave B correction.

On the Vindicator, fact is that there is still a learning curve to be climbed.  There are times when I wonder if it has any real value, such as Friday.  But on review, and with the benefit of hindsight, the Vindicator was signaling the approach of a down move:

Several things to note on the above charts:
1. 30 minute V Stoch slope topping at the close on Thursday
2. Last 30 minute bar on Thursday is a doji with a long tail 
3. Clear bearish divergence on the 5 minute V Stoch also in the last half hour of Thursday trading

One final chart to buttress the case:

The highlight in this chart is the Vindicator Buy/Sell line.  Although the Buy line pretty much retained ascendancy over the sell line since it crossed up on 5/25 it's been steadily tailing away since a peak on 5/27 , establishing a clear bearish divergence in the process.  It was giving a message (loud and clear) that buying pressure was waning.  As I said, there is still a learning curve with the Vindicator.

Friday 6/4/10 update

Stopped out of long ES @ 1090.75
This is why should ALWAYS trade with Stop Losses
Considering playing the bounce here

Thursday 6/3/10 wrap up

Tried a little long day trade this morning that didn't pan out, pretty much breakeven on that.  Went long again at lunchtime when the 30 minute V Stoch hit bottom and started curling up, still holding that position, long ES @ 1194.50 with Stop Loss at today's low of 1090.75  Buy/Sell line remains in Buy mode.

Wave count hasn't changed much from yesterday, although it looks like we completed another w1 - w2 sequence at today's low, if that's true this thing needs to kick in gear soon.  The trendline down from the 4/26 highs remains a key level.  Currently (4:30 PM CST) it's at  ES 1117.00 and will be down to 1113.50 by end of day tomorrow.

Wednesday 6/2/10 wrap up

I was commenting in the HOB chat room earlier today that the last few days have been a mish mash and would stay in cash until something I recognize happens. Well, it happened this afternoon.  Very clear impulsive pattern in process since the overnight lows in the ES, still needs a series of 4th and 5th waves to complete but I believe that is on the way.  So the count looks as follows:

The low of Tuesday 5/25 remains as a significant longer term turning point and we've had two sets of waves 1 and 2 since, with the most recent wave2 ending at last night's low.  By this count we are now in a 3rd of a 3rd wave and, if true, should see some upside acceleration.  One price level area to watch is the trend line down from the high of 4/26, it's right now at about ES 1120.50 and will be at 1117.00 by close tomorrow.  That should provide key resistance and if overcome could be a point of acceleration.

Finally, the Buy/Sell vindicator flirted with a Sell line crossover at the end of trading yesterday into this morning, but the Buy line retained ascendancy and the indicator remains in buy mode.

I'm planning to go long ES on a pullback, and might make that move overnight.  If I do I'll post on the "Current Position" section of this blog.