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Sunday, October 13, 2013

Sunday, 10/13/13 update

BEAR FEVER - A psychological condition common in futures and options traders, especially those involved in equity markets.  It is characterized by an underlying strong bias towards favoring a bearish point of view.  It is most harmful when the individual afflicted with this condition is unaware of it's existence.  It is theorized that it's causal impetus is the result of a hugely successful bearish trade early in the traders career, which can be an exhilarating experience due to the speed with which bear markets tend to move as compared to bull markets.  The deleterious effects of this condition are numerous.  A partial list of those would include the following:
- A tendency to establish larger positions than is prudent in a possible bear market situation;
- A tendency to fail to recognize the end of a correction in a timely fashion, leading to holding a bear position longer than it should be held;
- A tendency to close bullish positions earlier than necessary on the belief that a big crash is right around the corner;
...............and so on......................

Therapy for this condition can be effective if the individual can be made to recognize that the community of futures and options traders is relatively small in number and financial resources as compared to the quantity and resources of all the other market participants, and that those other market participants have a strong commitment to a never ending bull market. 


The series from the Sep 19th high into last Wednesday's low looks like 3 waves, with a nice impulse at the beginning and end but a whole lot of choppy and indecisive market action in between.  So very much a corrective sequence.

For intermediate term purposes the question posed a few weeks ago remains open: was the Sep 19 top Minute W1 of Intermediate W5 of Major W3 with Minor W2, W3, W4 & W5 yet to come as in Alternate #1 below, or was it the top of of Inter W5 and thus Major W3 as in Alternate #2?  If it's Alternate #1 then it's pretty definite that we saw the bottom of Minor W2 this week and thus Minor W3 is now in progress,  if it's Alternate #2 then last week's low was likely the end of Intermediate Wave "a" of Major W4 with a lot more corrective activity in the wings.  Right now the nod has to be given to Alternate #1 given the strong and impulsive nature of the move up off the 1640.00 low - much more what would be expected in a 3rd wave impulse than a "b" wave in an ongoing correction.  However, the news out of Washington this weekend would seem to portend a strong gap down open this evening, so if nothing else it will be interesting.  

  Alternate #1

 Alternate #2


  1. Hi Al,

    Does the gap down open favor one alternative vs the other?

  2. Thanks AA, always look forward to your posts. jason16

  3. Thanks Al,

    So we should be looking for a retrace to 1670 (50%) or 1663 (61.8%) as a 2.

    If the "a" wave completes soon (1700 to 1680, 20 points) then "b" would go to 1690 followed by a move of 20 points to 1670 ("c" = "a"). Would be a great point to go long

    What do you think?


  4. Hi Al..Me got bearish fever. TNA Close: TNA Volume Relationships suggest that the market reverses down now...Jordan

  5. Sorry didn't respond last night, didn't look at the PC again after I responded to you. Yes, I'm thinking about going long on this drop at some point IF certain things fall into place

  6. I generally don't trade one market based on what's occurring in another. That being said, there's always the possibility that the bear action isn't over, right now it doesn't seem likely IMHO but I've been wrong before (more times than I care to remember)

  7. Hi Al - Must we rule out an expanded flat correction beginning on October 3rd with A (Oct 3rd - 4th), B (Oct 4th - 9th), and C underway and exactly 3x A in price?

  8. I suppose that's possible but doesn't seem too likely