Brought exposure up to 5% at SDS 34.90 and 34.54. Did a dumb trade selling at 35.06 expecting an imminent breakout to the upside and instead got an immediate break to the downside. Wound up buying back at 35.35 to keep 5% exposure. Sold 5% at 36.40 after the close. Flat now. Profitable over the past couple of days, a real feat.
I sold because futures have formed a simple 3-wave up sequence off of yesterday's bottom. The decline this afternoon brought SP futures back to the top of what I classified as wave a. If wave 2 is in effect then prices will rally from here and a new high will occur and I will re-classify as a 5-wave up. If prices decline any further than the following chart indicates (below 1056) then the rally is done and new lows are in store.
I must expect prices to rally from here in order for wave 2 to be in force. If so and new high is registered then the following is the count:
In order for wave 2 to correct that large a move there NORMALLY must be time or price or both. Neither has been sufficient. The 38% retracement is 10,350. The time requirement is minimum 3 days.
Offsetting this is a declining I1, a big deal in my book.
In addition, the market held at critical resistance at the 5-minute, 380-unit M/A.
The fulcrum point is right here on SP futures. 1056 must hold for wave 2 to continue upward.
Another confirmation would be bond prices passing 125'08.
Steve,
ReplyDeleteTo answer the question you asked earlier, I think you might have been clearer about your call that the down move was over and wave 2 up was ready to start. I was following along and wasn't totally clear on your intent. I would chalk that up to the difficulty trading and blogging concurrently. :)
I entered the trade at close on Monday per the I1. Tuesday morning was enjoyable but I held waiting for 6/8 and added another piece at close Tuesday. This morning at 1090 I added my third piece. So, it turned out to be a nice move so far. Do you think this all hinges on BP's top kill?
Also, I was looking at the 2004 analogies where we had the multiple month three wave down correction before launching the final bull run. This also seems similar to the 2007 and 2000 tops too. How did I1 look during those three (or at least 2000/2007 vs 2004) a top vs a correction? Can we draw any insights from that comparison?
Thanks,
Charles
ps that's march/aug 2000 or july/oct 2007 and may/aug 2004.
Thank you, Charles.
ReplyDeleteI am glad you are in the money.
2000 had I1 below 4 for 3 solid years, a very long time. 2007 had only 6 month windows where I1 was under 4, but they corresponded to the declining phases of that bear. 2004 I1 was under 4 for the length of the decline but immediately went past 5.5 when it was over.
The comparison is that 2000 was an extended bear market (3 years) which, even though it had 3 phases, did not ever see I1 reverse it's bearish tone (go above 4). 2007 was a shorter bear market broken into 2 phases Oct,2007-Mar,2008 and June,2008-Mar,2009.