Saturday, July 31, 2010

7/31 Weekly Commentary

I actually pulled a small profit shorting the market from the start of the I1 down move through 7/29.  If I do not specify a stop on a trade I will always stop out at .25% beyond the latest DJI hourly high or low.  Sometimes less if other factors warrant it.  I'm currently long 4% SSO and 4% SP futures.
This Weekly will speak to the prospect that the rally will not continue in accord with I1, but will fall precipitously as expected by EWI and Arch Crawford.  The I1 is bullish through 8/13, where it peaks at 4.62.  This is far short of a buy signal (5.5).

The Daily Commentary addressed the high probability that the stock market will achieve another short-term high to complete wave 3 or C.  It will be wave 3 if there is a subsequent high in the rally as anticipated by I1.  It will be wave C if the rally then declines below SP futures 1100 or 1104 in cash.  In order to confirm the rally's failure this would need to occur, followed by a decline below 1075, basis futures.  This would break the 90-minute M/A as well as a daily trendline for SP, DJ, and ND.

I will be getting flat on a rally to a new high as expected to 1106 or better.  At that point there should be a reaction.  I will plan on buying back at 1101.75 (unless the market enters a trading range) and stop at 1099.50.  If the stop is taken out I will stand aside.  The only way I can go short (as much as I want to) will be if SP futures 1075 is taken out.  The market stalled at 60-minute M/A.  In order to re-enter longs if the stop is triggered the SP futures will need to rally to 1121.75, a new high.  This will also break the 60-minute M/A.
A decline beyond 1075 would break the 56-day M/A that caught the low Monday.  The DJ futures would require a decline below 10,160 to break their 220-day.

4 comments:

  1. Steve

    If we are in wave 3 how high do you think we can go? Charles is real bullish short term. Next Friday we have the employment numbers, how does this play into your strategy? In my mind it could be the catalyst to the drop.

    Jack C

    ReplyDelete
  2. Wave 3 needs to go high enough that the correction will not overlap 1101. This will keep the 5-wave potential intact. I have an expectation of 1106, but I'll let the wave structure tell me what to do.
    As far as targets I use I1 timing rather than targets normally, but the DJI has weekly M/As coinciding at 10,860. We should ask Charles his bull reasons.

    ReplyDelete
  3. Jack,
    I have the 73-day M/A coming in at 1108.80. This sounds about right for wave 3/C.

    ReplyDelete
  4. Steve and Jack,
    As I write this post, the futures are up healthily on Sunday night. You wondered my bullish reasons so here goes. First, I would say I am fairly short-term bullish but not all out bullish like I was at the early July low where I had several systems all lining up. Maybe I am 70% versus 100% last time. Here are the reasons: 1) I1 is rising for two weeks and i would call it a significant increase even of not a legitimate buy signal level, 2) my favorite trend following system (ichimoku) will give a buy signal tomorrow on the daily time frame for SPX; XMI & DOW already did, 3) Looking at the daily candlesticks, I see alot of tails indicating dip buyers (Jeff Cooper calls 3 in a row Charlie's Angels), 4) sentiment doesn't seem overly optimistic yet and i think we need overbullishness to set up for the big down so more upside price action is required, 5) at the daily level, we could be setting up a 5th wave up, and 6) just to be stubborn, I am sticking with my double top prediction. I do wonder what lurks out there to create another Lehman-style disaster in the next few weeks.
    Charles

    ReplyDelete