Anyone else think we make another leg lower here?

Discussion in 'Trading' started by ShadowTrader_08, Jun 10, 2008.

  1. ShadowTrader_08

    ShadowTrader_08 ET Sponsor

    Two dojis in a row after the drubbing of last Friday.

    Our thoughts are that the last two days of market trying to rise on weak internals and these mixed days (where Dow goes up and other majors fall) is bearish in the near term.

    We would have to close an hourly bar below 1350 however to send it. Check out the chart below. The lower squiggly line is breadth. Any readings under 50 are bears in control. Today's is especially bothersome as the market essentially was in an uptrend, yet breadth remained negative. Thats not good.


    If the market goes up by end of week without violating that 1350 at all, then our stance MUST stay neutral. Expect another 1-2 months of choppy crap as strength in oils dukes it out with weakness in financials for a long hot summer!

    I'll flesh out this concept more in detail in tonites report which will be posted in the usual spot on our main thread here:
  2. Yep,

    I think we tank by Friday.
  3. ShadowTrader_08

    ShadowTrader_08 ET Sponsor

  4. ShadowTrader_08

    ShadowTrader_08 ET Sponsor

    Looks like the chart we posted in the beginning of this thread was the one. Today's gap down below that gentle uptrendline created the overhead we were looking for to push the $SPX over 20 points lower. Breadth is the most important indicator for broad market direction.

    We shorted some SPY in the Model Portfolio early this morning and are looking to cover on a push of SPX to 1326 area. So far so good.

    Will be looking to also get aggressively long somewhere around that area. If we undercut it in a panic, even better!

    More on how to spot these setups in advance and what to do once they play out in our main thread here:
  5. The first leg down from 1440 was 70 points.
    Subtract 70 from the last counter-trend high at 1404 ( last Thursday ) and you get a projected target of:

    1334 SPX

    This is a simple and equal "measured-move" from basic technical analysis.
  6. ShadowTrader_08

    ShadowTrader_08 ET Sponsor

    That's not bad, Landis. I like the way you think. Methodical and without emotion.

    More proof that there should be a bounce once that area is touched. 1334 and 1326 are not very far from each other. We already went as low as 1335 today and closed a nice big body daily candle on its low. That means a bit lower tomrrow to my target I think.

    Again, a little panic below it to make everyone think its not holding for the "classic" undercut as I call it would be sublime....

  7. Wags and me do pretty much the same stuff but I too am using 26. I'm short (from much higher, lol) with a 31 cover working and I'll flip long off 26.
  8. From my letter this morning.
  9. You may want to add a few things to your scenario.

    Just as the first chart posted in this thread does not go back far enough to examine the envelope spoken of, when you examine annual legs there is sort of an understanding that for symmetries sake it is good to keep a balance fore and aft on the point of symmetry.

    Thinking that alternating leg lengths dominates makes some poor assumptions about the balance of players who have differing terms (lengths) of considerations.

    2008 looks, on these considered bases, to have 7 legs (just as it did at the beginning of the year) and we are in leg 3.
  10. I never said that the lengths of these legs are assumed to be EQUAL. That would be highly naive.

    One can calculate numerous fibonacci ratios thereof, which quite frankly aren't worth my time presenting here in the Trading Forum given that 99% of the people that frequent this forum on ET have no idea what a "measured" move" is in the first place.

    If anyone really wants to get "specific" about this kind of technical analysis, I suggest they head on down to the "Elliott Wave" thread of the Technical Analysis Forum.

    #10     Jun 11, 2008