So how does this analysis fit into our e-mini trading? Simply put, I expect higher prices. Looking at the daily chart level, several target areas are evident such as: 1. 1150.75 2. The open gap at 1156.75 3. The previous 4th wave and reverse fib extension at 1172.5 4. Wave (c) =wave (a) at 1158. As I mentioned earlier this week. The stage has been set for a turn. The information that has been provided herein provides key areas that you may want to consider for trades. As always, consider your risk and speak to a licensed broker or investment advisor before taking any investment action. Best of Trading
A very boring day from my view point whereas the market spent much of the day within the resistance zone near the top end of my projected targets of 1134 + 1%. As I mentioned in an earlier post, the only upside target that may still be in the works is where wave c = wave a at 1158 and closes the gap. In the meantime, prices have been testing the .618 retracement of the entire move down from 1216.50. Caution is still necessary as this area is not getting any stronger. There have been 3 tests of the area from a week ago. What interests me to day is that I can count 5 waves down on a 20 minute chart. While this by itself confirms nothing, it could be the beginning of the resumption of the larger degree trend. Therefore, I will be watching intently for confirmation of the trend change. As soon as I am able to confirm it I will discuss it. Until then, Best of Trading
Back to back days of lackluster trade on low volume. Today was an inside day. These price bars are often the precursor for range expansions. With GDP, Jobless claims, Chicago PMI and Helicopter Ben speaking early in the morning, we should expect a volatile trading session. There is no material change to my forecast that was published in the week in review. I believe it is on the previous page. You might want to review it and compare today's prices in ES_F and Dollar (DX) Best of Trading
That's correct but after some nearby upper price objectives are met, look out below. If you place Bollenger Bands on the weekly chart at 22 bars, 22 period sma and a SD of 2.22 you'll see that volatility is starting to contract. That's the set up for the next big move. More importantly, the 22 week sma is turning down. That implies that cycles that are longer than 22 weeks are turning down. That's negative! Also, while the rally has been impressive in terms of % gain, the fact is that the wave structure remains in a price channel which as an Elliottician is a corrective structure. Best of Trading.
With so little net process last week, I thought that I would share with everyone what my opinion of the current market position for the week ending 10/1/2010. Momentum: Overbought. A weekly momentum high is likely within the next bar or two followed by a decline lasting several weeks. Daily momentum is also overbought. The immediate upside at this point is limited. Pattern: Corrective. The trading has been contained within parallel channel lines and is typical for a corrective pattern. Expect a minimum a 3 wave decline or the resumption of the larger trend down resulting in new lows. Price: The .618 retracement from the low of wave 1 ( 1038.5) has been tested multiple times. Price is currently just below this important level. A 1.272 reverse extension (1151) of the decline from 1126.75 - 1037.25 has also been tested. In previous posts, I mentioned other clusters of fibonacci targets for the termination of this correction ( 1158, 1150.75). While there is another key area above the market (1171.5- 1182), the fact that several fib targets are clustered in close proximity to each other and near the .618 retracement leads me to believe that the rally has ended or is near confirming such. Time: From the low of 1006, 10/5/2010 +/- 1 trading day is the 100% time retracement whereas wave c = wave a of 27 bars. Also, 10/1/2010 +/- 1 trading day whereas wave b = .382 and wave c = .618. Therefore there is an expectation that the rally ended on 9/30/2010 or will do so between 10/4 - 10/6. Trade Strategy: Go Short. With weekly momentum, pattern, price and time all in position for a high, the trade strategy is to consider going short on the shorter time frame daily chart. How you accomplish that depends on your own trade plan. Best of Trading.
In my weekly wrap up I presented a case for a bearish turn... the completion of W. 2. Moving forward I will be using a similar format so that everyone can see how I combine 4 factors to locate a possible trading opportunity and make a trading decision. I hope everyone finds this helpful and I'd like to get some constructive feedback. Here's the bottom line as of the close of trade. Momentum: Overbought. Weekly momentum is starting to roll over. Daily momentum continues to decline but remains in overbought territory. 60 minute momentum is oversold and has turned up indicating sideways to up prices early on tomorrow. Pattern: Possible beginning of W.3 or building a larger W.4 decline that can't be ruled out at this juncture. That's why I stated in my weekly wrap that at a minimum a 3 wave decline would transpire. Keep in mind that my suggestion to go short was based upon the fact that two viable wave count interpretations indicated that the market position had a high probability of a decline for today's trade. Price: The decline from 1153.5 has remained in channel lines. If indeed a larger degree W.3 is unfolding, then price MUST break through the bottom channel trendline in an impulsive manner (See red bar). Tomorrow that line crosses 1119. A break of 1119.25 would also bolster the bearish case. Conversely, a break of the upper channel line and a close above 1144 would indicate that the decline from 1153.5 was just part of a larger W.4 correction and we can expect new highs with limited upside potential. Time: High to high cyclical patterns indicate that a momentum high should be reached within the first hour of tomorrow's trade. Trade Strategy: As long as weekly and daily momentum remains in overbought territory, short positions should be established on lower time frames. Look for 60 minute momentum to reach an oversold condition. Enter a short position on a lower TF as the lower TF momentum makes a bearish reversal. Best of Trading
In my daily commentary from Monday, I stated that if a larger degree w.3 was unfolding, then price MUST break through the bottom channel trendline in an impulsive manner. Conversely, a break of the upper channel line and a close above 1144 would indicate that the decline from 1153.5 was just part of a larger w.iv correction and we can expect new highs with limited upside potential. That analysis should have benefited buyside traders. However, two days later and there has been no further follow through to the upside after Tuesday's advance. Here's the Market's position at the close. Momentum: Remains OB on weekly and daily time frames. Pattern: W.iv of w.v of w. (v) of w. C of w.2 or 1-2, 1-2 count of w.3. The higher probability being a corrective structure. Time: Looking at the weekly chart level, H-H time relationships indicate that momentum highs range between 6-8 weeks +/- 1 week. That indicates that the top of wave 2 should occur at the end of this week or the week ending 10/15/2010. In addition, L-H time relationships of 4-5 weeks indicate that a significant top should occur at the end of this week +/- 1week. Trade Strategy: With weekly and daily momentum OB, there is limited upside potential as the wave structure is mature. There is greater risk trading long at this point. One trade that I'll be looking at is a break of 1151. My reasoning is that a break below this swing low opens the door for an w.iv A-B-C correction and possibly something larger if the wave pattern proves itself as minor w.3 down. Look for my Twitter updates and follow this trade as well as others in real time. Need the address? E-mail me. Best of Trading