Tuesday, March 10, 2009

Drilling down

Tuesday's open gapped right up above our Blue Wave Trading Buy-Stop of 685.07, setting the stage to go long and stay long into the close @ SPX 719.60.

Here is the Daily view of our Blue-Elliott chart:

Note, five waves down on the right and a new Daily Blue Wave Buy Bar on the left. Only the Blue Wave Weekly Bars are still red, way up at 805.30. It is conceivable that this rally phase will never get that far and that holding Short throughout the retracement will pay off in the long run. Most of us are traders though and holding short through a 100 point S&P rally is the antithesis of a rational life.

So let's drill down into some shorter time frames:

Above is a 120 minute, or two-hour bar chart. I like this time frame for it's combination of large wins with minimal whipsaws, but those two-hour bars can be killers in a wishy-washy market. Still, as a frame of reference it covers well what we are up against here. That False Bar Stochastic on the right is getting perilously close to overbought. Good to know, especially if the rally takes a snooze tomorrow.

More information still, drilling down to our 90 minute charts:

Here is our first indication that Elliott is coming along on this one. It is counting a five way advance with still a good ways to go, consistent with the Blue Wave chart on the left. But again, an ominous False Bar Stochastic looms.

Above are the 60-minute charts and a new wave count on the right. Now that FBS is beginning to make sense. This entire rally from late Monday may very well only be a Fourth Wave Bull Trap. Blue Wave defines our risk, 706.09 is where BW flips Short on this chart, which if it occurs, will coincide with a breakdown of the 4th Wave trendline (not shown). We know what that means......new lows.

Finally, the 30-minute charts, the ones I weigh most heavily for my intraday swing trades:

This is arguably the most bullish of the charts tonight. A robust five wave advance on the right and a very bullish looking Blue Wave trend on the left. The FBS on the right looks about ready to enter a trend mode and if it does, we disregard any FBS Sell signal, as it will mean the index is entering an established uptrend.



Unknown said...

Nice to see the surgeon at work.

Thanks for the disection. Really.


Anonymous said...

Thanks Allan. Where do we expect the wave 1 rally in the daily chart?
Thanks Inq

A said...

Re: Wave 1

The lone wave in EW that we don't know is even there until we look back and say, "Yea, that was it." EW by itself has dead zones, could be this, could be that, but combine EW with something like a rule-based trend indicator, i.e. Blue Wave, you're always in the zone, flowing with the current, rolling with the puches. The combination makes each technique more powerful and together, exponentially more robust and profitable. Perfection remains elusive, but this is close, damn close.

Anonymous said...

Great charts, thanks Allan!

Anonymous said...

I'm looking for a 1x inverse ETF of SPY that acts like a normal short when held for more than a day, i.e.:

* short on SP500
* does not pay a dividend
* does not do the "daily resets" that ultra inverse ETF's do which cause profits to deteriorate as the underlying equity stands still.

Any ideas?