Monday, March 16, 2009

Expectations

The market did the expected by doing the unexpected which turned into the expected by the close of Monday's session.


As the above charts indicate, the market ran up early and then topped around mid-day, falling far and hard enough to trigger SELLS on both the Blue Wave Trend Chart and the Elliott Wave 4 channel break.

Personally, I skipped the rally part (my bad) but went short with Blue Wave signal below, on the 30 minute chart:


Why skip the first three hours of rally? Most of it came pre-market and by the time the market opened, I felt that there was so little left to the upside that it wasn't worth the risk. In case anyone is paying attention, that is not how to trade trends. You just go with the direction of prices and don't think too much about things like risk and reversals. That's why I wrote, "My bad," above. Even Nostradamus screws up.

Tomorrow is a new day. I'm thinking we go down becasue of the 120 minute charts first above, and this 240 minute chart below:


Remember though, expectations are not facts, they are more like feelings and we all know what feelings do best:

They change.

A

25 comments:

Anonymous said...

Alln,
Nice post. Tomorrow and the following week will be an interesting day since we want to see how much the market will go into your counter-trend chart you posted yesterday and if resistance will become support.
Thanks
Inq

Tom said...

Allan,

FANTASTIC blog. I’m an average investor looking to get better and have already learned a great deal from reading your posts. THANK YOU!

I recently joined the Market Club because of your many mentions and look forward to combining the ‘triangles’ with your market insight. I only wish I found you before the waterfall of losses began last fall.

I have a question with regards to the ‘wash sale’ rule which I hope your attorney side can answer.

With the triangle system at the Market Club you often see on the daily charts or even the weekly charts a sell triangle below the buy triangle price. If you follow these triangles you end up in a loosing position and when it turns back the other way you’re left unable to participate due to the wash rule.

I am wondering how active traders deal with a loosing position when the tide suddenly goes against you.

Do you wait the 31 days or get into a different index ETF/stock, or any other options?

Many thanks, Tom/NJ

Allan said...

Tom, Yeah, I've been neglecting Market Club Triangles while introducing EW, Cycles and Blue Wave. I have some new ideas for using the trade triangles that I've been testing with good results, look for a new MC post soon, maybe next weekend.

As for wash sale and tax considerations, it is so much more important to make money trading then to save taxes on gains (or losses) my advice is trade first, worry about taxes once a year, around April 1st and for only about 2 weeks. Works for me.

Anonymous said...

Tom,

Normally you can use Marketclub's monthly chart for direction and weekly for timing or follow the same with weekly and daily. Really depends which works for you. I have seen the triangles work nicer in a trendier market.
Inq

http://inquisitiveaboutfinance.blogspot.com

Anonymous said...

Q? On your BWT chart from Sunday, the 2 hour bar chart, did the 760.7 point represent a reversal point?

If I had been long the BGZ(and I was), should I have taken that as kinda of stop loss point(cuz I did, unfortunately for me) and cut my losses?

Please explain so I don't make such a mistake gain.

Thanks Allan,

Mike

Allan said...

Mike: On Sunday's two-hour (120 minute) chart, the blue bars represented an uptrend and as of the open on Monday, the stop-reverse-short level was 741.82.

I thought that was too far below the Friday close, so I switched to a 30 minute chart for my personal reveral-stop. At the Open that was 750.33 (see Sunday's so-minute chart).

By mid-day Monday, that stop-reverse level on the 30 minute chart had risen (with the market) to 767.67, you can see that triggered on tonights (Monday) chart. These stops are dynamic, they move up under prices in uptrends and move down over prices in downtrends.

This carries back to my thesis that spending $3K on software can pay for itself if it continually nets points on trades, as Blue Wave does. In a way, Market Club's triangles do the same, but with much, much larger time frames, months, weeks and days.

I trade often enough to make the extra precision well worth the price of the tool.

A

Anonymous said...

Allan, a couple of weeks ago you were a bear on gold and a bull on oil. You really haven't mentioned them recently. Any changes there?

--VJ--

BTW, this blog is now a "must read" site.

Anonymous said...

MELA Technicals:
The RSI is at 49.22
Slow Stoch: K(15)=22.11 D(5)=21.07
SMA(200)=4.44 SMA(50)=2.81

http://finance.yahoo.com/echarts?s=mela#chart1:symbol=mela;range=5y;indicator=bollinger+sma(50,200)+rsi+stochasticslow+stochasticfast;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Looks like the bull run just started!!!!

Allan said...

VJ: Gold, Oil, Bonds, all of which I like to trade in addition to stocks, are all kind of choppy and I don't see an edge to trading any of them right now. As soon as I detect a tradable pattern or trend, I'll throw it up on a blog and comment.

Tom said...

Allan,

So if I understand your position on the wash sale correctly you would trade the same stock/index that you just lost money on within the 31 days but just not deduct the loss at tax time?

Is this correct?

Thanks, Tom/NJ

Allan said...

Tom,

Something like that........


A

Wayne said...

tom,

You would add the lost as additional cost basis for the next entry. Basically each wash sale is carried forward that way until the last trade that gets you out of the stock, at which point the net gain/loss is calculated.

Kind of a pain to calculate this way but not impossible. More explanation here:

http://www.fairmark.com/capgain/wash/

Regards,
Wayne

Anonymous said...

Allan, thanks for the explanation above. Still, on the Sunday BWT 2hr chart, what is the760.7 that is highlighted? I understand the 741.82 reversal, but why is 760.7 highlighted?

Mike

Tom said...

Allan and Wayne,
Thank you both!!!

-Tom/NJ

Anonymous said...

This is a key area for the market. My primary count is we are in a of 4 of intermediate 5 of primary 1.

Resistance was at 7174 or the 38.2% retracement of 3 of 5 of 1.

It was also at the fourth wave of a lesser degree, which peaked at 7405.

The market should do a b wave (zig-zag) down to below 7000.

I'm still watching the 10 year t-note yield which is in e of a 4th wave triangle.

I never anticipate a triangle break, but given what I think the bond count is, rates should rise significantly from here. Target 3.50% for the 10 year note.

Alex

Wayne said...

Hey Allan

You went short $SPX yesterday based on the Blue Wave signal. Let's assume the market heads up (against your prediction). At what price is your current strategy telling you to exit the trade?

Thanks,
Wayne

Allan said...

Wayne:

120 minute stop = 765.93
60 minute stop = 762.45
30 minute stop = 760.22*

Those are moving targets depending on price action but those are the reversal points as I post right now. I would use 30-60 minute stops, since it is just above high of day (so far).

*high today is 761.27, but stop only occurs upon a closing 30 minute bar above that level, which never occurred. In cases like that, I use EW analysis, along with FBS to weigh in on decision-making.

Wayne said...

Thanks Allan!

fyi I adapt the trades mentioned in your blog to "set and forget" type trades based on conditional price triggers (I work full time and have no chance to monitor my trades with enough frequency to take advantage of day-trading tools).

So in this case I decided to set a stop-out of around 775, based on the assumption that if the S&P reaches that target then it won't fall back below 760 in a 30-minutes period.

Regards,
Wayne

Dave said...

RE: Wash Sale Rule

If you are trading enough where keeping track of everything becomes a pain, you might take a look at Gainskeeper (www.gainskeeper.com). It automatically applies the wash sale rule when required. I have been using the service for the past 5 years and feel it's worth the modest fee to keep track of my trades and generate the Schedule D. My tax accountant loves it too since he doesn't have to do that tedious data entry from my brokerage statement. I'm not trying to sell it, just offer a suggestion for a tool that I find valuable.
Dave

Anonymous said...

Allan, if you get stopped out, do you immediately flip over to the other side...or pause and regroup?

Thanks,
Mike

Wayne said...

Interesting pattern here ...

On Feb 20th (a Friday) the SPX fell into the 775-750 zone. The following 4 days it bounced around in that zone and finally fell through the next Friday.

Now, on Mar 13th (a Friday, the SPX rose back into that zone. It's been there two days now (assuming no precipitous fall in the next 8 minutes). Will be interesting to see if it breaks out above 775 by Friday or breaks down again.

If it gets thru then I'll be paying attention to the behavior around Allan's previously stated point of interest, i.e. 807-ish.

Wayne

Anonymous said...

you cost me money big time today. for shame.

Anonymous said...

how much did you lose ???

did you go short ???

Allan said...

About an hour after I posted the above stops, both the 30 and 60 minute stops were confirmed. Using the 60 minute stop, the trend system went from SHORT to LONG where it remained until the close at 778.12.

This is not rocket science. It's simple arithmetic.

I really question whether this is worth the trouble, or maybe its just that some people are just not meant for trading.

"Trading" - the act of buying and selling securities for profit. If you're not prepared to do both, then don't do either.

David said...

Yes, it's definitely worth the trouble. I'm sure I speak for many, both experienced and inexperienced, in saying that.

I have a day job and can't trade intraday, but I take what you give here, add my own TA analysis, apply it across various timeframes, and come up with my own strategies to suit my trading style. Keep up the good work.