An update on the Daily SPY

As I have stated in previous posts I am cautiously bullish on the SPY and I will try and find any buying opportunities to get long even though we are in a Wave 5.  For those of you who don't follow Elliott Wave this means that we are awaiting a market top and an eventual change in direction. 

The SPY has been in this Wave 5 pattern for almost 4 months and we have been waiting for a good sell.  However, our original Wave 5 target was a price of 102.00 courtesy of the MOB drawn from the Wave 3 High on 6/11/2009.  Once this level was taken out it forms a very key level of support for any sell off and as long as the market continues to stay above this level I take a bullish approach to it.  On October 2nd Advanced GET indicated a perfect False Bar Stochastic (FBS) Buy trade that could and should have been taken as we remained above that MOB support of 102.00.  As of today we see another FBS buying opportunity forming but there is a warning sign present and it is keeping me from participating in this trade.

While we are above 102 the current profit taking has exceeded the normal 61.8% retracement.  To measure this I started from the Oct 2nd low and measure to the Oct 21st high.  While some traders may suggest that I am being far too aggressive by only measuring from the Oct 2nd low I have found good success in measuring my retracements in an uptrend from the last time Stochastic was below 25 as opposed to a random pivot low.  In using this approach the SPYhas exceeded the maximum retracement and I will be cautious and sit this move out if in fact it starts to rally as markets that retrace more than 61.8% tend to continue to decline instead of continuing to trend.

One last caution, if this market does start to move higher be aggressive at taking profits as this could be a Wave 1 low with a Wave 2 incoming.  I'll of course keep you updated if that pattern starts to develop.

Ron Wheeler

eSignal Learning

Comments

[steve brophy]

Hi ron: Thnaks for the update...understood everything but this:
"One last caution, if this market does start to move higher be aggressive at taking profits as this could be a Wave 1 low with a Wave 2 incoming. I'll of course keep you updated if that pattern starts to develop."
We've just completed 5 Waves up (on the daily chart) and the only thing I could see is an extension of W5 up, or starting W 1 DOWN to reverse the trend (or of course an ABC) Could you elaborate on what you meant? thanks so much
Steve B
NYC
Keep up the excellent work.

[anthony]

Hi Ron,
When I run my XTL (down) scan seeing a number of stocks setting up with the first requirement of 7 XTL bars (ie: trend in place). (Not too many candidates going the other way). One of the market leader's of the rally GS is one of the stocks setting up for Get continuation trade (waiting on the trigger).
Any thoughts or comments as price is telling me the market is weak going up ?
Thanks
Anthony

[Terry Felter]

I belive that Ron has a good idea about the .618 retracement, as when this level is violated the previous move continuation has a lower probablility. Now if one takes a ratio for the highs in Oct to the lows in late Oct early Nov, $INDU has tanken out the .618 level. Both $SPX and $COMPQ are very close to achieving respective levels. The 60 minute charts have all three with a labelled wave 3 completion. I personally don't like the look of the wave but won't argue with them. The point I believe needs to be made that IF either or both make a 60 minute higher wave 5, this may take all of them above the .618 retracement. This will lessen the probablity of a lower low than that of late Oct.