We were talking last night in Mentoring about what could possibly be going on with the Daily chart of the S&P. The current count shows as Wave 3 to the Down side, however, this really does not yet qualify to be a good Wave 3. It is not a "wonder to behold", nor does it posses the amplitude that most Wave 3s do in this market. Waves 1 and 2 are right next to each other, and just overall, the count does not look good. This does not mean that the software is bad, but only that it is difficult to make sense of the early stages of a new move with a static algorithm.
Thus, if it's not a 3, we need to try to make sense of what is going on. If the recent high is the end of Wave 5, then this new move down could either be a 1 or an A. In either case, the 2 or B that comes next usually pulls back 50-62% of the initial move. This puts us up between 1107.25 and 1117.
Taking a look at the 60-minute chart with 24hr data (ES #F), we see that we have a Type One buy setup. Taking the MOB from the previous Wave 4 on that 60 minute chart, we get a resistance level up at 1109, right between the two levels of expected pullback on the Daily chart.
While this is only one possible scenario, you can see how using time frames in conjunction with one another can help you to build a likely scenario. However, where most traders fail is by not planning for the WHAT IFs that may occur. Thus, formulate a Plan B and C for yourself, and BE PREPARED!
nate
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