There have been a few questions coming in about where the Dow (INDU) and overall markets are headed. We had a fairly textbook Type Two Buy setup right at the beginning of July. Since that point, we have had a pretty stiff move to the top side, followed by a 50% retracement. That could be a new 1 and 2 headed up for a new Wave 3. Yesterday's bar (7/26) was an XTL Blue Breakout bar, seeming to confirm that a 3 is coming. A 1.618 extension of 1 and 2 shows a 3 right up near the highs of this past April, which would be a significant resistance point. If this is just an ABC to the top side instead of an Impulse phase, then an equal extension of A for wave C would be right in the MOB from the high we had in June. In either scenario, we have resistance showing there. Any long positions should take at least partial profit at these levels to protect the profit obtained by that point.
I trade the SPY and es more frequently and there is a Stoch Sell that triggered on the daily early this morning. Using the daily you can get a real nice trend channel with a .994 Pearsons. Thats too tight to really see the trigger so if you change your time to a 60 min view, it pretty clearly shows the trigger and gives an excellent place to judge where a stop should be set.
Cheers and comments appreciated.
Posted by: Peter | July 28, 2010 at 08:05 AM
Hmmm...not what i see... if you use Elliot W you get a W3 top at 1114@ 200 MA (SPX) with sto crossing down...am i missing something here?
with GDP due out this AM moving lower still!
Posted by: steve brophy | July 30, 2010 at 05:33 AM
PS
You could still get to Nate's targets (and those are my targets as well)(you can see elliot calculate W5 on the chart) but only after this W4 pullback completes...and OSC pulls back as well.
I am watching STO bull cross to get long,
(I adjust the STO calc to 5,3 for an easier read.) Any comments welcome.
broph
Posted by: steve brophy | July 30, 2010 at 05:39 AM
Hi broph - my post was from Wednesday morning before the open and it setup just like I wrote. Turned out to be a great trade and I took it off this morning for SPY 2pts and change. On the 60' you should see a Type 2 Sell setting up and break of the trend was the entry. Unless you feel the little dip in the Stoch invalidated the rules it seems pretty clear.
You had to use a trendline break tactic to catch the es morning breakdown with the GDP report to 1085 support. That worked out very nicely.
Crude had a Stoch Sell setting up on the 13' chart but it didn't completely cross. A little help with a trendline break made it a good trade.
Not a bad week with a little more than a little help from GET.
Cheers and thanksfor the comment ... only way to get better at this.
Posted by: Peter | July 30, 2010 at 08:08 AM
Peter, my apologies for my slow response. I just didn't see your post last week. This setup, after a 5th Wave termination, sets up almost every time in the Stochastic format you mentioned. This is a big NO NO in most cases. The Elliott sequence in this respect TRUMPS the Stochastic. Thus, whenever you see a Stochastic setup like this (one after a 2nd attempt in a given trend) one should ALWAYS consult the Oscillator to make sure if divergence is present or not. Look back at a bunch of charts that have completed a 5th wave and changed the direction of the trend thereafter. You will see this setup happen time and time again, and fail each time. This is a good example of when NOT to take a Stocahstic trade. I hope that helps!
nate
Posted by: Nate McCartney | August 03, 2010 at 10:43 AM
Nate - that totally makes sense and I see it was more a matter of 'luck' that the trade actually worked out. Call it a lucky scalp. Many thanks for pointing this one out.
Posted by: Peter | August 03, 2010 at 11:54 AM