Changing your way of thinking…

I made a big mistake over the last couple of days, as I jumped the gun too soon. I didn't even follow my own forecast. I went short Wednesday at 1060, and then got out Thursday at 1043... well before the end of the day. And well before I should have according to my forecast. I made a nice profit, but I failed to follow my plan and missed a much bigger profit.

I then did something stupid and went long at the end of the day on Thursday (about 1031). I promptly sold today (Friday) at 1025 for a loss. I gave back my entire profit! Why? Because I got scared. I have been so programmed by the huge Goldman Sucks rally that I feared a bear squeeze was coming, so I sold.

I now have to change my way of thinking again, as I'm almost 100% sure that the P2 rally is over and P3 has begun. That means you don't have to worry about a bear squeeze after 2 down days, like you did on the way up from the March low. You remember that don't you? Every sell off was quickly rallied back up after only 2 (maybe 3) down days.

Well guess what? Those days are over! Now, every rally up for 2 days is going to be sold hard. This time the bulls are going to get raped! Paybacks' a bitch baby! I got raped too many times shorting this bullshit rally, and now it's my turn to do the raping! (Just teasing ladies... you know I'm a good boy).

So, I'm back at where I was on Wednesday. No big deal. I'm going to learn to not go long until the larger cycle hits the wave one down mark. That's probably about 850-900 or so. I'm not an EW expert, but I'm going to be able to count the larger waves pretty easily, and will know when we get closer. Probably by the end of the month or maybe even into November?

So far it looks like the move from 1080 to 1020 today was wave one inside a larger wave one (inside P3). Next week should be up for about 2 days only... just like they did to us bears on the way up. If they do a 50% retracement then that would be 1050, or 61.8% would be close to the major resistance at 1060.

Either way, what comes next is a wave 3 inside a larger wave one (inside P3). This should be nice and deep. The support levels are of 1020 (major), and then the 998-1000 area. Then 980 and finally 950 area. A wave 3 inside a larger wave one, inside Primary 3 should be brutal! I could easily believe 950 before it's done.

After that a wave 4 back up to maybe 980 or 1000, then down one more time to 900 or so. That should conclude larger wave one down. At which point I will be willing to go long again for larger wave two. I'm guessing that this will be in late November when the holiday comes in. Many traders will be gone, and light volume will come back. And you know what that means... it's easy to push higher by the PPT!

So, if you take 1080 from 900 (guessing on that bottom) then you have 180 points. Split that in half and a nice larger wave two rally back up to 990-1000 area should occur. A 61.8% rally could take us to the next resistance at 1020 area or so. This move up should take us through the month of December and into the first of next year.

Once the peak is reached, then another wave 1 down inside larger wave 3 of P3 should begin. Man... that will be bloody! But, wave 3 of larger 3 of P3 will be a massacre! One step at a time though...

Red

Author: Red