Saturday, April 20, 2024

Still Holding On…

The market had every chance to crash today, but it didn't...

Even though the market did sell off hard, it recovered a lot of the early losses by the end of the day.  It seems that the bears needed a breather before they can push it down again.  However, for tomorrow, it's going to be a tough call as to which direction I see the market going.

On one hand, we are pretty oversold on multiple charts... and it's option expiration this Friday.  The open interest on the put side is huge right now.  That wants to make me believe that they will gap it open tomorrow, to get above that downward sloping trendline, (that I have on the charts from yesterday's post).  That's about the only way I see them getting above the trendline, and rallying higher.

But the other part of me says that the charts are still pointing down.  The daily isn't showing any signs of turning back up yet.  The 60 minute chart is trying to turn back up, and the 15 is a little overbought now.  I just don't know how to read it?  So this post is going to be short.

If we gap open and run higher, the correction could be over for this week.  It doesn't mean it's done for good, but a rally until opx is over with this week, and then more selling next week is possible.  If we open flat, then I think we will continue selling off more.  So for now, I'm not sure about exactly what will happen tomorrow, so I not going to make a forecast.

However, I'm still bearish because of the daily chart.  It still tells me that there is more downside coming tomorrow, and Friday.  Plus the week chart also is still bearish, and I think we will go lower then where we currently are.  That's it for now.  That yellow downward sloping trendline is still intact for now, so not much has changed my opinion on the bearishness still in the market.

Best of luck to both bulls and bears... may we both get out at the ideal position.

Red

Red
Author: Red

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SC
SC
13 years ago

Hey that's me! Where did you get my pic?!!!

I demand a royalty fee! You will be hearing from my Sear's prepaid lawyer!!

Red Dragon Leo
13 years ago
Reply to  SC

Who you kidding? That's not you in the picture SC… it's me!

Rip Van Trader
Rip Van Trader
13 years ago

Tomorrow is supposed to be a moon phase (quarter moon), so we may get that rallyette.

I'm actually showing a loss today, on some puts that seemed cheap this morning but became very, very cheap by EOD. Lots of bullishness around, which is unseemly for a real bottom. Or so I hope!

Red Dragon Leo
13 years ago
Reply to  Rip Van Trader

Rally up to 1130-1140… then crash! (crossing fingers here)

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

I dont know about the rally up…but you have the crash right

Rip Van Trader
Rip Van Trader
13 years ago

Europe is auguring in this morning, doing the heavy lifting for a change (usually not much happens on their shift).

If we open at par with them, I'm going to be p1$$ed. They are due for some kind of resistance testing or rally soon.

Pre-market SPY has a low of 109.44, is at 109.84 as of this post. 7:59am.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Rip Van Trader

PP=111.63

S2=109.22

going down this morning…greece doing same thing as last week big strike…maybe another 1000pt drop…maybe…hope so…

bensjoyce
bensjoyce
13 years ago

looks like the 1107 pivot is being (already) blown out so 1066 is next

bensjoyce
bensjoyce
13 years ago

See if this helps, from Tony Coldero

” Today's low, with a short term positive divergence at the 1107 pivot gives us two probabilities. First, if the 1107 holds there is a potential for a failed flat (bar chart), completed flat (line chart), ending this correction. The market would have to clear the OEW 1136 pivot next to turn the short term charts positive again. Second, if the 1107 pivot fails to hold a likely retest of that SPX 1066 panic low would be next. This appears to be an important juncture for the markets. Best to your trading!”

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  bensjoyce

1066 is also the lower boundary of a long-term chart formation called an Ascending Broadening Wedge, details at Cobra's site:

http://stockcharts.com/def/servlet/Favorites.CS

If the formation holds true, we should not bounce at 1066 but have a little sideways movement. If we end the day at 1066, I hope to cover tomorrow in the termination range of 1008 to 1019.

monicadern
monicadern
13 years ago

Sundancer are you still using 1135 as your local min value or does that change daily? I would like to know if 967 is still the first tier buying point. Thanks!

sundancer390
sundancer390
13 years ago
Reply to  monicadern

1135.68 is last weeks $SPX close & one of many clues the operators left to the oncoming trainwreck this week

Per my Monday morning post:
This morning I canceled an order to liquidate my short inventory @ gold weekly containment($SPX 1050's) & re-entered the order to liquidate short inventory @ teal weekly containment($SPX 990's)

The first Buy tier off the 1219.8 $SPX high is in the low 990's.
2nd 967.15
Final Tier is @ 875.01.
Have enough capital to buy all the way down to 875.01.

I have a large buy order in the 990's.

jimhobson
jimhobson
13 years ago
Reply to  sundancer390

GLD is tanking in futures.

I take it you are positioning to buy calls at spy 990. How far out are you looking?

sundancer390
sundancer390
13 years ago
Reply to  jimhobson

I don't use levered instruments.

I don't suggest anybody using them. If you're a professional trader, leverage is co-relational to a drug addiction.

It never ends well.

Earl of
Earl of
13 years ago
Reply to  sundancer390

I really don't see any difference between
1) investing $100,000 in a stock and losing $5,000 because it dropped 5%
2) spending $5,000 on calls (holding $95,000 in reserve) and losing all $5,000

The issue simply can not be the use of a leveraged instrument.
You could argue that people are using the whole $100,000 to buy calls, and stand to lose all of it, but that is not at all what you said.

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  Earl of

That's where I'm at. Today I'm about 6% options, which is heavy. Usually it's just a couple % for a play.

I haven't held stock for more than a month. Just been playing options, and appreciate the leverage and risk management.

jimhobson
jimhobson
13 years ago
Reply to  sundancer390

Interesting comment. i do not disagree.
I did however make a bundle riding the markets up last year. The short plays since the top had not been confirmed were difficult to say the least.

So I take it you are playing straight long and possible unlevered etf shorts

AS2009
AS2009
13 years ago
Reply to  sundancer390

So Sun – you are not expecting any bounces on the way ?

What are upside levels to keep an eye on … pls could you share …

111.77, 112.89, 114.3 are there any others that I am missing ?

sundancer390
sundancer390
13 years ago
Reply to  AS2009

We'll talk about upside levels after we print the terminal value.

Until we get above teal containment on the 60 min.(1140's today) the dynamics don't change.

VinylMan
VinylMan
13 years ago
Reply to  sundancer390

If the potential exists for an over 100 point drop from the 990's wouldn't your larger buy order be held for levels lower than the 990's as opposed to your scheduled large buys at that level?

sundancer390
sundancer390
13 years ago
Reply to  VinylMan

No, remember this is a numbers game.
With less than 1% probability the $SPX prints 875.01, you're most likely going to get left high & dry.
Should we print 875.01 we would have a uni-directional move to 1097.
I have less capital committed to orders @ 875.01 but because of the exponential function it would be the most profitable tier.

VinylMan
VinylMan
13 years ago
Reply to  sundancer390

Got it. Thanks.

monicadern
monicadern
13 years ago
Reply to  sundancer390

Sun, I can't tell you have much you have changed my life and opened my eyes and I can't thank you enough.

AS2009
AS2009
13 years ago
Reply to  monicadern

Mon – maybe you do a basics class on this weekend – to help us grasp the lingo / calculations a little better … Sun is travelling, so maybe you can help us 🙂

monicadern
monicadern
13 years ago
Reply to  AS2009

Unfortunately AS2009, I don't have the answers – Sundancer is the only one that does. Listen to him while we can – get rid of your shorts in the high 990s and start buying in the 990s as well all the way down to 875(if we get there). Buy as much as you can. That's about it.

AS2009
AS2009
13 years ago
Reply to  monicadern

Mon – I am currently long – so trying to get out … I thought that the option CP of 115 would give me a chance to do that … however with june call options not gettin the chance and heavily underwater -80% …

You mentioned local min value – what is that ?

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  AS2009

Here's another stop, AS, probably as brief as the last.

sundancer390
sundancer390
13 years ago
Reply to  monicadern

You're Welcome!!!

After this Ritual terminates, I will likely crawl back into my cave.

In my early days, it never bothered me much seeing ignorant fools throwing their money away, but as we draw near to the Macro Sun Ritual individuals will need all the resources they can get their hands on.

Take care of your family.

monicadern
monicadern
13 years ago
Reply to  sundancer390

I figured as much and that is why I used leverage while I had the map! I am very worried about the future and that is why I have diverted time away from my family to focus on this. I hope that my resources will protect my family. I hope good things come your way because you certainly deserve it.

ashsail10
ashsail10
13 years ago
Reply to  monicadern

I second that, even though I didn't made any money except losing less capital , as I generally afraid to short.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  ashsail10

I dont know…all charts in alignment…5min 15min 60min daily…50ma 20ma 10ma

AS2009
AS2009
13 years ago
Reply to  sundancer390

Sun – didn't make any money of this awesome call of yours and heavily underwater with my longs … trying to figure out where to get out and join your party … 990s is a long way off …

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  AS2009

My $0.02:

We are getting a bounce right now, may not last long. Go to NASDAQ website and watch SPY real-time quotes, buy when the line direction is up. Direction is more important than price level.

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  AS2009

I think this rally will carry to 1105

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  Rip Van Trader

No, I don't think it will. Better act ASAP.

sundancer390
sundancer390
13 years ago
Reply to  AS2009

sorry, don't know what to tell you

It's a difficult position to be in.

AS2009
AS2009
13 years ago
Reply to  sundancer390

Yes – it is … I am trying to figure out where to get out … at this point.

You have been a great help to everyone here … though honestly I get confused with the terminology … maybe as I have not followed everything as I work fulltime ….

But to understand better … essentially you are looking at those 3 tiers 875-990 to go long unless we take out 1140 area = which is where you would go long as well ?

sundancer390
sundancer390
13 years ago
Reply to  AS2009

Correct with $SPX 990's providing the highest probability terminal value area from a numbers perspective plus there is teal weekly containment in that area as well as $SPX's last daily containment in the same region.

The short term dynamics would change should we get above teal containment on the 60 min (currently 1140's).

AS2009
AS2009
13 years ago
Reply to  monicadern

Mon – what is a local min value ?

jimhobson
jimhobson
13 years ago

I just saw futures. Maybe your crash is today.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  jimhobson

Thats what I'm seeing Jim

bensjoyce
bensjoyce
13 years ago

see jay strauss he says low aroun 10:30 or truncation at 10 then rally but big drop at close or am friday

see blog list

Red Dragon Leo
13 years ago
Reply to  bensjoyce

Ben,

There isn't likely to be any big rally today or tomorrow. They won't let the bulls out, just like they didn't let the bears out on the way up. This is going to be another blood bath for the bull.

bensjoyce
bensjoyce
13 years ago

twice in the last week i could have sold my puts at much greater value intraday.

After reading strauss he says big drop untill 10.30 or truncation at 10am then rally but big drop late day or friday am.

I may get out at 10.30 or 10
maybe then a rally to 1102 the 200 dma then down late today or tomorrow.

Red Dragon Leo
13 years ago

Looks like we will skip the “rally up” and go straight to crash.

Earl of
Earl of
13 years ago

Carl’s morning call:

June S&P E-mini Futures: My range estimate for today is 1075-1115. I still think that last week's low at 1056 ended the correction from 1216. Strength above 1120 would be very bullish.

1085.25 – 1116.50 range last night (31.25 points)
1075-1115 estimate for today (40 points, ~2 times normal)

1090 currently, so estimate is -15 to +25 from here (bullish)

Red Dragon Leo
13 years ago
Reply to  Earl of

Good luck to Carl then… as I wouldn't even think about going long at 1056. He's got bigger one's then I do!

Earl of
Earl of
13 years ago
Reply to  Red Dragon Leo

I suspect he waits for the smoke to clear. The trades he posts seem not to be too bold. Would be interesting to see his not-so-public trades.

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

I am always nervous about futures. The moving averages are aligned down in a furious way even with yesterdays lull.

If sp gets below 1100 this am I am thinking we have a major drop possibly straight to the Feb lows of 1044.

I will not go long until averages align to the upside. who knows where this wave ends??

jimhobson
jimhobson
13 years ago

China is imploding FXP is on Fire

newbear
newbear
13 years ago

nice gap down opening, happy red?

Red Dragon Leo
13 years ago
Reply to  newbear

Very happy now Newbear… but worried about others too.

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  Red Dragon Leo

Yes, there is a lot of pain and suffering caused by these hijinks.

Rip Van Trader
Rip Van Trader
13 years ago

Showtime!

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Rip Van Trader

yes it is…..definitely below 200ma

Turbo Tim
Turbo Tim
13 years ago

Anyone thinking about technical 10% correction bounce, then down

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Turbo Tim

charts say no…but then…

jimhobson
jimhobson
13 years ago

They are already moving to save the day.

bigbadwolfusa
bigbadwolfusa
13 years ago

just popped through S2 109.22

bigbadwolfusa
bigbadwolfusa
13 years ago

S3=108.08

jimhobson
jimhobson
13 years ago

In Dow Theory a close below 10221 is extremely bearish and crash is imminent. Might be 10271

bigbadwolfusa
bigbadwolfusa
13 years ago

eh Red you taking the day off…your awfully quite…

Red Dragon Leo
13 years ago
Reply to  bigbadwolfusa

LOL… Just enjoying the moment.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

I thought so….

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

congrats red, you had to suffer from the Bulls too much so this is your payday!

Red Dragon Leo
13 years ago
Reply to  newbear

Thanks NewBear…

I think we are going down to 990 or lower tomorrow. I hope everyone is hedged properly, as I worry about others too.

sundancer390
sundancer390
13 years ago

$SPX 1080.15 is where the operators left 1 of 2 gaps during 5.6.2010
http://www.flickr.com/photos/47091634@N04/46044
Remember that chart

ashsail10
ashsail10
13 years ago
Reply to  sundancer390

Thanks I am watching that area only.

AS2009
AS2009
13 years ago
Reply to  sundancer390

Sun – what would the next support be – will add puts on the break of it … break of 1080.35 on the 60 min ?

bigbadwolfusa
bigbadwolfusa
13 years ago

ok….I'm out of supports…hahaha

sundancer390
sundancer390
13 years ago

$SPX is now entering the lower threshold of it's 50 pt. slipzone that I detailed on Tuesday night.
http://www.flickr.com/photos/47091634@N04/46244

AS2009
AS2009
13 years ago
Reply to  sundancer390

Sun – based on this chart, it seems that the first hits of these points gives a bounce …. back to test the previous level broken – do u think that is reasonable to expect ?

sundancer390
sundancer390
13 years ago
Reply to  AS2009

The precise low of the 5.6.2010 came from light blue containment so should that break another 50 pt. slip zone down to burgundy containment which held the $SPX during 2.5.2010 low.

Best you could hope for is a $SPX reaction to 1095 area.

jimhobson
jimhobson
13 years ago

Does everyone agree?? ha! That 1044 is the target

Red Dragon Leo
13 years ago
Reply to  jimhobson

I believe that 875-990 is the target Jim.

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

That is below Feb lows. I take it you do not see the bounce to form the June 25 top now or at least a RS.

Red Dragon Leo
13 years ago
Reply to  jimhobson

Jim,

After the correction is over, I still see a move up to DIA 118.16 (about Dow 11,800) around June 25th, 2010. After that final high, I see Primary Wave 3 (P3) beginning and a 5,000 point drop by the end of the year.

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

That coincides with several cyclist i read like Nenner and Weiss.

the time frame is getting compressed. its going to be a heel of a month.

jim

wendel
wendel
13 years ago
Reply to  Red Dragon Leo

I'm with you Red. I believe this is going to happen also.

Rip Van Trader
Rip Van Trader
13 years ago

SPX bear flag pointing at 1066 area.

Red Dragon Leo
13 years ago
Reply to  Rip Van Trader

There's something about 6's that the bear likes…

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  Red Dragon Leo

Battle of Hastings and the Magna Carta…birth of the feudal system.

Red Dragon Leo
13 years ago

Isn't is amazing how quiet it is now that we have finally arrived at our destination? aka… the crash!

sundancer390
sundancer390
13 years ago
Reply to  Red Dragon Leo

the liquidation of individuals & entities won't take place until tomorrow

Too many HF's have sold Naked Puts in AAPL

Things are on track for the biggest harvest of Speculative Capital since Oct. 08'

Red Dragon Leo
13 years ago
Reply to  sundancer390

I'm still short and will wait until tomorrow to sell. Whether it's 990, or 875… either one will make me happy.

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

good luck red

Red Dragon Leo
13 years ago
Reply to  newbear

Thanks Newbear…

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

the way things are going you may get your chance today instead of tomorrow

Red Dragon Leo
13 years ago
Reply to  sundancer390

How do you think Gold will react during the crash? Up in fear, or down from panic selling?

sundancer390
sundancer390
13 years ago
Reply to  Red Dragon Leo

I don't know what the “media” is using as an excuse for this Ritual

there will be a great amount of liquidation in Gold from HF's that are now cooked

Earl of
Earl of
13 years ago
Reply to  Red Dragon Leo

Hey Red,

Another way of looking at this: we dropped to 1174.50, which is 0.50 below Carl's projected low for the day, and bounced up from there.

The day's not over, and anything can happen, but so far, it's not a crash — just dropped and bounced.

Earl of
Earl of
13 years ago
Reply to  Earl of

NYSE down volume to up volume is 42 to 1 at the moment — that seems pretty high.

Red Dragon Leo
13 years ago
Reply to  Earl of

Look at this daily chart Earl… Do you still anything bullish about it? This market is going to crash tomorrow my friend. Protect yourself with some wildcard puts on something.

http://stockcharts.com/def/servlet/Favorites.CS

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

my 5min is the only chart that has rolled and the others have gotten stronger…the 5min is now coming back in line

Earl of
Earl of
13 years ago
Reply to  Red Dragon Leo

Red,

Pretty much need to flip that chart upside down to see anything bullish 🙂

Carl came out with an update — his new view depends on whether 1075 holds or not. If it breaks again — he sees lots and lots of downside. No particular downside target.

Red Dragon Leo
13 years ago
Reply to  Earl of

Just protect yourself Earl… just in case the sky really does fall tomorrow.

Earl of
Earl of
13 years ago
Reply to  Red Dragon Leo

I have — thanks for the concern.

Red Dragon Leo
13 years ago

I see a 1110.00 fake print high on the 5 minute chart of the ES futures. Don't see it on the SPX, or the SPY…

Anyone else see one? (Ok, it just disappeared. I don't expect it to hit today of course, but I wanted to tell everyone).

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  Red Dragon Leo

Could be where the bounce is. I plan to sell puts right around there. Depends on where we are at today's close. 900s may be a day or two out.

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  Red Dragon Leo

Excuse me, I meant 1010.

jimhobson
jimhobson
13 years ago

MSNBC is talking about this 10% expected correction. They obviously cannot do basic math. 1252-1074=178/1252=14.2% from Feb high.

jimhobson
jimhobson
13 years ago

How much do markets recover at eod??

I see nothing in charts but we all know its a coming.

Red Dragon Leo
13 years ago
Reply to  jimhobson

No idea Jim? I know that Ameritrade is down now, and that's not a good sign for anyone trapped long right now.

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

I've joined you red let's take this POS market way down

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

S&P just broke lower BB on 5 minute so pressure for day seems to be picking up again. Maybe this really is it

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  jimhobson

macd is back on the 5min so down we go again

sundancer390
sundancer390
13 years ago
Reply to  Red Dragon Leo

I'm surprised anybody uses Ameritrade after the debacle back in 08'

Red Dragon Leo
13 years ago
Reply to  sundancer390

Well, at least I'm stuck in a short position instead of long. I should still be ok, as my puts are for May… which expire tomorrow.

By the way, I got this fake print on Gold a few days ago…

http://reddragonleo.com/wp-content/uploads/2010

sundancer390
sundancer390
13 years ago
Reply to  Red Dragon Leo

that's a good one, put that in the archive

wendel
wendel
13 years ago
Reply to  Red Dragon Leo

WOW. l was thinking Gold was going to go down. Look at DZZ. It needs a correction.

sundancer390
sundancer390
13 years ago

195 min Setup
http://www.flickr.com/photos/47091634@N04/46241
1066.44 is where the purple envelope is @

jimhobson
jimhobson
13 years ago
Reply to  sundancer390

I am sorry but i do not know what an envelope is. Never heard the term before your posts.???

sundancer390
sundancer390
13 years ago
Reply to  jimhobson

envelopes were a standard “tool” on brokerages platforms many years ago so I would assume they still are

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  jimhobson
jimhobson
jimhobson
13 years ago
Reply to  bigbadwolfusa

Thanks. Its seems they are synonymous w/ bollinger. I will try to figure out after close today.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  jimhobson

From Dr Elders Bk Come into my trading room

Channels
Markets are manic-depressive beasts. They rise in powerful rallies, only
to collapse in breathtaking declines. A stock catches the public’s fancy,
shoots up 20 points one day, and then slides 24 points down the next.
What drives those moves? Fundamental values change slowly, but waves
of greed, fear, optimism, and despair drive prices up and down.

How can you tell when a market has reached an undervalued or overvalued
level, a zone for buying or selling? Market technicians can use
channels to find those levels. A channel, or an envelope, consists of two
lines, one above and one below a moving average. There are two main
types of channels: straight envelopes and standard deviation channels,
also known as Bollinger bands.
In Bollinger bands the spread between the upper and lower lines keeps
changing in response to volatility. When volatility rises, Bollinger bands
spread wide, but when markets become sleepy, those bands start squeezing
the moving average. This feature makes them useful for options traders
since volatility drives options prices. In a nutshell, when Bollinger bands
become narrow, volatility is low, and options should be bought. When they
swing far apart, volatility is high, and options should be sold or written.
Traders of stocks and futures are better off with straight channels or
envelopes. They keep a steady distance from a moving average, providing
steadier price targets. Draw both lines a certain percentage above or
below the EMA. If you use dual moving averages, draw channel lines parallel
to the longer one.
A moving average reflects the average consensus of value, but what is
the meaning of a channel? The upper channel line reflects the power of
bulls to push prices above the average consensus of value. It marks the
normal limit of market optimism. The lower channel line reflects the power
of bears to push prices below the average consensus of value. It marks the
normal limit of market pessimism. A well-drawn channel helps diagnose
mania and depression. Most software programs draw channels according
to this formula:
Upper channel line = EMA + EMA • Channel coefficient
Lower channel line = EMA − EMA • Channel coefficient
A well-drawn channel contains the bulk of prices, with only a few
extremes poking out. Adjust the coefficient until the channel contains
approximately 95 percent of all prices for the past several months. Mathematicians
call this the second standard deviation channel. Most software
packages make this adjustment very easy.
Find proper channel coefficients for any market by trial and error. Keep
adjusting them until the channel holds approximately 95% of all data, with
only the highest tops and the lowest bottoms sticking out. Drawing a channel
is like trying on a shirt. Choose the size in which the entire body fits comfortably,
with only the wrists and the neck poking out.
METHOD—TECHNICAL ANALYSIS 95
Different trading vehicles and timeframes require different channel
widths. Volatile markets require wider channels and higher coefficients.
The longer the timeframe, the wider the channel; weekly channels tend to
be twice as wide as dailies. Stocks tend to require wider channels than
futures. A good time to review and adjust channels in futures is when an
old contract nears expiration and you switch to the new front month.
A channel drawn in an uptrend tends to fit the peaks. Rallies in a bull
market are much stronger than declines, and bottoms seldom reach the
lower channel line. In a downtrend, a channel tends to track bottoms,
while the tops are too limp to rise to the upper channel line. It is unnecessary
to draw two separate channels, one for the tops and the other for
the bottoms; just follow the dominant crowd. In a flat market expect both
tops and bottoms to touch their channel lines.
When we are bullish, we want to buy value near the rising EMA and take
profits when the market becomes overvalued—at or above the upper channel
line. When bearish, we want to go short near the falling EMA and cover
when the market becomes undervalued—at or below the lower channel line.

If you buy near a rising moving average, take profits in the vicinity of
the upper channel line. If you sell short near a falling moving average,
cover in the vicinity of the lower channel line. Channels catch swings
above and below value but not major trends. Those swings can be very
rewarding. If you can catch a move from the EMA to the channel line in
bond futures, you’ll make about $2,000 in profit on a $2,000 margin. If
you can do this a few times a year, you’ll find yourself far ahead of many
professionals.
A beginner who sells his position near the upper channel line may
regret it several weeks later. In a bull market, what looks overvalued today
may look like a bargain the next month. Professionals do not let such feelings
bother them. They are trading, not investing. They know it’s easy to
be smart looking at old charts, but hard to make decisions at the right
edge. They have a system, and they follow it.
When prices blow out of a channel but then return to the moving average,
trade in the direction of the slope of that MA, with a profit target near
the channel line. Prices break out of channels only during the strongest
trends. After they pull back, they often retest the extremes of those break-
outs. A breakout from a channel gives us confidence to trade again in its
direction.
Prices occasionally take off on wild runaway trends. They break out of a
channel and stay out for a long time, without pulling back to their EMA.
When you recognize such a powerful move, you have a choice: stand aside
or switch to a system for trading impulse moves. Professional traders, once
they find a technique that works for them, tend to stay with it. They’d rather
miss a trade than change to an unfamiliar style.
If a moving average is essentially flat, go long at the lower channel line,
sell short at the upper channel line, and take profits when prices return to
their moving average. The upper channel line marks an overbought zone.
If the market is relatively flat on long-term charts, rallies to the upper
channel line then provide shorting opportunities, whereas declines to
the lower channel line provide buying opportunities. Professionals tend
to trade against deviations and for the return to normalcy. Amateurs think
that every breakout will be followed by a massive runaway move. Once
in a rare while the amateurs are right, but in the long run it pays to bet
like the pros. They use channels to find when the market has outrun itself
and where it is likely to reverse.

Elliott-Wave-Education.com
Elliott-Wave-Education.com
13 years ago

new low on the day here it comes!!

Red Dragon Leo
13 years ago

Hey EWE,

Glad you stopped by… Having fun yet?

Elliott-Wave-Education.com
Elliott-Wave-Education.com
13 years ago
Reply to  Red Dragon Leo

Gotta be having fun on days like this…. Even the NYSE floor is making noise!

Red Dragon Leo
13 years ago

Glad you're having fun… tomorrow will be even more fun, for the bears at least.

bigbadwolfusa
bigbadwolfusa
13 years ago

my 5min macd rolled 15 ago and the 15min macd just rolled… so we could hit S2 @ 109.22

Red Dragon Leo
13 years ago

This move up will shake out a lot of bears now. Many will think that the bottom is in now.

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  Red Dragon Leo

That's the brightest green on my Yahoo screen. Pretty scary.

Elliott-Wave-Education.com
Elliott-Wave-Education.com
13 years ago
Reply to  Red Dragon Leo

I see this shakeout failing at 1088 then resuming the selling into close…. what levels are you looking at?

Red Dragon Leo
13 years ago

It's losing steam already it seems…

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

if it doesn't get through S2 then forget it…

jimhobson
jimhobson
13 years ago

there is your 1088. Looks like a serious wave of profit taking from short positions,

now we see how bad people want out.

Elliott-Wave-Education.com
Elliott-Wave-Education.com
13 years ago
Reply to  jimhobson

ya right here is a critical point in the day if we rally it could be a W.C of W.4 which could bring us up to 1093 aka the 50% fib line. But if we start selling then we are in W.5 down and well see new lows on the day.

There is an illustration on my site for those that may be interested…

Elliott-Wave-Education.com
Elliott-Wave-Education.com
13 years ago

looks like we are in fact in W.C will prob see 1093 before selling resumes

Red Dragon Leo
13 years ago

This move up is also to gap window, and many bulls will bail out there.

Elliott-Wave-Education.com
Elliott-Wave-Education.com
13 years ago
Reply to  Red Dragon Leo

looks like 1093 will in fact hold….. i believe this last hour of trading will be ugly.

Red Dragon Leo
13 years ago

Agreed…

I think this is a wave 5 down, and it should go to the double bottom around 1065 by the end of the day. I think many bulls will go long there, and be trapped overnight, only to watch a gap down in the morning. Panic is coming, I believe.

ashsail10
ashsail10
13 years ago

EWE, at what point in SPX if it crosses will you change your mind? I mean bullish. Thanks

Elliott-Wave-Education.com
Elliott-Wave-Education.com
13 years ago
Reply to  ashsail10

if 1093 doesn't hold then i would move to neutral but I wound be looking to go long anytime soon. My higher time frame counts are severely bearish and I always trade in synergy with the higher time frames. No need to step in front of a moving bus. Plus just look at how the markets have been behaving for the last several months, in the time it takes the S&P to rally x number of points it declines x number of points at a much faster rate. Imo the rallies are only serving as time corrections in out current environment. I am only looking at short opportunities. Just my two cents.

ashsail10
ashsail10
13 years ago

Thanks EWE, appreciate your response.

MobyDoc
MobyDoc
13 years ago

or todays move was another 1-2,, at your 1093 would be a good spot for the third wave down

jimhobson
jimhobson
13 years ago

Thanks. Its going to get interesting.

bensjoyce
bensjoyce
13 years ago

for what;s its worth Jaywizz (strauss) sees pop tomorrow am followed by sell off to 1050-1044 $spx

Red Dragon Leo
13 years ago
Reply to  bensjoyce

You know Ben, a few months ago I would have said the same thing. It looks like it should bounce, and maybe it will bounce tomorrow… I don't know?

But my gut tells me that they won't let the bulls out on any rally back up, just like they didn't let the bears out on the ride higher for the last 6 months. I personally think they will gap it down tomorrow, and trap all the new bulls going long around this double bottom area of 1065-1070.

But, I've been wrong before… a rally and and then a crash is possible?

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

We may just get an intraday bounce like the other day if the EW guy is right.

Red Dragon Leo
13 years ago

From the looks of things, we will be overbought on the 15 minute chart soon and should roll back down lower. Don't know the wave count, but being that it is also getting close to 3pm (est), the bewitching hour… I'd say there will be some panic sellers trying to get out of their long positions.

Probably more selling overnight, and gap down in the morning. I do believe that capitulation day will be tomorrow. Once the previous low of 105.00 spy is taking out… it's going to be ugly.

bensjoyce
bensjoyce
13 years ago

one big reason the stock are “crashing” is that the Eurozone is sick evidenced by the sick Euro BUT the Euro is rallying close to 500 pips ABOVE yest. low
this could be hurting the crash. Hopefully it resumes tomorrow

Rip Van Trader
Rip Van Trader
13 years ago

Huge buy (?) on SPY, 2.4 million shares at $109.45

Red Dragon Leo
13 years ago

This looks like we are now completing our wave 4 up (an ABC move), and should be selling off into the close with a wave 5 down next.

http://stockcharts.com/def/servlet/Favorites.CS

This isn't my chart, but it looks pretty close to correct. With 3pm now here, I expect to see wave 5 down start soon.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

Its going to take some energy to get this to S1 110.49 from here…I dont think so cause its been in the S2 all day…

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

fwiw my 5min macd just rolled down thats good and the 15min macd h just clicked down…so maybe we go down to the close

MobyDoc
MobyDoc
13 years ago
Reply to  Red Dragon Leo

that would not have been a very convincing wave 3,, with this kind of down move, wave 3 would have huge volume, be much longer than 1,, and absolutely bury the rsi.. which it has not done . yet

Red Dragon Leo
13 years ago
Reply to  MobyDoc

It's not my chart, and I'm not a EW guy. But it looks close too me. Regardless of the wave count, more selling is coming.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

5min and 15min are now getting in line with the 60 and daily…looking good

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  MobyDoc

eh Moby….good to see we have some save the whale people out here

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

If this continues you guys are good.
If it doesn't you are still pretty good.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  jimhobson

jim…you aren't a politician are you

jimhobson
jimhobson
13 years ago
Reply to  bigbadwolfusa

Hell no.

If you saw some of the emails I am sending out right now that are not politically correct you would most likely jail me. Which I guess is where politicians belong.

Red Dragon Leo
13 years ago

Looking at this on the daily chart, you will see that it make an “h” from the market top to the 1065 low, and now the current low. This pattern has a high percentage odds of falling much deeper on the right leg of the “h”.

Many people will abandon their short positions on the double bottom, only to see it go a lot lower tomorrow.

http://stockcharts.com/def/servlet/Favorites.CS

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

does it mean anything when you have two doji candles in a row

Red Dragon Leo
13 years ago
Reply to  bigbadwolfusa

Indecision… bulls and bears are equal at that level, and are fighting it out.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

well if thats true…they had indecision yesterday and this mornin it dropped…I guess if they have indecision today it drops tomorrow again…logical eh…

Red Dragon Leo
13 years ago

Sundancer,

What's the current count now on lower closes then opens? Is it 6 days now? Do we need today to close above the open to reset the count? Do you see it necessary to close higher on the close, in order for tomorrow to be down?

jimhobson
jimhobson
13 years ago

I just saw a tech that believes the Dow on 30 minute is oversold and will bounce to 10 400. In looking at my charts RSi is at 42.57, MACD is negative, did cross but is statring to level.

I definitely think more selling is at hand. Capitulation has not happened yet IMO

Red Dragon Leo
13 years ago
Reply to  jimhobson

Who said that Jim? What kind of “tech”? Someone on the floor of one of the exchanges? I don't see it happening tomorrow, as I don't think they will go up and allow the bulls to get out.

I really think a gap down is coming tomorrow. It really has too, when you think about it. In order for capitulation to occur, all the trapped bulls need to be forced into selling.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  Red Dragon Leo

coming back to S3 108.08

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  bigbadwolfusa

what does sundancer say….its just a dance

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

It was Vincent Michael. not that i give him too much attention. Additionally I just saw on Fox Bus, Neil Cavuto two “experts” that said buying volume will be extremely heavey tomorrow. That a pip squeak contry like greece is scaring people and the scared people are selling while the strong are buying.

out of the next breath its States cannot pay there bills etc…..

If that were to be the case you would think futures right now would be exploding

Red Dragon Leo
13 years ago
Reply to  jimhobson

That should tell you something Jim… do the opposite of what the media tell you. They want people to buy, so they can take their money too. I don't see any rally coming tomorrow. I see another gap down coming.

jimhobson
jimhobson
13 years ago
Reply to  Red Dragon Leo

Don't get me wrong. I am a bear at the moment. I just get pissed off at the media that spout off when there are no and I mean no charts that support their position.

If you were managing other people's money why would you buy until the market has given turn signals.

Bunch of crooks or irresponsible people.

I appreciate your perspective.

bigbadwolfusa
bigbadwolfusa
13 years ago

On a side note…from Dr. Housing Bubble

http://www.doctorhousingbubble.com/pasadena-rea

“Today we got more startling news that 1 out of 7 homeowners is either in foreclosure or has stopped paying their mortgage. With over 51 million mortgages in the U.S. that means we have 7.2 million mortgages in this distress pipeline. By the way, this is a new all time record yet somehow you still have people claiming that not paying your mortgage is somehow a sign of a healthy market? It isn’t and this just means the shadow inventory figures are enormous. We have enough in the pipeline for years to come. California is the king of shadow inventory. We have more properties in distress than we have on the MLS! Is this any surprise given the amount of Alt-A and option ARM junk still floating around the system?”

Red Dragon Leo
13 years ago

I'm not sell anything at this point gang, because I see a big gap down coming tomorrow. Hold on tight….b

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

I'm 100% with you on that call. Good luck to us 🙂

Red Dragon Leo
13 years ago
Reply to  newbear

Thanks Newbear… I just hope I'm right about tomorrow too, as I don't want to lose a very dear friend.

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

I don't think you'll have to worry about that red, this market is toast.

Red Dragon Leo
13 years ago
Reply to  newbear

I hope not Newbear. That friendship is more important too me then the money I'm making on this call, or whether I'm right or wrong.

P.S. I'm not opening the emails either…

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

Hey I really don't think your friendship is in question at all. Don't worry.

MobyDoc
MobyDoc
13 years ago

now this is looking like a 3 of 3 ,,,awesome

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  MobyDoc

3 min to go any guesses…107.45

bigbadwolfusa
bigbadwolfusa
13 years ago

that 2.4 mill trade has got to be hurting

jimhobson
jimhobson
13 years ago

Close at low of day. Congrats to you that called it.

monicadern
monicadern
13 years ago

Wow – what a day. I feel like the gods have been watching over us. THANK YOU THANK YOU THANK YOU!

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  monicadern

missed you all day

monicadern
monicadern
13 years ago
Reply to  bigbadwolfusa

Sorry, I was transferring funds and setting triggers. I will not be using leverage on the way back up.

bigbadwolfusa
bigbadwolfusa
13 years ago
Reply to  monicadern

Mon…I have dr appt tomorrow morning 10 CA time and would like to hear your thoughts on triggers so I can set mine…sure as >>>> something happens good tomorrow and I miss it…

monicadern
monicadern
13 years ago
Reply to  bigbadwolfusa

Bigbad – I hate to give advice because I have no idea what I am doing. But, I have trade triggers to sell my puts at SPX 998 and trade triggers to buy about 50-60%% of my capital at SPX 994. (I am somewhat concerned that the sell orders won't trigger in time for the capital to be applied to the buy orders). I have orders for a spattering of diversified stocks, single etfs (a lot of commodity stocks, some biotech, etc.). Then, I will buy another 30-40% IF we get to 967. If we get to 875 (that's a big if), then I will take the final 10% and will buy leveraged instruments like calls.

Rip Van Trader
Rip Van Trader
13 years ago
Reply to  monicadern

Monica, you are so right about the triggers. I was just following the action using a sell order and got frozen out.

Hate the idea of triggers but they seem to be necessary.

Red Dragon Leo
13 years ago
Reply to  monicadern

Everyone missed you Monica… Glad you could stop by. Go Bears!

newbear
newbear
13 years ago

Congrats Red! You really nailed it this time. I had a feeling this time you were on track. Good luck to everyone here and let's continue to bank coin. 🙂

Red Dragon Leo
13 years ago
Reply to  newbear

Just remember NewBear, we have 2 target ranges going down tomorrow. One is the 980-990 area, and the other is the 875 area. I believe it will be the 875 area because of how high we are dropping from.

The higher it is, the farther we fall. That's why I think the lower target area will be hit in a flash crash tomorrow. Go luck to everyone in OBB.

monicadern
monicadern
13 years ago
Reply to  Red Dragon Leo

Red – I don't know about 875 tomorrow but that would be cool! Anyway, the majority of my purchases will be made around 994 and 967 and if I have to ride a wave down then so be it. No leverage for me unless we get to 875.

Red Dragon Leo
13 years ago
Reply to  monicadern

Since my puts are May, if we don't get down there, they will just be exercised and the Ameritrade will be pissed at me for making them do it. I will monitor it tomorrow, and as long as they don't go down, I will be able to close them out myself at 980-990, should it look like that is the bottom.

newbear
newbear
13 years ago
Reply to  Red Dragon Leo

Yes I agree, the one thing I've learned is to never underestimate or overestimate the market. Because it can exceed your expectations to the upside and downside.

monicadern
monicadern
13 years ago

EVERYONE SET YOUR TRIGGERS!!!!!!!!!!!! I got locked out of Ameritrade for 1 hour and it could be worse tomorrow. Trade triggers may not provide for the best execution but it doesn't matter! Last time I tried to buy at the bottom and the market moved so fast, it was very difficult.

newbear
newbear
13 years ago
Reply to  monicadern

Were you trading during the crash of 08 I remember the spreads were unreal.

Al
Al
13 years ago
Reply to  newbear

Yup, Trigger works like a charm during crash days…

monicadern
monicadern
13 years ago
Reply to  newbear

Actually I wasn't. But, I believe it!

newbear
newbear
13 years ago
Reply to  monicadern

It was something unreal I was holding OIH puts and during one of the crash days I couldn't even get a quote the spread was $20 at one point, I crossed my fingers a put a market order in. I didn't get confirmation of the fill for at least half an hour while I was biting my nails.

PeterK80
PeterK80
13 years ago
Reply to  monicadern

Hi Mon,

I must have missed your post earlier. What kind of triggers are you setting… you are talking about a buy order off a bounce? I am worried setting a market order because if the spreads are huge you may get screwed. Just wanted to see what you meant. Thanks in advance 🙂

sundancer390
sundancer390
13 years ago

Today we completed the first 50 pt. slip zone that I detailed on Tuesday night.

I posted a chart earlier in the day showing you the twin containment in this region. The first bounce today came off the containment pt. that held the $SPX during 5.6.2010 low & the second bounce came off light purple containment.

I posted this earlier in the day
The precise low of the 5.6.2010 came from light blue containment so should that break another 50 pt. slip zone down to burgundy containment which held the $SPX during 2.5.2010 low.

Best you could hope for is a $SPX reaction to 1095 area

Well we got our reaction off the twin containment pts. & our reaction high in the $SPX was 1095.09
The close today was real interesting because the last 3 minute surge means the $SPX closed below both containment pts.
http://www.flickr.com/photos/47091634@N04/46246

The open tomorrow will be interesting.

Have a good night!!!!!!!!

monicadern
monicadern
13 years ago
Reply to  sundancer390

Amazing. My jaw is still on the ground!

Al
Al
13 years ago
Reply to  monicadern

It was a Good Call, and Red is catching up fast too.