Jump to content



Photo

Explosive down pattern


  • Please log in to reply
12 replies to this topic

#1 Entropy3.0

Entropy3.0

    Member

  • TT Member*
  • 2,045 posts

Posted 21 January 2008 - 11:45 PM

Time to start a new thread. The bull market top pattern I posted about on Nov 1st has been confirmed. I explained 'confirmation' in my last post to 'explosive down pattern' thread here:

http://www.traders-t...showtopic=79262

The recognition wave (3) I was looking for arrived on cue, and my sub 1300 January target from Decmeber looks to be met tomorrow. The wave 3 down confirms the majority were on the wrong side, and now are trying to 'jump ship' or 'go through the exit door' all at once...pick your metaphor.

I tried to get some comments out tonight, as I see there is a large gap down in the futures currently. If this holds, my best guess is it will be wave 3 of 3, which typically has a large gap. If this occurs, it will allow me to give a high odds measured objective for various lows/and rallys to come.

Based on 1987 and 2001 crash scenario, the FED will likely Intervene with an emergency rate cut before the open. Here's my take - if its 0.25% it will accelerate the gap down, 0.5-0.75% will produce a few hours rally, which will fail, only a full 1% will close the futures gap. IF that occurs I'm sure these futures levels will get retested in the coming few days/week - that has occured in 2001 crash, 1987 crash and prior.

Now, if the FED do nothing....well, lets wait a see...but that would be a clear signal and very bearish.

The bottom line is IF we gap down 4-5%, alot will depend on the first 30minutes, if the opening low is breached after 30 minutes, the gates of hell will likely open and a 1987 situation will be at hand, if we hold, a large 5-7% rally will likely occur. I have no clue what will occur, so will not be attempting to day-trade the first 30minutes until some pattern emerges.

The pattern setup for this was clear friday, I made a point of posting it in my blog friday afternoon, that the pattern was bearish with a bloodbath setup, and bottom picking was a poor risk/reward. Sadly, looking at poll data, and Rydex data, its seems the majority tried to pick the bottom friday, and so they must be shaken out.

Also as said, I remain short biased until I see typical washout signature, and a large gap down Tuesday does not guarantee that. I will have to follow events minute by minute and may not have time to post.

But unless I see something very unusual ( which I will post on my blog ) I will NOT be looking for a major low on Tue ( day trade rally maybe), because we need to see New Lows expand on NYSE with a washout close at the lows. So any rally tomorrow off the presumed gap down will I believe lead to more selling this week.

Tomorrow session is going to give me a lot of information on the bigger timeframes , and
once I've had time to process it, I will try to find time to post what I'm looking at for this bear market.
Alot if going to depend on whether SPX 1250 hold on a closing basis


Changing topics, I just want to clarify why I make these posts, I've said it before over the years, but not for a while so -

- Primarily, because I find it useful to write down/summerize my thinking, and examine it for right/wrong later, and personally I wouldn't bother to do that just for myself to read.

- because I've had encouragement to do so from a number of people over the years, and because I see a large number of readers even if very few questions/responses, and so its 'good karma' so to speak to try to help others.

BTW - feel free to respond to anything I post, as long as its TA based, that is the purpose of the Swing board, whereas when I posted for years on FF there was usually 'response overload' mostly non - TA, which is partly why I stopped posting on it, that and lets say 'the nature' of the board....the less said the better there I think.

FYI - I have been trading for a living for 6 years, my focus was originally Long term & Intermediate trend, became swing trend, and for last 3 years is day-trading and some swing - but I use ALL timeframe in my trading to some degree. For example, when IT is down, I only trade short bias on swing


At the start of another trading year, and some treacherous trading, I will pass along some things i've learned -

- I have had losing years, and winning years - for the first 3 years I traded I believed all my losses were bad luck, and my profits were my skill. Now I know my losses were poor skill, and that my profits maybe luck...differentiating luck from skills take alot of time and different market conditions.

- One losing year I had around 400 trades, with a 80% win percentage, and yet lost money due to 2 huge losing trades. I started that year with about 20 winning trades in a row, where I broke every trading rule

- I rode huge drawdowns back to winners and admired my cleverness

- I traded without stops, because I found I could trade out of any loss

Until on those two trades the losses got so high I could't sleep, and in the end exited due to exhaustion. In both cases my exits market the exact turning point, and if I'd held a little longer, I would be been alright - such is Mr ( Mrs?) Market the teacher and greatest destroyer of ego.

- trading successfully is more about money management( stops, position size) than calling market direction, yet calling markets gets all the oohs and ahhs...and money management a big yawn.

- I can't predict what the market will do, I can only estimate the probabilities of what it will do - understanding the difference is the difference between gambling and trading. I believe anyone who claims they know what the market will do is either inexperienced, trying to manipulate sentiment/or garner information on it, else they are of 'unsound mind'...trading seems to attract ego maniacs, but trading over time crushes all ego.

- message boards are full of 'paper traders', who don't have to suffer the consequences of their proclaimations - if your trading your hard earned money, know enough to follow your own advice, and if you dont' know enough, why are you trading?

- Trading has taught me not to believe anything I read on the internet, especially not on trading boards...some of the cleverest marketers I've ever seen are in the field of trading, that's how despite a 90% failure rate, trading continuous to attract 'fresh blood'.

- The best traders in the world don't run market newsletters, or post to message boards, why would they? they are very busy minting and spending mountains of cash.


Mark.


Edited by entropy, 21 January 2008 - 11:54 PM.

Pick a system, follow the system, ignore everything else.

#2 VolPivots

VolPivots

    Member

  • Chartist
  • 3,203 posts

Posted 22 January 2008 - 12:24 AM

Mark, Didn't know you were back posting over here...keep up the good work! D

#3 SilentOne

SilentOne

    Member

  • Traders-Talk User
  • 3,452 posts

Posted 22 January 2008 - 07:38 AM

Mark,

Thanks for taking the time to post your thoughts. You have been dead nuts on with the idea that the worst of this decline would come in Jan. I did see a sloppy Jan. coming, but nothing to this extent.

I tried to get some comments out tonight, as I see there is a large gap down in the futures currently. If this holds, my best guess is it will be wave 3 of 3, which typically has a large gap. If this occurs, it will allow me to give a high odds measured objective for various lows/and rallys to come.


I used to do a fair bit of ewave and it served me well during the bear in the 2001-2002. So today will be an important tell as you say. $SPX 1250 is approx. the 1.62 fib extension of this second wave down off the 1576 high (futures have been approaching those lows today). The large gap would be a wave 3-3 signature, but it could also be a terminating point. The targets are fairly well defined if the gap holds (approx. 50% of the move down complete for this wave from 1576 to say 1290 -gap midpoint). Fourth waves can be tricky affairs though.

I have no idea now what comes next, but I think I will have to don my trading cap and to start taking advantage of the volatility. This is something I have not really been doing since the August lows and it may be time to rethink.

A very interesting day is ahead indeed.

cheers,

john

Edited by SilentOne, 22 January 2008 - 07:40 AM.

"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#4 mss

mss

    I'M WATCHING

  • TT Sponsor
  • 6,181 posts

Posted 22 January 2008 - 08:56 AM

:)
I posted this yesterday in another thread on the FF board, in "fib's" topic on cumulative charts. LINK
===============================================================

I going to weigh in here with a "crumb" of thoughts. If we are not in the start of a Bear market, then we are in one hell of a correction in a Bull market. Quick suggestion as to SPX range - in steps - UP 1340, 1391, DOWN 1285, 1246, 1180 and there is a far off suggestion of 1116. Just something to think about.

Posted Image

Posted Image

mss

Edited by mss, 22 January 2008 - 09:02 AM.

WOMEN & CATS WILL DO AS THEY PLEASE, AND MEN & DOGS SHOULD GET USED TO THE IDEA.
A DOG ALWAYS OFFERS UNCONDITIONAL LOVE. CATS HAVE TO THINK ABOUT IT!!

#5 PorkLoin

PorkLoin

    Member

  • TT Member*
  • 2,194 posts

Posted 22 January 2008 - 11:00 AM

Mark - awesome - I love reading your stuff. Man, you have made some CALLS. Agreed that "Fearless Forecasting" isn't as important as making profits (well, to some people, anyway), but still, well done indeed. I've bought some stuff this morning. Quality foreign issues, mostly energy-related and/or paying big dividends, stuff I've had my eye on, and today represented good value, in my opinion. If this is an impulsive #3 down, then very likely will see better buys in the future. I'll be interested to see how we close on the day and week. Still have some money in a bond fund that I'd like o switch to stocks, but really looking for a long-term low, there, rather than just a one-day panic like the open today. Best, Doug

#6 mss

mss

    I'M WATCHING

  • TT Sponsor
  • 6,181 posts

Posted 22 January 2008 - 11:51 AM

Mark -- Posted Yesterday, 11:45 PM

- I have had losing years, and winning years - - - I believed all my losses were bad luck, and my profits were my skill. Now I know my losses were poor skill, and that my profits maybe luck...differentiating luck from skills take alot of time and different market conditions.


Some very good words you have passed along. Myself, been there done that (win some lose some), and someday will do it again.

Have often wondered how someone could trade and post 40 times in the same day. When, if I post often, I have no trade/position on or one that will not require full time attention.

I have found over the years that about 35 - 40 trades a year is all I can handle. For me a trade usually is a position that runs up to several months or even years. Very seldom do I short term trade.

Again let me THANK YOU for your time and effort taken to share with us your thoughts and experience.

mss

Edited by mss, 22 January 2008 - 11:53 AM.

WOMEN & CATS WILL DO AS THEY PLEASE, AND MEN & DOGS SHOULD GET USED TO THE IDEA.
A DOG ALWAYS OFFERS UNCONDITIONAL LOVE. CATS HAVE TO THINK ABOUT IT!!

#7 Entropy3.0

Entropy3.0

    Member

  • TT Member*
  • 2,045 posts

Posted 23 January 2008 - 12:02 AM

Thanks guys for the kind words, though as I noted to a few today that too much praise probably means I'm now a good fade. If only I could figure out how to fade myself I would be tempted. :wacko: :D Actually, this kind setup is where I've got it wrong in the past, expecting one more low that doesn't materialize. I've made changes to my method to avoid that, but just saying, it wouldn't be the first time and i'm fully aware of it here. That said, I have to stick to my method, and despite today forefilling most of my requirements for a major lows, its a case of 'close but no cigar'. We got the - Sky high VIX/VXN - but they closed outsde BB, which is bearish not bullish. Required New lows spike - THE low is very close in time now based on this But, we didn't get - TRIN Spike CPC spike - equity put call was arond 0.7 today, no fear there. Price pattern is not supportive of major low. - I could be wrong, no low is 'perfect' - but I call it a I see it, and as noted in my blog 1.30pm, I believe this rally today is wave 4, with wave 5 to new lows coming. (it would have been wave 3, if the FED hadn't predictably cut rates by a historic amount). I also just guage too much complacency for major low, it all too obviusly like August low, markets tend to 'alternate' so unlikely this low will be like that one. Given what almost occured today i.e. a full blown crash, folks are way to sanguine. This isn't 1987 or 2001 ( and if it is, in both cases FED cut and markets tanked in days after), the markets are crashing due to real, no quick fix problems. The FED as predicted cut rates before the open - in the matrix thats called an 'emergency cut' , ponder that for a moment. The FED are mandated to chnges rates to control inflation and ensure economic growth. So what has that got to do with a 4% gap down in the indexes this A.M? markets have been fallng for weeks, hmm...ifyou understand the matrix, you can predict they would do this. The 0.75% rate cut and the rally reaction was atypical and according to analysis from Sentimenttrader, the typical response is for a break of those lows i.e.my one more low, then a more major low. I just saw futures are down again, the NQ looks to want to test its low...if we gap down that big again as far a I know thats unprecedented, and have no idea what FED would do - cut another 1%...I think that would be disasterous if they did, and I don't expect they will cut again until the meeting...well, unless we crash. Summary is - as posted in blog, I believe we in or have completed wave 4, wave 5 down to come, which will be a swing/IT low for a few weeks/months...likely this takes about a week to bottom from here...i' taking it hour by hour though as we are in a unique historic decline. Mark.

Edited by entropy, 23 January 2008 - 12:08 AM.

Pick a system, follow the system, ignore everything else.

#8 SilentOne

SilentOne

    Member

  • Traders-Talk User
  • 3,452 posts

Posted 23 January 2008 - 07:25 AM

Mark,

Actually, this kind setup is where I've got it wrong in the past, expecting one more low that doesn't materialize.


Things are looking pretty stretched here. I wouldn't bet on pressing shorts for new lows, but I do think yesterday's will be tested.

I don't want to clog up this thread, but have you looked at BPs lately? :blink:

Posted Image

Posted Image

Posted Image

Posted Image

Posted Image

Posted Image

There is an important turn date coming Jan 22-24 and 25th for many assets (astro stuff). Given where the BPs are, it should provide a mulit-week rally and allow a restest in March. Then again it could be the low for the year as well. Who knows if this week creates a bottom, as this is what I had been expecting since Dec., but just not this low. :D

cheers,

john

Edited by SilentOne, 23 January 2008 - 07:31 AM.

"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain

#9 Entropy3.0

Entropy3.0

    Member

  • TT Member*
  • 2,045 posts

Posted 24 January 2008 - 12:11 AM

Fun day, this reminded me alot of couple of days back in 2000, worth looking at on a chart if you have time, we saw similar acion in that period.

We had new lows as expected printed or a 'retest' depending on how you want to see it on Q's, compq and SPX, though SPY did not because its open on tue was printed much lower than spx - an anomaly I guess due to the crash.

So with this today, and the all too obvious 'key reversal' I'm running out of reasons not see this as a major low.

OK - here's where I stand after today.

- I do believe today was a swing low, and we don't see lower low for at least a week, maybe a few weeks. However, I did NOT go long myself today, ..er, because I was out playing golf during the afternoon rally!....oh well, I don't trade those fast moves well anyway so probably a blessin'.

- I do NOT believe today was an Intermediate ( multi month) low.

When I say believe - I mean, based on my trading models, and to answer John( silientone) on that -


Silentone(John)
but have you looked at BPs lately? :blink:


yes indeed .. I have 3 backtested BP's indicators...and I look at just about everything imaginable infact, most of which have been stretched to historic limits, but we have been for a while....the challenge of course is like we've seen that the biggest price drop often occur at that point, as well as potential for huge rallies. Part of the reason for todays monster rally is folks have finally given up bottom picking, due to being killed trying to go long 'oversold' readings for the last week.

Even today was a nightmare for many from yesterday, one last shake of the tree. The Q's at the low was down about 5-6%?....depending on timeframe, daytraders and short term traders going long would have been stopped out, likely multiple times. Those with longer term swing/IT timeframes going long yesterday may have been stopped out, depending on risk taken, and they're nerves ( though on certain trading board, folks ALWAYS get in bottom tick, and are NEVER stopped out :lol: ).


A note I made to myself today, was how I see a change in market character, that we are going down very orderly, and then tending to 'panic up' since this decline began, whereas since 2003 did the opposite, we ground up/panic down. - I see this as more bearish confirmation for the longer term ( it has no 'relevance to swing timeframe).


OK - back to the questions at hand:
1. Swing - I don't have a view on what is going to unfold herei.e.targets/pattern, I need to see a couple of days more action. Very possibly I miss a huge upmove, OK, well I hope to get some of it daytrading if that occurs - but I just don't have the tools to give me a swing trading edge here, due to the historically unprecented nature of what has occured, and I rely on many backtested indicators.

I know enough to know..when..well..I don't know enough! so as soon as I get a view, I'll be sure to post it, i'm thinking end of the week.

2. Intermediate - I don't believe its a low for many technical reasons, mainly the lack of positive divergances, and also the price patterns, which is probably my strongest skillset so I tend to go with it.

Will be very interested to see how this unfolds, this is some historic stuff and hopefully I can learn something new from it.


Mark.

Edited by entropy, 24 January 2008 - 12:14 AM.

Pick a system, follow the system, ignore everything else.

#10 SilentOne

SilentOne

    Member

  • Traders-Talk User
  • 3,452 posts

Posted 10 March 2008 - 04:27 PM

Hi guys,

I think its time to bring this thread back to the top of the forum. The last time I posted a BP chart we bottom the next day. The $BPSPX was sub 15 at the time so it seemed like a pretty sure thing.

Posted Image

This next IT bottom could be trickier. The question is can we get the BPs to follow the same path as 1998?

Posted Image

This would imply the current retest of the Jan. lows is completed for the indices with BPs putting in higher lows. My stuff says a good bottom this month and very likely this week.

Posted Image

So Mark, where are you man?

cheers,

john

Edited by SilentOne, 10 March 2008 - 04:29 PM.

"By the Law of Periodical Repetition, everything which has happened once must happen again and again and again-and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law ..." - Mark Twain