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Risk Windows & Better Late Than Never


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#1 Douglas

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Posted 07 January 2023 - 03:36 PM

According to my risk summation system, the days this coming week with the highest risk of a turn in or acceleration of the current trend in the DJIA are Monday January 9th possibly stretching into Tuesday morning (see Powell comment below) and Thursday the 12th.  

 

Last week the Tuesday January 3rd risk window only tagged a dud rally, bolting out of the launch pad only to frizzle the very next day.

0hQ05DD.png

 

The summation system didn't identify next Tuesday as a risk window, but if the market is still rallying into Powell's morning speech, I would expect him to try to rain on the Wall Street parade.  Also he is probably thinking that the Thursday inflation reading will show further improvement, so Powell also may try to lower expectations in front of that as well. It's tough trying to tamp down a party when you've been the one handing out free drinks and cranking up the music for years.

 

Santa finally rolled into Wall Street with presents galore late last week .  I guess better late than never given Yale Hirsh's adage.  The question now is does the rally having staying power.

 

I've been toying around with a way to identify risk weeks in which larger trends change instead of just risk days and minor trends.  I'm still fine tuning the technique so more on this later, but based on preliminary calculations it looks like my first candidate will be the week of February 27th.

 

Regards,

Douglas

 



#2 Douglas

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Posted 08 January 2023 - 11:28 AM

I'm having buyers remorse over my switch to my alternate EWave count last week.  I correctly surmised that the breaking of the short term down trend line meant that any breakout would be to the upside which we got in spades on Friday, but the shear amount of time taken to form the "ii" wave correction in the current up move just doesn't look right.   It looks more like a small "b" wave than a "ii" inside an impulse.   Also the blue "b" wave which I show was just completed looks too small relative to its blue cousin "a" wave.    If the DJIA continues northward above the local high at about 34700, then I will stop worrying and learn to love the up move, but if the DJIA languishes this week, I will be forced to dig my old count out of the trash can.  The old discarded count is still waiting for a sharp down move to complete the blue "b" wave.  By the time Jerome finishes his little chat on Tuesday or at the latest just after the inflation figures on Thursday, it should be clear which way the wind blows.

 

33nf5NU.jpg

 

Regards,

Douglas



#3 beta

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Posted 08 January 2023 - 06:45 PM

Hi dougie, regarding your wave count above, I've been pondering this same pattern from the early 2022 top.  IF this is the start of a secular decline (in e-wave terms), it's likely that we are still in the early innings of primary "3" wave down -- or even completing primary wave "2" up.   The latter would make sense for your 10% up target.  And fool alot of people.

 

Alternatively, IF the mid-December peak marked the end of primary wave "2" up, then the "U" formation over the past 3 weeks would correspond to a i-ii type of pattern that MAY peak close to the mid-December high -- before a precipitous decline. 

 

Using price patterns, I think it's possible we see another 3-5% continuation of Friday's rally before the next major decline begins.  Note the daily Osc divergences forming on SPX, QQQ.

 

Let's see what Monday brings. 


Edited by beta, 08 January 2023 - 06:45 PM.

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#4 beta

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Posted 08 January 2023 - 11:16 PM

 ... correction: that note should be more properly addressed to Douglas, not dougie  (an entirely different trader).  


Edited by beta, 08 January 2023 - 11:18 PM.

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#5 Douglas

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Posted 09 January 2023 - 07:01 AM

Beta, lots of folks are flying the we're in a wave "2" up in a secular bear market count jolly roger flag.  My feeble attempt at being a bit contrarian is the reason for my somewhat more positive count above.  The problem with the "2" up count is that the secular "3" down they are expecting posthaste will require something horrendous to happen or even a black swan event to drive it. 

 

All the black swans that I have predicted here are lying six toes up floating dead in the East River having never made it across to Wall Street.  Of course, Putin or Xi or Bolsonaro or Biden or Powell, etc. could come to their rescue and do something really stupid, but they will have to get busy and do it soon given the time consumed already in this move up.  The real killer for the wave "2" up count is a new high, which my "B" wave count would permit.  If the DJIA makes a new high, the "2" up count will be mort subite. 

 

I expect Powell to talk tough tomorrow morning, but he has zero credibility with Wall Street given he is still pumping to this day.  The Fed Funds rate is below the rate of inflation.  The Fed will lend member banks overnight money for a negative real interest rate and for some unexplained strange reason Powell thinks this is tight credit.  I am quite certain that Powell is still a closet transitory inflation guy believing it was all Putin and covid's fault, and that with just a little more time and fairy dust, that nasty old inflation will magically evaporate into the ether.  His thinking will probably be reinforced on Thursday when the BLS number fudgers put out their latest read on inflation which is almost certainly going to surprise to the downside creating the potential for a big stock market rally.

 

The saving grace to all the above, I suppose, is that this count controversy should be cleared up in pretty short order.  As I said before, To "b" or not to "b", that is the question.

 

Regards,

Douglas