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.
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.
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