Tuesday, March 23, 2010

Market Extends Higher, Looks Like a 5th Wave

I know many people would like to punch me in the face after I say that the market is finishing up it's rally since I've been saying that for about the last 100 S&P points to the upside. Trust me, I feel your frustration and my account has paid for it. I have been stumped on this rally more than any other in my stock trading career. This thing has seemed so overextended for so long but continues to float higher on practically no volume. Today there was less than 1 billion shares traded on the NYSE and the Dow pushes up 100 points, and momentum indicators continue to drag. But the market is always right, so with today's new highs across the board now I have to sit and wait for the next opportunity to get short on signs of a top. Right now I see no reason to get short right now as the market is still showing signs of strength, but getting long this late in the rally seems too risky. Once evidence of a top comes forth again, I'll mention it here as soon as I can and mention opportunities I think are worth taking. Above is a daily chart of the S&P that shows a simple 5 wave rally occuring, with us currently in the 5th and final wave of the rise. The rise can extend and be attracted to the 1200 resistance level, but there's no guarantee. My strategy now is to stand aside and wait for the market to present an opportunity. Unfortunately, right now I see none.

S&P 500 Cash Index 15min

Above is just a closeup of what the declining structure turned out to be; just a WXY double zig-zag correction. I think it's too early to start labeling the current rally from the wave Y low, but hopefully as the structure continues to unfold I'll have more certainty in the smaller waves so we can get a better idea of where to start looking for a top again.

Sorry I don't have more to say. But the last thing I want to do is impose my goals or needs onto the market, or take my frustration out on my account by losing trading discipline. So I just continue to play a lot of XBOX360 and watch every old movie in the book to keep my mind off the frustration I feel towards the markets so I can stay on track and remain focused on my trading plan and overall strategy.



Anonymous said...

i've been watching market for 25 years - this is a very odd time indeed - the lack of volume cleary means something - cnbc reported heavy volume in options activity which to me means people who are late to the party

all your posts are appreciated!

jd in fl

Anonymous said...


Since early February, the NYSE McClellan Oscillator has traced out four waves and is heading up for a 5th. Also, if you look close, the Summation index powered ahead in waves 1 and 3 with ever so slight pauses in two and four. Normally the summation index is a good indicator for the intermediate trend and it's last signal at Feb bottom was rather precise.

If we are lucky it will reverse before actual market price high this time and let a bear pounce.


jd in fl

Todd said...

Thanks for the insight JD! I love getting data from other methods I don't use myself.

Yeah, I don't see any reason for a top and reversal now as the market is showing all strength. That doesn't mean it can't turn on a dime any moment. But I certainly won't put my money on that type of event since it's of low probability. Once this thing shows signs of a top and reversal I will definitely be a bear that pounces!


Gustavo said...

Hello Todd:

I think what the people of EWI was with your free publications the most influential in the public believe what the end of the rally was near, really the best thing what can make an operator in any market is don't listen to anybody and trade in your own.
Everyone is responsable of how and when open and close the operations and it is a clear statement in your site.
No punchs needed:-) We are sharing opinions about where can go the market , nothing less and nothing more.
I don't see nothing to worry:-).

Todd said...

Thanks for not punching me Gustavo, lol :)

What you said is exactly what I hope we can all do here at the blog, and that is to exchange ideas and thoughts.

Thanks pal!


Milen said...

Hi Tod, I am really happy to find one more EWaver, who respects the price action, not the EWI opinion only.
Take care.

Todd said...

Hi Milen, thanks for the comments. I see you have an EWP blog as well.

Hope you chime in again in the future.