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This market seems to escape the trap door no matter what’s being thrown at it. Besides, are you trading Bear Sterns or the ES? I’ve posted a monthly chart of Bear Sterns for weeks now, long before last week’s news got to your screen or on the tape. The chart was showing that some type of news was about to come out of it. But since we are trading the S&P, I’d rather know where that’s going, not Bear Sterns or the China ETF. Remember that low in March, when the blame was on China? Take a look at that ETF now – it’s screaming to all time new highs and not a peep from the trading community. Beside the S&P, I, like many others, watch a variety of markets. Like the NDX. Remember that theory that the NDX leads? Even if you don’t like the idea, would you agree that we couldn’t have seen the NDX scream to new highs this past week as the S&P collapsed? OF COURSE NOT! Well, looking for the S&P Futures to break the 1490 area with the NDX in a w4 was expecting exactly that.
Many analysts and traders focused on the double top in place in the S&P. For some reason, cynicism has become en vogue, predicting a crash is the “in” thing to do, and preaching doom and gloom sounds wise. Maybe that day will come, but what I was seeing in this chart, and unbiased traders along with me, was a clear wave 4 pullback. Anyone who wanted make money was getting ready to buy!! As I said last week, part of being unbiased is knowing when the count’s wrong. In this case, the blue line is there to get us out. But, as it turned out we saw a perfect wave iv low this week as they opened the trap doors in the S&P on Wednesday to let uneducated traders “short the hole”. Wednesday’s opening was the c wave bottom we were looking at exactly the price level we were looking for it. Buying that bottom allowed us to relax and watch the market make us money. Not shorting the hole has been the biggest lesson that members have finally learned. It sure wasn’t easy to break that bad habit but after seeing the results of the last 30 or 40, they now trade it professionally. When the time comes there will be a hole to short and stay short. We haven’t seen it yet but I sense it will come soon. It really can be this simple, folks. The chart below shows that while the S&P was exaggerating the downside and getting people out of long trades, the Nasdaq was shaping up nicely and suggesting another upside move for the whole market. This flexibility to trade only markets that offer clear risk/reward setups is another highlight of our Elliott wave based, unbiased technique.
Wednesday morning we had this large spread created between the S&P futures and cash because of the late Tuesday selloff. The charts below were what we focused on, and they sure did paint a much different picture than what was being presented by the media, newsletters or forums. We were looking to buy support into the open as others were selling into the idea of a crash.
After all, all I was doing is staying on the maps that we have been following since the March lows. That closing line was just under 1491 in the S&P futures. The actual low on Wednesday was 1492! After buying the market at those lows, the only sell signal was into the close. It was more of a money management idea than a sell signal.
Going forward will be more of the same, trading this trader’s paradise. Have a profitable and safe week trading, and remember: “Unbiased Elliott Wave works!” Dominick
Market
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