Friday, October 3, 2014

Inverse heads and teh shoulders

Blow-off finish with new highs next week?



Suren said...

So far, none of the forecast has come right. 2030 by mid next week is a pipe dream. Who is going to buy? How can one trade based on forecasts that don't work? All indices has turned bearish already!

Bryan Franco said...

Suren - keep in mind the old adage, "Strength, where weakness is expected, must be respected." Things were looking pretty dire Thursday morning.. long term trendline breaks, new intermediate lows in several major indices, etc... And besides, one couldn't call this a spasmodic dead-cat bounce when we were just 3% off the highs.

Sal Miller said...

The full moon is a couple nites away. Last week you were forecasting 1904 by full moon. Now it's 2030? Do you actually put real money on your forecasts, or is it just some kind of weird hobby for you?

I'm not trying to be an asshole. I came across your blog because I was searching for some insight into EW theory. After seeing last week's track record I've concluded I would be better off studying the entrails of a frog than trying to apply EW to market timing.

Susan is right. This is a pipe dream.

Phat Repat said...

EW is an interesting view of the markets and I enjoy following the counts. The problem I have found, and what I was asking Bryan, has to do with the numbers.

Irrespective of the investment style, whether EW or frog entrails studies, there has to be a stop-loss, a target, and a reversal value. With those in place, and strict adherence, it is unlikely you will lose substantial sums and will very likely gain over the longer term.

So, I like what this blog has to offer, but it is not sufficient on its own. At least not without having the aforementioned numbers in place. Bryan? CG? Bicycle? Bueller? Bueller? Bueller? ;-)

Bryan Franco said...

What i had posted was just an empirical study. It had nothing to do with elliott wave. I also listed all of the parameters. It is remarkably simple, and admittedly, offers very little in the way of short term tactical value. Seperately, Sal said something about CGs "track record" last week. Week, you say! I do not think the financial markets are something you should he dabbling in, if that is what constitutes a track record for you. Yikes. And besides, when the facts change, CG, and anyone else that is good at risk management, has changed with them. What sir, do you do?

Sal Miller said...

Bryan, I wasn't responding to your post at all. My comment is to CG's prediction that the full moon would see 1904. Then a day later his prediction is 2030 within a very similar time frame. No explanation as to why the wide swing in predictions. Now, If one is supposed to ignore those predictions and not take any action because they're meant to be for entertainment only, that's fine. But had I purchased a put based on those little squiggles that CG was referencing, I surely would have lost money. No doubt I would similarly lose money if I go out and buy a call based on the 2030 squiggles. BTW, those squiggles (facts) didn't change, the chart was cropped differently, so that one could make a new interpretation out of the same data as previous.

Anyway, I've seen enough of EW theory to satisfy my curiosity. It doesn't belong in my toolbox. Fortunately my toolbox contains hardened steel and deep experience, not frog guts.


Bicycle said...

Christian is Simon, and we are Mack.

Like minds, parallel discovery, and different ways of seeing. I suspect that's why most who come here, are here. Nothing more, when it really comes down to it.

Bicycle said...

Hey, in the current rising wedge on the Dow since February:

The first wave up took about 5.5 months.

Wave 3 up took about 1.5 months, or about ~27% of the time.

Wave 5 up, the final wave, should take us about a dozen days, tops, including weekends. Monday will be 5 days in.

12 days in puts us smack dab on Columbus Day, of all days. 'Amerigo!

Christian Gustafson said...

The tape convinced me last week that it wasn't time just yet (again, still, I know, here we go again).

At the beginning of the week I posted this little bit of excitement, we opened that morning on a -20 handle move on the /ES, but there was no follow-through, was there? Nothing you could call impulsive.

I was holding SPY 195 puts and a mess of UVXY at the time, which I exited for nice gains. The SPY puts would have been really sweet if I had held them into Thursday, but I was unsure of the count after the support shown on Monday. UVXY gains were $5 or so per share.

My worry this week is that UVXY was not showing the fear for real index violence here. When UVXY smells real fear, she puts up those 20-25% days.

Instead, she added a couple more bucks since my early exit, languished, and collapsed.

You have to observe and respect these details.

I posted the bullish alts here only after Bryan noted that we met the criteria for his own historical study on these major turns, that we were now setup for the One More exhaustion high ahead.

The bullish alt charts are sharp because there is a larger megaphone in play, plus a significant turn window is setup for this week. Add in two inverse head-and-shoulders patterns, and a McClellan that has been oversold forever now.

As I comment tonight, /ES is up about 6 handles, with the Yen looking like it wants to fall apart again. This should gap us up and over overhead resistance in the morning, arguably targeting the next level up for the larger IHS.

I'm holding a passel of SPY calls I got last week for just under 9 cents a share. If they score this week per the megaphone, I'll flip the proceeds from them immediately into week 5 October SPY puts, and see what happens next.

My position has been the same all along -- some day this war is gonna end. And when it does, I dare to use TA in an attempt to profit from it.

The insane chart of the run up from 666, past any sensible bounce and into the blowoff above the old 2007 highs, well all this has given us clear areas of support and resistance. If we foolish bears have any money left by the time we reach the final stupid top in all of this, it's a great opportunity, I think.

But it's still an act of faith to believe that the markets will behave in a sensible way, that we'll be able to use them on the way down and get out in time, that shorting won't be banned altogether, or the winners rounded up and treated like kulaks.

You can't see what is ahead through the lenses of profit and loss. The financial markets are a fantastic magical resource of our time -- the fact that you can manipulate some abstraction like FB shares, take your chances, then send the winnings home and buy real groceries with them, well, this will be a wondrous tale to tell your grandchildren around the fire one night.

The markets, when they do finally die, are an anachronism and a resource for extraction, to rip as much remaining "wealth" out of the system as it collapses.

And collapse is inevitable. Good luck this week.

Phat Repat said...

I like EW as a road map of what could be. Most people probably don't realize that, as data comes in, these counts can and are often revised based on the set of rules that guide EW. And is often the reason alt counts are given; if this happens, then here is another possibility.

CG does a good job of showing what these possibilities are.

However, IMHO, EW by itself is not sufficient and an investor requires additional tools. Both Sal and Suren sound like they need to acquire those additional tools and use EW for what could be. ;-)

Christian Gustafson said...

FWIW, I sold the weekly SPY calls this morning. Bicycle has a point re the timing here -- this could burn a few days going sideways this week before making another push next week into October opex.

I don't like holding calls as it is, but especially not with that possibility on the table.

There's another Bradley turn coming October 16th, which like all Bradley turns and astro stuff, is either surprisingly spot-on -- or completely useless!

The turn window this week (Bradley, full moon, etc) could end up being a B-wave bottom in this leg up.

Phat Repat said...

Given the current numbers, I have no positions in SPX. Buy above 1979.21 with stop at 1955.77, T1 2045.06 and Sell below 1946.83 with stop at 1970.24, T1 1862.49. Numbers subject to change with each passing day. ;-)

Bicycle said...

Bullish broadening descending wedge has been painted on the Dow this morning...