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Sunday, May 25, 2014

Market Report: Are You Ready?


SPX

In my last article I wrote that we were looking for more upside, the SPY and ES are the first markets to confirm the upside move we have been expecting, although the SPX has yet to confirm a new all time high, the DAX and DOW are likely to confirm the move that we have seen on the ES and SPY. Both the DAX and DOW have similar patterns to the SPX but they need a bit more upside, which I think will be seen this coming week.

For the last few weeks I have been monitoring a potential ending diagonal and in the face of all the bearish news the bulls did what was needed and really stuck it to the bears. As I mention numerous times to members, news is just garbage and those that use the news to make trading decisions are likely to be on the wrong side of the market direction.

The bears have tried to use virtually every conceivable excuse to look to sell, but the stubbornness of the markets have completely wrong footed those that were convinced of a sell off due to the Crimea or Ukraine conflicts. It just goes to prove that the news is garbage and price and patterns are more important. Well they are to us.

Simply put the market was suggesting it wanted higher, patterns also confirmed it wanted higher, and here we are, just about to make a new all time high.



It’s now that I am warning members not to get too overly bullish on these markets, if I am right about the ending diagonal, we are likely a few days away from completion and a strong decline setting up, with the media all gleefully happy about the market sitting just under the prior all time highs, now is not the time to be throwing caution to the wind, whilst I have been warning members not to be getting too bearish, as soon as we get a new high its then I will be looking to jump back into my bear suit.

If you recall as the market sold off in April, the media was convinced that it was starting a 10% correction. What about “sell in May” that everyone was so convinced of, sell in May huh! More like spank the bears in May.

We at wavepatterntraders simply follow what we see; we don’t confirm to any market statistics, if the markets suggest they want up, we will follow it higher. Likewise if we see a setup that can suggest a move lower we will look to sell the market, we feel that such an occasion has presented itself once again and we are looking to try and capitalize on that just as we did on the January puke I warned about.

If the market is finally ending the trend from the Oct 2011 lows, then we can expect to see a target initially towards 1750SPX, but suspect we could see towards 1600-1550SPX, our focus now is trying to confirm that this ending diagonal idea is coming to an end and try to get positioned for a large decline.




Timing

We have also been watching a possible timing peak window, a 53 week cycle (+/- 2 weeks) seems to be a common theme for this market, so that’s a potential clue to suggest the ending diagonal could be very close to completion and see the much awaited pullback everyone expects, although I think with the market making new all time highs, I would dare say not many are not expecting a “swift swoon” a decline that could really shake up the bulls.



The furthest thing on the bulls minds is a sell off, if the ending diagonal is correct, hold on to your hat things are about to get a little uncomfortable for our horned friends.

Whilst the decline in January was a great move for us, I am expecting a much larger decline, so looking to get members properly positioned for the expected decline.

As always ideas are always subject to revision, nothing is every case in stone, our objective is to find ideas to help members make $$$, if we are wrong, we can live with that. Being wrong is OK, but just make sure you are not wrong for long is our motto.

Until next time,

Have a profitable week ahead.
 


Sunday, May 18, 2014

Market Report: Update To SPY/SPX Article


In my last article I was looking for the peak of wave 3 of the ending diagonal/wedge idea I have been tracking for the past few weeks. The reversal we saw last week confirms that wave 3 has indeed peaked and it appears we are now in wave 4, ideally we should see a corrective 3 wave decline towards 185 -186 (1850 - 60SPX).

The late day bounce on Friday suggests a a bit more upside on Monday towards 189, that can setup a decline back to 185 and complete wave 4, so we are still looking for a bit more downside to around 186-185 before wave 4 is over.

If we can spot a 3 wave decline for wave 4 that can offer aggressive traders a chance to get long for the move higher for wave 5.

Unless we see a strong break of 184 (1840SPX) the odds still suggest we can push higher (a dip 1st) then complete what i think is an ending diagonal and potentially complete a larger 5 wave advance from 2011.

That should then give way for the biggest decline the markets have seen since 2011. My initial targets are 173 then possibly 165.

Sunday, May 11, 2014

Market Report: More Upside Still Expected For SPX/SPY

SPY



A new week, same outcome.

This seems to be same message every week, up down up down, if you are getting dizzy because of this price action you are not alone with those thoughts. I suspect the market is still currently in an ending diagonal for what i think is a 5th wave to complete a larger 5 wave advance from the Oct 2011 lows.

The whipsaw we have seen over the past few weeks is an inherent characteristic of the ending diagonal pattern, chop up as many bulls as bears before it finishes and then sets up a reversal. The key factor to the pattern is the shape, most will refer to the pattern as a bearish wedge, although in Elliott wave circles we call it an ending diagonal, but the message is still the same.

I have been short term bullish for a few weeks now, although it feels like i have been looking higher for months, the choppy upside is slowing the rate of ascent rapidly and causing most traders to either move to the sidelines or be forced to participate begrudging.

Wedges in general tend to be lethargic patterns and bore everyone to death right about the time most have given up to the idea of a reversal, this is where experience really matters, having the confidence to stay with the idea and ignore outside forces. I still feel that this pattern has a bit more upside to resolve first, so unless i see a strong reversal that breaks support, then i am continuing to look higher.

EURUSD


A good example of a potentially completed ending diagonal was witnessed on EURUSD this past week. The rapid reversal of that market argues that the idea is completed and a large decline is likely, that too bored traders to death for weeks, although we stuck to our guns and kept looking higher much to the dismay from the EURUSD bears until we got the new high above 13965, I am looking much lower on EURUSD, initial targets are at 136 then 133.


If we do indeed have an ending diagonal setting up on the SPY/SPX then what we saw on EURUSD is what i would expect to see on the SPY/SPX once its completed then a strong reversal lower.

Bulls beware, the ending diagonal (bearish wedge) is a classic reversal pattern and one that should not be ignored, in my opinion ignore it at your peril, markets don't go up forever. Although you would think they do judging by the level of bullishness in the media.

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Conclusion

I am still looking for a bit more upside in the SPX/SPY to complete the wedge pattern, once completed we are likely to setup for a strong decline, a decline that should be in the order of what we saw in 2011.

The EURUSD has probably put in a major peak, so against last weeks highs at 13993 i am expecting more downside.

Until next time,

Have a profitable week ahead.