If you have any discipline you will care IMO.That is why
shorting up at resistance at 1140 to 1150 even though everyone was
going on about the trend is up was such a good trade.It was a great
trade IMO ,not because it was in retrospect some sort of top but
because it was a defensible short.We were right up against an upper
trend line and a logical stop was just a few cents above.Going
short now will give you the headache of NOT being able to set a
good stop IMO.A defensible short is what you want.You can short the
break but this happened many times on the way up from March and
each time the market rallied up to retest the broken trend line
many % from entry and you were screwed every time waiting for
the retest.Whether the trade makes money or not one needs a
defensible position and that is why shorting last week was such a
great trade.Indicators showed numerous divergences and the stop was
so close unlike now when IMO you are in no mans land as to stop
setting.A wave 2 could retrace all the way back to the gap on
$SPX(and it wouldn't surprise me if it did as the market screws
with us all all the time)and then tell me you don't care.
Ok, I see your point. What I still don't understand is why gaps
below are of any significance. To me of any significance would be
strong support. Also, are you referring to the gap about 1130 as
the target of wave 2? Please be specific, please.
I think the point with gaps is that they seem to work like
magnets IMO..it is as if price is sucked to them.No doubt this is a
self fulfilling prophecy.Traders place orders below the gap or
short above maybe and then price moves in the reverse direction
once filled.e.g Price comes down to gap support and fills it and
then when complete moves back up.That said it is said that
the whole gap is support or resistance and price may stop at
the top or bottom of the gap(not fill it at all or
completely) and then turn around.The point IMO is that gaps
get traders attention and hence price seems to gun for the
gaps.Hence the other BPT member was talking of the gap as a
target point to watch..there is a gap around 1075 I think and I
guess he thought price could fall to there since we are close
now and it looks as if we will fall further , fill the gap and
reverse and that may very well be the end of wave 1 down.A
target zone is how he is thinking I guess.
I am definitely NO EW guru..ask Daneric or Steve as they
are the experts....anyway on a shorter time frame if you look at 15
min $SPX you will see a gap up at 1148 ish..yep all the way up
there.I am sure Steve will correct me if I am wrong but wave 2 can
retrace but not exceed wave 1 so assuming we get a completed wave 1
then wave 2 could retrace all the way up to fill that gap and as a
result I feel a bit uneasy about that gap up in the
heavens..Although most wave 2's (again ask Steve) would retrace
lets say MAYBE up to 78.6% max I assume that it could fill
the gap up at 1148 and that would be still a valid wave 2 if it
doesn't take out the high.That is why personally i like these
kind of tight defensible positions where I can set a stop so
easily.Think of my example of the 1148 gap.For me this is a great
short if it gets there because I can short at 1148(the top of
the gap) and I can put a stop at even a cent above the high of wave
1 because if it is a genuine wave 2 it can't take out the existing
high.My risk is pennies.That is a defensible position.I never said
the gap was a target of wave 2 but when I see the gap up there I
get worried.You will even notice on many of Steve's charts he
highlights the gap as a target and in this move up everytime we got
a gap down move it turned around and filled the gap so I sense
we will do it again to screw the bears in wave 2.(but such a
retrace would be unusual if this is a genuine wave 1 down and then
2 up.I think many would imagine that if we go back to 1148 then
probably the count is wrong.)That is about the limit of my
knowledge on EW but I am sure Steve will correct me if I said
anything wrong above...hard to get away with anything on this
site..lol!!...and half the time they misinterpret what you said so
you have to write extra carefully or they will come down on you
like a ton of bricks!!....heavy weight on my shoulders...lol
Ok, I understand the purpose of gaps now (see my other post). I
don't see it relevant to deciding where the short-term trend may
reverse: the assumption that there are enough orders there at the
gap that would interfere with the move in the opposite direction.
Well, there are many more orders below the gap as well. In my
observation, what determines the turning points is not the number
of orders but the density of the orders in one place, compactly
placed to obstruct further price movement. I see no reason to
assume that gaps would contain a highed density of orders than
normal.
Turning points occurs in two major cases: buyers (or sellers)
are exhausted or they switch sides when the trend has gone too far
and for too long, and when density of new sellers (or buyers)
exceeds the density of existing buyers (or sellers). Then gaps
could become an obstacle only if the trend has lasted long and is
ripe for reversal already, so a bit higher density of orders in the
opposite direction impedes the already weak trend.
There is another story to gap at 1075: 1070 to 1075 was an old
resistance. To me the word resistance here matters more than the
word gap.
Order density..you indicate why would they contain a higher
density of orders than normal.I think our discussion on gaps
answers that question.We concentrate on them.If I showed 20 traders
a weakening down trend with a gap just below price and asked them
where they want to place a buy order you can guess where many
(a density of orders)would get placed as you put it..around
the gap..maybe above maybe in the middle..maybe below..but around
it.
Sure I agree with your point about 1075 gap..obviously often
gaps occur where price lurches out of a consolidation zone
,trendline etc and yes we could interpret it as support /resistance
issue due to earlier consolidation there rather than gap
issue as to why price turns there...but again as Steve often
says...a confluence of support etc..just another part of the puzzle
but all the bits give one an idea where price turns.
So' junkie' now that we have sorted out gaps lets go enjoy the
weekend.!!!TGIS where I am!...so do you think we will revisit the
gap up at 1148?..or are the bears home free now ..the
machines never let the bears off easy it seems...a question to
consider for the weekend?
Another observation is that a purpose of the gap is to jump over
a support or resistance zone. We saw this in December during the
stalemate between bulls and bears in the rectangle consolidation,
till the option expiration day. Ok, now the nature of the market
manipulation with futures over the weekends is clear to me: they
create gaps and ease transition to the next target. Heck, tha't why
the market falls so steeply now: it's rise to sky highs was
artificially strong, so there is less resitance than in the other
direction than it would normally have. Now Peter Campbells comment
on the purpose of the such a long advance makes sense: it was
engineered to recapitalize those who drive it at the expense of
everyone else, to the hilt.
Now I can answer your question: we will revisit that gap, but
not in wave 2. Wave 2 or B up will stop much lower than that gap
zone, because it would be such an awesome shorting opportunity for
everyone else. That trick cannot be played twice, now it's been
exposed to the masses and it will not work again. What will happen
is, the price will turn around at an odd point: a Fibbonacci
retracement plus 2 or 3 points. This advance retraced 53% of the
decline from 2003 to 2007. Wave 2 is (sometimes) engineered to
exceed a known entrance point --such a MA(20) or EMA(20)-- by 11%,
because stop loss orders are typically 10%. Or wave 2 retraces more
than 61% of the decline in wave 1: most think that a move beyond
61% retracement is a genuine move in that direction. (This explains
a sudden strong move after November lows above 1075, whereas before
that a move up seemed weak. And remember that 1075 was around 61%
of the retracement from the previous low at 1019). Quick moves are
genuine moves, and they portend more action in the same direction.
(In the EW parlance they are termed impulsive. Steve, if you are
reading this: can you explain the purpose of extra moves beyond the
minimally required number of 5 moves, such as 7, 9 or 12?)
I have plotted the Fibbonacci retracements between 1150 high and
1007=MA(200) low:
38%-
1093
50%-
1075
61%- 1057
70.7%- 1044
78%- 1032
Note that we closed at 1091, and 1075 is the 50% retracement.
Now it's becoming very interesting. Now note incorrect Fib.
retracements (the Fibbonacci retracements +3 and -3):
41%- 1088, 35% -1097
53%-
1071, 47%- 1079
64.8%-
1053, 58%-
1062
73% - 1039, 67%- 1048
So the current decline may turn around at 1088 (41%),
1079(47%),1071(53%),1062(58%),1053(64%). Assuming that the whole
move is going to be ABC, and wave C is 61% of move A; I get
1051-1007=144, and 144:2.61=55, and 144-55=89. A drop from 1151 in
89 points would lead us to
1062, which is 58.8% retracement of the move from
1151 down to 1007.
Therefore, 1062 is a pretty realistic target for wave A down. As
far as the whole move, 10% of 1150 is 115 points, leading us to
1036. The average decline so far has been 6.37%, or about 80
points, leading us to 1081. So, if 1071 is taken out, we are headed
down to 1036 or 1007 for the entire move.
Title: I care.. If you have
$SPX...
Posted by hurricanemalta on 22nd of Jan 2010 at 07:42 pm
If you have any discipline you will care IMO.That is why shorting up at resistance at 1140 to 1150 even though everyone was going on about the trend is up was such a good trade.It was a great trade IMO ,not because it was in retrospect some sort of top but because it was a defensible short.We were right up against an upper trend line and a logical stop was just a few cents above.Going short now will give you the headache of NOT being able to set a good stop IMO.A defensible short is what you want.You can short the break but this happened many times on the way up from March and each time the market rallied up to retest the broken trend line many % from entry and you were screwed every time waiting for the retest.Whether the trade makes money or not one needs a defensible position and that is why shorting last week was such a great trade.Indicators showed numerous divergences and the stop was so close unlike now when IMO you are in no mans land as to stop setting.A wave 2 could retrace all the way back to the gap on $SPX(and it wouldn't surprise me if it did as the market screws with us all all the time)and then tell me you don't care.
Ok, I see your point.
Posted by junkie on 22nd of Jan 2010 at 08:55 pm
Ok, I see your point. What I still don't understand is why gaps below are of any significance. To me of any significance would be strong support. Also, are you referring to the gap about 1130 as the target of wave 2? Please be specific, please.
Title: Hi Junkie..Gaps etc.. I think
Posted by hurricanemalta on 22nd of Jan 2010 at 09:44 pm
I think the point with gaps is that they seem to work like magnets IMO..it is as if price is sucked to them.No doubt this is a self fulfilling prophecy.Traders place orders below the gap or short above maybe and then price moves in the reverse direction once filled.e.g Price comes down to gap support and fills it and then when complete moves back up.That said it is said that the whole gap is support or resistance and price may stop at the top or bottom of the gap(not fill it at all or completely) and then turn around.The point IMO is that gaps get traders attention and hence price seems to gun for the gaps.Hence the other BPT member was talking of the gap as a target point to watch..there is a gap around 1075 I think and I guess he thought price could fall to there since we are close now and it looks as if we will fall further , fill the gap and reverse and that may very well be the end of wave 1 down.A target zone is how he is thinking I guess.
I am definitely NO EW guru..ask Daneric or Steve as they are the experts....anyway on a shorter time frame if you look at 15 min $SPX you will see a gap up at 1148 ish..yep all the way up there.I am sure Steve will correct me if I am wrong but wave 2 can retrace but not exceed wave 1 so assuming we get a completed wave 1 then wave 2 could retrace all the way up to fill that gap and as a result I feel a bit uneasy about that gap up in the heavens..Although most wave 2's (again ask Steve) would retrace lets say MAYBE up to 78.6% max I assume that it could fill the gap up at 1148 and that would be still a valid wave 2 if it doesn't take out the high.That is why personally i like these kind of tight defensible positions where I can set a stop so easily.Think of my example of the 1148 gap.For me this is a great short if it gets there because I can short at 1148(the top of the gap) and I can put a stop at even a cent above the high of wave 1 because if it is a genuine wave 2 it can't take out the existing high.My risk is pennies.That is a defensible position.I never said the gap was a target of wave 2 but when I see the gap up there I get worried.You will even notice on many of Steve's charts he highlights the gap as a target and in this move up everytime we got a gap down move it turned around and filled the gap so I sense we will do it again to screw the bears in wave 2.(but such a retrace would be unusual if this is a genuine wave 1 down and then 2 up.I think many would imagine that if we go back to 1148 then probably the count is wrong.)That is about the limit of my knowledge on EW but I am sure Steve will correct me if I said anything wrong above...hard to get away with anything on this site..lol!!...and half the time they misinterpret what you said so you have to write extra carefully or they will come down on you like a ton of bricks!!....heavy weight on my shoulders...lol
Title: to hurricanemalta on gaps Ok,
Posted by junkie on 22nd of Jan 2010 at 11:38 pm
Ok, I understand the purpose of gaps now (see my other post). I don't see it relevant to deciding where the short-term trend may reverse: the assumption that there are enough orders there at the gap that would interfere with the move in the opposite direction. Well, there are many more orders below the gap as well. In my observation, what determines the turning points is not the number of orders but the density of the orders in one place, compactly placed to obstruct further price movement. I see no reason to assume that gaps would contain a highed density of orders than normal.
Turning points occurs in two major cases: buyers (or sellers) are exhausted or they switch sides when the trend has gone too far and for too long, and when density of new sellers (or buyers) exceeds the density of existing buyers (or sellers). Then gaps could become an obstacle only if the trend has lasted long and is ripe for reversal already, so a bit higher density of orders in the opposite direction impedes the already weak trend.
There is another story to gap at 1075: 1070 to 1075 was an old resistance. To me the word resistance here matters more than the word gap.
Title: Gap Junkie..I like it..lol Order
Posted by hurricanemalta on 23rd of Jan 2010 at 03:00 am
Order density..you indicate why would they contain a higher density of orders than normal.I think our discussion on gaps answers that question.We concentrate on them.If I showed 20 traders a weakening down trend with a gap just below price and asked them where they want to place a buy order you can guess where many (a density of orders)would get placed as you put it..around the gap..maybe above maybe in the middle..maybe below..but around it.
Sure I agree with your point about 1075 gap..obviously often gaps occur where price lurches out of a consolidation zone ,trendline etc and yes we could interpret it as support /resistance issue due to earlier consolidation there rather than gap issue as to why price turns there...but again as Steve often says...a confluence of support etc..just another part of the puzzle but all the bits give one an idea where price turns.
So' junkie' now that we have sorted out gaps lets go enjoy the weekend.!!!TGIS where I am!...so do you think we will revisit the gap up at 1148?..or are the bears home free now ..the machines never let the bears off easy it seems...a question to consider for the weekend?
Realistic targets for this move down based on Fibbonacci ratios
Posted by junkie on 23rd of Jan 2010 at 09:14 am
Another observation is that a purpose of the gap is to jump over a support or resistance zone. We saw this in December during the stalemate between bulls and bears in the rectangle consolidation, till the option expiration day. Ok, now the nature of the market manipulation with futures over the weekends is clear to me: they create gaps and ease transition to the next target. Heck, tha't why the market falls so steeply now: it's rise to sky highs was artificially strong, so there is less resitance than in the other direction than it would normally have. Now Peter Campbells comment on the purpose of the such a long advance makes sense: it was engineered to recapitalize those who drive it at the expense of everyone else, to the hilt.
Now I can answer your question: we will revisit that gap, but not in wave 2. Wave 2 or B up will stop much lower than that gap zone, because it would be such an awesome shorting opportunity for everyone else. That trick cannot be played twice, now it's been exposed to the masses and it will not work again. What will happen is, the price will turn around at an odd point: a Fibbonacci retracement plus 2 or 3 points. This advance retraced 53% of the decline from 2003 to 2007. Wave 2 is (sometimes) engineered to exceed a known entrance point --such a MA(20) or EMA(20)-- by 11%, because stop loss orders are typically 10%. Or wave 2 retraces more than 61% of the decline in wave 1: most think that a move beyond 61% retracement is a genuine move in that direction. (This explains a sudden strong move after November lows above 1075, whereas before that a move up seemed weak. And remember that 1075 was around 61% of the retracement from the previous low at 1019). Quick moves are genuine moves, and they portend more action in the same direction. (In the EW parlance they are termed impulsive. Steve, if you are reading this: can you explain the purpose of extra moves beyond the minimally required number of 5 moves, such as 7, 9 or 12?)
I have plotted the Fibbonacci retracements between 1150 high and 1007=MA(200) low:
38%- 1093
50%- 1075
61%- 1057
70.7%- 1044
78%- 1032
Note that we closed at 1091, and 1075 is the 50% retracement. Now it's becoming very interesting. Now note incorrect Fib. retracements (the Fibbonacci retracements +3 and -3):
41%- 1088, 35% -1097
53%- 1071, 47%- 1079
64.8%- 1053, 58%- 1062
73% - 1039, 67%- 1048
So the current decline may turn around at 1088 (41%), 1079(47%),1071(53%),1062(58%),1053(64%). Assuming that the whole move is going to be ABC, and wave C is 61% of move A; I get 1051-1007=144, and 144:2.61=55, and 144-55=89. A drop from 1151 in 89 points would lead us to 1062, which is 58.8% retracement of the move from 1151 down to 1007.
Therefore, 1062 is a pretty realistic target for wave A down. As far as the whole move, 10% of 1150 is 115 points, leading us to 1036. The average decline so far has been 6.37%, or about 80 points, leading us to 1081. So, if 1071 is taken out, we are headed down to 1036 or 1007 for the entire move.
Disagreements and corrections are welcome!
Nice post Junkie...I just want to see 1030 target by Friday..lol!
Posted by hurricanemalta on 24th of Jan 2010 at 11:19 am