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Friday, April 17, 2009

885.36 Must Not Be Breeched...

...for this to be a valid ending diagonal. Wave 3 can never be the shortest even in an ending diagonal. In theory it shouldn't really be challenging 885 and flirting with breaking EW hard rules.
I went short yesterday but it feels like fighting the tape. I've been itching to trade more than I have (extremely busy at work with an important project) and I won't chase the longside as long as this is a valid ending diagonal formation. I'll stick with my plan on adding more shorts at 876 if it is reached. But my stop losses will be set at around 880 or so.
I imagine a lot of traders have similar plans including the big boys. This is a huge squeeze opportunity for bulls if they can trigger stop losses by heading to 885. This indeed would run the tape up likely to 900-920 and eventually higher and a confirmed wave 3 would be playing out and not an ending diagonal.
So a lot is at stake in the next few trading days. The fate of this entire Elliott Wave structure. Turning it from a "sure thing" ending diagonal to a bullish wave 3 in disguise would be a brilliant bull plan if they can pull it off.
So just wanted to get that out there that this is a key area and bulls won't lie down and die I don't think....they have the "ball" and the bears are the ones who have been playing defense for 6 weeks. 845 is a key level as are all the trendlines you can see on various timecharts.
As a technician, the path of least resistance is still up and the market is still trending up no doubt. But as an Elliott Wave technician, a true ending diagonal often retraces the entire move from where it started which would be 779. Right now that interpretation is the top count. That will be nullified the second 885.36 is breeched. No emotion in that. Just hard numbers.
I don't have to work today, so I'll be monitoring the tape unless I'm out mowing the yard.


  1. Thank you, Dan.

    As always,your charts & thinking-things-through are very helpful!

    Best of luck to you on your trades.

  2. agreed, close over 880 should lead to a catapult into the 900's

    bear massacre, whats left of ursine orphans anyway

    i'd like to see a reaction back to 780-800 but so do the majority i think, cheers

  3. Dan,

    If 885.36 is breeched, and it turns out that we are in Minor wave 3 instead of Minor wave 1, as we have been assuming, what the heck would have happened to Minor wave 2?

    Does EWT allow for Minor wave 2 (which is usually a 61.8% retrace of Minor wave 1)to be that puny, minus 5 or 10% "flat" that you and Kenny considered back around 779, I think?

    I just can't believe we could go to 920 or higher without a serous pullback. Your thoughts?

  4. Short the S$P from 875 and long FAZ from $8.75, too strange that one is. I didn't think it would get there the way it was acting but in the game again and we'll see what happens.

  5. To clarify; S$P 875 is the cash quote which is what I use as the trigger for the e-mini which was 871 entry point. :)

  6. SRS, no its not a normal wave 2 (which I am, not saying for sure it is) but there is no hard rule on that. Considering the market is coming off an all-time record drop, it can be forgived to have a shallow wave 2 pullback.

    That would only mean wave 4 would have a deep pullback. Guidelines of alternation

    I guess what I'm saying is that if it can happen, that would be the spot

  7. Thanks for your reply, Dan.

  8. Load up all possible shorts, TZA, SRS, and FAZ, at spx 875 today. We end the day with a Doji. The bulls better watch out next week. I have a feeling that there is going to be a lot of pain for bulls regardless of BAC, WFC, and MS ER reports.

  9. To Tri, Daneric, or anyone:

    I looked up "doji" and it said it's a neutral sign, by itself. Should we necessarily interpret this doji ending (along with the apparently complete ending diagonal)today to mean that the market pulls back immediately on Monday? Or might the market retest 875 and maybe "overthrow" to 880-885? I'm eager to buy FAZ and SRS too, but having been burned badly by this relentless rally, I do not want to short too soon. Anybody care to share their thoughts about when exactly to short? Thanks.

  10. Hey SRS, its Sun Devil from Kenny's blog. Regarding going short, I think it is anybody's guess. I have some shorts on right now, but will cover if we break 885. If premarket is up on Monday that may be a good time to put on some shorts with a stop at 885. I think everyone who is short or wants to short or short more feels like you do at the moment, scared after being burned so badly so many times. Good luck and have a great weekend.

  11. SRS a doji represents a balance of forces or "indecision". Since this has been a bull market lately, this represenst a moment of indecisiviness on the bulls' part. It often marks the top of a move.

    I don't think they'll just roll over though. However a battle will ensue and whoever has the most money in the game wins. A lot of traders whoudl be shorting this market come Monday.

    You might see some overthrow to 880, sure its possible. If you see the tape in a state of battle and it hits 880, short bigtime and just set your stop at 886 like everyone else.

    Will it pan out? Thats what makes it all so exciting.

  12. Hi Sun Devil!

    Thanks for sharing your thoughts and action-plan. It will help me think through what I plan to do Monday and next week.

    And thanks too for your empathizing with being badly burned by this relentless rally, and being gun-shy abut being burned AGAIN.

    I hope you & I & all of us shorts recoup our losses and go ahead with gains during this expected pullback (and the next big wave up).

    Thanks too for your well wishes! I also wish you good luck in your trading and a really good weekend. See ya Monday & next week. :>)

  13. Thanks, Daneric!

    I always learn good things from you sharing your knowledge. And like I just said to Sun Devil (and as I said to you this week), hearing about others' viewpoints & action-plans helps me evaluate & refine my own. Thank you, I really appreciate that.