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Monday, May 4, 2009

Ok Lets Get This Straight

Even the media TA guys have called for a pullback sooner rather than later. We got a few down swings, like the 50 pointer to 826, but since then no. A long sideways running triangle which actually keeps making new highs turned out to be the market's "B" wave correction. Is that normal? No, its not. Its just more proof of the strength of the P2 wave. And now we are in the C wave up of that P2 (most likely).

But I just checked my 401K statement and I have a gain of 21% since March 1st and that was done via all long mutual funds and what left in my "stable value" fund. I have an indexed SP500 fund and a small/mid cap.

My corporate 401K is larger than my side daytrading account which has been mostly cash since 775 SPX for several reasons: 1) I am very busy at work on a tough project 2) I have been trying to supplement my 401k longs via picking spots to short via a swing-type trades. I picked a few good spots, other spots not so good. Its largely a wash with a net loss so the effort has been a waste of time and money no doubt.

But I do have a good idea where P2 is heading. The 200DMA will be hit. More upside is likely after a market correction of 38% from that spot. 1000 is also a magnet for the longer haul but less certain....

Here was my original thoughts with this P2 rally: 1) Hold tight my 401K longs until the 200DMA (haven't wavered) 2) Find along the way the likely spot for a 38% market correction and short. 3) Go long (buy and hold) after the 38% market correction for the final advances of P2.

So in review, My "trading plan" I have been trying to probe and find the 38% correction spot based on EW theory and TA. Lo and behold the 38% correction refuses to happen. It doesn't surprise me and I haven't made big bets to the downside except the one false "ending diagonal" that did drop 50 points and that was a winning play. So hence, I haven't really traded to the long side too much either.

Here is what I think: This Primary wave 2 WILL experience a 38% correction at some point maybe deeper. It will happen from a higher level most likely now that a C wave up has been identified. So finding the TOP of the C wave shouldn't be too difficult. This I can do and this is why you need to pay attention now just when you have given up on EW and such.

The sideways triangle was a difficult formation. A breakout above and counting to 5 is not.

So I will stick with my plan and find the top of this C wave and dump at least 75% (most likely all) of my 401K holdings at the 200DMA. And then I'll short it if I have counted 5 waves from the 847 start of wave C. Will I buy more longs after a corrective period? I don't know. My plan was to do that originally, but if the SPX heads to 950 or more, its more than a full valid P2 pattern.....no one knows exactly when P3 will start.

But in the end, P2 has been profitable to me. P2 has more upside. P2 will have its 38% correction after the C wave up has played out.

8 comments:

  1. Just don't get it DE. I don't see the room in the indicators nor does a 31% run up without any significant retracement in a market with all the problems it has make any sense, but if the count is right I'm eating crow and jumping ship to the green team. Tired of fighting it. Thanks.

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  2. Dan couldnt agree more with your assessment....been gettin my head handed to me for 2 weeks..wow......anyway no more shorts till end of the 5

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  3. I just want to see if I understand this:

    Theoretically, the C wave you are talking about *could* be the end of P2? If P2 continues, past this C wave, would it be as a double or triple zig zag?

    Is it possible (although not probable) that the ABC we've seen so far is the A wave of a flat?

    Thanks for your blog. I am new to EWT and your analysis every day is a wonderful learning opportunity.

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  4. I am thinking of creating an account with Disqus or open-id, so for now "Anonymous".

    If P2 is in A-B-C formation, I don't understand your following comment:

    "P2 will have its 38% correction after the C wave up has played out."

    Wouldn't after C wave up IMPLY start of P3?

    Thanks.

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  5. This may be obvious to you but how do we know that the 200DMA will be hit??

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  6. Anon, I assume that P2 will be a double zig zag and take more time. I don't know anything for sure just educated guesses

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  7. If this is p2, p1 lasted 17 months. elliott says little about time but realistically p2 should last at least four months. I do have a question DE, how do you rationalize your BKX count, still in p1 far as i can tell versus the S&P in p2.

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  8. Like your site and your analysis. Top notch. Thank you!

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