The Deviant Standard

Traders' preparation for volatile markets.

Browsing Posts tagged Trading

We anticipated the current downward move, and while we might have expected some more significant upward retracements since June, 21st things are going mostly according to script.  As expected in a third wave, continued selling pressure is now battering bulls into submission and will continue to do so for as long as they attempt to buy the dips.  That’s what third waves need to do: convince people that what had worked before doesn’t work now. 

As more traders begin to pile into the short side, the risk to bears will no longer come from dip buyers but from short-covering rallies.  We don’t expect that any such pops will alter the longer-term view, but they can develop quickly, move a long distance, and cause lots of pain to short-term positions.  So while a nice bounce might be welcome as a milestone to benchmark wave progression, it would be unwelcome to traders with short-term traders unable to take the heat of a several hundred point run.  Keep in mind, some of the biggest up moves can take place within bear markets.

The overall point here is to be aware that relentless selling we’re experiencing should naturally lead to a short-covering rally at some point even if we cannot predict when.  The trend has shown itself to be down and we should trade accordingly, but those trades also need to contemplate swift, surprise bounces.

  • Share/Bookmark

As I write this, NYSE advancers less decliners is a whopping 2250.  One of those decliners is GS.  We mentioned last night that FS has little support below $134 and is working on a very nice inverse head and shoulders pattern.

  • Share/Bookmark

Nothing, in theory.  Our Wednesday evening issue used our Elliott Wave theory analysis to advise:

At the end of five waves we should get a bounce.  If our count is valid, that bounce should not take out Wednesday’s high. 

This morning’s bounce in equity index futures is a deep retracement of the move down.  That stresses our outlook, but it gives any short entry hear the top defined risk.  Either makes a great entry or will lead to questions about our outlook. 

Keep in mind that we expect foreclosure statistics and jobless claims this morning.

  • Share/Bookmark

I have to admit, the prospect of entering multiple 3rd waves of different degree has me a little to eager to sell.  The trick is to be patient and wait for the market to tellus that wave (ii) is complete AND that wave (iii) has begun.  I may end up with palm prints on my behind, but that may but sitting on my hands may be what’s neccessary for today — or at least for the open.

  • Share/Bookmark