Spring Break-Down

By: Joseph Russo | Sat, May 10, 2008
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Financial Sphere & Fed Gone Wild / cost, well over $500 Trillion in notional derivatives
With no apparent end in sight to their omnipotent magical power, as you watched our fascist-like fed usurp ever-more control over the financial sphere, were you impressed enough to trade-long shortly following their lead in contriving the spasmodically incessant rally from the March lows?

- We were.

With stammering Hank and Uncle Ben's "all-in" guarantees to cover your long-butts, did you buy completely into a la-la land bullish frenzy that would launch equity prices straight up the their old highs?

No? Didn't think so, - we didn't either, and that's a good thing.

Knowing when to hold 'em or fold 'em / cost, $Tens of Thousands in learning-curve dues
Although we positioned long for good chunks of the run, by no means did we buy into it completely. Going forward, there are a few things to keep in mind however. One, is that; it ain't over till' it's over. Secondly, we did not get this far without some battle scars along the way. Finally, one should never expect perfection in this type of endeavor. Furthermore, taking pre-determined losses are very much a part of an overall long-term winning strategy.

What Next / cost, risking jail-time for blackmailing members of the working group
For now, the jury remains out on this unprecedented intervention. We will be working intently over the summer to assess the markets deliberation towards verdict on the durability of the feds deplorable self-rescue efforts.

Our next tasks are to monitor for a renewed summer rally following this recent spring breakdown, and to observe signs for a resumption of bear market declines amid a potentially serious affliction of the summertime blues. It should not be too long before we get handle on which direction these coming headwinds are most likely to blow.

Markets Waiting to Exhale / cost, $60 Billion straight away give or take
For many, we assume it appeared that the fed-led intervention rally would just keep on going like the energizer bunny. We suspect many were certain that the rally would eventually fizzle out, but did not know when, or where to position orders to protect long side trading profits, or reverse short to capture the inevitable pullback.

If you were in either camp, you shouldn't feel too bad. The rally off the March low was rather complex, elegantly seductive, and difficult to interpret by design. Whatever you do, don't get mad - simply get even.

After imposing an authoritarian 50% retracement on the dime of taxpayers, the dynamic duo and their global "working group" apparently achieved some level of comfort in easing off the national emergency, bullish-bid-offensive essential to preserving their sacred monopolies.

Fear not bulls, fascist backstop subsidies will return with statist intervention whenever necessary, and at any cost. That you can count on - in the meantime...

Nailing a Near-Term Complacent High / cost, just $75.00
Realizing our divine masters had achieved an appropriately safe level of lift following 8-weeks of unprecedented intervention in the supposed free market, we were fully prepared for this week's rather tricky and sudden decline.

Patiently tracking the fascist-like propping-up of equity markets from the March lows, our proprietary timing, sentiment, and momentum models began sounding a confluence of alarms upon the Dow's strike-high of 13132 on May 2.

On Friday May 2, our Near Term Outlook signaled a key-pivot counter-trend short position in the Dow against the 13132 high. Proprietary standing criteria elected short positions at 13047, just 85-pts from the top tick.

One week later on Friday May 9, standing proprietary interim-pivot criteria alerted select traders to exit shorts at 12734 near the close, booking over 300-pts profit. (Or $3,000 dollars in profit for each full-size futures contract traded)

Many Caught with their Shorts-Off following Tuesday's recovery / cost, $3,000.00
If you were certain another high was sure to follow coming off Tuesday's impulsive recovery rally from the 12863 low, it is likely that you were not alone in such reasonable assumption.

If you lifted shorts, or got caught off-guard after Tuesday's five-wave impulse rally, which then followed such bullish price-action with an unusually rare sell-off, we suspect you had an abundance of good company.

We presume that this was the precise intent of the prevailing price-action. We consider this type of price-action the rather fine art of "working group" chart painting-101.

However, if you were privy to viewing our real-time interpretation of the price action at hand, you would have acquired an alternate perception as to what was really going on in the familiar trading arena of cunning and deceit.

What, you ask?
How can a five-wave advance be corrective! How is it that a five-wave impulse is supposed to be able to crest a corrective 'b' wave terminal? How can this be a proper Elliott Wave count?

We will show you how.

The chart below provides clear illustration of fully conforming tenets of Elliott Wave structures. Do feel free to email us in sharing any opposing views.

Hearing Mayday, Mayday / cost, a mere $75.00
As if the market is not difficult enough to forecast and trade, the shenanigans of working group antics can make it even more deceptive.

Tuesday was one of those days where statists executed chart painting-101 flawlessly. They may have fooled the many, but they did not fool the few, at least not the few who subscribe to our service.

Yes, a five-wave advance can be corrective, and yes, five-waves up can terminate a "b" wave at one larger degree.

The chart below meticulously illustrates the culmination to our dynamic interpretation of wave structures from the get-go print-high of 13132.30 on Friday 2-May.

Short-Term Bull-Trap / cost, $3000.00
In contrast to the choppy corrective decline from the 13132 high, the sub-dividing five-wave impulsive advance from the low on Tuesday led many to believe another fresh high for the move was sure to arrive.

The dead giveaway confirming our "take nothing for granted" count was the markets failure to hold and rally from the noted .500 and .618 common retracement levels arrowed with question marks in the chart above.

The chart below, extracted from the NTO archives from Wednesday illustrates our real time observations. As the price action unfolded, and without the benefit of hindsight, we were one-step ahead of the creative chart-painting antics of the most cunning adversary's on the planet.

At this stage of our analysis, we already had counter-trend shorts on from the 13047 level. To bolster our Key-Pivot counter-trend position, following the bull-trap five-wave advance toward the -b-wave high near our 13040 break-even point, a shorter-term trade trigger hit a resting target at 12835 into Thursday's surprise sell-off.

Fridays follow through selling sent price beneath our next downside capture window spanning the noted 12776-12747 range. Additionally for select traders, proprietary criteria also provided another exit or potentially early reversal signal near the close at 12734. All told, we clearly got the better of the battle in the previous week's trade.

We intentionally did not include the accompanying 30-minute price-chart for the archived text below. In the interest of fairness to our clients, we consider displaying proprietary larger degree terminals, and specific trade-triggers or chart notes, a potential compromise of integrity to longer duration open positions held by NTO traders.


An accurate forecasting toolkit of visual price charts and commentary - PRICELESS
Whether one is trading a personal account, or moving substantial size as a professional trader or manager of funds, an abundance of work and preparation must be acquired, and diligently maintained toward assuring a positive outcomes to such complex and challenging endeavors.

Amid the zero-sum terrain of "winner-take-all", it is nearly impossible not to form bias towards ones analytical conclusions, embracing strongly in the belief that the desired outcome of preference regardless of one's size/time horizon - will pan out as planned.

Although a variety of effective tools and vast pools of institutional resources may be readily available to traders and professionals alike - one should nonetheless seriously consider the benefits of cross-checking ones work, perceptions, and assumptions with that of an alternate reliable source of study.

At worst, ones conclusions and assumptions will confirm. At best, one may discover additional areas from which to profit, and/or to see relevant alternates that may not have been considered or factored into one's current analysis.

Come spend the summer with Elliott Wave Technology...
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The express focus of Elliott Wave Technology's charting and forecasting services is to keenly observe, monitor, and anticipate the future course of broad market indices over the short, intermediate, and long-term.

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We vigorously observe standard charting protocol, in concert with classic application and adherence to the exceptionally accurate navigational benefits provided by the proper application and classic tenets of Elliott Wave Theory.

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One last thing to remember, never fight the fed nor trust them either.

Trade Better / Invest Smarter...

 


 

Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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