Market Report: The Moment Of Truth

By: Nouf | Sun, Sep 11, 2011
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The markets once again threw in a couple of curve balls to the unwary trader, without a plan this market will simply chop up and cause great pain to a lot of traders, I suspect there was a lot of pain seen this week due to the craziness that seems to be getting more intense week by week, knowing when to get in and stay out is paramount to this sort of market.

As traders you should be embracing this sort of volatility, it's not every day you see these sorts of moves where you see 30 handles on the ES in a daily range.

But again we continue to map out and get in and out at our areas, it's kind of scary how the market seems to obey our ideas, but as long as our ideas keep working we will keep trading them.

The market could be now be setting up a potential water fall decline much like you saw a few weeks back, the recent moves have been corrective against the main trend which is down and providing great trade ideas for the active and aggressive swing or day trader, in a number of markets.

This is not an exaggeration from my part; it's about reading price action and what price suggests, if I am wrong, you have lost nothing by staying out of the markets, if I am right, then you may just regret those early bird stocks you just bought thinking they were a bargain. Cheap can get a whole lot cheaper, just look to 2008 to see how "cheap" cheap was.

Until this market shows me some evidence that the bull is back in town I continue to stay nice and cozy in my bear suit as we have been bears since the breakdown of 1280SPX a few weeks back.

Readers of my articles will note that I was bullish for the majority of last year and this year right up until the point of the breakdown point. So it's not like I am perma bear saying the same old stuff, I can read a chart and atm I don't see any evidence for a bullish market.

Whilst the bulls will argue that you need to buy when there is blood on the streets, I will say that being a contrarian at the wrong time without any supportive evidence is akin to been a perma bull and not respecting price action.

This is no buy and hold market for an investor imo, my advice for investors is to stay out of the markets, as the market at this stage could have a nasty move lower setting up, and you may just regret those early bird stocks you buy.

So far the market is working our script and we continue to nail moves week after week, and as long as the market respects out ideas, I suspect that a substantial decline is potentially starting or a week or 2 away.


SPX

I am sure most traders with the basics of technical analysis understand the H&S pattern.

There is an obvious one now showing on the SPX, in fact it's showing up and many markets, most of the US equity markets have this pattern as do some of the risk FX currencies.

Now the contrarian in me suggests that the market is about to setup trap and burn the shorts again for the 3rd time in as many weeks, however being a contrarian is one thing, respecting price is another.

Until I see price confirm the "bear trap" then the H&S is a very valid pattern and at this stage with what I am seeing and the weakness across the board of other markets needs respecting, as the potential is very real for more sustained downside.

The market has chopped around for a number of weeks, but it is an obvious bear channel/flag and the odds say once finished more downside is looming.

Bear Flag

It may be finished and the next leg lower is starting next week, but we have an idea that we will respect as long as the market stays above 1141SPX, under 1141SPX kills the idea.

The obvious H&S is there and potentially a day or 2 away from being confirmed, however there is an idea that we are following should the market setup a trap for the bears.

Make no mistake we are traders at Wavepatterntraders.com we know when to kill an idea and reverse our bias, short term or long term the market appears to be in a bear trend, but we find trades to adjust to both sides of the market.

Buying is just as easy as selling, if the market wants to set up a bear "trap" early next week, that's fine by us, the majority of us are flat into the close, not taking any risk due to the Greece situation.

Remember the $$$ is not yours till its banked, you can always put the trade back on, you can't get back lost profits, the safe trade was to reduce risk into the close on Friday and wait till Sundays globex open to evaluate and watch some ideas we are working.

We were watching a series of trend lines that the market has into the 1146-48SPX area. I made it known well in advance that we should respect this area as solid support, having been short for the best part of 35 handles, we did not want to make any mistakes going into the weekend. So knowing those trend lines in advance as well as a key area of support at 1147ES (Sept) was key to us. It seemed like a good area to close out a good percentage of gains and reduce risk, as you just don't know what crazy stuff could happen over the weekend, the ES might gap down 30 handles if Greece defaults, or gap up 30 handles if a fix is in, the odds are not worth the risk and banking the $$$ seemed like the best choice.

SPX Cycles
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"Da trap"


ES

Posted 07 September 2011

"With 5 waves seen in other risk markets, it appears that we are at least correcting so looking for the 1180-1195SPX area to stop any upside, only a move above 1200SPX would we need to be cautious if it gets aggressive."

Going into Thursday I had a target of 1180-95SPX, the market pushed a bit higher than I anticipated but the key was what happened in globex after the market made that high, as we wanted to see a small 5 down, which we got and the bounce got us short in globex.

SPX Before
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Before

SPX After
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After

Aggressive traders that were looking for the move, made off with anywhere from 30-40 handles.

1 handle is $50, that's also happens to be the monthly membership. So members just made 2-3 years membership in one day and that's using a 1 lot.

The ES is just a tiny part of the markets we cover; FX markets last were putting in 100+ pip moves.

I find it somewhat amusing that the move on Friday took many by surprise; I guess they were not looking at our ideas. We were actively looking for a high in FX pairs AUD/USD, AUD/JPY and NZD/USD so it came of no surprise to us, and we rang the register as the ideas worked out well. The ES follows FX markets or vice versa, as there is a selection of FX currencies as well as the ES that we call "risk" markets.

Knowing and following other markets is a huge edge in today's markets, in fact if you are not following other risk markets, you simply don't have much of an edge.

The risk was to the 98ES high, I made it known to members that I wanted a reaction at the 90-92ES area, fibbo came to the rescue and delivered. If he was still around today I am sure he would have been proud of that move.

You still think markets are random huh!!! Think again, traders control the waves by emotions; Elliott does a great job of creating those waves based on emotions.

The skill of the trader using Elliott Wave is where it matters, knowing when to enter with small risk for high reward, and of course staying objective and respecting the market price action is telling you, no perma bias, just objective analysis.

I have said it before, but the skill of using Elliott Wave comes from the user, if you follow an experienced Elliottician, it is a powerful tool if it's used to its strengths, it has some flaws, but is worthy of the effort that we put into using our maps.

This is just one market, we did that for another 5 markets if I recall, in the FX markets this week alone, so members had a great selection to nail some low risk trades.

Take a look at out before and after section if you need convincing. http://www.wavepatterntraders.com/index.php?/forum/179-before-after/


Conclusion

So Sunday's globex action will be important for some ideas we are working, but we won't know until then as a news bomb from Greece could change the demographics somewhat around the world, kind of reminds me of the Lehman weekend for those around in 2008.

Traders need to be very careful from this area, the market could be setting up a substantial decline, but equally there is a potential trap, staying under the 68ES-75ES area in globex, should confirm the bears still in full control. An aggressive move above 1175ES Sept and the bears need to respect that move, especially if it's being seen in other risk markets, such as the FX risk pairs.

Should be another great week next week, and we are looking forward to again making $$$ and successful trades.

Come join us, you are witnessing some of the craziest markets in a while, and if you're struggling for ideas and need some guidance, then you have come to the right place at Wavepatterntraders.com

Until next time.

Have a profitable week ahead.

 


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Nouf

Author: Nouf

Nouf
www.Wavepatterntraders.com

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