Equity Bulls Double-Down: NASDAQ on the Verge / Bears Stop-Out Fading Fridays SP Rocket Launch

By: Joseph Russo | Sat, Jul 14, 2012
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NDX

Two weeks ago, back on June 29, as equity indices were attempting one of their quintessential rocket launches following declines in excess of 10% in early June, we opened our Near Term Outlook dispatch for the NDX stating the following.

"Although some smaller dates may occur in between, i.e. Wednesday marking 5-sessions from the 2633 pivot high, and Monday marking session 8, the next turn-date noted on chart falls on Wednesday July 11, 2012 (+/- one bar)."

In the chart below, we fast forward to last Friday July 6, where we had opened dialog on the NDX chart below stating that so long as 2660.26 holds pivot high, we are citing an 80-pt. sell trigger contingent upon breach and sustained trade beneath the rising red trendline trajectory so noted.

One week thereafter, precisely upon the turn-date (+/ one bar, which accounted for the July 4th Holiday) forecast two-weeks prior for Wednesday July 11 (+/- one bar), the NDX set a tradable low at 2522.89 in concert with capturing the projected 80-pts of downside laid out the week prior. So where does the NDX go from here? Though we cannot be 100% certain, it is plausible that the NDX is on the verge of cresting a lower high in advance of another sizable leg down.

NDX 30-Minute Bars

However, as the wizards of Wall Street and Washington can never be trusted, one should not rely upon such an outcome as a sure bet. Instead, allow us to provide three short-term constraints going forward.

As we said, equity bulls are doubling down as they are on the ropes. If they fail, they risk another leg down. If they succeed, prices are likely to grind higher into months-end.


S&P Bears shutdown amid Fridays rocket launch

Before we go, we will take you on a short ride over to the CME to see how counter-trend traders from the Chart-Cast Pilot are dealing with all of the post July 4 fireworks.

For the first two weeks in July, our counter-trend trading strategy is up over $1,000 dollars per contract traded. As you can see, beginning on Wednesday July 11, we began bottom fishing for a tradable low.

As they say, the third time is a charm. After stopping out on two previous attempts to buy into weakness, longs taken at 1328 held their ground, and we rode the rocket launch all the way up to 1348.25 on Friday.

Though not an officially tracked strategy within our model portfolio, we nonetheless provide members with an ancillary birds-eye view of what takes place in this strategy on a daily basis. The 30-minute chart renders ES mini futures for the S&P in lockstep with the cash market viz. it does not trade overnight.

E-Mini Counter-Trend Strategy

Each daily session contains 13 price bars representing each ½ hour of trade throughout the regular cash session hours. Here you can see the counter-trend bears top fishing at bar-9 amid Friday's rocket launch, taking 20.25-pts in profits on longs and reversing short at 1348.25 for a profit of $1,012.50 dollars per contract traded.

At bar-12, an hour before the cash close, bears were shutdown, covering shorts at 1350-even giving back $87.50 per contract heading into the weekend flat.

 


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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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