Market Update: Are We There Yet?

By: Dominick | Sat, Nov 11, 2006
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The Nov 4th update stated:

By Friday the bears were out and talking the "C" word again, but after rallying from 1220 to 1390, why worry about a pullback to 1360? Don't get me wrong, I'll turn bearish when the time is right, but right now I'm just glad I wasn't the first in line to go short back in June. The bear call is tempting, but this market is still carefully moving forward 2 steps, and then stepping back one. We're still vibrating around the hidden Fibonacci level at SPX 1360, and if this becomes support, we're definitely going higher. In fact, I won't short this market as long as we're above that level, to avoid risk of a final blowoff.

With 1360 still acting as support, I'll allow for additional gains, with first target for the SPX at 1404.25.

Once again the market gapped up on Monday and never looked back. With the bears chasing it all the way into the close, the day was up a whopping 15 1/2 points! Anyone that's read my updates from August will have bought the low last Friday into the 1360 Fibonacci support coinciding with the trend lines and forks. Talk about risk reward! Buying low 1360's, with a stop a few points under it, produced a 3 day gain of 30 points! The chart below is one of the many I post on Saturdays to review the week in context of the big picture.

Thursday, the S&P's rallied above the week's high, forming a double top, and then sold off into the bell. We thought that high was a 'b' wave of a flat or triangle. Friday we put in a low after selling off in 5 waves and this is where knowing the count makes a big difference. To trade from here, you need to know how to distinguish the difference between a C wave that ends a move, or a 5 wave decline that starts a bearish move. If we ended a flat, we can explode once again here to create a blowoff. Not so, if we've topped.

Many members already went long the ES at Friday's lows as we discussed the trade in the real-time chatroom. Thinking this might be the end of a small correction instead of a failed high, we took the trade that we had been waiting for just as many others traders probably fell into the trap. Ours proved a win-win trade as the stop is already at a profit.

Looking to next week, I've been watching a Fibonacci cycle that seems to escape most others' attention. All my work contains Fibonacci studies on it, but I usually don't do much with cycles. But, if you take the S&P's high from 2000 to the 2002 low and extend it out in time by 1.618, it reaches a level we're currently approaching. As a matter of fact, there is another 1.618 time target and a low to low to high cycle, all hitting in the next 2 weeks. Since almost every traditional cycle has failed to work out, we're watching this one to see if it's the reason.

In summary, we have the same target as last week, SPX 1405, plus some dates to watch, the S&P 1360 area, and a ripe bullish sentiment. Don't get lost in the hype or bearishness, use the same numbers we keep discussing, but, do I even have to add, be careful! This week the QQQQ's reached a Fibonacci measured move right to the tick! Like the kid on the road trip that's always asking, "Are we there yet?" you can now say, "Almost." We still have no confirmation of a top and that's been what's kept us from shorting too early. If 1360 gets above us, that's the signal. But absent that, if our present setup is correct, there might be a nice long trade as soon as Monday morning.

While many of our traders only follow the S&P futures, look what many easier markets have done. The chart below is a continuation Soybean chart.

Now this is a market on fire! Well, has been, at least. Don't go running to buy it now as chances are excellent it's already topping, but anyone trading commodities should have made some huge money holding soybeans lately. We waited for months, but caught the bottom nicely: eight weeks of trading was worth $7500 on only a single contract! Some of our commodity traders are smiling all the way to the bank with this trade.

Also, don't forget the precious metals, which have also been rallying lately. Have they started an advance? Or is this a bull trap triangle? We're on top of those markets in the Forum, plus Joe's been writing on the metals. His updates have also been posted here, but if you missed them, they're also in the free access forums of my homepage.

If you've enjoyed this article, signup for Market Updates, our monthly newsletter, and, for more immediate analysis and market reaction, view my work and the charts exchanged between our seasoned traders in TradingtheCharts forum.

Last week I showed you how my proprietary trend charts caught the exact top. Did they give a buy at the lows? How about at Monday's open all the way until yesterday. Those charts are now available to current members. Be sure to join and have this addition be a part of your daily trading decisions.

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Author: Dominick

a.k.a. Spwaver

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual. Check with your licensed financial advisor or broker prior to taking any action.

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