Going into the week, members had the benefit of the 1458 target on the S&P futures that I mentioned in the Forum and reiterated several times at the start of the week. As you might recall, in the Feb. 4 update, I wrote: “I think this is the time the market makes or breaks. I do think the market has a great chance of turning before the target of SPX 1472.”
As it was difficult to share the opinion of a huge rally in the summer, it is hard here to express a bit of danger as the markets advance each and every day. I see next week as a slight advance on Monday and then possible a boring consolidation before another advance that marks a turn.
Do we have confirmation that this week was it? No way, but I do have enough evidence that if things remain as they are, we will rollover soon.
That said, you can make the case that if all is peaceful next week, we could doll up a few markets and give them their finishing touches.”
Monday’s pop came on Tuesday’s opening, but I am sure no one is upset over that extra hour. With the number 1458 deeply imprinted on our minds, it was an obvious trade into that level and, as the market stalled, we shorted as it hit 1457.75 and faded. We expected to cover at ES 1446/47 support and, sure enough, not only did we catch a quick 10 points to start the week, we bought the very bottom of that move.
Now, having the high on the futures come in one tick below an often repeated, totally expected target… Maybe that’s a lucky guess. But getting a high risk/reward trade that captures both the top and bottom ticks in a choppy market? That is what I call the benefit of membership.
From there a new high could have been reasonably expected, but the sloppy advance had me worried about a bear raid. I posted Friday morning that a fake out was possible, as the advance could be halted at a double top. As it played out, the day’s high came in three ticks below the previous top and then, like all good workers across the country, traders who were tuned in to the market got their payday.
The NYSE chart below also shows you how price has been “vibrating” around my target for two weeks now. Was it coincidence that the drop from the high found support exactly at the target and tried to advance again? I don’t think so! Now that we have sliced through it and closed below, do you think I will be watching to see if we get to the underside of that number next week? You bet!
I also want to warn readers about shorting a number blindly. My two primary methods of analyzing the markets are Fibonacci and Elliott wave. The Fibonacci method found the NYSE target. Now that we have met it, I look to Elliott and my technicals to see if they agree. Like the S&P, I have no problem inviting another high in the NYSE. Once we have both the target and pattern completed, I would feel comfortable labeling it complete. Keep that in mind if price gets back on top of 9314 to finish off the pattern.
Reaching this target has been exciting, but my big thrill came this past week when I heard a big house was selling June and Sept futures, and another big house had finally turned from buyer to seller. The wonderful service of TradetheNews.com had me in front of a landslide before many other traders knew what hit them. Not only that, but now all the pieces are coming together. Having NYSE hit its 9314 target and shy away as the big guys start selling gives me supreme confidence in the power of this target.
Once the rollover was in effect, it seemed to most traders that the TOP was in and the markets were about to crash. But the bottom line is the S&P is only down 10 for the week, which is not the end of the world. Fortunately, as traders, we did much better than that. On Friday, once the big selling started, I recommended to cover shorts or scalp long into the close as we were due for a bounce and that a complete crash was not upon us. Even though we knifed through the level I said to watch, we only went lower by 2 points and then rallied into the close for yet another great example of how to trade the volatility instead of praying for disastrous, monolithic moves.
In the end, members of TTC who played their cards correctly probably still are bragging about catching all the wiggles this week. Even if that’s you, you are probably still wondering, 'what about next week?' Can we call a top in place?
The perfectly honest, less than exciting short answer is “no,” if the market gave it to us that simply, there would be no other side to take our trades. Next week is option expiration and most of you know the market will go where it wants to go, not necessarily where you want it to go.
Those who went home thinking that Friday marked a top might want to look at the chart below. Have we not, “been here, done that”? We are still in an uptrend and Friday’s bar is not too much different from the other three circled ones.
Last time I checked, we are still called “Trading the Charts.” The confirmation is not quite there yet, but do not get me wrong, it surely can be there by Monday with this type of volatility. Also the fact that some big houses are unloading agrees with what I have been thinking the last few weeks. Some will be tired of hearing that we still do not have confirmation, but that is what has kept us on the right side for 200 handles!
So, the good news is we are unbiased and we trade the market as it directs us and we are only several points away from being able to project the next outcome. Overall, I think trading next week will be easier than confirming where we exactly are in a count. Sentiment readings once again argue that a top has not been seen yet, but then again real time sentiment last week was very bullish. With that in mind, next week can turn out boring as the option expiry kicks in or very exciting, as biased traders will be caught wrong as the market once again attempts for that “1 more high.”
As soon as Globex opens on Sunday and then Europe during the night, we will put together the week’s plan and targets and post them in the Forum. If Friday’s decline is once again nothing more than a bear trap, I’m positive all members will know it and discuss it on the boards. That is, after all, the benefit of being a member.
Dominick Mazza
Dominick@tradingthecharts.com
www.tradingthecharts.com
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