The Standard & Poor’s 500 closed flat for the week, but as usual, that does not mean there were not some juicy moves along the way. The unbiased traders at TTC have consistently been on top of every swing, from one side or the other, week after week and we have the charts to prove it!
The markets opened to the upside on Monday and then pretty much went to sleep for the whole day. I am sure many traders thought the week would go sideways until the Fed announcement, but Tuesday morning the market proved that was not the case with a nice gap down. Monday’s close had left pattern traders a bit bullish, as the S&P seemed to suggest a triangle that would resolve to the upside. Instead, it turned out to be yet another example of what I call the “Triangle Trap.” The chart below was posted before Tuesday’s open to suggest once again that we would NOT sell into the gap, but buy it instead.
After a few minutes of vibrating around the target area, price and my proprietary trend charts took off to the upside and gave us an instant 7 points. The trend charts kept us out of shorting a losing gap down and then hinted we should take the money and run as the indicator started rolling over into the close. Below is a chart of the S&P e-mini futures into Tuesday’s close.
Wednesday brought the Fed meeting and most traders felt they had to be correctly positioned in front of the statement. Readers will remember I have had May 9 as a turn date for months, and have been looking for a top to sell into. We elected to be flat and let the day traders worry about trading that mess. The Fed announcement delivered that new high to set up a bull trap into Wednesday’s close.
After months of waiting for the ninth, we were excited to see a new high appear dead on the very exact day. Sticking to the plan, Wednesday night I became cautious and posted that I was looking for a reversal pattern to confirm that we should get short. The next morning we gapped down and, once we were able to rule out a pattern that would see one more high, we shorted a number that was posted for members the night before. Of course, after a brief rally, the S&P rolled over to close down 16 on the day.
So, with our long-awaited turn date kicking in, members rang the register all day Thursday as the S&P sold off straight into the close. By that point, bullish traders that bought the Fed announcement were probably scrambling to get flat, but yes, we went long at the close at a price of 1497 for the ES futures. As you know, that was not such a bad thing, considering the low of the day was 1496 and the S&P closed Friday at its highs.
Our long position was explained to members at Thursday night’s review, when I posted the following chart. The symmetry of certain markets are unbelievable, you just need to find them. And of course, TTC does that for its members each and every day.
For the past year, I have been getting on the bears’ case because they are continually getting trapped into overnight holes that explode in their face. Now, I get the feeling the bulls will have their share of traps in the near future, but we are not there yet. This market still feels toppy, but I am not ready to give up on it yet. Of course, we have the luxury of going into the weekend flat, with profits, and waiting for the next setup because as I said, in a week where the markets closed unchanged, we were able to capture Tuesday’s sell-off perfectly, go short our May 9 turn, and then cover and reverse 1 point from the S&P low on Thursday.
Now, many might ask why I would cover on Thursday after having caught such a nice swing, and the answer is simple if you step back and read what the market’s been saying for the last few months. Swing trading just has not been as profitable lately as it used to be. Take Friday for example. The S&P has already recovered 73% of Thursday’s sell-off, and could do more. I am not sure about others, but giving back 73% of my profit and hoping to get the right move on Monday is not what I call trading. What if we hit new highs next?
Once again, trading unbiased Elliott Wave is the only way; take the money and run. Going into next week, if the market continues to scream to the upside, we can trade it. If you are short from Friday and already at a loss, well, professional pit traders are going to have a ball with you. For those who just want to be short the market for the next big drop, well, after five years and 50 points from a new high, it is clear that strategy does not work either.
So, members should be going into next week flat after taking profits on Friday.I think we have the pattern going into next week working for us perfectly. We have also mentioned two potentially important dates for the very near future. A few weeks ago, when I mentioned the turn we got this week I mentioned to be careful with the wave degree. Was this week a tease of the old highs with the bulls about to be trapped? Or will we hit a perfect double top soon? Either way, if we are correct, I think many out there are about to be surprised. I am hoping to be short early this week and test our target area below, which we expect a violent move from, once we confirm its direction.
If you have not made nice profits this year, it’s time to think about what you are doing wrong. If you’ve watched from the sidelines as the markets screamed higher or if shorted a rally from the 2002 lows only to watch the S&P recover all but 50 points of the initial decline, then it’s time to try something new! If this is you, it is about time to understand why you trade a certain side of the market and learn how to find the real money. Join now, become part of TTC and begin to “earn and learn.”
Join before May 18, 2007 and if you do not see value from TTC, send me an e-mail within three days asking for a complete refund! No questions asked. Now is a perfect time to join because the fee will be increased before the summer.
Unbiased Elliott Wave works!
Dominick Mazza
HYPERLINK "mailto:Dominick@tradingthecharts.com" Dominick@tradingthecharts.com
If you enjoyed this article, signup for Mar HYPERLINK "http://visitor.constantcontact.com/email.jsp?m=1101385994602" k HYPERLINK "http://visitor.constantcontact.com/email.jsp?m=1101385994602" et HYPERLINK "http://visitor.constantcontact.com/email.jsp?m=1101385994602" U HYPERLINK "http://visitor.constantcontact.com/email.jsp?m=1101385994602" pdates, our monthly newsletter, and, for more immediate analysis and market reaction, view my work and the charts exchanged between our seasoned traders in HYPERLINK "http://www.tradingthecharts.com/phpBB/index.php" Tradingthe HYPERLINK "http://www.tradingthecharts.com/phpBB/index.php" C HYPERLINK "http://www.tradingthecharts.com/phpBB/index.php" harts forum.
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.
HYPERLINK "http://www.tradingthecharts.com/phpBB/viewtopic.php?p=39389" \l "39389"Elliott Wave Tutorial
TTC’s Quick View
*To Current and Prospective Members:
TTC will be increasing its monthly subscription fee sometime before this summer. The increase has become inevitable due to our ongoing expansion of the Web site, computer and software upgrades and the addition of services such as trend cycle charts. Current members and anyone who joins before the increase takes effect will not be subject to the new price and will continue paying the current $50 subscription fee on a month-to-month basis. So, if you have been thinking of joining, this might be a great time.
