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Guest Post: Another Batch Of Trading Setups For The S&P500 Are Here
Another Batch of Trading Setups For The SP500 Are Here, Submitted by Chris Vermulen of The Gold And Oil Guy
The past few weeks I have been talking about the SP500 forming a top similar to the January top we saw earlier this year. Well the charts below show exactly what I have been waiting for to unfold and I think the time has come for the market to take a healthy breather before continuing this strong bull market which could last another 12 -24 months before really topping out.
SPY – SP500 ETF Trading Chart
I am showing the SPY etf because that’s a fund most people know and
trade, but this analysis is the same for trading futures like the ES M0
Mini SP500 contract.
You can see the similar price action which formed in January and
what has happened recently. I feel we are about to see a correction
which would last several weeks which is very exciting for us traders.
SPY April Top – SP500 ETF Trading 60 Minute Chart
This chart shows the past few weeks of price action with the market
becoming more volatile with waves of selling and buying. This indicates
exhaustion and generally leads to a market correction or at least some
sideways movement to digest the recent rally before continuing higher.
SPY January Top – SP500 ETF Trading 60 Minute Chart
Take a look at this chart of January….
Very similar price and volume action.
SPY January Sell Off – SP500 ETF Trading 60 Minute Chart
This chart shows the sell off last January and the setups I had when
the market reached extremes generating trades with the underlying down
trend.
SP500 Day Trading & Swing Trading Opportunities:
I hope these charts help you to see how I read the market and what I
am looking for in trade setups. While its easy to see these setups in
hindsight it requires a lot of research and experience in-order to time
these plays in real-time when emotions are flying high and with BNN,
Bloomberg, CNBC and other newsletters all saying different things…
»
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Is that a flying burrito double shooting star top I see forming in the VORAX trendline?
It's actually a flying chimichanga with extra spicy sauce...this always leads to a huge blowout the backside.
+1 LOL
LOL
The rule of alternation suggests that the likelihood of this pattern repeating itself is small.
Look for an assblast on Monday after a quick selloff under the 50-day EMA in the morning.
I guarantee that any weakness in the morning will be accompanied by Index Put/Call ratios in the 3.00 range.
The 5-day ARMS closed at around 7.5 on Friday, one more big TRIN reading and -1300 TICK reading will set up an "automatic rally"....
What’s an assblast I cant find it among my charting software indicators? :-)
Its right below the Ultra Low Volume Bull Market Indicator.
Weakness? I expect we'll gap up and rally hard. New highs for the rally by Friday. Everyone I know wants this to go down, so - it won't! (yet).........
You think the market will like Greek bailout plan then?
Amazing!
This quote from Dorsch really says it all, "Imagine for just a moment, that the Dow Jones Industrials has become a key instrument of national economic policy, and that by “actively managing” its direction, the government could impact the wealth of tens of millions of US households, and by extension, influence consumer confidence and spending. By ramping up the growth of the money supply, and slashing interest rates to zero percent, in order to inflate market bubbles, the Fed could in theory, fuel an economic rebound.".
Bernanke is quoted somewhere as saying that the Fed can buy the entire US stock market. The market will not sell off until all the shorts have been adequately punished and shorting has been made (once again) illegal. Then the market will go down.
The economic rebound that was greatly celebrated was accomplished in 2002. Though in inflation-adjusted terms, it was just a bear market rally. Very unlikely they can accomplish the same in the midst of a liquidity trap this time around. The derivatives market would have to be expanded by 100X, as it was in 2002-2007, so that eventually means a 60 quadrillion derivatives overhang on world GDP.
http://dshort.com/charts/N225-SP500-deflation-series.html?N225-SP500-ove...
This idea that the govt can force the markets to do their bidding is not a new idea. Many countries have tried - Taiwan, malaysia - during the Asian crisis. Most of the Bric countries etc etc. In the end it never works. The markets are bigger than govts. Ultimately - like in the mortgage markets in the US - the govt . becomes the only player - and everyone knows it. That is really the end game - then the govt has succeeded in killing off that particular market and reviving it will take a long time if at all.
The "clue" I received was how WFC and STI failed to participate in the end of day massacre....
These banks were actually ticking up into the closing bell Friday..
RT, In the "morning weakness" scenario Goldman could drop a few more points to 140-ish (June 09 support) or even 130 (May 09), before joining Wells and Suntrust in a bounce to infinity.
Logic ceased to be a useful trading tool a long time ago.
Maybe Warren is cooperating with the doj against GS with the promise of more insider nuggets to scalp from the sheeples.
Different angle, same perspective - the market is primed for a correction at least symmetrical with the January - early-February 2010 pullback: http://chart.ly/mpyq62
It’s days like this that get your trading account caught up. Those choppy days can eat away at your money, but anticipating a day like this makes up for a lot of poor trading. Hopefully, everyone heeded the tip about not fighting the daily trend and didn’t get cute trying to pick a bottom. The same goes for Monday, where I am expecting a green candle. The market will typically run over the top-pickers during a strongly trending day.
As you can see on the first chart, I am still expecting a W4 scenario, and am looking for at least a correction to the red highlighted circle area. By my best count, the move down today was W1 of Wave C of this large W4 or the move up from early February. With the magnitude of this W1, a proportioned impulsive wave would likely take W3 into the red circle. That would then imply a W4 and W5 that could go as low as 1148.25 (maybe even 1132.14). These are my musings as I look at the longer term possibilities. Of course, if ES has other ideas, we will switch gears and go with the flow.
http://www.bostonwealth.net/wp-content/uploads/1.png
This next chart below is an analysis of the move down Friday from the 78.6% retracement level. It could be counted several ways, but they are all completed, or almost completed, 5 wave impulses. Since this should be the beginning of Wave C of the W4, it should be a 5 wave-W1 of Wave C. Monday, we should see W2. W2 should typically correct from 50-62% of the entire move down, but ES like to hit extremes. So don’t be too anxious to step in front of any strong trend day. W2’s are typically sharp and sudden. In a market moving down, a sharp W2 rally gives a sense that the correction is over and the Bull has returned. But W3 then removes those hopes from the shorter-term Bulls. As with any corrective W4 pattern, they can be extremely variable and complex. So we still have to be on our trading-toes. Good luck trading next week.
http://www.bostonwealth.net/wp-content/uploads/2.png
I have a 30 day free trial service on my site if you are interested.
About me:
Trading is an avocation for me - one that I take seriously, and one that I consider the most difficult endeavor I have ever undertaken. I have a lot going against me as a trader. I was a Marine officer in Vietnam and fought in the Ashau with a Battalion called "The Walking Dead" ~ and so, like most combat Marines, I'm too aggressive.
I'm a Doctor (one of the Dental specialties) ~ and everyone knows they are the worse investors/businessmen. I am a perfectionist and hate to be wrong ~ so I have a tendency to want to fight the market. Overcoming these liabilities makes the prize more rewarding. I'm still a work in progress, but am making headway. I think I have a lot of good advice for new traders. If I would follow my own advice more consistently, I would be a far better trader also.
I like your analysis much better than the guest authors "hey its Jan correction deja vu" predictions.
I happen to be a former Marine as well (no-combat, cushy air wing MOS) and I can relate to the perfection seeking, hating to be wrong traits. Its served me well mostly, but there tends to be friction when working in my civillian job because no one really seems to care about getting things right the first time cause it all pays the same.
I started out being way way too agressive, seeing right through all the BS on TV about the "recovery" and thinking every dip was the big sell-off.
Started studying the wave theory recently and Ill be damned, those 5 and 3 waves really are everywhere, its just tricky interpeting them.
Before; smelling blood, I would have backed up the truck with puts Thursday, been all jazzed Friday, and been shocked and railing agaist the rigged market come Mondays little pullback. I would have sold the puts having lost so much letting them ride before.
Not this time; Friday, I figured the smart move would be to sell and wait. The big correction isnt going anywhere if its for real and a wave back up is expected even if the correction is upon us. I see the area on your chart to look out for, and when that wave starts heading back down, thats the smart time for the puts,imo.
I would subscribe to your excellent site, but due to recent losses from being fooled by the Jan correction, by being too stubborn to admit it was just a minor one, moneys a little tight!
Heh - you could imagine my reaction when I read this bunch of pumper pimping in the Boston Globe-Democrat today...
http://www.boston.com/business/markets/articles/2010/05/02/bulls_bolster_boston/
And my reaction? Perfect - just in time for the Pigmen to sell into the highs of the highs and for the retail investor to take it in the posterior, sans lube, yet again.
12 to 24 months to bull run....so you are leaning to a bull market continuation. are you sure of that? what gives you this great insight?
If the govt/PPT was so powerful why did they let the SPX collapse to 666 in March 2009? That was clearly an overshoot down to 1968 levels in real terms. Should never have been allowed.
It was an engineered selloff by Goldman to facilitate a wealth transfer.
All the big boys loaded up at the lows while the sheeple bailed out.
As usual, the rich got richer....
"allowed"........LOLOLO!
Every bull hopes for a "healthy correction" so they can buy more. Just wishful thinking. May well turn into an "unhealthy crash"!
Gotta monitor the French Kiss indicator. Whats that? The thing that really seems to matter to the markets is the govt embrace (and French kiss) of wall street and the banking system. If the govt is just taking a cigarette break - healthy correction. If the govt has had enough and is moving away from their former darling - look out below!
My firm much prefers the "Circle Jerk" indicator with the same explanation
Wow, who wrote this article Harry Wanger or Simon from CNBC?
"breather before continuing this strong bull market which could last another 12 -24 "
2 more years to get the ark finished. Sweet.
http://www.proshares.com/funds/sds.html
http://en.wikipedia.org/wiki/Students_for_a_Democratic_Society_(1960_organization)
Coincidence? I think NOT.
Long live the priapism!
It's interesting how well rained all the posters here have become: they believe the market will bounce rehardless.
this is really bad and dangerous analysis
Yours is non-existent. Care to give yours?
Looks like you did.....my bad.
Hey Fred
This isn't bad analysis because of the market call or the direction that the writer thinks the market is going, it is a bad analysis because relying upon what happen 1 or 2 times ago to make your decisions is just really bad and dangerous. He should consider all the data and similar set ups over the entirety of the data not just the 1 or 2 to the left of the chart. Got it?