The S&P closed flat for the week, but as
usual, that doesn't mean there weren't some juicy moves along the
way. We 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!
TAKE THE MONEY AND RUN!
May 14, 2007
The markets opened to the upside on Monday and then pretty much went to sleep for the whole day. I'm sure many traders thought the week would go sideways until the Fed, but Tuesday morning the market proved that wasn�t 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.
Members at TTC are using these trend charts for intraday trading in the SPX, DAX, gold, and oil. Daily and weekly time frames are available on a few other markets, and I plan on getting them for most other markets in the near future. Stop by, spend a few weeks with us, and see if we can improve your trading for only 1 ES point ($50) per month*. If you've been thinking about joining, now is the time to act! Keep reading to learn about the coming price increase and how you can get grandfathered in at the current price.
Wednesday brought the Fed meeting and most traders felt they had to be correctly positioned in front of the statement. Readers will remember I've had May 9th as a turn date for months, and have been looking for a top to sell into. We elected to be flat and let the daytraders 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 9th, we were pretty 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 wasn�t 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've been getting on the bears� case because they're 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 aren't there yet. This market still feels toppy, but I'm 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 like I said, in a week where the markets closed unchanged, we were able to capture Tuesday�s selloff perfectly, go short our May 9th 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 hasn't been as profitable lately as it used to � take Friday for example. The S&P has already recovered 73% of Thursday�s selloff, and could do more. I'm 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're short from Friday and already at a loss, well, professional pit traders are going to have a ball with you. For those that just want to be short the market for the next big drop, well, after 5 years and 50 points from a new high, it’s clear that strategy doesn't work either.
I think we have the pattern going into next week working for us perfectly. We've 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're correct, I think many out there are about to be surprised. I'm 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.
Having a problem trading the ES? Of course you are, its one of the hardest markets to trade, but no one tells you that part. Most other markets don't have as many traders scrambling around in them all day long, which makes there charts much cleaner. You might want to think about finding these other markets as there is much easier money out there to be made.
The Dax is certainly an index on our radar screen as it’s been pulling us along on its explosive ride the last few weeks. We think we have the area it’s targeting, as shown in the chart below. Here too, we are waiting for confirmation but we don't have it yet.
OJ gave us a perfect selloff from the top. We then expected a bit of a rally and so far it seems to have reversed off the expected target.
We continue to wait for a reversal that�ll become a nice swing trade in the chart below. Stay tuned.
Gold survived the week�s selling pressure and has come out on top of an old multi-year trendline. And the trend charts have nailed every move. Read Joe�s Precious Points for a closer look at what's in store for the yellow metal next week and beyond.
Dominick A.K.A. "spwaver"
analysts are always welcome to contribute to the Forum or newsletter.
Email me @ Dominick@tradingthecharts.com if you have any interest.
Ideas from this update are provided as general information and are not investment recommendations. TTC accepts no liability whatsoever for any losses resulting from action you may take based on the contents of its charts, commentaries, or price data. Each person must do his or her own research to determine the appropriateness of taking a position in any financial or commodity market. If you are uncertain, please check with your licensed financial advisor or broker prior to taking any action. Securities and commodities markets inherently involve risk.