Financial Sense

Make or Break

by Dominick A.K.A. "spwaver", TradingTheCharts.com | April 14, 2008

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Not only did Friday�s inexorable drip lower invalidate several bullish charts that would have seen an extension of the April rally, it also crushed positive sentiment on the Street and reiterated the prevailing wisdom of a bear market. But as we now enter the mine field of earnings season next week, TTC members have covered their shorts as our indications suggest the market has reached a crucial potential support level that will prove to be make or break early next week. Besides, we can always get back on Sunday night when we actually start our week.

Last week�s update spoke of �a crucial area that will determine whether there's still one more new high in this rally or it's now time for consolidation.� The chart above shows Monday�s open making the Friday lows a true bounce off that support level, and a subsequent rally into the expected target, which proved to be the high of the week. By Tuesday, the chart looked like this:

Anyone who�s read this update on anything approaching a regular basis, even for just the past few weeks (if not the past few years), knows we do business a little different at TTC. Sometimes we have wave counts, other times we just trade the action off of our numbers or listen to some oscillator no one else has. The fact is that it’s our unique blend of Elliott wave theory with proprietary targets and technical indicators, in combination with the community spirit of our forums and real time chat room, that produce the consistently accurate market analysis and profitable trades our members enjoy.

The chart above, which is a retrospective of most of the week illustrates our eclectic approach. First, on the left, is Friday�s low based on Elliott wave, and the target for Monday generated through a mix of different techniques. Whereas as many traders were probably taken by surprise at Monday�s rally, we were able to see it for what it was: one more high that was bound to roll over. On Wednesday and Thursday the S&P oscillated between our two targets for the decline, recognition that is a sure sign of good numbers.

One thing TTC doesn't do is trade the news. We react to whatever the market hands out. Friday�s surprise gap down took us into the lower range described in the chart above. Before the opening bell, our strategy was to look for a test of 1351 from below to signal which direction this market wanted to go. 1351 was hit and promptly sold, indicating the lower range at best. As 1442 was reached, it, too, was recognized by the market before finally giving way to the despondent sellers that characterized the day, the heart broken believers in the April fool�s -rally. But, as mentioned, members are already aware of our all-important line in the sand for next week, have access to the big picture charts in the weekly maps section, and will trade accordingly. More importantly, we have been watching a long term cycle that is due soon. Let see what happens�..

Copyright © 2008 Dominick A.K.A. "spwaver"
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Disclaimer: Market 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.

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Dominick A.K.A. "spwaver" | NJ, USA | Email | Website

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