Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold Amid Epidemiological and Economical Update - 15th Jul 20
Is it Time To Dump Gold Stocks? - 15th Jul 20
Retail Stock Market Traders & Investors Squeezed to Buy High-Risk Assets Again - 15th Jul 20
SPX about to Challenge 8/08 High - 15th Jul 20
How to Grow Huge Fruiting Magical Indoor Grape Vines at Home UK - 15th Jul 20
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Using Elliott Wave to Enhance ETF Trading Returns

InvestorEducation / Learn to Trade Apr 02, 2009 - 09:04 AM GMT

By: Weekly_Wizards

InvestorEducation

Best Financial Markets Analysis ArticleWhat‘s your intermediate-term view of the market?

We ended March on a good note, with the panic behind us. I do believe we're going to see some higher levels ahead.


Using Elliott Wave analysis and looking at the daily chart of the S&P 500, we see that the primary downtrend ended with the lows of March 9, which was the completion of the 5th wave down (Elliott Wave analysis counts in 5-wave sets).

Now we're in a new, secondary trend – a large countermove – up! I see this next set of waves, which began with the upleg in March, culminating in a move to the 1050 area over the next 3-5 months.

What about shorter-term?

As I've mentioned, we've had a wave up in March, which I expect to be followed shortly by a down wave (wave 2 of this 5-wave set) that drags out anywhere from 2-3 weeks in a downward flagging pattern that takes the SPX to the 750-30 area.

On the Nasdaq, this could mean a turn at around the 31.00 level on the Q's (QQQQ) to 28.50 or possibly as low as 27.84.

That would be followed by what is typically the strongest wave of the set, Wave 3, that could see the S&P 500 trading up in the high 900s, possibly even 1000. See chart below.

How do you trade these trends?

We use the ProShares Ultra Index ETFs to trade these trends, typically as swing trades, using the QLD/QID to trade the QQQQ swings, the SDS/SSO to trade the SPX swings, and the DDM/DXD to trade the Dow. Right now we're long a half position in the ultrashorts of each of these three indices, looking to fill the other half on strength.

What rules do you follow in identifying waves?

Some of it has to do with Fibonacci retracement levels – i.e., support or resistance levels at which a stock tends to retrace a large portion of its original move before it continues in the original direction.

But there are some rules of thumb like I mentioned about Wave 3 being the strongest move. In addition, none of the prices in Wave 4 can overlap the prices of Wave 1. If they do, then you've counted your waves wrong, and are not, in fact, in the 4th wave. You may, instead, be in an ABC wave, a countertrend 3-wave move within a larger wave, where the rule is that the A and C waves are the same distance. These are just some of the rules that help us determine where we are in the wave trend.

On Monday you entered the DDM, SSO and QLD for a 1-day trade capitalizing on the upside. What gave you the signals to go long the market?

We gapped down on Monday, and I started seeing buy signals in the “smart money” charting I do. We have proprietary software that measures institutional block buy/sell volume, and when I saw the institutions very aggressive on the buy side when the indexes were falling, it automatically told me this was not going to last on the downside. We got into the trade with the SPX right around 785, and it ended up gapping up on Tuesday to 799.

Then on Tuesday, I started seeing the institutions selling up there, so we went short. We're taking advantage of this volatility in the market because we're able to see firsthand what's going on in terms of institutional buying and selling, and then from there piece together where we are in the wave structure. When both the charts and the volume indicators give a trade signal, and my other technical indicators are confirming, then we'll enter the trade.

We've gotten in and out on both directions pretty close to the bottoms and tops this week. It's giving us that easy gap down or gap up where we're able to lock in 4% or 5% at the open!

We see you've recently begun also trading the ultra financial ETFs? Why?

The reason is a lot of times we see the indexes either topping or bottoming, and we've found that the financials are either leading the way down or up. A lot of our members like using the ultra financials as a trading tool, because of how fast they move and how much can be made in a short time. I'm using it very carefully and believe the safest thing to do unless we see a big trend forming is to limit the trades to just the Direxion Financial Bull 3x Shares (FAS), which is the long side of the financials. There's just too much news that can come out overnight, especially with what's pending with the mark to market accounting rules for the banks, and if you're in the Direxion Financial Bear 3x Shares (FAZ), which is the inverse 3 to 1, you can wake up 20-30% down. That's why I'm very careful with those. If I see them bottoming and I see buy signals, it's something that's worth it.

The FAS had gone down from about 8 to all the way down to 4.85, and on Monday it was at an extreme where our software was calling for a buy. We were at support levels and were able to get in basically at the low, at 4.85. So the downside risk wasn't all that bad there, as we may have been looking at another 5-6% down. But the upside was 25-30%, which is a risk-reward opportunity we'll take anytime!

Gary Dean is author of MarketsPath.com, a live chat room and trade journal focusing on the ProShares Ultra Index ETFs, using the QLD/QID to trade the QQQQ swings, the SDS/SSO to trade the SPX swings, and the DDM/DXD to trade the Dow. Sign up for a Free 30-Day Trial!

http://www.advicetrade.com/Wizards

© 2002-2009 MPTrader.com, Weekly Wizards an AdviceTrade publication.  All rights reserved. Any publication, distribution, retransmission or reproduction of information or data contained on this Web site without written consent from MPTrader is prohibited. See our disclaimer.

Weekly Wizards Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules