Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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