This past week, the tune of 85 Billion dollars fueling the markets continued driving up the S&P past the expected decline of the primary roadmap, now calling this into question. W.D. Gann always regarded the 60 yr cycle to be the most important, and that would align to the alternate roadmap which the current market levels and recent behaviour seems to be moving towards. Both roadmaps predict a decline into late February early March so neither is invalidated at the moment, however the alternate roadmap is predicting a 7% drop and seemingly more realistic. Reminding that the Primary Roadmap predicts a low of March 4/5 and the Alternate Roadmap predicts a low Feb 25 - 28 (2013 RoadMaps).
Lets look at my reasons for the S&P finally being ready to start its correction. This first one using Andrews Pitchfork shows the S&P is ready to meet the mean at approximately 1515 in the Jan 28 - 30th time frame. I believe that 1508/09 will be the high however either way this first top is here and the reason for this is the Alternate Roadmap had the 28th the actual turn date. According to the chart, 1440 should be the bottom of the drop meeting the bottom of the pitchfork, however I think we'll get carry through with a 50% Fibonacci level of 1424. This is my late Feb early March target.
Next you see the trend channel that has developed and will give us some short term signals confirming when the trade is on, a TTT moment. Shorting an upward break of 1515 might be risky, so potentially a downward break of 1502 would be safer as the trend channel would be broken and start the first wave of the decline, minor support at 1485, but likely first wave hitting 1474 which is the first major support (also noting this is the 18 MA).
The next chart shows basic fibonacci levels using the November Low and my projected high of 1508. I'm suggesting that we will at least see 1424 which is a 50% retracement and where I will start my first long position. The ultimate would be 1405 (61.8% retracement) and where my final long batch would be bought.
Lastly worth noting:
S&P
RSI is at 75, KST is at 40.4 and about to negatively diverge.
RUT
RUT is overbought for the longest period as far as I can see spanning many years by some margin with RSI at 77 and KST has just had a negative divergence.
TRAN
TRAN is at parabolic overbought levels with RSI at 85 and KST at 87!!!
Reminding I will update my trades in real time in the Trade History section. Currently trading TZA as I think the drop in the RUT will be larger on a percentage basis during the same time period.
8.6% down on a triple leveraged ETF equates to 25.8%, how do you manage your risk?
ReplyDeleteThanks for your comments. A paper loss does not equate an actualized one, but in previous threads I acknowledged I should have scaled in my shorts. I remember ZZ back in 2011 being down significantly more that 8% but the roadmap told him to keep buying. Add the fact I've presented my reasons to back up my confidence that my trade will realize a big realized gain, I feel the risk reward is great. Just wish I saved some more dry powder to short some more. Remember, you and I trade different timelines, and this is important.
DeleteI should correct you though, I am not down 25%, down 8% at the moment.
DeleteSS76 you seem like a nice bloke. So ill be kind and honest with my response.
DeleteIf you do not manage your risk you will not survive. This market is rigged against you and will take every penny you have unless you manage your risk. Unrealized or realized regardless, at what point do you throw in the towel. I believe Lehmans said the same thing back in 2007.
Keep buying on the hope that price will follow one of your roadmaps will end you and likely this blog too. Let me present an alternative scenario that the roadmap has inverted, what then, are you prepared to lose 50-60% because you are too stubborn to cut your losses and find a better entry.
Again i ask you "how do you manage your risk?"
According to my calculations 8% on a triple leveraged etf is around 24% can you tell me how you only got 8% loss?
Hey CIT, I bought TZA at $12.10 as my trade history shows. TZA is now $10.97 as of the close, that is a 9.33% paper loss at the moment, not light by any stretch but not hiding from it either.
DeleteNow, I hear you about the risk management piece and should have scaled in my shorts, but right now I am nearing my limit both in time and price so we'll see.
Its not just about the roadmaps alone, its about all the other technical indicators that are suggesting a sizable correction is coming, at least I think it is, but no, I won't hang around for a 50 - 60% loss. I have a mental stop of $10.50 for this trade if I don't get a down move before Feb 5th, but being so close in time I am willing to wait some more.
Always appreciate your honesty and commentary, thanks Anthony.
Well good luck SS76. It took some expensive lessons for me a few years ago for something to click. I realised that being wrong is always better than being poor, managing risk turns one from a gambler into a trader.
DeleteAll the best.
ps if we break 1495 today look for a low around 1487-1489.
Good man. Will watch the levels you suggested.
DeleteSS76 - thanks for the analysis. Looking forward in the crystal ball, once we make the low in end-Feb/early March, do you see the final push this year as a significant long term top? Many are calling for pro-longed decline into 2014/15 time frame and I agree the next few years could be down years and perhaps lose up to 50% on the S&P. Perhaps getting ahead of myself but interested to know any thoughts you have. Thanks for the great blog!!
ReplyDeleteMany thanks for the nice comments. The short answer to your question is yes, but until I see exactly which roadmap the S&P is following will depend on how I see the rest of the year playing out.
DeleteOK thanks...will stay tuned. Have a great week!!
DeleteJust found your blog-- very nice. and thank you
ReplyDeleteThanks John.
DeleteHey SS76, I am new member to your blog. Look forward to reading your analysis. Good job.
ReplyDeleteThanks Muzz. Welcome and look forward to your input also.
DeletePart of my confidence of a significant gain from my trade entry is that looking back a few years, you can see other examples of the RUT being in the extreme's it's showing today (even less extreme comparing the RSI and KST levels).
ReplyDeleteTZA bounces from these extremes:
Sep 2012 to Nov 2012 +43%
Mar 2012 to May 2012 +36%
Oct 2011 to Nov 2011 +45%
April 2010 to June 2010 +62%
so as I see this correction until Late Feb/early march, even if TZA rebounds 25% from these levels, that will be a 14% gain that I will be very happy with. To break even, I need a 3.5% drop in the RUT (down to 875), and at this point I don't see how that will not happen particularly if it is going to head for new highs with the SPX after this correction.
DeleteTZA was a dog today in comparsion to FAZ and UVXY. Interesting.
Deletehttp://www.cnbc.com/id/100408154/Why_One_Big_Trader_Is_Getting_Into_the_VIX <-- this from Afshaikh in SC site. Interesting read. Looks like someone knows something. Or maybe it a hedge.
Yes, today it was. However given the extremes in TZA versus FAZ, the immediate upside potential I feel is better with TZA. In terms of he article, I saw that but you'll note that the week before there also was a large purchase of VIX calls. Not sure you can deduce much from this to be honest.
DeleteBullish Doji star pattern on TZA. Requires confirmation today or tomorrow. SPXU printed a white spinning top, also potential reversal but needs confirmation.
ReplyDeleteTZA must close above $11 for confirmation.
DeleteS&P 500 Support Resistance for today.
ReplyDeleteSupport: - 1485.29 and 1473.70(main). Break will give 1462.30, where correction could be. Then follows 1450.23, where correction could also be. Be there a strong impulse, we would see 1440.00. Continuation will lead to 1430.44.
Resistance: - 1507.23(main), where a correction may happen. Break would result in 1509.50, where correction may also be. Then 1516.70. Be there a strong impulse, we would see 1539.22. Continuation will lead to 1563.75.
Here we are, 1508 SPX. I think it holds, but clearly the RUT is not joining into the party. Now would be the ideal time to add TZA.
ReplyDeleteIf 1508 breaks, then we are looking at 1515 approx. Stage looks set though for a big FOMC let down.
As yesterday, TZA close over $11 is a buy confirmed.
ReplyDeleteAlso, looks like 1508 may in fact hold, lets see if the FOMC mucks things up. I think the market will use the negative GDP to bring about the correction.
Looking good so far, but the SPX will need to break the uptrend channel at 1502 for further downside if 1508 holds as the high. The RUT is signalling that its coming.
ReplyDeleteMy bias is usually short vs. long. Michael Gayed bias is usually long vs. short. He's such pro bull that a correction call get's my attention.
ReplyDeletehttp://video.cnbc.com/gallery/?video=3000144090
http://theetftrade.blogspot.ca/2013/01/interesting-post.html?spref=tw
Thanks for the links, very interesting stuff.
DeleteI replaced the COT page which wasn't exactly what I was looking for, and put the AAII Sentiment Survey in. I will update it weekly and am working on putting into into a chart for a better visual.
ReplyDeleteThis one is good as well: http://tickersense.typepad.com/ticker_sense/
ReplyDelete1502 was the bottom of the trend channel and we got a close below it, but just barely. Near term this is an important level to watch particularly if the markets head down to start with.
ReplyDeleteI think that we should see 1473 today or tomorrow as major support, along with minor support at 1492 and 1485.
Todays S&P Support and resistance levels (Thanks to FX trade)
ReplyDeleteS&P500
Support: - 1485.29 and 1473.70(main). Break will give 1462.30, where correction could be. Then follows 1450.23, where correction could also be. Be there a strong impulse, we would see 1440.00. Continuation will lead to 1430.44.
Resistance: - 1507.23(main), where a correction may happen. Break would result in 1509.50, where correction may also be. Then 1516.70. Be there a strong impulse, we would see 1539.22. Continuation will lead to 1563.75.
Also, yesterday we had a confirmed buy on the candlesticks for TZA and SPXU.
ReplyDeleteThis could change in a heartbeat so must watch levels closely. I am holding regardless into Feb 25 - Mar 4 for my desired sell level and will not try and trade this as I think there will be many shakeouts here/bull traps.
Finally got a sell signal on RUT yesterday. If you can handle 20-30 more points of upside, I'd hang with the short. Over the years I have found that if I wait for what I think is the most insane/extreme reversal point -that is usually the one that ultimately gets hit (and even exceeded) - just takes a whole lotta patience
ReplyDeleteyup, I'm with you on this, but an extra 20 - 30 points on the RUT not sure I can handle, lol. I'll be watching levels closely, wasn't thrilled with how today played out on the RUT given the SPX was down. Perhaps weak Chinese data along with weak NFP numbers tomorrow give a good sell off tomorrow.
DeleteGotta be careful here. Looking at a gap up. 1508 is the level to watch, 1517 is my line in the sand. TZA I will likely hold, contemplating trading my way out of this.
ReplyDeleteThen again, markets do not usually top on bad news.
ReplyDeleteWell, 1508 broken, and now on to 1515. The close is important but a breach of 1515/6 is important also as it could signal direction.
ReplyDeleteHolding short TZA with conviction but not liking the action. Roadmap #2 is still the likeliest bet.
you might want to look at the REAL roadmap for this year.....1929
ReplyDeleteI looked at 1929, but do not see the correlation at all. I am getting many hits looking at a first drop into Feb 19/20, then up into the 22nd, then perhaps retesting lows sometime between Feb 25 and March 5. We'll see.
DeleteAlthough I though 1508 was the top here, I saw the potential of 1515 being hit as a possible last gasp higher, although momentum is on the bulls side for sure. If 1515 is the top, then my target low is 1428.
you do understand that the correlation charts you use carry a year and a half of time on the chart??? on the chart 1929...the '29 begins where 2013 begins...that section of time is VERY much like this month. als it comes to a peak on FEB 1 then down so that top is not rounded... which is like now as well.
DeleteI do stockyard and sure, I see it a bit but overall the correlation to 1928/29 is only 73%, of course not to say it couldn't follow it just that I wouldn't make that leap yet.
DeleteEither way, its marking a low Feb 18.