Sunday, April 25, 2010


[9:05PM Update]

Here's a chart using the Simple Moving Average. A nice 38% retrace from the current level will target approximately the 50 day SMA.
This is a long post. I hope one takes the time to read through it though.

I realize I have used reverse Fibonacci techniques previously but did not realize it at first. Unfortunately, not all projections panned out. See here for previous posts.

So given that, I would not give yesterday's post, "REVERSE FIBONACCI, FIBONACCI EXTENSION & LONG TERM RESISTANCE " too much credence. As I said in that post there are no guarantees but certainly something to be mindful of.

I like what Kenny is doing now. He is challenging and questioning where we are and is going back to the basics. I agree with him completely.

For those who follow Daneric, there was once a poster named Wags who had much to share (and it was quite simple) . I believe Wags' message was the most useful thing for novices (trade the trend and watch the moving averages) out there but the method in which he delivered his message fell on deaf ears.

The two charts above somewhat highlights what good ole Wags (if ur still out there Wags, correct me if I'm wrong) was talking about. Many who disputed him claimed that trend trading was too slow because of the lagging nature of the indicator. I say so what?  The two charts above should  be reason enough to believe that one could have made a good chunk of change trading/investing the MAs.

I like counting waves period. There is something about the principle and Fibonacci that intrigues me. I think it is useful and I do believe you can trade with it. (See previous posts on this). However, I am not saying it is an end-all-be-all tool, but yet another tool on the tool belt.

With the charts above though I placed some comments (especially the second chart) where I have learned that perhaps trading and counting corrective waves should take a back seat to the moving averages.

Trade the trend and if challenged with a questionable wave count, give more weight to a count that goes with the trend. In my posts, "A Road To SPX 1228", I began to post on this. I believe it was the weekly MACD bull cross that first caught my eye on this potential among other reasons.

Many will say these EW bloggers are capitulating as we start to turn more bullish. I won't say that is what I truly believe at the moment, but I have to at least address this issue and share some lessons from the past.

I still find that many folks are bearish and I don't know if it is just cheerleading a short position or hoping for something they believe to be right but I see the heavy emotion in the chat rooms. Some appear to be trapped in their positions and I don't know if that is what is preventing them from seeing something that is and has been obvious for sometime now. (Unfortunately I believe that is a product of not having a proper risk management strategy and stop-loss exit point).

I am not short/caught in a short position at the moment but I do blame myself for not heeding what I'm posting about much sooner. Hey, live and learn.

I believe Pug, of PUG Stock Market Analysis  , was the only person (at least the only person I was aware of in the EW community) who went bullish early on. Heck, when Pug was pushing his bullish counts and to see many ridicule him, that should've been a contrarian indicator. Kudos to you Pug!

You can call this post a bearish capitualtion but the trend still says up. Let's face it we can't predict the future, let alone find the tops or bottoms. The only that is good for is our egos and nothing more.

Do I still believe we may see a pullback in store? Absolutely, but I'm not quite sure it will be "the one" everyone has been waiting for.

I have posted a few times and commented in the chat rooms that I'm still waiting for a minute degree impulse wave down along with the associated moving average cross-overs to believe that a much larger turn is coming.

Until then, watch out for the dip buyers.


  1. The trend is what it is until it isn't.

    Trading with the trend is easy. The hard part is identifying the trend, and its end. ;-)

    I’m reminded of this piece on the subject.

    Sometimes you feel like a nut, sometimes you don’t.

    Every bear has his/her day in the sun. Sometimes it’s trend, sometimes EW, sometimes indicators, etc., etc.

  2. I disagree with the above poster.

    While trading with the trend can be easy; especially if you leave your Ego out of it and are not predisposed to "sophisticated" theories such as EW, it really is not all that difficult to identifythe Trend, let alone the END of a Trend.

    When markets no longer behave like they have been in the past (during the Trend) and start to violate certain price levels, then a Trend has exhausted itself and is in the process of reversing. Identifying and Confirming the TREND via moving averages may sound rather simplistic, but it is the most significant manner in which to "listen" to how the markets are behaving, in my opinion.

    If you LISTEN to the market without any pre-conceived BIAS ( that usually comes from a "sophisticated" theory like EW ), you will be in the driver's seat when it comes to successfully being able to make money trading the markets.

    Via technology and all sorts of electronics, the markets move at increasing velocity these days. If one trades actively, you just don't have the luxury of playing the "alternative" count game that more often than not comes into play when trying to apply EW Theory.

    My suggestion to anyone that wants to be successful is to "listen" to the market by strictly relying on moving averages that determine key support/resistance levels that will help identify and confirm the trend.

    In similar vein, I also find it most valuable to pick a certain sector of the market and concentrate on trading that ONE particular sector. Again, there is only so much that a human brain can process, especially given the amount of data that comes out of the market these days. Try and keep things SIMPLE! That will help one be most effective and successful in my opinion.

    Good Luck to All!


  3. HighRev

    thanks for reading and the comment. i was hoping my first chart would make it pretty clear how simple it would have been to identify where the trend had changed in 08 and back again in 09. but ur point is well taken in terms of when things have its place.


  4. Wags! hey buddy. good to see u here. thx for the comment. should've listened to u a long time ago. u must have been killing it! GL!

  5. What I was saying is that with 20/20 hindsight, everything is easy. Oh, if were only so easy.

    Here's a couple of historical examples where the "correct" trade was the range using indicators and the trend based signals would have generated quite a bit of churning.

    I need S/R, channel and trendline info, patterns and market structure, technical indicators, MA's, fibs. EW, in short, I need everything I've got in the toolbox. I'm happy for and congratulate those who rode the trend up, but like anything in this business, there is always risk that comes with reward - there is no magical method and nothing should be presented as such. That having been said, I'm very interested in learning more about Wags' method! TIA