Whuff another long one... exec summary at the bottom.
Tradey Waffle
Well apart from a few ups and downs, all in all I am in the happiest place I could be as far as my attitude and understanding of my trading goes.
Although currently sitting on underwater position in shorts on the SPX, I am actually quite comfortable, because I know why they are underwater. Whether I close them at a loss at this stage is fairly moot, the market will let me know what to do
Trading wise, the post I made about mistakes etcetera was one of the best things I have done for myself lately, and this is a major turning point for me.
Soooo Guess what??? It’s all about me after all LOL!
Taking the attitude of whether a trade is for scalping or longer term has been most beneficial… My definition of scalping is a trade with a set target based on set entry conditions and set exits, and I have been pumping these at high contract levels with good success. The longer term strategies have been less good and it is possible that this is due to a little bit of internal conflict with trying to run two different strategies at once.
My idea to deal with this conflict is to reopen my CMC account and trade that for the longer term, while keeping the IG one for the scalping as I am most familiar with and comfortable with it and so can move faster, and have more faith in the customer service and integrity of the company.
Now before I go on… I AM A TRADER… and generally a short term one at that, at least on indices, commodities and FOREX. I have come to the conclusion that having a mindset that belongs to a particular camp, and a totem that goes with it is not for me. Bear... Bull... COBBLERS! Being a HUMAN I bring them both under my thrall. Being a trader, I try to make money going long when price goes up and going short when price goes down.
My major money trades are done as scalps based on 1 and 5 minute and hour charts. My major tools are the stochastic (indications of TIME cycles) and the MACD (indications of PRICE levels), with wavecounts, moving averages, trendlines and (minor) pattern work on price.
Okay, here’s some analysis of the XJO. Note of late I have made most of my big cash from the dax, it is a jumpy beast but the right attitude towards it has seen me make far greater winners than losers, and I have found it a scalping dream.
XJO Analysis
Orright, I am going to work backwards from a Monthly timespan and down through the lower ones.
Monthly
The chart above shows the decline from October through to the last bar which is for the month of may and incomplete.
The light green lines over price map out what appears to be a 3 wave decline.
The first wave I have marked with an A. The second wave B.. the importance of these will be explained later.
On the bottom of the decline I have marked out in blue, the bottoming triangle or hump or dome. I have also placed two red lines, on either side of this triangle. The length of these lines is exactly the same.
Early on in my career as a poster on the XJO thread, I pointed out a particular trade I called the Triangle Trade. On lower time frames it goes much like this…. A decline is followed by a base which forms a triangle. If price goes up above the tip of the triangle, then price will often retrace the full length of the initial decline.
As we can see on this monthly chart, price has gone above the tip of the triangle and I am conjecturing, that price MIGHT go to the top of the decline when viewed from a monthly perspective. The red vertical lines are the length of the decline.
This gives an upside target of around 5000. the larger diagonal blue line shows this
The tip of the triangle often acts as support Of some interest and possibly just a fluke, the longer blue line is the same length as the first wave down, A and at the same angle +180 degrees. By no means would I suggest that price will follow this line, but I find it interesting that the vertical length of wave A if applied to the bottom of the basing triangle also brings price up to the same level as the beginning of the decline. This means nowt and is jus an interesting aside.
Another interesting aside in relation to the wave lengths. Wave B the second wave of the decline I have copied and added to the base in the form of a dashed black line also labelled B. Should perhaps we be tracing out a five wave decline from November on the monthly, it is interesting to note that the hight of this wave B when added to the basing triangle gives a level of around 4070… interesting as it aligns with the 4050 figure I introduced in November last year as an upside target, and currently being mentioned by Volt and others through different calculations as a potential upside target as well.
Just for kicks I added the A wave again to the dotted black B and this gives a downside target of around 2200… meh… I have no other ways of supporting this downside figure, and this is just voodoo so I’ll leave that alone.
Weekly
Sorry chart is getting a little crowded here, but there are a bunch of things I’d like to show on it, so … SUFFER! LOL!
Prolly a bit hard to see, but once again I am showing the complete decline from October highs last year, note again this is IG’s futures market, important to me cos I play this market, but different from the cash markets of the XJO/XAO etcetera.
Firstly, note that on the daily it is relatively easy to trace the decline out as five waves, as I have done with the thinnish blue line on price and the dinky little numbers.
The fact that we have traced out a five wave trend, and one could even possibly say seven if you include the two waves of the basing triangle at the bottom, suggests to me that the down trend at least in this little phase from Oct 2009 has finished.
This does not mean we are not going to go lower, nor that we will reach new highs before a turn once more and a new trend down. But it definitely suggests on the weekly level the decline trend is pretty much spent. Observations of lower time frames suggest that even though we may be in a new upwards trend, getting that momentum into play to the upside is a jagged process, with a few false starts potentially occurring. ‘Tis like a big old wheel that is hard to get rolling, but once rolling it does it keeps grinding on.
Right… back to ze chart… and I’ll pop it up again cos there is a lot of text and ‘twill help with the readability, I hope.
Firstly, there are two colour matched pairs of lines on the MACD and Price, Red and Dark Green.
These are MY Whooshka indicators, first a divergence in histograms, then a divergence in MAVS between Price and the MACD.
The ultimate target for where price goes is based on the historical price level at the extreme histogram on the MACD where divergence began. I have marked this out with a veritical black dotted line going up into price, with the target level being the historical point of risistance prior to the selected price bar. According to my chart, this gives us a level aywere from fo75 to the upper level around 5400. Nice correlation with the conjecture from the monthly regarding the potential upside from the “Triangle Trade” mentioned on the monthly analysis above.
Also on the chart, I have included two vertical blue lines, little short ones down there on the left. Often enough, price will move in a three wave fashion after a five wave trend, only a little three wave potential that I am trying to map out here, but, the first blue line is roughly the first wave, and the second is a copy of the first blue line, counting the flat bit over March april as a second wave, giving a potential upside of 4250 odd in the short term.
Also note that we have cleared the 21Ma (thick Green and red MA on price), and already performed a bounce or two off the 13MA (Orange thin ma on price).
Of interest, and may put a certain amount of choppiness into the next few weeks, is the historical set of bars beneath the “5”, at the same level we are at now with price… often enough, price can reflect this choppiness as it moves in the sam regions as recent historical areas. Some further notes regarding potential upside on the weekly, the stochastic (indicator directly below price chart) is in the overbought region and turned up, and this is the first entry after a period of congestion in the oversold region. With out going into too much detail here for proprietry reasons, let me just say that this, on a lower timespan, could well mean that the indicator could stay up here for a bit, and price moves remain in an upside direction.
As well I would like to point out the last set of MACD histograms on the right hand side bottom indicator. The last histogram has rasied its head above theprevious three. Often enough histos will form three peaks and this could be the start of a third peak forming, also suggesting upside.
Daily
Firstly Matched pairs of red and Green Lines on MACD and Price. I pointed these out AGES ago, and using the Whooska Histogram Targetting methodology, based on the extreme negative histo bar back in mid October 08, one can see justification for the 4050 ish upside target.
However, I would like to add to this that the particular area of price in that October period 08 is pretty volatile, and it is VERY hard to be certain where exactly the nearest historical resistance occurs.
I say this specifically as I mentioned above, previous historical volatility can create volatility in current price moves.
Of import TO THE DOWNSIDE is the price level as marked by the blue dotted cross hairs.
As can be seen, in the right hand bottom MACD indicator pane, the recent rise on the daily is showing divergence on the MACD histograms, the histos are falling as price is rising.Using targeting methodology, this gives us an area of around 3630 as a downside target once price turns.
Two other things to note, the stochastic although in theoverbought area, is currently pointing up. Also it has traced out a little peak after some congestion dipping back in to less overbought levels before entering the overbought area agin. Edxperienc with smaller time frames suggests that this is actually an indication that the daily time cycle is still up and could well remain up for a period of the previos congestion, which would be a good month.
The two small vertical lines are a carry over from the weekly chart and are there to support my conjecture that we might be tracing out a three wave form on the daily at the moment.
Of Ultra Double interest here is that the futures, including overnight action, have closed ABOVE the 200ma (thin dotted red MA on price. As pointed out by Farsight in the XJO thread, a,though in relation to the cash index, this is a very bullish sign, Of note here though is that the IG charts are weird when it comes to where they choose to place their daily bars and at this level of granularity it is pretty hard to know where the close actually should be.
Mkay
Hourly , and ya can chill as this is as far down as I plan to go today…
Firstly in a big old view going back to mid march (use the vertical blue line for reference from the daily chart above). For a start, this has been some jagged run to the upside… look at that MACD it is all over the place and soooo hard to find specific points of divergence.
However, if one goes back to 31st of march, first dip of the depicted run up, the histogram there is the highest of the run, and could legitimately be used for targeting.
As such this gives a level to the downside of 3580 ish, which is close enough to the one taken from the hourly of 3635 to give me some confidence of this area as a possible downside target.
Now… downside or upside in the short term…. Kay heres a zoom on the Hourly
Possibly 7 waves up though I have to say that whether the 7th wave is finished is open to conjecture. The chart includes overnight action and can thus be a little untrustworthy for the last eight hours.
Also it is not impossible that the area around wave 5 and 6 is open to contention as to whether they can be counted as waves or should be another cont start at 7, or included as one 5… times the wave counts can get iffy.
Either way, I am suss here as to whether this particular trend has neared its finish at this time span level. I am disinclined to go long, even though we still have that upside target of 4050 ish close by.
Over further support to the SHRT TERM downside, the last set of histograms has formed three peaks, and this is often what occurs before downside.
The MACD Mavs could be said to be declining, but as yet are to confirm and in a dodgy area where they could go either way so they are no help there.
Downside target gives around 3860, but there is so much congestion around here, tis hard to say, and as we can see,there has been a lot of strikes in this area and may be no more… The hourly is pointing down and in the oversold area for the stochasticand about right to begin a down cycle…..
Dammit I’m gonna have to go to a lower time span after all… just when you thought it was all finished LOL!!!
SUffferrrrr
10 Minutes
Mmmmm I don’t normally operate on the 10 min but this kinda shows some waves nicely…
This does include overnight action so all cautions that apply. Once more though, we can see that we have an up trend that is divergent according to the histo grams.
We have a seven wave count suggesting exhaustion of the trend may be nigh
We have the ten minute stoch pointing strongly down We have a downside target, including a gap at around 3895.
So, Currently… I am short… Might be the wrong move but even if we gap up on open, I will be shorting for the close on Monday… stops in place of course…
Executive summary…
Longer term time spans seem to indicate that we have a large possibility of there being further upside with the potential to retrace a fair portion of the entire drop over the forthcoming months…Potentially an entire 50% of the drop from October highs in 2007.
This potential is reflected in the weekly and monthly, with the weekly indicating the initial downtrend may have been exhausted and a new uptrend of unknown strength developing.
On the daily and hourly we are approaching heavy resistance / have hit heavy resistance of the 200ma, and initial upside targets have almost been met.
On the hourly and lower, current up moves are nearing wave counts that suggest these particular trends may be close to completion ans (short term ) downside might ensue.
(20min delay)