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Bounce Targets
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Bounce Targets

by The MoleAugust 9, 2011

I promised to briefly chime in tonight with some bounce targets, so let’s get to it:

Momentum in a downtrending market does actually resemble a ball bouncing down a sloping surface in that it doesn’t move linearly – rather it drops and then at some point bounces off of certain support levels. The vehemence of the resulting retracement is directly related to its speed (i.e. how fast it dropped) and the type of surface it bounces from (i.e. the ‘softness’ in the amount of dip buyers stepping in). From there it propagates upward until it either runs out of energy or hits some type of resistance.

If you would draw a Fibonacci retracement on the image above (I was too lazy to do it but if you have time to burn please try) you’ll see that those bounces fall very close within common fib lines. Of course it’s a bit of an art as well as a science but in the past I have seen fib levels being observed over and over again.
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SPX target areas and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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Not really too much magic involved – if you are a long term reader here you may remember how I stacked those fibs in the past. No worries – I’m not about to start counting waves again – but in the past I did use a loose approach to wave theory rather successfully when projecting possible target areas.

So what we have here already is a push above the 23.6% mark – the fact that it happened within the same day we painted a low gives us decent odds to expect the 38.2% mark to be touched. Which would be the minimum after the oversold readings of the past few days. Depending on velocity, breadth, volume, etc. we’ll then assess whether we should go short there or wait for a bounce to 1230. That would be my preferred setup as it’s also more easily defendable. If we push toward 1250 I would get worried about the bulls taking over the steering wheel and that the current intermediate leg down had completed.

Of course nothing prevents the tape from dropping like a rock again tomorrow – there are no guarantees and we have to roll with the punches. I personally would not chase the tape if i see degradation tomorrow – but in the end it’s your call. The final target areas for the completion of this push down I presented remain unchanged at this point.

See you on the other side.

Cheers,

Mole

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://www.youtube.com/watch?v=-y_J77RO-wY mmrmnhrm

    Mole, curious… it’s been quite a while since you’ve posted (publicly, at least) about anything having to do with EWT or spiral calendars.  Have you just been keeping those to the decoder-ring people, or given up on them as useful methodologies in favor of Zero, momentum gauges, and other algorithmic approaches?

  • http://practicalt.blogspot.com/ Gold_Gerb

    soooo many posts.

    I love it.

    no comments from the Daneric gallery.

    any takers? comments welcome

    http://tinypic.com/view.php?pic=23kt8oy&s=7

  • http://practicalt.blogspot.com/ Gold_Gerb

    yes yes, spiral calendar…it has been a very long time.

  • http://practicalt.blogspot.com/ Gold_Gerb

    yes yes, spiral calendar…it has been a very long time.

  • http://evilspeculator.com molecool

    Strange – disqus is broken on Mac for me. Anyone else having this problem?

  • http://evilspeculator.com molecool

    That was me.

  • http://evilspeculator.com molecool

    Wave theory is only good for general context – especially in a third wave situation. I don’t use it to project targets, no.

  • TwinTurboRX7

    to Mole about disqus: works for me, the avatars sometimes does not show, and when it does not, the comments gets jumbled up

  • Anonymous
  • Schwerepunkt

    Have you carbon dated those tree rings?  Lol. Actually, they do seem to line up pretty well, but how would you interpret them as far as price and time? Go out on a . . . ahem . . . limb?

  • Anonymous

    Couldn’t see the comments section untill now.

  • http://practicalt.blogspot.com/ Gold_Gerb

    The tree rings (clever) act as lines of support and resistance just like other TA lines.
    in this case, price is in danger of downdrafts after any bounce.
    😉

  • Anonymous

    Also, Is it possible that the link to the little ES icon is missing?

  • Anonymous

    So what do you all make of the stock futures being lower this morning?  Unless I misunderstood the Zero, it seemed to be pointing toward bullish strength (at least in the short term).  Is this just a head fake for the bears setting up an even bigger short squeeze?

  • Anonymous

    As Mole has stated above, swings of this nature are common in adowntrending markets. Volitility is on the rise incase you have not noticed:)

  • Anonymous

    Right now, it looks like an SPX open of about 1150.  That’s around some short term support/resistance. So, what happens after the open look like the key. Maybe after the first 15-30 minutes, there will be a clearer picture.

  • volar

    very very true.

  • Anonymous

    Make sure you wait for the candle to complete on either the hourly or 5 minute Zero. The Zero indicator *will* change intra-candle. If I recall correctly, that hourly candle will complete at 10:00 EDT.

  • http://thefxspeculator.blogspot.com Onorio

    Little advise for those who want…if this is indeed P3 don`t expect great bounces, they will be fast and shallow, the game here is say in the trade and manage the positions, get out and go long to short the bounces will be a waste of time, and probably money.

  • Anonymous

    Thanks guys!  I really appreciate your help and patience! 🙂

  • Anonymous

    Went long small position on the backtest, small position. See how it will play out for a daytrade

  • http://practicalt.blogspot.com/ Gold_Gerb
  • http://practicalt.blogspot.com/ Gold_Gerb

    DOW -320

  • Anonymous

    Should I be reading that the heavy red line that was once resistance is now support?  Or, don’t read that much into it?

  • http://practicalt.blogspot.com/ Gold_Gerb

    sure why not?
    but remember how freaky this week has been.
    and there is a few more economic items on the news calendar today.

  • http://practicalt.blogspot.com/ Gold_Gerb

    DOW -400

  • Schwerepunkt

    I would think 1115 area (61.8 fib retrace of the spike off overnight low yesterday) might offer up some support. 

  • Schwerepunkt

    I would think 1115 area (61.8 fib retrace of the spike off overnight low yesterday) might offer up some support. 

  • http://practicalt.blogspot.com/ Gold_Gerb

    that is what I have on my 30m bollinger as an outlier.

    however, my 60m bollinger it’s 1105.

  • http://thefxspeculator.blogspot.com Onorio

    Well it`s a bit late but here`s todays pick…

  • http://practicalt.blogspot.com/ Gold_Gerb

    GLD 172.50

  • Anonymous

    Floor painting is what this looks like right now.  Can it hold is the ?

  • http://practicalt.blogspot.com/ Gold_Gerb

    Looking at the 1m TICKs, it’s all neutral IMHO.
    +/- 600

  • http://practicalt.blogspot.com/ Gold_Gerb

    I’ve got a feeling the bears are being sucked in, for a face rip up to 2pm.

  • Anonymous

    Out of long, check out DAX. It looks like 1000 target still on the table.

  • Schwerepunkt
  • http://practicalt.blogspot.com/ Gold_Gerb

    ES 1129 – well there goes that feeling.  crushed 15m candle.

  • http://practicalt.blogspot.com/ Gold_Gerb

    ES 1129 – well there goes that feeling.  crushed 15m candle.

  • Anonymous

    Dead cats tell no tails?
    Head or tails?
    Anyway, all still to play for, for both the longs, and shorts, it seems

  • Schwerepunkt

    1115 area is also 78.6 (not orthodox, I know) retracement on the spike from Tuesday afternoon’s low to the spike high.

  • http://practicalt.blogspot.com/ Gold_Gerb

    ok, Time to split.

    /ES 2pm EST wind advisory.
    Good Trading.

    http://i55.tinypic.com/ofaxoh.png

    -GG

  • Anonymous

    VIX buy signal may get negated today if spoos don’t go UP.

  • Anonymous

    Divergence is there for a rise but so far it’s not happening.

  • Schwerepunkt

    3/1 decliners over advancers; down/upvol 9/1

  • Anonymous

    Looks like we might be getting a rising three methods setting up on the hourly chart

  • Anonymous

    Small, though….waiting to power thru to plus territory?

  • Schwerepunkt

    Europe closing in 3-min. All hell could break loose . . . or not. SocGen denies all market rumors. Gotta love it.

  • Anonymous

    I don’t know what “three methods” mean, but 5min is still fairly negative

  • Schwerepunkt

    ES keeps hitting the 1122 area but not dropping through. Seems like support but it keeps coming back down there. How to read that?

  • Anonymous

    Bull flag forming? on 5min

  • Anonymous

    My guess Probably end today at low

    Seeing futures margins getting
    jacked up. this often means more forced selling, may lead to higher prices once
    margin calls stop.

    broker raised Russell margin from
    3500 to 5000 now it is 8250

  • Anonymous

    Need to see a break of 1150 for me to even think about it.

  • Anonymous

    FEARLESS – are you out there?  You wrote yesterday BTFD if 1120 is held.

    So far, so good….the question was asked, “on the close?”

  • nyse

    Damn. Gold just hit 18.

  • Schwerepunkt

    FTSE held 5K; psychological level. Still . . . devil’s night continues?

  • Anonymous

    Just read about the French Banks leading the way.  

    What’s also amazing is how fast the deterioration of the American Market was.  

    Over 1,400 DOW Points lost in just the last 10 Trading Days.  The Perma Bulls and especially the newer ones got killed in almost a blink of the eye. 

  • Anonymous
  • Anonymous

    I don’t see it.

  • http://practicalt.blogspot.com/ Gold_Gerb

    i’m not seeing it.
    maybe you can set me straight.

    http://quotes.ino.com/chart/?s=forex_xauusdo

  • http://practicalt.blogspot.com/ Gold_Gerb
  • Anonymous

    Starting to hear the hampster wheels churning:)

  • omelette

    huh thanks for pointing that out i hadn’t even noticed..do you know when it happened? When they did it to silver a couple months back they sent out a notification.. 

  • nyse

    My fault, I am going off the futures price.

  • Anonymous

    15 min still bellow that 50 sma.  Maybe the Fed pop was just noise.

  • Anonymous

    I don’t have a lot of details …I guess check with your broker .

  • Fearless

    The polar bear’s blackbox trading system is about to fire a major “BTFD” signal via the VIX today.  So far 1120 is holding and the selling pressure seemed to have abated.  The polar bear might enter a 10% long position near the EOD if the market holds up.

    Yesterday’s short squeeze was so relentlessly strong that the daily chart would sport a positive divergence even if the SPX is another 100 points lower, that’s why it’s a risk to take long positions now even if that major “BTFD” signal is fired today.  A prudent speculator waits for a break of the acceleration line (1175 today) for a trend reversal trade.  Like I have been saying for the past year, 1173 is the all-important level.

  • Anonymous

    You never know with this crazy market.  But in reality, what did The Fed give the market that would cause it to rally?   I think the only thing it gave was a date certain somewhere into 2013 of screwing savors by promising to keep interest rates near zero until then. 

    And after all that, I see that the market is bidding up Long Term Bonds and driving yield even lower.  

    It also looks like it will be another 3X Volume day on SPY.  HFT’s are having a great time all while 401K’s are going down the toilet.

    How we close is too soon to call but the longer we maintain current levels, I think the higher probability is that we close at the LOD but we still have a 2 1/2 Hours to go and that is a lifetime in Market Time.   🙂 

  • omelette

    looks like the latest increase was on monday EOD

  • omelette

    looks like the latest increase was on monday EOD

  • omelette

    looks like the latest increase was on monday EOD

  • Anonymous

    Inside bar forming on the 15 min SPX right under the 50 sma.  Could be a good opportunity.  Also ZL 5 min kinda wedging.

  • Anonymous

    Inside bar forming on the 15 min SPX right under the 50 sma.  Could be a good opportunity.  Also ZL 5 min kinda wedging.

  • Anonymous

    Inside bar forming on the 15 min SPX right under the 50 sma.  Could be a good opportunity.  Also ZL 5 min kinda wedging.

  • Anonymous

    i’d say it’s more or less a technical thing, not the FED. simply too oversold.

    “nothing goes down in a straight line” thing.

  • Schwerepunkt

    I guess that’s it .  .  going higher.

  • http://pulse.yahoo.com/_N2BRXG3E35GXBXZTEBSXLUSDCM B

    With MACD and RSI strengthening, the 5min ZL sealed the deal, I went long BGU at 1:56. Just sold at 2:14 for a 2.25% gain. My day’s done! Thanks Mole!

  • http://pulse.yahoo.com/_N2BRXG3E35GXBXZTEBSXLUSDCM B

    Just to get some feedback from you guys, I also considered the higher lows SPY was forming while it oscillated around VWAP as strengthening. The oscillation was tightening into a penant I and waited for a break. It breaks up. After 10 minutes and pushing outside the BB it seemed a strong enough to be tradeable. Reasonable?

    Currently we look like we are either consolidating for another run up, or setting up a short for a return to VWAP?

  • http://evilspeculator.com molecool

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    N E W P O S T ! ! N E W P O S T ! ! N E W P O S T ! !

    ???????????????????????????????????

  • Anonymous

    wow!

  • EvilTrader

    Possible McClellan oscillator divergence today.

    That´s a very reliable bottom signal.

  • EvilTrader

    Possible McClellan oscillator divergence today.

    That´s a very reliable bottom signal.

  • EvilTrader

    Possible McClellan oscillator divergence today.

    That´s a very reliable bottom signal.

  • EvilTrader

    Possible McClellan oscillator divergence today.

    That´s a very reliable bottom signal.