End Of Second Wave Limbo

Charting is a bit like playing chess. Every technical analyst commands a particular repertoire of technical patterns, instruments, momentum indicators, resistance/support lines, trend biases, trading tools, etc. In the end we all somehow try to anticipate what will happen next – or at least attempt to consider various scenarios of what could happen at what stage if x happens or y will not. From there you plan your next move – and you better anticipate how the market will react to it. If you get married to a particular idea it’s checkmate in three moves or less. Which happens when you fall in love with a particular wave count and refuse to consider other scenarios.

Good analysts know that in many cases they will be wrong and if they somehow manage to survive for more than a few years the lesson learned is not how often you’re right but what you do when you turn out to be wrong (which will happen regularly – get used to it).

When looking at the current chart in the context of all my complementary tools I have very little confidence in proposing what’s next. Frankly – at this stage it seems we are stuck in complete limbo – or what I call ‘end of second wave limbo’. Let me explain:

As you can see there are various ways of how we could count this pain in the ass of a tape. Maybe we completed Minor 2 yesterday (blue) or will do so after a push into 1,128 (light blue). We all know what should come next and it would make any put holders very happy. However, life and especially trading is usually not that easy. If we push higher from here it’s also very resasonable to count the advance as a motive, which would suggest that we are completing Minute {i} of Minor A (green). This would be followed by Minor B, the first half of which would look to the bears like the onset of Minor 3 to the downside. Which would be tantamount to a bear trap clusterfuck of death star like proportions. Not a pretty picture.

I hate second waves – especially in the past year or so – because more often than not they have turned into A waves which were followed by long and painful short covering C waves a few weeks later. Even if you bulked up at the very top (like yours truly) you still suffered from theta burn by the time you figured out you were on the wrong side of the trade. As I said – not a pretty picture.

So, what to do?

Play it long term. You can’t win this one. News do not matter. Good economic news might actually tank this market while bad news might rally it. Too cynical for you? I really can’t blame you – but read this first. The magic word is quantitative easing (i.e. money for nothing and chicks for free) and it’s what has kept this turd of a market melting up and now holding up in the face of a tumbling Euro (and rallying Dollar).

TA does not matter either. I can post all the wave counts I want – it won’t really help you negotiate the mind fucks they’ll throw at you in between. Come on – how many postings and opinions and comments have you digested in the past few months? Did any of them lead to a successful trade? Rarely – and you know one when you see one as the setup is often too sweet to pass up.

Play it long term. You can’t win this one. They will fake you out if you play the small moves. It’s quite simple: Either we’re wrong with Primary {3} or we’re right. If we’re right we’ll bank a shit load of coin as we are among a small minority. Yes, doesn’t feel like it here, but we all exist in our respective monkey spheres. Trust me – 99% of all market participants think the bull market is back – we are crazy to think otherwise. Or are we?

Play it long term – especially if you trade options and hope for P3. If we’re wrong – well, we’ll know soon enough. It might take a few more weeks to get out of second wave limbo but we will. One way or the other. Once we get verification it’ll be too late to jump into the game as things will move rapidly and you won’t be able to get positioned. The pain you are going through right now is the price of admission – deal with it.

Play it long term.

Cheers,

Mole

P.S.: Did I mention to play it long term? 😉

P.P.S.: OR – play it very short term. Ever heard of Geronimo? No? Your loss…