Tasty Thursday Rub Down

Sorry for being MIA in the past two hours but I’ve had a myriad of things to deal with. Let’s take a look at the sweet tape we all enjoyed today:

Obviously this was a textbook down day with little breaks for the bulls. I have added the past three trading days on the Zero Lite to point out the fact that the negative signal strength appears to be increasing, which is a good omen for the bears. Also worth noting is the NYSE A/D ratio which closed at 0.196 and thus beats the 0.307 reading of September 24th. This would be in line with the type of increasingly bearish sentiment I would expect for a third wave to the downside.

A quick bone for you rats – I’ll probably flesh this out either tonight or tomorrow. At this stage we are pushing into an important support cluster on the SPX. The bears will have to breach through this tomorrow and continue downward if this is indeed a third wave according to the blue count. For now I have removed the orange line as I’m not sure yet how I would count it should we rally back up tomorrow. I want to be clear however – we are not out of the woods yet – as you zoom out of this chart you realize how little we’ve dropped in comparison with the countless rallies we had to endure. If this is for real and not just another dip buying opportunity then we need to see a continuation which would represent some pain and source of frustration for the bulls. As I’ve pointed out on numerous occasions – we need to see some panic and ‘forced selling’ – the only way to make that happen is to breach through some important support line and thus sweep some stops.

I continue to remain steadfast and short like a midget in a limbo contest – unlike other hobby bears I have not taken profits as my trading window is measured in months, not in days. After months of failed starts many bears have been so traumatized that they will quickly take profits according to the old (and completely specious) maxim that ‘nobody ever went broke taken profits’. I beg to differ – if you tried to short five times and had your ass handed to you, taken profits early will not get you back on track.

You’ll have to make a decision as to what kind of trader you are: Either you are an Elliott Wave trader who attempts to anticipate market tops and lows, or you are a trend trader who follows an already established trend change. You can’t be both. Because the trend trader will get in late and the EWT trader will get in early – otherwise, why bother counting waves in the first place. OR – you can do both – that’s what Berk is actually doing right now, and it’ll be my approach as well. IF this is Primary {3} then I will add positions once we are near the peak of Intermediate (2) – and that’s most likely when trend traders will hop on the bandwagon as well.

Again, whatever your system may be – think it through and then trade it. Don’t just be reactive and head for the hills because you’re afraid that the big bad bull will take it away from you again.

Program Trading Update:

geronimo/ES: -8.75 (ouch)

In case you rats are wondering – yes, there is a short signal in geronimo, but it has not triggered yet. Also, Eric and I are monitoring the market each day and as soon as new tradeable short patterns emerge we will add them as trading signals. And that will happen when the GS boys switch from trading the tape up to trading the tape down. More on that later – I have made Eric an author on this blog and I’m sure he’ll chime in on the subject in the next few days.

Cheers,

Mole