Week Oct 24th Wednesday Update

Mkt did rally several times getting up to 204.60, but has stalled a little.  Having said that, the pattern is corrective and am still looking at the possibility that this is an irregular (expanded) or running flat - two three wave corrections with a final five wave down (this is where we may be).  Because of this and the fact that we closed at the lower channel line, I am putting in stops @ 198.65 on some of the position and below 194.20. If the market moves farther than this, then I am back to the original correction targeting the 165/150 area. Note: Brazilian Real back to 172.10 and breaking through some short term resistance (need to watch this over the next few days - it may not get to the 160 target).

Tradeflow graph: post option pit market tested lower channel line and 62 % retracement.  As evident by the dominance of red bars, sellers were the aggressors over the last 2 hours of the market.  You could buy this with a stop only a few dozen pts away - very high reward/risk and decent probability that it will pay out.

Week Oct 24th

Quick summary

·        Oct 11^th – had expected mkt to fall, but did not expect it to recover above 180 and thus moved my corrective target to 195 from which I expected the market to correct back down again targeting 160/165.  It did not.

·        Oct 18^th – Was still expecting the move to 195 (bull pennant tgt), but again did not believe we would take out the new high.  It did. Taking the conservative sell (break below 182.95) would have kept you out of the short.

General:  I think the biggest lesson here is that if it walks like a duck, quacks like a duck, and looks like a duck, it must be a duck. That is, I was looking at the move off the 198 high as corrective, but I wanted it to take longer and be more complex (note to self: let the market determine its pattern and don’t try and project). The overall trend remains definitively up. That does not preclude a sharp correction, but for the time being the trend has resumed.  The only possibility would be an irregular flat; not impossible, but it seems this week will continue up. Several short and long term targets looking at the 210/215 area.  Friday took form of yet another bull pennant – this point to ard 215. In summary, I have discarded the correction in the near term and looking for at least 212. Invalidation of this would be below 194.90 (intraday should be enough).

Trade: Aggressive - buy on the open.  Slightly conservative - buy stop above 200.65 (see TradeFlow graph).  Stop @ 194.90.

Open Interest -  previous indicators turning bullish again. 

Graphs

60 Min - nice clean impulsive move up.  Had broken trend, but was nearly a textbook ABC correction where A = C.

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Tradeflow - nice visisble resistance at the close, but a move above that should set the stage for a nice next leg rally - buy stop above that resistance would work well.

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Weekly - was looking for that question at 160/165.  It still may come, but probably not until we see a good new high (215/220).   If the rally fails now, then Ill start looking at this as an irregular flat which which would bring us back to the 160 area.

Obviously lots of upside potential still.  This is either a 5th or the middle of a big III - both point up in the medium term. 

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