Daily Archives: May 15, 2012

Heart of Wave Down (by Avi Gilburt)

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These are the types of trade set ups we like to see. Today, we were able to narrow down a short trade set up to within one point of our ideal target top of 1343.50ES (with the market topping at 1342.50), and provide a target of almost 20 points lower at the 1325.50ES level.

Based upon the current count, it does seem as those we are in the heart of a wave iii of a larger wave (5) of yellow 5 of the c-wave of a wave (4). For this to follow through, the market should remain below 1332, and MUST remain below 1334, which would then provide us with the target of 1320ES as the wave (5) of iii, as you can see on the 3 minute chart. We then normally see a wave iv bounce up to the 1.00 extension at 1328/29, followed by a drop down to the 1315-1318ES region. Normally, I like to target the 2.00 extension. However, since we have an overlapping 1.382 extension on the 60 minute ES chart for a wave c target, which coincides with a 1.764 extension on the 3 minute chart, I do like that target much better. My alternative target will be the 2.618 extension on the 3 minute chart, which coincides with the 1.618 larger extension for the wave c at 1306ES.

So, for tomorrow, I am expecting a potential bottom to this c-wave, which is also within the Fibonacci timing window we mentioned in the Weekend Analysis. At that point, the week after this bottom will clarify if the markets are heading up to make new highs (with a move over the 1352ES level) or if we have topped and are only moving up in a wave 4 of a larger degree 5 wave decline from the recent market top.

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Originally published on ElliottWaveTrader.net.

Risk-on Risk-off Trades in JPM from 1990

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Further to the comments in my post of May 11th pertaining to JPM, the Monthly comparison chart below of JPM (purple), the four Major Indices, and the Financials ETF (XLF) shows the major swings of JPM from 1990 to Monday's close.

As you can see, its swings have been very much more volatile and large in comparison with the Dow 30, S&P 500, Russell 2000, and XLF. It has, however, behaved more in line with the Nasdaq 100 Index (green). Both of these instruments have traded much more aggressively over the past 22 years, indicating a much greater appetite for risk than the others. However, when losses have happened, they have also happened to a much greater extent in these two on a percentage basis than in the others.

The price of JPM now sits down at 1998 levels, and, at the moment, the risk trade in it is OFF. I'll continue to monitor it relative to these indices and XLF in order to gauge its relative strength/weakness over the next weeks/months.