Bullish Set Up Still In Place for Miners

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by Avi Gilburt, ElliottWaveTrader.net

Originally published on Sat Mar 18 for members of ElliottWaveTrader.net:  Last weekend (Mar 11), I noted that we needed to stay over 21.60 on Monday and complete 5 waves up to give us a bullish set up going into the Fed announcement.  On Monday, the market gave us our 5 waves up off the prior week’s low, and on Tuesday, we saw a deep retracement of that initial upside structure, which certainly scared many people in the complex. 

The morning of the Fed day on Wednesday Mar 15, I sent out a “Pre-Fed Warning:”

“. . . please focus on the simplicity of where we are.  Micro support is 21.20, with support below that at last week’s pre-market low of just below 21.  As long as we hold those supports, we have a set up in place to break out.”  

As we know, the market broke out rather strongly after the Fed’s announcement.  But, please do not make the mistake of viewing the announcement as the “cause” of the rally.  Remember, sentiment was set up to take us up no matter what the Fed said.  And, the fact that we went up even though most believed that a rate hike was certainly going to cause the dollar to rally and the metals to drop provided us with another example of how sentiment trumps all supposed market forces.

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The Rising Wedge Breaks Down Hard

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The SPX rising wedge broke down slightly yesterday and then followed through hard this morning. I have a minimum target at the 38.2% fib retracement in the 2280 area. However I would normally expect to see a topping pattern at a high like this and while there is some potential for an H&S to form, I’d note that about 70% of SPX significant highs are made with double tops, so we may well still see an ATH retest before the main decline begins. If we are to just see a move to 2280, and that is going to be set up with a double top, then the obvious place to see the rally to the second high start would be in the 2340-50 area, and I have drawn in a couple of possible bull flag support trendline options for that. The first one has been tested at the current low today. The hourly RSI 14 sell signal has made target but no positive divergence yet. SPX 60min chart:

170321 SPX 60min

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Gap and Crap

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It’s been an, ummm, busy morning. This is the most profitable day I’ve had in a LOOOOOOOOOOONG time, and every single one of my 71 short positions (even the ones I opened today) are in the green.

Every. Single One.

I’ve got to update my stops, but in the meantime, here’s NVidia, which I just shorted today. It covered its gap, and it’s insanely overvalued. See ya later, Slopers.

0321-nvda