Trading the Stock Market and Commodities With Elliott Wave Theory

By: Dominick

Readers who've joined and finally understand what we do at TTC, and how we do it, often tell me they used to see these updates every week but just couldn't believe we were actually making in real time all the trades they contained. It seemed too implausible that week after week we'd find easy trades in various markets and buy tops and sell bottoms with such frequency.

So, I'm almost hesitant to write in this update that yet again members at TTC bought the lows of the week in the S&P while most of the world was buying those crash puts and getting ready to retest the lows. Sure, last week's update said, “ As for this past week, the key numbers were 1306, 1264, and 1292......looking at a chart makes it seem impossible to have them in advance but members can verify them. ” And most of the week turned out to be bouncing between 64 and 92 and another number we introduced so nicely that even experienced members were delighted with the results. But even with these numbers out in advance, it seems that if I don't make it clear how we're able to make these trades in real time, no one but members and my broker will believe they're true.

The first thing to keep in mind going into an environment like we've seen over the past few weeks is that a rangebound market is an undecided market, and if the market hasn't decided which direction it wants to break out of a range, why would a trader assume to know the answer? No matter how it plays out, the odds are always in favor of the unbiased trader who can react to the market, not the bull or bear who has to hope to be right. Unfortunately, so many analysts flood the internet with their opinions on where the market has to go that it damages trading psychology and gets traders turned around. In rangebound markets, we even put wave-counting aside to help avoid distraction and focus on our numbers. With the market dropping big, the approach of our number at 1264 was the first signal to begin looking for support and thinking about a possible long trade.

The second factor that had us buying lows this week was our proprietary trend cycle charts. As the 1264 area looked like it might hold, encouraging us for the long side, we began to notice our small time frame trend charts cycle towards the top of their ranges and start to pull up the larger time frames. This is a classic buy indicator at TTC, giving us further confidence.

And the third factor was simply that rotten sentiment. With everyone getting short looking for a retest of the lows or the fabled 3 rd of a 3 rd down, it was too easy for the market to reverse and trap so many in a vicious short squeeze. Yes, a major top might be in on this marker, and yes, we might put in new lows before this thing is through, but because we are always looking for the next trade , we were able to get long 1264 early last week and take what turned out to be a comfortable ride into 1300. Even Art Cashin's observation about historic trading patterns ahead of Memorial Day weekends proved to be the worthless stuff amateurs trade on when they have nothing better to go on. But just knowing it's out there can effect even an experienced trader.

A perfect example of the kind of brainwashing many traders fall for presented itself to me when a member insisted over the weekend that the decline from 1313 was a five-wave decline. No coincidence, I'm sure, that he's also a subscriber at several other advisory services, all of which had the same count. My response was to post the chart above simply showing that an unbiased view of the wave pattern did not warrant a bearish leaning, let alone an all out determination that the market must crash! That crash mentality must sell subscriptions because it's always around whether we crash or not, but mostly it just seems to keep otherwise smart people from being on the right side of a good trade. The chart from last weekend looked like this as of Thursday:

Another unfortunate misperception is that traders can only trade the market they know and that money can only be made on the big indices. Nonsense! In fact, my experience is that the major indices are usually the hardest markets to trade, but that a chart is a chart is a chart. In other words, we trade good setups where we see them and rely on other members who are familiar with that particular market to fill in the details we might need as we go. For example, we've been watching natural gas for weeks, and were able to offer this chart for members in last weekend's Weekly Maps feature:

As the chart clearly states, a complete five-wave measured move down was complete in nat. gas as of last Friday. If ever there's a good risk/reward trade, there it is! Of course the rally that ensued over the first few days of the week were blamed on the hurricane in the Caribbean , and I'm sure it didn't hurt, but clearly the technicals were driving the trading in this market. Members were advised to TMAR (take the money and run) or really tighten stops if it was a big picture trade ahead of the inventory report on Thursday morning, not because we thought we knew what the report might say, but because the easy money had been made. That little bit of prudence saved members a return trip to the lows, and the whole experience gave them confidence to trade good setups in new markets. I received the following message from a member shortly afterward:

“It is funny your comment about the ES right now. I have only tried to trade it three times the last 2 weeks. Got stopped out twice, made a little the third time. It was just too much chop trying to use the Proshare Ultra ETFs, that I took your recommendation and looked at other markets. I traded oil and nat gas and have had the two most successful weeks profit wise (and made the fewest trades), since I joined. Thanks for focusing us on new markets.”

So, as I think you can see, TTC is a vibrant and growing family of traders dedicated to making money week in and week out. We all get up in the morning knowing where to look for the information that is actually going to be useful in trading that day and we show up in chat ready to learn and contribute to the team. And that is how we're able to put together weekly updates that sound like they can't be real. Most of our traders started as very biased permabears, but are now traders.

Now, for limited time only, is your chance to join this community of traders. Beginning Saturday August 30 until September 8, or until available spaces are filled, TTC will be accepting new members.

Because we take the quality of our service very seriously, we strictly limit membership and work to develop members' trading skills. Having noticed an improvement in our current membership, most of which are professional, institutional traders, we will accept a limited number of new retail members for one week only. TTC does not issue trade signals because we teach you how to trade. We don't spoon feed you because we teach you how to take care of yourself. So, whether you're a novice trader who wants to get better, or a more experienced pro that's wants to share what they've learned and go to an even higher level in multiple markets and timeframes, TTC is the place for you.

Finally, I should say that if you join TTC, be ready to stay. It usually takes a month or so for traders to comfortably incorporate our techniques into their trading, but once they do, members don't often leave. In fact, it was this dedication and sense of community that inspired us to work with the Northwest Territorial Mint to produce a custom commemorative “Unbiased Trader” precious metal medallion – which will be available for purchase soon. Professionally designed and proof struck in association with the Northwest Territorial Mint , these gorgeous medallions will be available in 5 oz .999 fine silver or 1 oz pure gold varieties. Last year's supply sold out quickly, so join now to reserve your chance to purchase your own “Unbiased Trader” TTC medallion.

Have a profitable and safe week trading, and remember:
"Unbiased Elliott Wave works!"

By Dominick , a.k.a. Spwaver
www.tradingthecharts.com

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual. Check with your licensed financial advisor or broker prior to taking any action.

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