Counter Trend Stock Index Futures Position Trading
Stock-Markets / Futures Trading Sep 06, 2008 - 04:41 AM GMTBy: Joseph_Russo
Semi-Generational Long Haul is Toast: For one reason or another, Fibonacci time intervals of 34-units have maintained an excellent record of accomplishment over the past 150 years in identifying semi-generational peaks and troughs in the major equity indices. 1857-1891, 1932-1966, and 1974-2008 each represent 34-year long-haul bull market runs, all of which ended with 3, 5, or 8 years of bear market declines. If 150-years of pristine history are any guide, the current bear market will (at minimum) continue running its course through 2011, 2013, or 2016 prior to an absolute low marking its eventual bottom.
Low-to-Low cyclical bottoms:
In the above secular chart, we have identified three low-to-low cyclical time spans. The earliest spans 39-years from the low in 1857 to the low in 1896. The second spans 36-years, from 1896 to 1932, and the last is currently underway from 1974 through some unknown year in the future. Using 117-years of previous history as a guide, we can extrapolate the future low-to-low point from 1974 as one of the three historical references illustrated arriving at 2010, 2013, or 2016 for a postulated bottom. Combined with the similar 3, 5, or 8-year cyclical peak to trough downturns identified in the paragraph above, we attain further historical precedent in confirming the potential duration of the current bear market. Beyond duration, amplitude is a topic for future deliberation despite a Dow target of 5267 in 2013 seeming a highly probable bottom at first glance. Of added concern is the prospect and plausibility of this magnificent 150-year old secular bull morphing into an unprecedented secular bear amid intervening cyclical bulls.
Longer-Term Position Traders/Investors:
Now that the “good times” are clearly well behind us, how does one remain actively engaged in broad markets without falling victim to flat returns or substantial loss of amassed profit over past decades? Worse yet, how does one cope in the event of a secular generational bear market? First, one must protect capital and amassed profits from long-term downside risk. Secondly, one must decide whether to actively short the market to profit on the downside, or simply get out of harm's way and into safe interest baring cash equivalents. Sounds simple enough however, for proactive participants, this is much easier said than done. Timing ones exit and entry in such endeavors can make or break one's entire strategic purpose.
Keeping an accurate pulse of the market place on a daily basis can be a grueling if not frustrating endeavor, especially for those who may not be inclined to read the technical tea leaves with proficient consistency. In our exhaustive mastery surrounding the technical architecture of the markets, as well as the entire strategic landscape relative to tactical trading protocols, we are now offering new and improved dispatch of our Near Term Outlook . Elliott Wave Technology's charting service provides a broad array of users with unique insight to a blend of tactical trading strategies, which serve every level of time horizon and risk tolerance.
To employ these proprietary strategies effectively, one must be fully acquainted with our NTO Essentials File, which is a dynamic fixture in the member's area.
How it's delivered:
The following two charts reflect monitoring of slow moving counter trend and trade trigger strategies geared for longer-term position traders:
Prior to violating its 1 st wave crest @ 11047.76, the chart below takes us back to May of 2008 when the Dow still maintained a plausible 4 th wave downward correction posture prior to losing its bullish status in printing fresh new lows beneath 11000 in July. The Near-Term Outlook had already positioned long-term traders on the defensive back in October of 2007, and was now issuing a secondary sell signal despite bullish prospects of an imminent 4 th wave basing terminal. Remember, Elliott Waves guide, they do not dictate.
Below is a brief excerpt from the NTO dispatched for May 20, 2008 .
Near-Term Outlook for the Dow :
(For 20-May 2008 )
The orange down-arrow in our lower momentum panel has confirmed KP/sell-probe campaigns against the 13136 high on 19-May. The bearish smaller degree “e” wave divergence signaled short-entry @ 13042- basis our 30-minute price-chart and basis the entry criteria clearly explained in our NTO ESSENTIALS file.
Though wave counts provide essential ancillary information, price action is the ultimate arbiter in procuring our proprietary brand of blended charting protocol. Note how the dynamic wave count shifted from the chart above to the chart below once concrete evidence of a key wave violation took place upon the fresh lows printed in July.
The momentum panel in the chart below reflects dated counter trend buy and sell signals for our slow moving longer term Key Pivot trading strategy. Following the first sell signal in October of 2007, the up and down arrows along with their respective notations reflect this charts history of elected long and short positions generated per this particular trading strategy.
Of added note are the numerous arrowed trade triggers, chart patterns, and point values resident on either side of the market. Each bearing a time/price sensitive trade strategy of its own, and provided for use in general strategic overlap and risk management relative to open positions on either side of the market regardless of strategic origin. Our shorter-term intraday trading charts provide similar strategic information, but at a much faster moving pace.
If one elects to remain exposed to broad based indices in the current market environment, it is advisable they attain suitable advisory and made aware of potential risks, along with optimal entry and exit parameters for active engagement.
Below is an actual example of the NTO commentary provided twice weekly for longer duration index traders. We strive to maintain brevity in delivering our narratives with a brief relevant comment - commonly used abbreviations, and by breaking down strategy specific guidance and actionable occurrences by the paragraph headings illustrated below.
Near-Term Outlook for the Dow :
(For 5-September 2008 )
NMC (no material change) from Wednesday's 9-3 NTO comment, which stated:
Following last week's attempted breakout above it, today's sharp reversal from a strong head-fake open has the daily price action revisiting the edge of our shaded moving average bias. Failure to maintain closes above this average will not bode well for bulls over the near-term.
Todays Active and Pending KP Counter-Trend Strategies: ( KP Strategy-Specific)
NMC / ANA (additional notes added) : The additional KPD short positions elected in May have done phenomenally well and are seeking to add to positions at the next overbought condition. KPV CT strategies remain cautiously long from 7-14's long-probe against the 10827 low . Near-term momentum has turned bearish and appears to be heading for a run at oversold on the daily chart-
Todays Newly Activated KP Trade-Triggers / New Price Target Captures:
Today's sell-off tripped KP sell-triggers at price-actions downside cross of the lower pennant boundary, which now defends the 10900 target as noted. No new price target captures have occurred at the KP level per today's chart.
Todays Newly Suspended or Reclaimed KP Trade-Trigger Targets:
Until we get a print below the associated pivot low from which it spawned, the bullish 12023 remains defended at S-1's falling trajectory.
Discretionary Set-ups and Tactics for todays Pending KP Trade Triggers: (KP Strategy-Specific)
Beyond those that have already elected, there are no set-ups per todays chart.
The balance of trajectories, targets, point-values, wave-labels, and alternates remain as noted.
Short-Term Active Traders:
In a class of their own, active short-term traders seek to constantly profit from swings of varying size and strategic origin. Be they counter trend in nature or momentum driven, our Near Term Outlook and accompanying Evening Posts provide daily insights into eight strategy specific trading disciplines, complete with entry criteria, stop, and exit targets. To employ these proprietary strategies effectively, one must be fully acquainted with our NTO Essentials File, which is a dynamic fixture in the member's area.
How it's delivered:
The following two charts reflect monitoring of extremely fast moving counter trend and trade trigger strategies geared for shorter-term and day traders:
Provided daily for short-term index traders, the chart above and commentary below is the actual information dispatched from the NTO's Wednesday Evening Post for 9-3-2008 . Again, we strive to maintain brevity in delivering our narratives with a brief relevant comment - commonly used abbreviations, and by breaking down strategy specific guidance and actionable occurrences by the paragraph headings illustrated below.
Todays Active and Pending Tactical Considerations: (Strategy-Specific)
NMC/ANA : Relative to its 2nd wave (see the hourly closing data chart), time is running out of harmony in terminating a complicating 4th wave. Again, we would need to see strong downside impulsive follow-through toward the July lows to terminate the larger (a) wave down.
MANIC-Versatile (MV-counter trend )
Booking over 200-pts in profits - AGAIN! - MV's SAR'd (stopped and reversed) long @ 11477, and are sitting on over 50-pts in additional open profit per the close.
Interim Pivot Versatile (IPV-counter trend)
IPV‘s are at their discretion, protecting well over 200-pts in open profits on recent shorts. As noted above, this strategy technically maintains its directional stance until a sufficient amplitude of momentum registers to set SAR entry criteria in motion.
Interim Pivot Directional (IPD-counter trend)
IPD strategies remain short along with IPV's as noted above.
Todays Newly Activated Trade-Triggers / New Price Target Captures:
As price crossed above the falling portion of S-1's trajectory, a CTT buy-trigger elected citing 11630 as upside target. Unlike the S&P and NDX, the Dow failed to capture its noted downside TLB target of 11335 amid today's session.
Todays Newly Suspended or Reclaimed Trade-Trigger Targets:
Aside from monitoring the efficacy of our proprietary shaded MA bias, nothing new per today's price action-
Discretionary Set-ups and Tactics for todays Pending Trade Triggers:
Bearish proponents maintain ADT sell-stops resting at or beneath S-1's rising trajectory in anticipation of a sharp 300-pt price slide from breach point. Bear in mind that such aggressive triggers are often traps in the making.
The balance of trajectories, targets, point-values, wave-labels, and alternates remain as noted.
From the Near Term Outlook for Friday September 5, 2008
Todays Active and Pending Tactical Considerations: (Strategy-Specific)
As is often the case, what would ideally be a smaller 5th wave to complete a larger wave-1 has turned into a black hole selling event giving the appearance of an (a-b-c) corrective thrust. As such, more data is required relative to downside follow through and/or upside retracement structures to confirm variable wave counts. Apart from ancillary “Elliott” guidance, proprietary trade-triggers alongside counter-trend probe signals are capturing much of the recent price action adequately while also providing clear boundaries relative to early ( counter trend) probe failures.
MANIC-Versatile (MV-counter trend )
Forced to cover recent long-probes, MV's are preparing to try again PEC (pending entry criteria against the current thrust lower).
Interim Pivot Versatile (IPV-counter trend)
With over 500-pts in OPEN PROFIT, waiting for the oversold reading paid off handsomely for IPV's now poised to SAR (stop and reverse) long PEC (pending entry criteria).
Interim Pivot Directional (IPD-counter trend)
IPD's will take profits and get flat upon election of the first “pending” SAR long signal issued to IPV's.
Todays Newly Activated Trade-Triggers / New Price Target Captures:
As price dipped beneath the tan portion of R-2's rising trajectory, sell triggers elected citing the 11128 target which it now defends. Likewise for R-1 which has a rather bearish target of 10766. We have also noted a PROFITABLE DRAWDOWN FREE capture of the 11335 target.
Todays Newly Suspended or Reclaimed Trade-Trigger Targets:
None per today's price action-
Discretionary Set-ups and Tactics for todays Pending Trade Triggers:
None beyond those that have already triggered-
The balance of trajectories, targets, point-values, wave-labels, and alternates remain as noted.
Two Sides to Every Trade:
Elliott Waves are on neither side of any trade, tactical market orders are. As we attempted to convey in Strategic Command and Control , wave-counts play a small role in executing trade and investment strategy. Governing successful strategies are respected trading disciplines together with tactical deployment of speculative capital that responds to real-time price action regardless of ancillary wave guidance. Wave counts serve only as a general guide in monitoring which outcome currently has the upper hand
Wave Counts and Trading:
Although exquisite and impressive in both hindsight and real-time, Elliott Wave analysis serves only in providing forward vision to several plausible paths the market will take in its dynamic evolution, especially at the largest degrees of trend. By effectively monitoring guidance systems of this profound nature, one can then begin to develop investment and speculative strategies to profit smartly from the vast array of endless possibilities the wave structures will inevitably adopt. Defined clearly, strategy-specific rules of engagement together with accurate tactical guidance will soon have one trading like a Spartan Warrior .
Come spend a month Elliott Wave Technology …
…And you may never again trade the indices without us-
The express focus of Elliott Wave Technology's charting and forecasting service is to anticipate price direction and amplitude of broad market indices over the short, intermediate, and long-term.
We deliver our unique blend of proprietary charting protocols daily with the express intent to convey timely information. Our daily reports convey strategy-specific guidance , which strives to anticipate, monitor, calibrate, and observe market impact relative to a multitude of signals and triggers generated, which are in direct alignment with eight distinct and clearly defined trading strategies set forth by the author.
Regardless of one's level of experience, users must allow sufficient time to become acquainted with the authors charting protocols, strategies, and tactical narratives prior to entering positions or developing discretionary trading strategies.
Should one have interest in acquiring access to our long-term technical analysis and/or utilizing our proprietary trading strategies, we invite you to visit our web site for more information. For immediate access to broad market coverage in all time-horizons, one may subscribe directly to the Near Term Outlook .
Trade Better / Invest Smarter...
By Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology
Email Author
Copyright © 2008 Elliott Wave Technology. All Rights Reserved.
Joseph Russo, presently the Publisher and Chief Market analyst for Elliott Wave Technology, has been studying Elliott Wave Theory, and the Technical Analysis of Financial Markets since 1991 and currently maintains active member status in the "Market Technicians Association." Joe continues to expand his body of knowledge through the MTA's accredited CMT program.
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