Saturday, January 31, 2015

Weekend Update - Jan 31, 2015: The 3 year count cloud since the 2011 low

Unfortunately, the reality about wave analysis is that the market attempts to retain as many "options" as possible, until a pattern nears completion.  This makes it very difficult to do analysis, and also means that most of the time, doing long-term prediction with wave-analysis is impossible because the analyst must juggle too many scenarios. 

Fortunately, at CERTAIN moments, the market becomes so "stretched" that all of the count options start to point (at least in the short term) the same direction. As far as I can tell, this is one of those moments. Moments like this aren't reached very often, so savor it. Because it took years of waiting to reach this moment. This is why wave-theory is not a useful tool for most human beings to make money, especially trading a chart like the S&P 500. Because it requires more discipline and patience to apply than 99.999% of people have at their disposal.

Even if you knew how to do wave analysis perfectly (which noone does), AND the desire/motive to work hard to find a short opportunity on the S&P, did you have the discipline and patience to wait years (and continually do analysis) until the market became "clear" enough to make a single short trade? 

Noone did. Certainly not me. I was too early, just like everyone else.

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This shows various counts and the analysis which supports both.

I prefer the blue count, but I'm OPEN to the orange count as a possibility, and also keeping my eye on the "unfavorable" red count. Both of the two top counts (blue&orange) imply a short term d-wave drop to 1840 starting NOW, a small upward pattern, and then a larger degree drop to 1650 area. The red count behavior would also imply something very similar.

What happens from there, is a matter to be decided later, as the market may be keeping its options open. (potentially due to policy response to a rapid decline?)

The danger in strongly favoring the blue count is that 1650 potentially contains massive support due to the completed running-double-three or running-triple-three which formed in that region.  Such a pattern is valued at a 261.8% . Therefore, it is potentially EXTREMELY dangerous to hold short once within that price region.

I prefer to wait until later this year (to give myself as much information as possible) to make any decisions about that subject. 

Do your own DD. Forecasting is a very different matter from trading, and this blog certainly isn't intended to be trading advice.  The only trading advice I will give is that you shouldn't accept trading advice from ANY blog or any 3rd party. Always do your own research and analysis. If doing your own research and analysis is too much work, then you shouldn't be trading..

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charts below




note: small error, orange (a) should read (1)