The past 5 blogs looked at the fundamental and technical picture of the US Stock Market.
It’s important to remember that:
- I use fundamentals not to time my trades but to provide a context. The reason for this is not hard to find. Fundamentals are not timing tools. For example, even if I were right about the coming second-wave sub-prime tsunami, it may not come until the S&P and DJIA travel to the top of their 12-month (yearly trend) PRIMARY SELL ZONE.
- As far as trading is concerned, analysis is but one aspect of preparing for a trade; the other is the need to create a set of action plans. Here are mine, basis the E-mini March 2009 contract:
- If the market breaks above the current 5-Day (weekly trend) Primary Sell Zone and accepts above FIGURE 1’s Maximum Extension, I will buy on a pullback provided we see a decline of volume on the pullback.
- If the market breaks below 737.25 on low volume, I will cover shorts and go long on re-acceptance above 781.25.
- If the market has a strong day down closing below 829.25 I’ll look to go short provided we don’t see 781.25 on the day of the break. If we do, I will wait for acceptance below 737.25 to look to go short. The rational for this setup is the market is forming a sideways market. It has rejected off the lows at 741 and on completion of the current pause should head for the 5-day Primary Sell Zone. Acceptance below the bottom of value at 829.25 is a Negative Development setup suggesting a move below 737.25
- Stops for longs and shorts will be determined at time of entry.
- Target for longs (basis cash) is the 12-Month Primary Sell Zone 1576 to 1475.
- The minimum target for the shorts (basis cash) on a log basis is 536. I used 50% of the congestion range 1576 to 768 projected from 768 to arrive at the target.
FIGURE 1 5-day ESH9
Tonight I was going to complete this series - instead I’ll complete it tomorrow by painting a picture of the human face to the sub-prime meltdown.
Refer this blog post to a friend or colleague…
