Nov 28, 2013

EW charts

And when I am on the EW "wave" here are some charts - food for thought... if you do not like turkey:)

Ok the first chart sums up the counts which I found in Internet. There is variations in the waves of smaller degree, but I am focusing on the big picture.
- the bearish one W-X-Y(red) - not very popular as you can expect. Daneric /
- bearish but with expected more upside A-B-C green /
- the bullish one impulse 1-2-3-4-5 - Tony Caldaro/PUG the most prominent I think.

My comment - take a step back and look at the big picture, forget about all the bull/bear fight, forget about the relentless move up and up and up....
What I see is a three wave structure 2009-2011 and even on a bigger degree another three wave structure huge moves 2009-2011 and 2011-2013 divided with sharp correction in the middle. The two surges has almost the same size and length. According two the EW rules three wave structures are corrective.... Today posted the same what I am thinking for a while. This means the count should be W-X-Y. We have not confirmation for reversal so the second surge 2011-2013 could extend further or the A-B-C count.
I am just trying to look at the waves without emotions and I ask my self - why should I discard the count which fits the best - good shape,good proportions? The only argument is sentiment - no one wants to believe in something bearish after 5 years and SP500 has tripled.

Now the bulls will kill me:)) You can forget trying to discuss counts with the bulls - you are a moron,idiot,doomer, Prechter follower aka moron:),lost all your money shorting aka stupid bear, etc. it goes on and on.... It is all about sentiment. I am sure, if 99% of them, see this move on... say 15 min chart will say 3 wave correction but this one is running for almost 5 years and getting parabolic so it "must be" an impulse what else....
I am curious how the bulls will count the DAX the second chart. Impulse on the DAX is pure fantasy, "creative counting" as I call it, count to fit my sentiment not the market....

Now instead fighting with the bulls or the bears,wasting your energy, we should try to be practical - you do not get paid to be the "smart ass" who nailed the top, the market will pay you if you have the right trading plan and follow it. Here are the scenarios:
- the bearish scenario - in this case we should see an important top. Even if this is true, the price is way too far from MA50 on the weekly chart and the first move lower will finish around this levels 1600-1650 and it will be bought. There will be an subsequent rally to test the top. See the last chart how the top usually develops or this post Is-it-different-this-time
- the other two scenarios - for the intermediate term they are the same, but one says this is impulse wave C the other says this is impulse wave 3, after all it is the same impulse. In this case the correction will be just a wave 4 with the same target as above and than here it comes the next rally ~2200. It is logical to see a sharp correction because greed should be purged(the herd has to be scared) before the rally continue higher. That is the way it works.

So for the intermediate term the next 3-4 months all counts see a correction and move back to the top. Here is my plan:
- getting long now is too late for me - the SPX500 could move 20-50 points higher but with downside risk 150-200 points risk/reward looks awful
- take partial profits if you see a spike higher and/or a move bellow 1800. Close longs and open shorts below 1775
- ride a correction lower to 1630-1600
- ride the subsequent move higher
- take half of the profits near the previous top
- wait to see what happens - add more longs after breakout(bullish scenario)/sell longs and go short(bearish scenario)

I showed similar chart two months ago I think comparing the DJ 2000 top and the current action - the similarity continue and the next move should be a sharp decline.


  1. Great work Krasi.
    I have been focused on the WXY as well. If the high on Nov. 29th stands. Then you have W as 787 calendar days from 3.6.09 to 5.2.11 and Y as 787 calendar days from 10.4.11 to 11.29.13. Plus all of the price relationships that you labeled.

    1. W-X-Y is the most simple and elegant of all counts - Occam's Razor:)
      Of course the market is 90% emotions and this count is the most laughed at.
      I can't wait to see if it will play out. It is exciting to watch the market action recently... with all the extreme sentiment and the bull/bear fight.
      And in the next months it will get even more interesting, whichever scenario plays out:)