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MortiES' Forecast for the Intermediate Term. 4Jul2009
July 4th, 2009at 12:49 am
HOLIDAY HOMEWORK! Have I got a chart for y’all. This chart is a historic and predictive overview of the market primarily using the ellipse study. The chart is well annotated, so I won’t repeat myself here. To best follow my comments on the chart, I’ve numbered them in a somewhat coherent order. Just telling you that the ellipse is a really cool tool is, IMO, not enough. So I’ve gone back to the Oct2007 high and used the ellipse to try and catch all the major swing highs (and a couple swing lows) in the market. The ellipse is best for catching swing highs in a bear market and the MOB is best for swing lows in the same bear market. The MOB will not reverse as many moves as the ellipse because its purposes is different. MOB stands for “make or break”. It is often 1/2 target and 1/2 resistance/support. You have to know where you are in your wave count and fibonacci levels to best anticipate if the MOB will reverse the move. I included some MOB’s for historic value and one for predictive value. The two black lines on the MOB bar give a time range that is most typical. I find that the ellipse and the MOB help me to be patient. Once in a trade that is going your way, these studies will help exit at better profit levels.
The MOB can change as the market progresses and therefore will have to be redrawn (one click) periodically. It doesn’t change that much however. The ellipse, on the other hand, automatically tracks the market until they both meet and then it closes and is permanent. I hope that it is evident from the chart that the ellipse is an awsome tool. I took a lot of time to indicate which swings I used to calculate both the ellipses and the MOB’s. As you will see if you take time to review each ellipse, you have to experiment with swings until you find the right combination. It usually only takes 2, or at most 3 combinations, to get the best one. I usually only need one set of ellipses to trade the market, but it isn’t unusual for me to have two sets going. Then if the market closes an ellipse, I look to see if there is agreement with pattern (waves) and fibonacci targets. I have so much confidence in the ellipse that I will often fade the piercing of the ellipse with my trade in order to minimize my capital exposure. 90% of the time, the market will at least stall or reverse at a closed ellipse, If it stalls and begins to form a continuation pattern, I get out with maybe a couple points. A close beyond the ellipse is one step away from my being stopped out. If the bar that closed beyond the ellipse gets taken out by 1 tick, I’m gone. Anyway, for those who have shown an interest in these studies, I hope this will give you something to chew on this weekend besides hamburgers. For those who couldn’t care less about them ~ look at the arrows. They are my final summary anyway. I would appreciate feedback from many who follow my comments to let me know if this extensive a posting is beneficial. As I’ve said in the past, I don’t want to waste internet space. I don’t get a cent for spending the time to put these posts together, so feedback would be appreciated to let me know that this is of value to some.
BE SURE TO CLICK ON CHART TO SEE FULL SIZE
Categories: Markets
Searchgr: sorry I just found this question about when W4 should end per the daily chart. There is really nothing that will prevent a W4 from becoming a long sidewise consolidation. If the blue (normal) ellipse does not catch the market and end W4, then the white (LT) ellipse can catch it. After a time, the PTI would get so low that a successful W5 would become less probable though. The PTI compares the area under W3 to the area above W4. As the area above W4 increases the PTI would decrease until it got below 35 ~ at which point a successful W5 that will take out W3 is less probable.
Thank you Mortie..
Appreciate you taking the time to provide some detailed coaching on how to manage risk, and how to not let emotions dictate your trades. I’ll be putting to use these invaluable tips to use and better my trading styles so that I can be consistently profitable, while improve my trading every step of the way.
I can’t appreciate your tips and your thoughts here enough.
Keep up the great work.
One day, I hope to be able to make contributions of my own as well.
[...] MortiES’ Forecast for the Intermediate Term. 4Jul2009 [...]
A bear trap
searchgr ,
Very good point regarding the obvious… I believe the wise saying is: “What is obvious is obviously wrong” – the critical inquiry becomes whether the H n S pattern will be obvious to the masses of retail traders/investors or whether it’s so obvious to more observant market participants… Ill let the market answer that inquiry without relying on its fulfilment for my trading objective as I’ve already established short positions with profit objectives fulfilled at the 38.2 retracement near 850 – So ill start scaling out there with the understanding that we very-possibly could be headed to the low 800 level.
Mortie,
Regarding getting the ellipse to intercept point 17 using some combination of x and 16 – I was able to get the interception on a weekly chart using 8 and 16.
And I was able to get the interception on a daily chart using 8 and 16 (and) an ellipse of size 2x larger than standard.
Mr Trader, patterns that everyone looks at have a high rate of failure. The H&S pattern that everyone looks at will possibly become a bear trap. Retracement under the 38.2% will violate the red line.
I concur with Rocky – this post is definitely of ‘spectacular’ quality. It’s incredibly generous of you to put the time and effort into making such detailed posts.
FWIW, my ellipse study is projecting a 50% retracement of the march-june rally (which is further supported by the H & S measured move target) rather than a 38%, and my SPX high target for late 09 is the 1050-1135 range which will be more clear if/when we get the retracement and possibly continuation to a high above 956 on the SPX.
Thanks again for the spectacular work.
BostonWealthMan , Thank you
Mortie, I use the Adv. Get EOD and as per the daily MOB the 4th wave is expected to be completed latest until the july 14th. Can you confirm?
Seachgr: My web programmer is currently working diligently to launch live chat by Monday.
Other investors have asked before you about the possibility of getting email alerts to posts.
What we are planning in the next several weeks is a sign up to receive market information and a newsletter, and we are looking into implementing a feature to allow for email alerts.
Please also click on open to see what else is in the works for the website.
Rocky: Glad I can help. Best suggestion I have for you as a new trader is to slow down. Don’t feel like you need to be in the market all the time. Wait for the extreme moves that are really high probability setups. A low risk trading style is to trade W2’s, W4’s and Wave B’s. Learn the typical fibonacci targets for these waves and place trades there with a stop 1 tick beyond W1 or Wave A. Then look for 5 wiggles and be ready to take profits. Wave 3 and Wave C should be impulsive. I almost never risk more than 2 or 3 pts. with my stops. Small losses are part of trading and you should never feel badly about them. Continuation trades are always the safest IMO, because you have a trend on your side or at least a temporary bounce. I consider trading a W2 or Wave B a continuation trade and if I’m wrong, I have a small capital exposure. Don’t play the javelin catching game! Standing in front of a trend takes a lot of experience and is not recommended if you are new to trading. Don’t chase the market and don’t try to make up your losses with aggressive trading ~ it won’t work! Believe me, I speak from experience and am much more qualified to write a book on how to not trade than how to trade. Be careful about following anyone with your trades. If you like my analysis, go over it yourself with your own charts and don’t trade until you own that trade!
Also, I recommend that you keep your trades small (1 contract, at most 2) until you become consistent. It will limit your ability to scale your profits out, but IMO your emotions will be less attached to the trade. I also recommend, if fear and/or greed is a problem, that you place what my broker calls a TTO order. Some call it a one order cancels the other. Basically, once you get into a trade, enter your stop and your profit target and leave it alone. Believe in your trade plan and let the market do its thing. Once your trade moves “enough” in your favor, place a break even stop, and now you’re no risk. The trick is to know what is “enough”. Basically, you don’t want normal market action to stop out a good trade. My favorite place to be is a trade that has moved far enough in my favor to be able to take partial profits and having a stop that is better than break-even. When that happens, don’t be greedy and let the market take you out.
Searchgr: I post my comments on twitter. You could follow me on Twitter. Maybe BostonWealth can give you a better option. Let’s see if he’s reading my post.
Make Or Break
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Hi Mortie…
I refresh you webpage 5 times a day to see if you have made a new post. You are truly spectacular in terms of your detailed studies of the charts, fibs n now the ellipses. You have got me all excited about learning EW as well as the ellipses etc.
I have lost so much money trading..n mostly trading news n emotions, that the only times i have been able to make profitable trades is by letting the charts decide the exit-entry points. I am not good at it yet, so I look for your posts and your calls to enter or exit a trade. I have followed you in and out of a few trades, and those have worked.
Please keep up the good work. You are doing a great service here, by providing all these details. I look forward to continue to see your posts, and to learn and get better by the day.
Wish you a wonderful 4th of July. Have a great weekend.
Excellent Analysis. So you except a bounce for the first days of the week and then movement to 846.
Thank you