2.5 week low but extensive damage on charts

I really did not want 4800 to break yesterday. But it did and in the process it has done some good damage on the charts. I mentioned that my stop was 4800, market sliced through it so I got stopped out. Still have some puts(hedge) which I will close today. So not really a loss but I am disappointed with the way this trade worked out. Not because of anything I did wrong - just disappointed. So the setup was there, the risk reward ratio was very good - Risk 100 points, Reward 400 points. So you just take the trade and see how it works out. This one didnt.

So now, we wait for the next setup. I dont have anything clear right now except a risky buy for a possible good bounce. I mentioned before I was expecting the 2.5 week low on Friday or Monday. So did we see it yesterday? Or do we see it today in morning? We shall see. I never expected it to be so dramatic and I think all the data this week has amplified the cycles right now.

So what did yesterday's downmove do? I broke down through the 5 week FLD. What this generally means is that the 5 week high for this cycle has been seen. Ofcourse anything is possible but most likely the 5 week high is in and so we shouldnt exceed it in this 5 week cycle(until Jan2nd or so when we see the next 5 week low). The other possibility is that this is a whipsaw and we regain the FLD today but its not good to trade on hope of this happening. Chart below -



So now the 2.5 week low has come. So its not a good time to short - risk reward will be horrible. Long also is bit dangerous without getting some more clarity. However we can play for a bounce back from this low to setup the next short trade. Bit dicey right now - I will prefer to do short term trades until more clarity comes in and the next FLD trade sets up - More on this tomorrow.

All the fundamental news and events out there are skewing up the cycles but this is expected. It will alter the amplitude but cannot change the timing by much.

Bharat asked some good questions earlier -

1. You mentioned on December 07 that the 5 week FLD has been crossed generating a target of 5350.... So when we look into FLD's, is the time span of 5 week target from the date of it crossing it? i.e. target is within January 14, 2012?

- My ans: 5 week low was on Nov 23rd. So the 5 week cycle will run 5 weeks from that date. So next 5 week low will be around Jan 2nd. So we need to hit the target in this timeframe. This point is ofcourse moot right now with yesterdays price action and this target is now null and void.

2. When you calculate these time frames, do you count weekends also? cause I have seen you counting them at times...

- Calendar days. Hurst says that even on holidays and weekends, the market is trading(in the sense somewhere some market is trading, and some event is happening..what would the market do if it were open at that time?)..so we need to factor them.


Best,
Lee