12/15

So like I said before..the charts look ugly. But we still seem to be working on that 2.5 week low.

There are 2 possibilities here -

1. The 2.5 week low is still exerting its influence here and cycles are extending. We were supposed to ideally hit this on Monday but today looks like it is extending. Do we see it today? I think it is possible.

2. We saw the 2.5 week low on Monday and had a quick bounce up from there and its OVER..And now we are declining into the 5 week low. If this is the case, then market will break 4600 and head much lower in coming days.

Both scenarios are equally likely right now and since the charts look like crap right now, I am not very comfortable either long or short.

So whats the trade?

Heres the chart -



So now we are playing around with the 5 week FLD here. And I think it even broke it for some time and then got above it. So its quite dicey here. If it breaks again and stays below, it implies the 5 week top is done and market is down from here with small bounces in between.

On the other hand, the 2.5week low is coming in and if we can make it above the white line/5 day FLD and the next higher one the 10 day FLD, then we can go higher till 4900 or so...Above that we can get to 5050 area. These are all very rough numbers. I want to see if we can make it above yesterdays high first before refining the targets. Yesterdays high was 4840. You can see the importance of this from the above chart.

So again whats the trade?

Maybe best thing here is to stay out and wait for more clarity to emerge. I dont think shorting here is a good idea unless we break 4600 conclusively. And wait to go long above 4840 only. 2nd option is ofcourse to build longs here today and maybe tomorrow as long as we manage to hold 4600. And we get confirmation of bull case above 4840 where we can add more to longs. I am thinking of going with the 2nd option today in panic. Let us see.

Best,
Lee

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

Week Ahead 12/12

No change in my earlier updates. 5 week FLD cross is still valid BUT need to be bit careful in here because a downcross is also looking like a possibility here. But still I think the 5350 target is still valid due to the FLD cross. Stop 4800 odd. I know there were many questions and comments. Havent been able to reply so far but I will be doing edits to this post in next 2 hours with whatever updates I have and also charts. I will answer all comments there.

Best,
Lee