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Wedge Breakout Has New Target, We Don't Hide, We Ride! 5/27/22

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Yesterday was a good day for us, in terms of reading the stock market futures chart pattern well in the premarket, and laying out the likely direction and targets for the day. Can we do it twice in a row? 

Nah, but what the hell.

Why not try again? ūüėĄ

On a slightly more macro level, like 2 weeks rather than 2 hours, the Liquidity Trader Swing Trade Chart Pick List is having one of its best weeks ever. Normally when that happens, the market is on the hair trigger of a brutal reversal which obliterates all the profit, so this time I tightened the trailing stops to begin the week on Monday. So far so good. Three of the picks have been stopped out over the past week with gains of 1.1%, 23.3%, and 28.1%. They were all shorts. Nice going! 

Here's how the whole thing looks. 

image.png

This theoretical performance is based on 100% cash, no margin. No options. It's not sensational, but it is honest, and easy to follow. I post the opening picks on Monday morning before the open, allow them to trade for a week wherever they will, and then post stop levels or easy to follow trailing stop instructions. This way I don't burden anyone with having to watch the tape every day all day. It's kind of a set it and forget it approach that requires about 30 minutes a week on Monday morning before the market opens. 

Now back to the current list. Truth be told, all of the remaining picks that are doing pretty well at the moment are oil and gas related. When those signals first popped up two weeks ago, my reaction was WTF! But I honored the screen output, reviewed the charts visually, and picked the ones that had the best looking patterns and risk/reward setup, regardless of my market view. This is a mechanical system that attempts to recognize short term swing turning points. Trusting that screening algorithm that I wrote in bits and pieces over the past 20 years, with the most recent tweaks in mid January, is the key. This week it paid off. 

Will it pay off every time? Of course not. At times, there are externalities to the market's and individual stocks' wave actions, that act like bombs dropped on the waves. They disrupt or distort underlying wave patterns for days or weeks. The outcomes don't conform to the algorithmic expected outcome. But this is a game of probabilities. If outcomes come down on the side of probability and the trades are set up accordingly, over time, they pay off. 

So the approach must be mechanistic. Our personal opinions about market direction in the big picture shouldn't play a role. When there are losses, that's part of the process. The numbers game says that just persisting should result in more gains than losses, assuming that the algo is sound.  

That's for traders, of course. But long term investors would do well to apply similar principles to long term charts. Which always boils down to following Rule  Number One and Rule Number Two.

  1. Don't fight the Fed.
  2. The trend is your friend.

If you pay attention to Rule Number One, you'll have no problem in recognizing when the major trend is changing direction, when the old trend is no longer your friend, and a new trend will be. As an investor, the major trend is my friend, if I have no choice, then I want to ride that bucking bronco until the Fed reverses course.

Unfortunately, if you're limited to long only for example, in your 401k, you're screwed. If you're a long-only investment manager, you are well and truly screwed. Then there are years when the only logical choice may be cash. And then inflation eats you. Or you lose all your clients and your spouse divorces you and takes the kids, and you end up living in your elderly parents' basement waiting for the next bull market. In the meantime, you short BTC and smoke weed. 

Of course, if you were a really great money manager, you would have made your millions, and you're living on a beach in Costa Rica. Smoking weed.  

So I prefer the trading approach. I don't want to be locked in to an investment view, especially long-only. I want to take what the market gives me in the short run. 

As for today's expected direction, here's what I'm looking at.

We started out yesterday with the view that it appeared that the wedge pattern that had developed was setting up a trend breakout. I showed the 2 hour bar chart to illustrate that potential. Sure enough, we got the expected more likely outcome.

y7-as

Now we see the market at another old trendline extension on the 2 hour bar ES chart of the 24 hour S&P fuguetures.

At the end of the day yesterday, the 5 day cycle projection had settled around 4080. It did not get there overnight. Here's how it looks on the hourly at 5:30 AM New York time.  The 5 day cycle projection is now 4100, and if the ES gets to 4076, then it would have a clear path to that 4100 projection. 

tvc_46e8aab32cb898e9d1194960822bb295.png

What are the bears' chances here? Not great. At the very least I think they would need to be below 4040 at some point this morning. Barring that, the path of least resistance is up. 


For the big picture: 

If you're serious about the underlying forces of supply and demand that drive the markets, join me! 

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3 hours ago, DrStool said:

The 5 day cycle projection is now 4100, and if the ES gets to 4076, then it would have a clear path to that 4100 projection. 

As of the first 10 minutes of NY trading, I put the 5 day cycle projection now at 4130. 

Technical Trader

Lee Adler’s proprietary cycle analysis with market trend and position ideas for investors and weekly individual stock swing trade ideas for traders. Click here to subscribe. 90 day risk free trial!

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But if they can manage an hourly close above 4098, then we have a base pattern breakout with a measured move target of 4250. 

tvc_1d5f77f2d12d64d55b6361357fcea3b0.png

I don't think it will get there today. 

Technical Trader

Lee Adler’s proprietary cycle analysis with market trend and position ideas for investors and weekly individual stock swing trade ideas for traders. Click here to subscribe. 90 day risk free trial!

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1 hour ago, DrStool said:

As of the first 10 minutes of NY trading, I put the 5 day cycle projection now at 4130. 

Now looks 4115-20. Done. 

y82c1

Hit a bit of a trend resistance convergence there also raising the odds of a short term peak. 

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Here's a look at the 5 hour bars on the ES 24 hour fuguetures, to give you an idea of what we're facing if this thing breaks out right here.

y839n

4300 anyone? 

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It's the first Friday evening of the unofficial summer season here, just like back home in the good ole USA. I just took a walk around my neighborhood. 

I must tell you that as the sun gets low in the sky on this glorious weekend evening, this place is magic. Despite all the chaos in the world, there are literally thousands of people out in my neighborhood. They stroll the streets and promenades, the squares and the pedestrian alleys They enjoy the moment with friends and family at the countless restaurant, cafe, and bar terraces, in this endlessly charming and beautiful city. Joie de vivre lives on here. Vive la France! 

It's a poignant moment.  

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Jesus Effing Christ.

Republicans Signal Refusal of Jan. 6 Subpoenas, Setting Up a Showdown

The decision by the four Republicans, including Representative Kevin McCarthy, the minority leader, had broad implications for the inquiry and for congressional powers.

 

Four House Republicans including Representative Kevin McCarthy, the minority leader, signaled on Thursday that they would not cooperate with subpoenas from the committee investigating the Jan. 6 attack on the Capitol, posing a dilemma for the panel that could have broad implications for the inquiry and for Congress itself.

https://www.nytimes.com/2022/05/26/us/republicans-jan-6-subpoenas.html 

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They and Trump and the rest of those scum will successfully stonewall this insurrection/ coup inquiry. They'll all get away with it. Thanks to the inflationary mess the US is in (thank you Fed), and gerrymandered Congressional districts, they'll seize control of the House in the midterms. That leads to the possibility, if not the likelihood, that in 24, they will throw out the electors in states where the D candidate wins the majority of the popular vote, but Rs control the state elections departments. Or the House will reject certain duly elected slates of electors.

This will end democracy in the US. 

And the Rs have the guns, so peaceful mass protests won't do a damn bit of good. 

I'm not optimistic. 

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Seems the market has broken out. 

And I'm breaking out for the weekend. I will be here off and on, while you should be out enjoying the holiday! 

Jusqu'à ce qu'on se revoie, bonne nuit et bonne chance!

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AN OFFER JUST TOO BAD TO NOT REFUSE

One of the joys of a truley disfunctional financial system created by massive central Bank interferrence is I keep on getting adds from a certain bank to deposit money.

The rate offered.....drumroll please......

A wonderful 1.9%

Inflation in Australia is currently 5.1%

Now if the rate offered was say 8% I might consider it.

The numbers just dont add up!!!!!!!!!!!

What will happen when said bank actually has to pay real rates for its money........

For the shareholders....

It won't be pretty.

Not pretty at all.

 

Banks were great investments while the era of central bank cheap money lasted....but when its gone....the capital gains and dividends will be replaced by capital losses and no dividends.

 

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