TWTR Premature Bearish Entry

Inspired by the need of our POTUS to counter punch any perceived attack, I took a look at TWTR. They dared to add fact checking to a Tweet, and now the Executive Branch must find a way to punish them.

I don't normally trade on fundamentals but I see enough technical reasons to short TWTR to enter a  trade. It would have been better to wait until a close under the upward Trend Line but we did get a close below the 8ema. But should have also waited for the next candle to demonstrate continuation to the downside. There's also possible support from the 20sma and then again at the 50sma.

The technical short signals I see are:

• Near top of Downward channel.
• Minor Upward Trend Line about to break.
• ADX/DMI about to cross.
• High Stochastics dropping.
• Rejected off 200sma.
• Close below 8ema on good volume.
• Was a Doji Sandwich candle pattern before profit taking at the close.

Got Sep 30 Put for $3.15 with
Delta 40% and Gamma .042
Set the Target to channel bottom 20.
(30-20)=10*.042=.42=42% additional Delta.
40%+42%=82% Delta at $20 target.
(40+82)/2=61% Delta average (don't know how valid a linear relationship is).
10*61%=6.1+3.15=$9.25 estimated option value at target.

Risk is option cost 3.15
Reward is 6.10
R:R=3.15/6.10=1:2 very good.

Next Earnings Report is 7/30/20 Before Market Open.

July Wheat Got In My Face Update 5

Woot! We had a nice follow through to the upside today. In the 5/27/20 post I mentioned we will create a Head & Shoulders pattern if we continue up in price (https://jmstweets.blogspot.com/2020/05/july-wheat-got-in-my-face-update-3.html). Well, we did and we did. I added the neckline and measured move in light blue on the chart. I didn't copy and paste the measured move yet, to find a new target, because we haven't broken through the neckline yet.

If we do breakout through and close above the neckline, I'd want to add to our position. However, our current target of 528 looks like a serious resistance level, so rather than add to the long position at a breakout, we should wait for a likely rejection off 328 resistance, followed by a likely retest of the neckline, and finally a reversal back upward. On the reversal back upward off the neckline, that's the best time to go long. By then our current position will have been liquidated.

July Soybeans Possible Breakout Update 2

Another tough call today, similar to the tough call on wheat 5/27/20 (https://jmstweets.blogspot.com/2020/05/july-wheat-got-in-my-face-update-3.html).

The 4 days consisting of today and the last 3 trading days form a sell signal. Its a kind of double doji Evening Star candle pattern.

Today and yesterday's 2 candles form a sell signal also. Its a "doji gap down".

And today's candle alone is a red candle with no top wick that closed below the 8ema.

All 3 of these bearish signals are telling me to close our long position. However, I see extenuating circumstances.

We are oscillating up and down within a fairly well defined consolidation range between 857 1/2 and 828 1/2. So it seems likely if we do continue down we'll probably stop and reverse at the bottom of that range. The 4/21/20 candle does have a scary low at 818 1/2, but that looks anomalous compared to the other candles.

Here's an analogy. Look at the 3 candles from 5/21/20 - 5/26/20. They make a strong bullish pattern. Its described in an earlier post in this thread. But does it rocket upward, as you'd expect? No, price is stifled at the 34ema and 50sma resistance area, forms doji's and gaps down today with continuation. I point this out because we just had a strong buy signal fail within this consolidation. So if today's sell signal also fails at the bottom of the consolidation, it wouldn't be very surprising.

Also, notice our low today, and yesterday for that matter, stops exactly on a downward Trend Line. Its not uncommon to retest a level after a break out. The 5/26/20 candle can be considered a break out through the Trend Line. So maybe we're just retesting the Trend Line after the break out.

I've given 2 reasons not to exit. Here's another one. July Corn, Soy Oil, and Wheat all look bullish. Soy Meal's decline has leveled out on very low stochastics, so that doesn't look very threatening. These other grain futures provide a somewhat supportive price environment for Soybeans.

Do we sell, as our trading rules instruct, or do we hold due to the specific circumstances of this trade? The rules assume we can always buy back in, but we could gap up when the market re-opens Sunday night, and run up much higher before I can wake up and do something about it. I could enter a conditional order to enter if price exceeds a a certain level, but we could have a large gap up followed by a big profit taking down move. I'd much rather deal with a market re-open in real time where I can use my judgement.

Today's candle closed close to halfway back up and close to the 8ema, although this is a very weak argument to not sell.

Due to the very muted reaction to buy and sell signals earlier in this consolidation since 4/22/20, and the fact that today is a Friday, I decided to hold our long position.

However, since the bottom of the consolidation is 828 1/2, I changed our Stop Loss from 830 to 827 1/2.

July Wheat Got In My Face Update 4

Well, looks like holding onto the long position yesterday paid off surprisingly well today. We climbed through yesterday's open, the 8ema, the 3ema, the 20sma, all the way to the 34ema (Blue-green color downward line at today's high. For a description of all the colored lines on my charts please see jmstweets.blogspot.com/2015/04/my-standard-chart-indicators.html.), and we closed above all of them.

Unfortunately, today's candle combined with yesterday's candle do not form a buy signal. However, we do have all the other indicators on the original post in this thread. And, if we continue up from here, then yesterday's low forms a higher low than the previous swing low on 5/18/20 at 493 3/4. This could be very bullish, if we don't make a lower low before hitting our target.

So we leave our position in a better condition today than we did yesterday, and with more expectation for a successful outcome.

July Soybeans Possible Breakout Update 1

Today's price action went up to and tested the 50sma, then went down and tested the Trend Line, and rose up and closed above the 3ema and 8ema, resulting in a Doji candle. The second Doji in a row. A Doji candle signifies indecision.

We're currently caught in a bobble (term credited to Steven Bigalow of Candlestickforum.com) between the 50sma and the Trend Line. This can continue for several trading days. Normally it would eventually break out to the upside or the downside. However, we've been in a consolidation for weeks. So maybe we just continue to get more of the same. Indeed, you can see the Bollinger Bands and Keltner Channel are pretty flat.

But if you look at the consolidation you can see we're already near the top of it. So, if we break out to the upside, we'll clear the 50sma and most likely clear the consolidation range. The past 3 days we closed over the 8ema, which favors a break to the upside, if we get a break out.

And there is still plenty of room in the Stochastics before we have to worry about being over bought.

If we do get a breakout to the upside, it would be normal to get a small retracement back to the breakout level, then a resumption of the original breakout direction. In this case, the breakout level is the 50sma and/or the top of the congestion. A retest of this type would be a stronger pattern then just meandering all the way up to our target because once the support level is "proven", traders can have more confidence in the breakout, rather than worrying about when the up move will reverse.

Unfortunately, for our mental health, tomorrow is a Friday, which can be a quiet trading day. So we'll probably have to wait until next week to see if we get a definitive break out.

I feel like I should add a reminder that all of my analysis and expectations are my opinion.

July Wheat Got In My Face Update 3

Tough call today!

On one hand I should exit this long trade because we closed below the 8ema. Actually I should have exited yesterday for the same reason.

But price action likes to retrace less than 100% of the previous move, then continue in the original direction, and you have to make allowances for that natural behavior. For today's candle, notice the calculations shown on the bottom of the chart. It shows today's low was 75.2% retracement of the recent up move, and today's close is 62.8% (very close to 61.8% Fib ratio) retracement. If this is the extent of the retracement, and we start back north in tomorrow's session we'll probably close above the 8ema, and start to form a possible Inverted Head & Shoulders pattern.

If you look at the first post in this thread (https://jmstweets.blogspot.com/2020/05/july-wheat-got-in-my-face.html) you'll notice on the chart we're making a double bottom. If we make an Inverted Head & Shoulders and break up through the neckline, as part of a double bottom, we could have a sizable move to the upside.

Plus we gapped up at the open of today's candle, and continued higher before we rejected off the 20sma and reversed lower. So maybe what we're seeing is the result of profit taking. If that's true then we didn't have an actual change of sentiment.

July Corn, Soybeans, and Soybean Oil, could be described as bullish. This adds to the odds Wheat could turn bullish, in my opinion.

To be frank, while everything I said above is true, it comes from my aversion to taking the loss by exiting here. If price closes lower tomorrow, the loss will be worse, and I'll be sorry I didn't follow my exit rule today. But if I got out and took the loss, then have to re-enter at a higher price tomorrow due to big move back up before I wake up, my profits in the end, if any, will be less. I'm not sure whether I'm having a self-discipline problem or I'm making a wise decision to waive the rules in this specific case.

Tough call today!

July Soybeans Possible Breakout

July Beans have been in a bottoming consolidation for weeks, as part of a descending triangle. Today's candle may indicate a breakout to the upside. Here's what I see:

• Bullish Engulfing candle (double).
• Engulfing past 2 days bearish candles.
• Actually engulfs past 7 candle bodies.
• Morning Star-like candle pattern.
• Closed well above the Trend Line.
• Closed above 8ema.
• Large volume.
• Plenty of room on stochastics.

Those are the bullish indications. However, today's high rejected off the 34ema, and we have the 50sma hovering over us that could provide resistance. If we can clear those 2, it looks like pretty clear sailing.

Due to the pent up energy from a long consolidation, and a possible BB/KC breakout, this could be a good size move. So, if things go well, I may move the target higher as we progress.

Entry 847 1/4.
Target 50% Fib 869.
Stop 830.

Jeff Huge Bearish Call on US Equities

Saw a very interesting presentation. This cycles chart is supposed to be accurate for the past 100 years. Predicts the US equities market is headed way down until a bottom in 2023. Dow to go into 6 thousands.I suggested 6,470 for the Dow on my 3/18/20 blog posting (https://jmstweets.blogspot.com/2020/03/dj-30-index-targets.html).

This is an interview with Jeff Huge of Alpha Insights on the Larry Pesavento show on TFNN 5/15/20. 

Start at time 24:10 to 50:58

https://youtu.be/d26fQUYf1jk

I post this because it supports my own opinion.

Stan Harley Bearish Call on Equities

Stan Harley, a newsletter publisher, presented a very interesting bearish opinion on the US stock market during an interview on the Larry Pesavento show on TFNN. Basically, he's expecting a bearish market for the next couple few years.

If you'd like to see it, it's from time 24.11 to 40.11 on YouTube:

https://youtu.be/eYk4GTD7N6g

If you're interested in Stan Harley, here's his link:

http://www.harleymarketletter.com/profile.html

I post this because it supports my own opinion.

July Wheat Got In My Face Update 2

Today's candle came all the way back down and went below 61.8% retracement of the range of the past 2 days. If it closed under the 8ema we would have had to exit the position. But thankfully, price hit bottom and bounced back high enough to close right on the 8ema.

Today and the past 2 daily candles formed an Evening Star candle pattern, which is bearish. And we're still in a general down trend. This is a very squirrelly chart right now. The idea is it is going through a bottoming process. We have the bullish indications I listed on the first post in this thread, but this trade could still fail.

Even though we have an Evening Star pattern, we didn't close under the 8ema, so we held the long position for the long Memorial Day weekend.

July Corn High Risk Trade Exit

I sent out a Tweet this morning when I sold the Call option referenced in the first post of this thread. Today's candle broke through the Trend Line and continued down with apparent intention. So we sold the option for 3.00 points.

Of course, as Mr. Murphy would have it, price retraced back up to the 8ema and the Trend Line. However, it did close a little under both, which is a subtle hint we may get more downside. I considered getting a Put option near the market close, but restrained myself when a voice in my head said "you have no edge". Which is true. It would be wiser to wait until the next market session and see which way it breaks. There isn't a compelling skew of the odds one way or the other. So I just sat on my hands for now.

The July Corn 3.35 Call option had cost 4 1/4. So the loss is 3 - 4 1/4 = -1.25 * $50/pt = $-62.50. Glad we got the option and not the futures on this one.

July Wheat Got In My Face Update 1

We had a very nice continuation today after a gap up at the open, but then we got a retracement to the Trend Line. We're still above the open as well as the 3ema and 8ema. So steady as she grows.

July Wheat Got In My Face

When I first brought up the July Wheat futures chart this morning I said "Whoa!"out loud. Here's what I noticed on the Daily chart:

Double Bottom on 3/16/20 and 5/18/20.
Morning Star like pattern formed by today's candle combined with the last 2 days.
Doji Gap Up between yesterday and today.
Very low stochastics.
Large candle on high volume.
Previous large candles, on this chart looking backwards a couple months, with small wicks usually have continuation in the next few candles.
At the end of the day it seemed likely we'd close above 8ema.

Then I zoomed in on the 10 minute chart:

Here's what I noticed:

Could be forming 3 drive pattern.
Could be forming a cup pattern.

All these observations are bullish. But its a little early to enter a trade with conviction until we see some follow through. But if we don't enter, we could miss a nice gap up and run.

So we got the July Futures 5.20 Call option for 13 7/8  points * $50/pt = $693.75.

For a target, there's a very nice confluence of several possible sources of resistance:

Fib -261.8% from the Purple range.
Fib -61.8% from the Yellow range.
Daily 200sma
Daily 50sma
Daily previous swing high

These all occur at about 528 1/2 (the 50sma is converging on this level). So We entered a conditional order such that when the futures contract reaches 528, we'll sell the option.

The option Delta was about 48% when we bought it, and July Wheat was 514. If we hit our target at 528, then the profit should be at least (528-514)*48%=6.72 points*$50/pt=$336. That would be about a 50% return on the $693.75 option cost.

The most at risk is the full option cost. Chances are very high, if we need to sell the option due to the trade going against us, there will still be a significant residual value. For example, say we sell the option when the futures closes under the 8ema at 504. The reduction in option value would be approximately (514-504)*48%=4.80*$50/pt=$240. So, the Risk:Reward is likely acceptable.

July Corn High Risk Trade Update 3

Getting some long tailed gyrations past 2 days but closing on or over the 8ema, as well as over the Trend Line. Notice today there was significant volume. Looks like an attempt was made to break down through the Trend Line, but price recovered by the close of trading. Given the price action and high volume, looks like the bulls and bears are battling it out, and were evenly matched.

Held on since we haven't seen a sell trigger yet.

July Corn High Risk Trade Update 2

While I wouldn't say we're in the clear with this trade, we are looking better today. We stayed above the upward Trend Line, and we closed above the 3ema, 8ema, and the 20sma.

Also, we had an increase in today's volume compared to the last 2 trading days. That adds credibility to today's bullish close.

July Soy Oil looked very bullish, while Soy Meal looked very bearish. Soybeans looked bullish but Wheat looked bearish. So, can't really get much insight from the grains complex as a whole.

So we stay in the long July Corn trade and continue to watch it closely.

July Corn High Risk Trade Update 1

Well, we're still alive. The high risk trade (because it was too early) is in a good position. You can see on the Daily chart above, we had a positive day, and the close was over the 8ema. It also closed over the 20sma and the Trend Line support.

Since I showed the 10 minute chart yesterday, here's a look at the 10 minute chart just after the close. You can see July Corn went generally up since yesterday's Trend Line break out.

If I didn't enter the trade yesterday I would have at the close today at a less advantageous price.

We were looking good at the close, so held onto the long position.

July Corn High Risk Trade

Above is yesterday's chart, the same as what is on yesterday's post. I saved it at exactly 2:33pm ET yesterday. The grains market closes at 2:20pm ET. When the market re-opened at 8pm ET last night,the daily candle from yesterday had changed. There must have been some late trades not yet in the candle or bad data in the candle that was corrected.

You can see on today's chart how the candle changed:

Notice how the bottom of yesterday's candle is mush closer to the 8ema. Even if I didn't exit yesterday, I would have last night or this morning as today's candle started descending. Why then do I point out yesterday's altered close? To help explain why I did what I did today.

Today, near the close, I took a look at the 10 minute chart to see if there were any Bullish or Bearish indications. Here's what I saw:

There's clearly a triangle that's been forming since about 8am ET. You can see it broke out to the upside, came back and retested the downward trend line, and continued upward. This is a bullish indication. It's also starting to form a bit of a cup formation. If price continues and completes the cup and then breaks higher, that would be a bullish signal.

We closed over the 3ema, 8ema, 20sma, 34ema,  and the 50sma on the 10 minute chart. That's bullish, but we closed under the 8ema on the Daily chart, which is not bullish.

We should not enter a long position until we close over the 8ema on the Daily, and then get confirmation on the next candle. But we've been looking for Corn to bottom on the Daily chart for a while now, and this might be an opportunity to get in a little early thanks to the 10 minute chart.

So, recognizing we're breaking a more conservative rule, designed to maximize our probability of a winning trade, I decided to take a high risk, albeit fixed and reasonably sized, bullish trade. To limit our risk to a fixed amount I bought an option.

I got the July (with June expiration) 3.35 Call option for 4 1/4 with a 27% Delta. So max risk is 4 1/4 * $50/pt = $212.50.

Trying to catch the bottom of the July Corn chart has been problematic but if we catch it early enough and it hits our target, it'll be well worth it.

July Corn Rising? Exit

Our corn trade went to mush. We closed under the 8ema but didn't form a sell signal. Normally I'd hold on to see the price action of the beginning of the next candle or maybe even hold on longer to see if we get support at the upward sloping trend line under our bottoms.

However, take a look at the 3 thick upward angled white arrows. They point to similar upward trend lines. What happened at each? Break through to the downside. I put a question mark at the base of the current trend line because we don't know if we'll get support or a break down. Its about 3 points further down to find out (318-315=3*$50/pt=$150).

Given the recent history indicated by the arrows, and the ugly Bearish charts for Soybean Oil, Soybeans, and Wheat, I think the best decision is an exit now and re-evaluate in the next day or so.

Sold the ZC July 340 Call for 3 1/2 at 2:19:12pm ET. Waited until the last minute to make sure we were closing under the 8ema.

Loss: 3 1/2 - 5 1/2 = -2 * $50/pt = -$100.

July Corn Rising? Update 1

July Corn Rising? Yes. Got a nice big green candle on 5/12/20 on good volume. Closed above the 20sma, which was a resistance level challenging our ascent.

Tonight the market reopened 8pm ET and we went down a little for what Carter Braxton Worth calls a "check back" to the 8ema and 20sma. At 11pm you can see we bounced back up and we're over the 3ema.

Things look promising for our trade at the moment.

July Corn Rising?

On the chart see the 5/8/20 comment. July corn has been bottoming for a couple weeks. Finally, it looks like its breaking out to the upside today. Here's what I see:

• Double bottom.
• Little rounded bottom.
• Bullish engulfing last 2 days.
• Close slightly above 8ema yesterday.
• Close above the 8ema today.
• Break through the downward trend line.

We were looking better before the rejection off the 20sma, but we did close above the 8ema. We may get a little bobble between the 8ema on the bottom and the 20sma above but the odds favor breaking through to the upside. I say that because of the reasons listed above, but also:

• The thick white angled line segments show a possible 3 drive to a bottom pattern.
• The thick yellow angled line segments show a smaller possible 3 drive to a bottom pattern.
• The thick purple angled line segments show a possible AB/CD pattern.
• Soybeans, Soybean Oil, Soybean Meal, and Wheat all look bullish as well.
• There's a Positive Stochastics Divergence on July weekly corn over the previous 2 candles.

Due to the choppy nature of some Ag futures lately, and other concerns, such as tensions with China lately that could effect the grains market, as well as not proving we can break through the 20sma yet, I decided to go with the defined risk of an option rather than the futures, at least to begin with.

Got a July 340 Call option with a 30% Delta for 5 1/2 * $50/pt = $275.

The target is the 50% Fib shown on the chart. Its 356 3/4. I entered a conditional order to sell the option when the futures hit 356 1/4. I like to shade targets by 2 ticks to account for the Bid/Ask spread and also sometimes targets are missed by a couple ticks.

Assuming we lose the whole value of the option, the Risk is $275.

The reward is 356 1/4 - 322 1/4 (where futures were when I got the option) = 34 * $50/pt * 60% Delta (at target) = $1020. The Delta is 30% now but if we hit our target at 356 1/4 it'll be about 88%. If we use a simple average (30+88)/2=59.

I got the 88% by looking at the Delta for a 320 (ATM when I looked) - 34 = 286 Call. There isn't a 286 Call so I used a 285 Call. A July 285 Call today, with July Corn at 320, is 34 points in the money. That's where we'll be if we hit our target.

Using a simple average is an approximation because the price curve of an option is non-linear. Also, using the 88% Delta for an option today is an approximation because we'll have a higher Gamma when we hit our target due to a shorter time to expiration.

So, bottom line for the Risk:Reward is 275:1020 = 1:3.7, which is great.

ZL Double Bottom Exit

Now we get the bullish break out! This is why we entered this trade to begin with. Normally I'd re-enter this trade long, but we've been experiencing several days of chop, and we're going into the weekend. Better to get confirmation we're still going up on Monday.

By bullish break out I mean we can see on today's chart:

Bullish Harami 2 candle pattern the last 2 days.
Break through the 20sma.
Close above the 8ema and 20sma.
Close more than half way up today's candle.

You might say wait a minute, we could see the last 2 day's candles before today. Yes, that's true but we couldn't rely on it due to the chop, and the 20sma was providing resistance.

So now that we have some bullish signals its time to sell the Put option we got as a hedge. I waited until the last possible minute to make sure the futures would close bullish, and at the same time give the market a chance to do some profit taking which would lower the futures price which would increase the Put option price. At 14:18:28 I sold the option for .135.

The loss on the Put option was .135-.40=-0.265*$600/pt=$-159.

Adding that to the loss on the futures (See "ZL Double Bottom Update 5"): $-159+$-228=$--387.

This trade is clearly a loss. But now it looks like the trade will go as originally planned. So, we'll revisit on Monday.

ZL Double Bottom Update 6

Chop... Chop, chop, chop. Hate chop!

We are closing on either side of the 8ema daily. Held the Put option because if the pattern holds, we should go down tomorrow. We can't tell which way the chart will break, up or down.

We're chopping around the 8ema but we haven't broken up through the 20sma. If that continues to be true, we'll probably break downward and find support at the 25.02 area. That would be a good time to sell the Put. So that's the current plan.

ZL Double Bottom Update 5

Today we ended the session with a Bearish Engulfing candle pattern with a close below the 8ema. So we had to exit the futures position. Sold it for 25.86.

Held onto the June 25.50 Put Option. Unfortunately its currently down -$27 from where we bought it. So it didn't offer any actual hedge against the Futures loss, but probably would have if the stop was hit. But, the candle pattern we had today is bearish and if we continue downward in the days to come, then the Put will increase in value. The Put expires on May 22nd, so we'll have to sell it by then.

If what we're seeing on the chart is a Bull Flag, which is possible, then we may re-enter this trade on the long side.

Loss on the futures is 25.86-26.24=-.38*$600=-$228. Too soon to label this a losing trade because we could more than make up today's loss with the Put option. That's why I didn't use the word "Exit" in the title.

ZL Double Bottom Update 4

The Bobble continues. I mentioned the Bobble on the "ZL Double Bottom Update 1" post. Price is bobbling between the 20sma and the 8ema. Today we were up at the 20sma on top of the range but we closed at the 8ema on the bottom of the range. That's not Bullish.

However, we closed on the bullish side of the 8ema. It was easy to decide to stay in the futures trade but whether to hold onto the Put option we got yesterday wasn't as obvious. Its losing value because we're higher than when we bought it, and also due to Theta time decay. It can't lose more than it cost which is $240 (see yesterday's post). Its down $80 near the close.

Am I confident the breakout from the Bobble will be through the 20sma at the top? That's what we want since we're long, but no I'm not confident because of yesterday's candle dropping pretty far below the 8ema. Also, soybeans and soy meal charts look bearish.

If I lose the whole $240 Put option value by holding it, waiting for a close above the 20sma as confirmation we don't need the Put anymore, can we afford it? Well, if we hit our target we'll make $876 (see the original "ZL Double Bottom" post in this thread). So yes, we can afford holding the Put.

So those 2 answers led me to decide to hold the option at today's close.

We've only been in the Bobble for 4 days but I am more than ready to break out already.

ZL Double Bottom Update 3

This morning around 6am ET, I awoke to find a broken Head & Shoulders. Sounds like a horror movie. It was worse than a horror movie because it was real :) But I had my stop working since I entered the trade, so I new my worst case. Although, the stop isn't much help over a weekend if you gap down big Sunday night at the open.

So, what do we do? We can just rely on the stop at 25.70, or we could exit and look to get back in. Or, we could do what I did, which was get a Put option for protection, and hedge the $324 loss we're risking if the stop is hit. I got a June 25.50 Put with about a 33% Delta for .40*$600/pt=$240.

ZL went down further and finally bottomed and started back up.

By the close we ended up very close to the 8ema, but just under it. The Futures value was down a little and so was the Put option. What do we do here?

Don't want to exit the Futures and find a gap up 8pm ET tonight. Don't want to sell the protective Put option and find a gap down tonight. So, I made a command decision and did nothing. Nothing is a valid choice. In fact, I think it was in "Reminiscences of a Stock Operator" by Edwin Lefèvre (a great book) where the author said something like "the most money I ever made trading was by doing nothing".

DJ-30 Index Targets Update 2

Overall, I'm expecting something like an Elliot Wave 3 leg down pattern, where the middle down leg is about 1.618 the length of the first down leg. An Elliot Wave is shown above.

We already got the 1st leg down and we're working on the 1st retracement up leg (Wave 2 in Elliot Wave parlance). As shown in my last post in this thread, Wave 2 has already made a retracement between 50% and 61.8%, so its about time to start Wave 3, which is the 2nd wave down. If things go as I expect, this drop will be the biggest but not the last. Here's that chart again.

If you asked me what would cause this case to be wrong and the market has made its low and we make new highs before we make new lows, I'd say its the artificial dramatic inflation of the money supply by the Federal Reserve.

US Dollar denominated assets, such as the stock market, may increase in price to reflect the diminished and diminishing value of the Dollar (See my pizza post). But if that happens we're probably on our way to hyperinflation, which will kill investor confidence, which will drop the stock market later, after the new highs. Either way, the stock market is a very risky place to trust with your money for a very long time.

ZL Double Bottom Update 2

In my previous post this morning I said "And now we'd expect a rejection off the 8ema.". That's exactly what we got. Came right back up to the 20sma. This is encouraging.

Next I'd expect to either bobble back down to the 8ema or break out to the upside Sunday night. Or retest the 8ema Sunday night and then reverse near the 9:30am ET open to break out to the upside.

No brainer to hold the position over the weekend. Although, holding over a weekend is not my favorite part of trading.

ZL Double Bottom Update 1

Price came down overnight to where we entered this trade, evaporating over $300 in paper profits. We can't let that engender any negative emotions. Its just a rejection off the 20 sma on the daily chart. That's not unusual. Its not a deal killer. And now we'd expect a rejection off the 8ema.

We could have a bit of what Steve Bigalow (candlestickforum.com) calls a bobble as price bounces between the 8ema and the 20sma.

We would have preferred to have sliced right through the 20sma but at the moment we have to just hold on. If we get a candle close under the 8ema we'll have to exit.