Perception is not always reality. A profound statement created by an Ad agency for Mercedes Benz a few years back. I found it extremely pertinent at the time and still do today as it pertains to the markets. I have been discussing the ongoing correction in the broader indexes and that an intervening rally phase was underway and possibly complete at last Thursday’s highs. I thought better on making the declaration and after Friday’s trade I felt there was a solid chance of getting a higher opening on Monday from which to fail. The best laid plans don’t always come through, however the fact that a higher opening was attempted should count for something, right? Yeah right – about as much as my last trade I suppose. In any case the “B” wave rallies are complete with the next leg down – a 5-wave decline forming wave C of the correction is well underway. In fact by my estimations today’s trade was wave 3 of C. As many readers now know – 3rd waves are a wonder to behold because they are normally the strongest and longest segment within a 5-wave structure. This proved to be the case on Monday as the Russell 2000 lead the way lower. Here is the final tally for the broader indexes: DJIA dropped 326 points or 2.08%, the SPX finished down 40.70 points or 2.28%, the NDX lost 81.42 or 2.31% and the RUT lead the pack down loosing 36.30 or 3.21%. This is typical 3rd wave action tracked in real time.
Where are we now was the big question on Monday. Although many are feeling the downside is just getting started and to be honest that could be correct, but the correction off of the highs does appear to be heading more towards its completion point rather than its mid point. The strong oversold conditions left after Monday’s trade suggests Tuesday will start with another rally attempt. I wouldn’t be looking for much and the move is likely to be led by the RUT and the NDX. Resistance at 1108 to 1115 in the RUT, 3473 to 3485 in the NDX, 1759 to 1766 in the SPX, and 15521 to 15575 in the DJIA should contain upside before the next leg down takes over.
Check out today’s charts for the latest Elliott counts and Fibonacci levels for the broader indexes.
Also included on Monday are TSLA and AMZN as seen through the eye of the Eagle.
Also catch up on last week’s review by clicking here.
Join me Monday thru Friday from 9:30 AM to 10:30 AM EST as I continue to review trading equities using DTS. The room is open to all and is a great place to review how the DTS birds are easy to use and will make consistent trading profits.
The good news is that the current atmosphere remains prime for day trading. And while the $264 billion trade remains elusive there are solid opportunities to trade profitably. I expect there will be numerous opportunities from a growing list for both traders who approach the market from a bullish prospective as well as traders who approach the market from a bearish prospective.
Remember the key is being able to reduce and separate the “noise” from opportunity. This takes knowing and executing a well-defined strategy and allows you to see opportunities amongst the “chaos” and by trusting the mechanics of your strategy, be able to take advantage of them.
The trading opportunities should remain abundant within equities, futures, ETFs, options, treasuries, and precious metals. Opportunity continues to knock on our doors. While it doesn’t come without risk, risk can be defined and more manageable. Volatility and broad moves are exactly what a day trader desires and being able to respond without questioning is a luxury many are unaware of.
Using the Hawk Micro Scalper, Falcon Swing Trader, and the Eagle Trend Trader within the various markets can produce strong results. The combination of any of the “birds”, the Hawk, Falcon, or Eagle platforms with Trade Manager provides a solid, more stress free way to building profitable trades.
Indicator Warehouse has in my opinion the best platforms available covering a wide range of traders from novice to expert.
The Diversified Trading System from Indicator Warehouse offers cost effective products that allow a trader to enter into the “chaos” and trade more effectively.
Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility. Automated stop-loss management and position sizing eliminates most of the problems most individual traders have. Day trading and position trading both require (actually demand) good risk management. Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades.
Profit Finder – System Back Tester. When implemented it allows the user to:
- Immediately know the impact of parameter changes.
- Automatically reads all of your DTS entries and exits
- Calculates the profit/loss of each trade
- Performs a wide number of essential intelligence boosting calculations instantly
- Provides solid details about the effectiveness of your trading strategy/ methodology/ indicators
My point on money rotation and sector rotation is similar to that on parabolic moves that they happen with frequency within many time frames. As traders these types of moves can be a bonus for day trading or position trading so again don’t get caught up in the “what’s the catch.” Realizing a rotation is occurring within a stock you trade or a sector is a great source of stocks to plug into the Diversified Trading System. Allowing DTS to cleanly and beautifully capture the moves though any or all three DTS trading platforms. Our goal remains to assist traders to make greater profits during all types of markets. Sector and money rotation is another tool.
The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA). In the near future I will be adding options strategies to the trading list.
Here is a list of the markets where I have found that DTS (all three birds) are producing numerous signals. Continue to bear in mind that there are days when trading opportunities are not as plentiful. These are days when not trading is likely more profitable than attempting to “force” a trade”:
- DJIA future (e-mini available) – highly recommended for experienced traders
- S&P-500 future (e-mini available) – highly recommended large intraday moves. The SPY options are a valuable alternative to the future.
- Russell 2000 future (e-mini available) – highly recommended can lead in either direction.
- NASDAQ 100 future (e-mini available) very highly recommended and dominated by AAPL, AMZN, NFLX, GOOG, and TSLA – will likely continue to have higher percentage moves as the next larger degree decline begins in the NASDAQ first.
- GS (Goldman Sachs) – good two way volume – usually has $3+ intraday range – Options available
- AAPL (Apple Computer) – highly recommended – Options trading as well
- GOOG (Google) – highly recommended – larger accounts needed – options traded
- LNKD (LinkedIn) – solid intraday range and has picked up recently Options traded
- NFLX (Netflix) – solid intraday range – volatility has deflated on the rise back to $300 – Options traded and very liquid
- TSLA (Tesla Motors) – highly recommended – patience is required if you trade the options – trading the stock remains solid
- TWTR (Twitter) – both stock and options strategies available.
- 30-yr Treasury Bond future – highly recommended
- 10-yr Treasury Note future – solid two way trade
- TLT (Treasury Bond Long ETF) – very active – options as well
- TBT (Treasury Bond Short ETF) – very active (moves inversely to TLT) – options as well
- Gold (futures and ETF – GLD) very active – not suitable for all traders
- Silver (futures and ETF – SLV) – very active – not suitable for all traders
- GDX (Gold Miners ETF) – lower priced – suitable for all traders
- ABX (Barrick Gold) – Large rally potential – capable of sizeable intraday moves.
- NEM (Newmont Mining) superb volatility produces opportunity laden intraday moves.
- EURO FX (futures, mini and micro contracts available) very active suitable for all account sizes – Highly recommended
- Natural Gas (futures) – can be active and volatile
- VIX Index (futures) – not suitable for all traders, more experienced traders should find a growing two-way trade.