(Click On Charts To Enlarge)
Chart #1 - Daily: Prior to the October breakdown, the UYG had FOUR nested patterns. Those can be very powerful when they break out or break down. They're "packing some punch." When the Ascending Triangle (or, Symmetrical Triangle, if you will) in purple broke down in the $16's and the Rectangle broke down in the $14's, the targets of 5.62 and 3.67 might have seemed a bit ridiculous, but at yesterday's close of 6.52...not so ridiculous :(
Notice the steep black down trendline coming off the final high of 24.88. Be careful about viewing a move above a sharp trendline like that as a "breakout." They often produce some kind of move higher, but they can be very deceptive. They often come back and "walk down the trendline," or move to new lows as this one did. Eventually, if the UYG had only traded sideways, it would have "broken out" at some point simply by falling over the trendline. Those moves often are a "break above," but not a breakout.
Chart #2 - RSI: Be careful of Positive Divergences in a bear market. There was one in June in the 20's, but the UYG dropped to $14's. The positive divergence at 14.75 in July produced a very nice rally, but it also was accompanied by a Bullish Morning Star pattern in the daily chart. We recently had another positive divergence, and now a DOUBLE positive divergence. Looks encouraging, but the UYG closed a new lifetime low yesterday.
Chart #3 - MACD: It took a TRIPLE positive divergence in the MACD to get a good rally in July, and again, the third one was accompanied by the Bullish Morning Star in the daily. Getting on the first two positive divergences didn't work. The MACD currently is coming back to its signal line. A bounce off that often produces a rally. Not always. There's no always in the stock market.
Chart #4 - Volume: Huge volume doesn't always produce THE capitualtion low. The UYG has made two "lower lows" on much less volume.
Chart #5 - Possible Bullish Wolfe Wave - I'm not real happy with the Wave 1-2/Wave 3/4 relationship since Wave 3/4 is much longer in terms of time, but "...if it walks like a duck...quacks like a duck." The Wave 5 Fakeout to the downside is a posssibility here. The proverbial "everyone" who has been long the UYG has a loss, and the breakdown of what looked to be a Bullish Falling Wedge invites the bears in to short it, putting "everyone' wrong-footed. If the UYG goes lower, or even rallies right from here back inside the Wolfe Wave (above the Wave 1-3 trendline), that would suggest that the "fix is in," as it were, and that the UYG could rally to or at least toward the target line, at Wave 6. I'd like to see a move back inside the Wolfe Wave (if we get it) accompanied by something like a nice bang higher off the signal line in the MACD.
No time to proofread. Sorry. Will do it later.
4 comments:
Melf,
I completely missed the market today even though I was waiting for the break. I had a completely dysfunctional emotional break in my trading.Do you have any suggestions about how to deal with it and return to stability and dispassionate trading? Thanks for any old timer advice.
What happens after the target of a Wolfe wave is made usually? Just continues the same direction as the lead in usually?
S&P looks like a Wolfe wave if it does what Atilla's wanting it to do.
Is the wolfe wave you are talking about an expanding triangle and aren't expanding triangles unstable. I can see the potential for an expanding triangle in Attillia's forcast, but not in the above chart. By the way any ideas on Attillas secret indicator. it appears to me to be option market based.
Mark,
Sorry to hear that, but you're not alone by any means. "Fear and greed," (and other emotions) seem always to be like little monkeys on our backs, and it can be very difficult to stay disciplined, have a plan, and stick to it.
The "greed" monkey is on my back because I waited until the UYG got all-ll the way back to UNCH, at 6.52, yesterday afternoon before I bought it. That little monkey is saying, "You KNEW that it was going to rally after that Wave 5 washout. You should have bought it in the low $6's. What the &^#$ were you waiting for, you nitwit?!" LOL.
No, I didn't KNOW that it was going to rally. I had a strong "feeling" that it would rally back to the Wolfe Wave, but I've gotten cracked many times before for playing strong "feelings" that I've had ;)
Bottom line: try to have a trading plan ahead of time, have a reasonable stop if it doesn't work out, and try to steel yourself to your own emotions during the daily gyrations of the market.
Good luck, Mark, and hang in there, buddy!
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Susannah,
After a Wolfe Wave target is MADE, I don't find that it does anything consistently, as far as the next move is concerned. Some examples that you can look at:
1. "SPX: Bearish Wolfe Wave," posted on Nov. 6. The MADE very quickly, but the SPX continued down until yesterday afternoon.
2. "UYG: 14.08-14.50 Resistance," posted on October 17 (the chart is in the second post that day). The Wave 5 Fakeout was THE top for that move up in the UYG. Several other bearish patterns developed during and after that. "Nested bearish patterns." The UYG continued down...down...down, and didn't continue its prior trend.
3: "How The Shorting Ban Played Out," posted Oct. 19. There are two charts in that post on the two Bullish Waves in the SKF. Both of those examples resulted in sizeable selloffs after the targets got MADE.
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ohunt,
It isn't an expanding triangle right now, although it would look like one if the UYG takes out the Wave 2 high, wouldn't it?
As far as "unstable," that's a pretty good word, I'd say. If you look at the charts that I just mentioned to Susannah, particularly the SPX and the SKF charts, the moves to the Wave 6 target line can be very parabolic on the upside and crashy on the downside, like we just experienced on the move down from SPX 1007 to 818. That was a wicked percentage decline, which began when the Bearish Wolfe Wave broke to the downside, at SPX 979.
No, I don't have any idea about Atilla's flux capacitator, but it's fun, isn't it? Your guess about something to do with options seems like a good one ;)
Speaking of "unstable," look at how parabolic the chart of that flux capacitator is! We've had about 200 points down in the SPX, then yesterday's nearly 100 point reversal. Maybe we ought to blame tha-at thing for all of this volatility, huh?! LOL.
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