Luna $ Ticks

August 5, 2008

Wave Count

Filed under: Trading SPX SPY — moontrader @ 2:57 pm

Here’s my wave count since last year’s top. One of my main criteria for the count between January 22nd bottom and May 19th top is time, which is shown in my previous post.

The main question here: is the bottom of July 15th the end of big wave C or is it just the first leg “a” of a deeper – and more panicking – wave C?

While time (and action) will answer that question, my main concern now is the short term direction and target. It seems that we’re heading toward the levels 132/133 in SPY, judging from the proportions of subwaves “a” and “b” seen in the last trading sessions. The thing is that this level also corresponds to the bottom of wave subwave “3” (in grayish blue, at 132.86), showing that there’s an agreement to that level. We should be getting to that level in the next week or so, probably at or around August option exercise (the 15th).

Once we get to that level, we should have a drop (hopefully) and the extent of this drop will definitely tell us at what point we are.

I’ll be covering my SPY calls between today and tomorrow around 130 and wait for another entry point which should take us to the 132/133 level. I will only get puts once we’re in those levels, which will give me a clearer stoploss in terms of both price and date. That means, if the drop that will eventually (and hopefully) happen after we reach those levels is sharp and fast, then we’ll be heading to bottoms below 120. On the other hand, if the drop is shallow after a couple of days, then I might close the position.

An update on today’s action:

We strongly pierced through my 3 DMA’s (3×3, 7×5, 25×5) and MACD is definitely in positive territory, along with the Stochastics. And more, the Detrend Price Oscillator shows there’s still room to the upside.

While the circumstances are rather bullish, remember that we’re still in a longer term bear market and this rally might not long last. My 3 DMA’s have become support and a confirmation of a new short term trend reversal should come when DMA 25×5 will be seriously pierced to the downside along with a reversal in the MACD (and obviously, the Stochastics).

Any comments, suggestions and ideas are welcome.


1 Comment »

  1. That seems to be a reasonable target. The 38% retracement would be around 134-135, perhaps a confirming candle to take a position to the downside again.

    Comment by Jigsaw — August 5, 2008 @ 4:51 pm | Reply

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