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At 09:08 PM 10/7/97 EDT, Ronald McEwan wrote:
>Based on signals I am getting I am looking to buy OEX Puts if the OEX
>moves below 940.48 and the Vix moves above 21.78. I expect the OEX to
>move below 940.48 before the VIX gets to this number. I think this move
>down will be short lived.
>
>Good Luck
>Ron McEwan
>
Ron and fellow Realtrader's,
For those who are interested in the symmetry of market declines, and
based on Ron's possible "short-lived" down move in the OEX, I thought I
would indicate to you where the market should find support once the decline
begins.
Please remember, this is based on a short term time horizon lasting
probably several days. And instead of using the OEX, I will illustrate my
analysis using the 60 min S&P Cash Index.
Currently our smallest wave structure of any significance originally
began on 9/22/97 at 960.59 (Wave A high) and Wave B low on 9/25 at 937.40.
This decline measures 23.19. Thus our leeway is 20% (rule) of the 23.19
decline or 4.64 points and forms a target decline zone of 18.55 to 27.83
points.
On 10/3/97 Wave C high was formed at 975.47 and Wave D (the BUY signal)
was also formed on 10/3 at 955.13. This decline measures 20.34 points AND
falls within our target zone as mentioned above. Thus a short term buy
signal was issued last Friday. Since that low, we have again formed a new
high, higher than Wave C. Once this current move stops and rolls over, we
should look for a magnitude decline which matches the original Wave A-B
decline of 23.19 points +/- 4.64 pts. Your stop loss will be set at a
level of 27.83 points from the high. Again this is calculated by adding
23.19 + 4.64.
On a longer term symmetry analysis, you will also see an original wave
structure that began on 8/20/97 at 939.47 and ended on 8/29 at 896.82.
This decline measures 42.65 points, and we will call this wave structure
Wave 1-2. Our 20% leeway is +/- 8.53 points which forms a target decline
zone of 34.12 to 51.18 points.
On 9/5, the Wave 3 high was formed at 940.27 and on 9/11 the Wave 4 low
was formed at 902.57. This decline measures 37.70 points and also falls
within our target decline zone of 34.12 to 51.18 points. Hence an
intermediate term buy signal was formed at that time and the index has
rallied from the 902 level all the way up to our current level of
983....not bad.
So how do we play this analysis. Since we have two wave structures, as
mentioned above, I would avoid taking any long positions at this time
especially since the market is overbought on a short and possibly
intermediate term basis (For aggressive traders, consider going short
possibly tomorrow, 10/8/97). For those short-term traders who want to go
long, wait until this market declines 18.55 to 27.83 points and becomes
overSOLD on a short term basis with respect to your favorite indicators and
oscillators. This will be your buy signal. Your stop will be, if the
market declines greater than 27.83 or 28 points from the high. If that
occurs, and it is possible because we are now beginning an overextended
wave structure, look for a decline in the magnitude of 42.65 points +/-
8.53pts. Again, this translates into a decline of 34.12 to 51.18 points
from the high. At which point an intermediate buy signal will be issued.
Wait for conformation from your favorite indicators and oscillators.
Again, your stop loss will be, if we decline greater than 51.18 points from
the high. ( If this should occur, I will update you as to the next larger
wave structure which took place between 8/7/97 and 8/18/97...just remind me).
Anyhow, hope you find this information useful. One caveat that I should
mention deals with the S&P Futures Index, specifically the December
contract. If you take a look at that chart (preferably a 60 minute chart),
you will notice that the Wave 3 high that was set on 9/5/97 in the futures
price IS NOT GREATER than the Wave 1 high as presented in the Cash Index.
Therefore, the FUTURES chart has formed a DIFFERENT wave structure versus
the Cash chart. Personally, I have not seen this happen before and hence
this situation may form a complication in our analysis with respect to the
number of wave structures. For those who care, I have measured this 9/5/97
to 9/11/97 decline on the Futures charts and we have a magnitude decline of
41.95. This is similar to the cash decline but instead of being a Wave 1-2
and 3-4 as in the cash chart, we just have a wave structure that we can
call Wave 1A-1B since the 9/5/97 high is NOT higher than the 8/20 high.
Therefore, it would be prudent for us to consider this decline as a
separate wave structure as compared to the Cash analysis. Obviously this
only applies to the Futures prices and the wave PRECEEDING this wave (8/20
to 8/29) measures 50.50 and will need to be considered if things get a
little crazy. Anyhow, this may be getting a little complicated so maybe
you should forget what I have said in this paragraph if you are getting
confused...if not, good for you!!! I guess we will see.
Finally, if you take a look at the 14 period stochastic oscillator on
this 60 minute chart, you will see that it is extremely overbot, and has
been for several days and is beginning to rollover. This is usually a
tell-tale sign that a potential reversal is pending. And yes I do know
that stochastics is a trading range oscillator but can also provide
fabulous signals after a strong trending period. This is according to
George Lane, the creator of Stochastics. The key is to know how to best
interpret this oscillator, and yes, a sell signal is close at hand.
Good 'luck' and profitable trading,
John Boggio
PS Note - Again take a look at the original wave 1-2 decline of 8/20 to
8/29. As I said, this decline measures 42.65 points. If we add the 42.65
or 43 points to the top of Wave 3 (9/5/97) or 940.27, we get a level of 983
or a doubling of the original decline...our current level. Often times,
this situation will come to a conclusion with a top (depending of time
frame), in the price action and is best identified by an RSI swing failure.
For recent commentary and more informations regarding SymWave, please go to:
Commentary: http://www.realtraders.com/boggio/disc7_toc.htm
Info regarding SymWave: http://www.realtraders.com/boggio/boggiobio.htm
Thank you.
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