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RE: [RT] SPX

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Hi Lenny,
 
Referring to attached chart:

1) The Wolf Wave reversal pattern was triggered on Thursday when price hit 1355+-.

2) Price did not find support in the 1353+- area as I expected. It continued down to 1330 which is the 162% retracement of the rally from the Nov 26 low to the Dec 11 high.

3) Price rebounded powerfully ... I have drawn a heavy blue line to show overnight price action. The WW pattern calls for price to rally to the WW target line (1420+-) sloping downward to the heavy gray 2003 trendline.

4) Following whatever rally we get, I expect further declines in the market. My chart work suggest that we are quite likely to visit SPX 1250 before this is over. We will know more when we see how this rally works out.
 
I had to be away for most of the trading day yesterday so I left orders in the market for a 1/2 position in SnP futures at 1360 and another half (which I did not expect to be filled) at 1345. Needless to say, when I returned I had a full position on and was deep under water with price in the 1330's. I looked at the charts and decided to stick with the reversal pattern. I exited the full position this morning at 1358 taking a small profit.
 
Why, with the Wolf Wave reversal pattern triggered, did I close out my long position? Using TA is all about identifying when odds are stacked heavily in favor of a trade. I like minimum odds of 2:1 risk/reward and when doing major trades (my long in futures was major) I like 3:1 or 4:1. Had the 1345-50 area held, I would likely be adding to the full position this morning with expectation of booking profits on a 70+- handle rally. The fact that it did not hold, and that price dropped all the way to 1330 did not invalidate the reversal pattern but it significantly decreased the odds of success.

Earl 

From: realtraders@xxxxxxxxxxxxxxx [mailto:realtraders@xxxxxxxxxxxxxxx] On Behalf Of rosow@xxxxxxx
Sent: Thursday, January 17, 2008 9:16 PM
To: realtraders@xxxxxxxxxxxxxxx
Subject: Re: [RT] SPX

Earl,
  Well, 1345 already hit! What a day!
 
Lenny
 
In a message dated 1/10/2008 1:06:17 A.M. Eastern Standard Time, ROSOW writes:
Earl,
  Looks like we are basically on the same page!! Below is an e-mail I sent Ben back on 12/31/07. Thought process looks pretty much the same:
 
In a message dated 12/31/2007 5:32:08 P.M. Eastern Standard Time, ROSOW writes:
Hi Ben!! Up in MA/CT for 2 weeks and just catching up on e-mails!! Attached is my take on the S&P 500 daily chart. I'll try to get to the Weekly by next week. E-wave speaking it looks like we have finished a Wave (1) down move in late November. We have either completed wave (2) up in mid December or are still completing a larger ABC Wave (2) up. At this time minor wave 3 targets 1345 and Intermediate wave 3 targets 1230. See attached!
 
Lenny
 
In a message dated 1/9/2008 9:03:09 A.M. Eastern Standard Time, eadamy@xxxxxxxxxcom writes:
See attached chart of SPX. 1374 and 1356+- are targets which stand out for me. Ultimately, I think we go considerably lower.
 
Earl
 



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