Saturday, October 20, 2012

Predicting longer term moves


Its easier to make predictions on long term moves than to be able to successfully capitalize on it. That's not saying much because longer term predictions often are apparent only post-facto.

The above chart is a monthly chart of the ES 12-12 contract and note that the last bar is an incomplete October bar (i.e. we are mid-bar).

From a structural view, we have had a spike or trending channel from around Mar of 2009 to Apr 2010 and then we have a channel phase. The channel lines are shown in blue. At present, we have poked above the channel line on the third push. We should likely get at least two pushes down. Often the lower trend line (blue) is the target. The most pessimistic scenario is that the move will test the start of the channel near Jul 2010.

Given that this is a monthly chart, this could mean a big drop if this happens suddenly or a prolonged horizontal to down move over the next year or so. A bit more optimistic scenario is that the magenta trendline from the start of the move acts as a support (especially on a 2L or 3L approach) and continues to push the market up. Even more optimistic scenario is that the steep purple trendline combined with ema arrests any down move and continues the move up.

The most optimistic scenario is that the upper TCL will fail to contain the move up and give a rally up by an equivalent amount as the last up move. Such failures are extremely rare and only occur after a lot of violent up and down moves.

Given we have three pushes in a channel and there has not been any recent violent up and down move, my guesstimate is that we will dip below the magenta line and probably also test the channel trendline.

The summary here is that there is lot of good trading in store for 2012 Nov and Dec is unlikely to be a dead market.

Long term investors could take puts on their positions unless they want to exit them. The proceeds of these puts can be used to add on to the same stock positions when the market bounces at long term support.

10 comments:

  1. Hi
    Cadaver is it possible that you can redo the posts of 2010 and first half of january 2011 with fresh charts(PA as happening nowadays)? It would help your readers especially those who are joining now,to understand your posts of 2010 which are not as comprehensible due to the missing charts.

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    1. Due to time constraints, I'm unable to do so. If anyone can generate all the appropriate charts, I'll consider uploading them.

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  2. Hi Cad. I have in a word document one copy of this charts + text of 2010 and january 2011, If ti helps I can send it to you. Just need one email adress.Saludos Agustín.

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    1. Its pretty hard to put an email address here without getting a ton of spam. You can share it on a google doc and post the link here or make a one dollar donation using the paypal link below, which will enable me to respond to you via email

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    2. unfortunately when reviewing my word documents I have realized that I have lost "January 2011". I only have in this moment the copy of 2010 text + charts. I tried to share it using google doc but there is a big problem, I don´t know why but it only appears the text and not the charts. I think I will use the donor's choice. Can you please tell me what´s the difference between "Option Plus" - "Premium" and "Keeping it real"? . Do you offer a live trading room at "Keeping it real" donors option?. Saludos.





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    3. Click on the "Donate" button. You can enter any value once you are taken to the donation page.

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    4. Yes Cad that´s clear and no problem, but my question is about whether different services are received on each donor level. Webinars, trading life rom, etc. As I will make a donation I would like to know if it can be more interesting pay some more and receive additional services paying for "Premium" or "keeping it real" donors level or simplmente all of them are equal, sorry but there is no information about this in the blog. Gracias Cad and excuse my ignorance on your way to work and my very bad englihs. I hope you understand what I mean.

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    5. Yes there are different level of services, but I do not advertise any because they are experimental and may stop without notice.

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    6. Hi cad. I have just made some minutes ago the "keep it real" donation. Saludos.

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