Tuesday, February 13, 2018

February Stock Market Pullback 2018 - Advanced Trading Techniques

February Stock Market Pullback 2018  - Advanced Trading Techniques

After doing this for many years, I've learned to rely on a variety of indicators, and charts, to determine market direction; market sentiment (charts), Fibonacci ratios, tracking separate sectors, heavily weighted stocks, cyclical stocks, and even foreign markets, to name a few. It requires a tremendous amount of due diligence to keep track of it all, and thinking outside the box. If this were not so, then anyone could do it, consistently.

Not to sound arrogant, but my level of expertise, and the multi faceted system I've created, goes beyond most peoples comprehension. It would take a book to even scratch the surface... but I can offer you a glimpse into what I do, and how I do it, by explaining what I'm seeing in the chart below, and consider the weight this chart gives, to the bottom I recently called in US markets. Think of it a preponderance of the evidence. If the German market took out the target, as expected, then that says a lot. It's a tell. It means the route in global equities has come to a halt. If the Elliott Wave Theory agrees, and the (lower) $VIX level agrees, and foreign markets agree, and sentiment has changed, and the rest of it, then we're not guessing where the bottom is, we're confirming it.

You're looking at the 3 year German $DAX:

1. The most obvious thing this chart should tell you is that the index continues to channel up in a bull market. The trend remains intact. I touched on this point in a recent blog at 3xtraders.com. You gotta know how to read long term charts, short term charts, how to read the $VIX. You must me able to accurately chart several different timelines, organize them in folders, and archive your charts, so you know where to look, when the short term charts are a mess. To give you some idea... 99% of my charts are still intact. 

2. The previous rally (into the recent new high) confirms Elliott Wave "B", as I pointed to in several US markets, including the $SOX, over the weekend. A "head-fake" rally in wave "B", is always followed by a powerful wave C. In order to know this, you'd have to have a good grasp of Elliott Wave Theory, something I've been studying for years. It's not a magic bullet, but I rely pretty heavily on it, because it works.

3. The $DAX pulled back into a key Fibonacci retracement target, where it landed at the bottom of the channel. We're not guessing at the bottom here. It's obvious. May not be so obvious when you're looking at the S&P chart, alone, and this is why I (literally) chart 50 different things.

4. When support breaks, the market is sold, and this is exactly where you also want to be a seller. When the action fell out of the triangle (marked wave "B"), and took out the October 2017 high broke, investors rushed to the exits. Once support at 12,950 broke, selling accelerated. This is where you sell, not guessing at where the top might be. Laying out support levels is simple for most seasoned technician, but selling them - when they break - comes down to knowing how to trade. I don't spend enough time talking about trading, because I don't do a lot of trading. I predict future market direction, which more often than not, only requires following the trend, and identifying support and resistance. I can offer you key levels, but trading those levels is a different ballgame.

5. This is how a powerful wave C looks. If it's a primary wave (C), it can turn into a crash. But this isn't how reversals into a bear market ever begin. If this was an extended market crash, then this would have to be the 1st wave/ leg down - wave 1, (or possibly wave A), and wave 1's (in a bear market) don't look like a crash, or act like a crash. Wave 1 looks like a pullback, which is inevitably bought. This is basic Elliott Wave Rules and Guidelines stuff. Each wave leaves it's own signature. Nobody suspects a crash in wave 1! It's not until wave 3, that investors become aware that the trend has changed. Similar to what we saw in 2007. Everyone bought the dip, and didn't realize the trend had already changed, and many were left chasing a suckers rally.Still today, you hear folks referring to "the crash of '08", when it actually started in '07.

To conclude, and make things clear, this looks like a simple A-B-C correction, on the $DAX, and that confirms the reversal in global markets, and we're only getting stated, as markets continue to build a base, at support. If support breaks then you can start calling this a crash. Maybe this turns into part of a larger corrective pattern, down the road at some point, but let tomorrow worry about itself.


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