Friday, 29 June 2012

S&P 500 hourly chart Elliott Wave count indicates a new decline should begin from nearby current levels

I have zoomed in to show the hourly candlestick chart for June. So long as the market stays below the wave C / June high, the count calls for a 3rd wave decline to begin. Also the chart indicates that the 3rd wave lower should start from nearby current levels, as the market is butting up against trend line resistance, and wave 2 has retraced  approximately a Fibo 78.6% of the preceding wave 1 decline. If wave 3 unfolds next (IF! nobody knows), then it must be at least as long as wave 1.

The above Elliott Wave count is crystal clear, which bears emphasising, as such is not always the case, especially on the hourly chart. I like to use a model or edge when its message is clear. Of course a crystal clear edge does not imply that the model or edge won't fail. Traders must be comfortable with uncertainty (understatement). Each trade is just a data point in an long sequence of edges. So long as my risk is defined and the potential reward to risk ratio is favourable, as it is in the above chart, the model is useful to me. If it fails, I go looking for another edge and another trade.