Our members-only post Monday, 4/4/16: Trade of the Week From Today Up $360 So Far + Video (Members Only) is now available to the public – so feel free to check it out.
We traded a combination of SPY options and the E-mini futures contract.
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On April 7 – we reached the same exact area when the Fed speech was announced. Recall that Yellen told everyone to “jump in” when ES was at 2027. Well, we revisited 2026 but rallied hard from there.
On April 7 into April 8 – overnight, there was a really strong rally that almost recovered entire drop. We went from 2026 to as high as 2054 – a bit unexpected especially for overnight action for it to continue into the next day.
Yet, at the same time, we didn’t quite visit the support levels at 2020 or 2012. The pattern into the bottom at 2026 also doesn’t appear to be that conclusive – which makes me think that there may be more to come.
But then, how does one explain the action of Thursday night into Friday?
Well, earlier this week we had a complex double zig zag from March 30 to April 1 that resulted in a fakeout.
I suspect we could be entering into another Elliott Wave Complex double zig zag. If so, I would not be surprised for us to move up towards 2060 and hit resistance there, then turn down and test the 2020/2010 region before violent ripping back up.
This way, this pattern helps explain the bullish setup that began developing into Friday April 8 — yet at the same time offers an explanation for how we retest those support levels. Once we successfully hold support at those levels, then a strong 5th wave up is possible.
If Thursday April 7’s action consolidated or went lower, I would have been open to a wave 2 drop pattern, but since that did not happen I am now considering this complex double zig zag.
Another alternative is that we reach 2060 without a completion of a 5-wave pattern and we coast up towards new highs – perhaps even to 2080.
Some of you are paper trading before you get into the real thing. Nothing wrong with that:
It’s a work in progress, but I’m putting together a Stock Market Fundamentals section. Open to feedback on what you would like to see covered.
What else would you like to see?