SP 500 Midweek Daily Chart Structure Apr 22

Apr 22, 2009: 9:55 PM CST

Let’s take a quick mid-week look at the S&P 500 daily chart structure for April 22, 2009.

While I’ve been making much of the “Bearish Rising Wedge” (which was broken to the downside on Monday), keep in mind that it still looks like we could be forming a “Rounded Reversal” on the Daily chart as well.

Without getting too deep in the weeds, we have a persistent negative momentum divergence in the 3/10 oscillator and a slight (if not flat) negative divergence in volume (as price has continued its trek higher, volume has inched lower most days).

Price came into resistance at the 875 level which proved to be resistance at the February highs.  The price “arc” continues as price is nearing (or has reached) the apex (highest point) of the arc.

Now for a bullish look.  Price is above its 20 and 50 Day EMAs, and they have crossed bullishly as price ‘held’ the Cradle Trade crossover in early April.  I’ve highlighed the ’space between’ the EMAs which could be expected to hold as support on a subsequent push down.

However, if bears manage to push price beneath 820, then we’ll break known support and enter ‘open air’ to the downside which could pull price back down to the 750 level or below.  Needless to say, watch 820 like a hawk.  It is the line in the sand as far as I see.

The most recent candle patterns have a hint of bearishness to them, as one can argue that a bearish “Evening Star” (three candle pattern) formed at the April highs or at a minimum, a “spinning top/doji” formed after the price rejection at 875.  Today, a ’shooting star’ or ‘doji-like’ candle formed close to the price highs of the swing.  Bulls will have to overcome these candles to press higher.

Keep studying the daily structure for additional clues and manage risk accordingly.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Travel to the LA Trader’s Expo in June to hear Corey speak on “Idealized Trades for Intraday Traders”

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Elliott, TICK, and Momentum Divergences Create Power Trade in QQQQ

Apr 22, 2009: 12:23 PM CST

It’s rare when all of you indicators point in the same direction, but when it does, a powerful trade can open up.  I wanted to show you such a trade that just completed in the QQQQ:

Real quick, price formed a 5-wave Elliott Wave fractal into the intraday highs, but more importantly, notice it did so on a ’screamingly obvious’ negative TICK and 3/10 Oscillator Momentum divergence.  Two doji candles and a shooting star candle formed as price began its ‘arc-roll’ to the downside, setting up a powerful short-sell trade with low risk and high odds.

The ’scalp’ play was to target the 20 EMA but with so much confirmation, it was a better idea to play for a larger target – that of the rising 50 EMA.  With a hammer forming just beneath that level, that’s a decent sign to cinch your profits and go on to the next trade.

If the Elliott wave structure is correct, we could see a B wave up followed perhaps by a C wave down – but that’s not as important as learning the different methods of analysis that integrated to form a profitable, high probability/opportunity, low risk (stop just above the highs of the day) trade.  Take it one swing at a time and assess the structure as it develops piece by piece.

Corey Rosenbloom, CMT
Afraid to Trade.com

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CMT Awarded and MTA Information

Apr 22, 2009: 11:02 AM CST

I’m pleased to announce that I have been granted the Chartered Market Technician professional designation from the Market Technician’s Association!  I also wanted to share some background on this and for those interested in persuing the designation.

The MTA (Market Technician’s Association) was incorporated in 1973 and has become the leading professional organization for technical analysts worldwide with roughly 3,000 members in over 60 countries.  The MTA oversees the Chartered Market Technician program which has become the ‘gold standard’ in the field of professional technical analysis.

According to the MTA website CMT Section:

The Chartered Market Technician (CMT) Program is a certification process in which candidates are required to demonstrate proficiency in a broad range of technical analysis subjects. Administered by the Accreditation Committee of the Market Technicians Association (MTA), Inc., the Program consists of three levels. Level 1 is a multiple choice exam; Level 2 is a multiple choice exam; Level 3 is the essay portion of the exam.

The objectives of the CMT Program are:

  1. To guide candidates in mastering a professional body of knowledge and in developing analytical skills;
  2. To promote and encourage the highest standards of education; and
  3. To grant the right to use the professional designation of Chartered Market Technician (CMT) to those members who successfully complete the Program and agree to abide by the MTA Code of Ethics.

To be awarded the CMT Designation, a candidate must “demonstrate proficiency in a broad range of technical analysis of the financial markets.” The CMT is the culmination of a certification process that is made up of an educational component, an experience requirement, an ethics requirement, and a membership requirement.

Personally, I have benefited greatly from the structured educational coursework, interactions with other professionals, and idea/research sharing that takes place among members.  For example, my interest in applying Elliott Wave developed directly through the CMT studies – I was skeptical of its application until I had to learn all the rules and apply them to multiple charts.  I have also deepened my awareness and interest in Fibonacci Applications. I incorporate Inter-Market Analysis as the core of my strategies, which I learned as the result of the program.  My analysis and trading are remarkably improved as a result of the 2-year structured process.

More importantly, I have been trained as a classical technician with a focus on the early “founders” of modern TA such as Charles Dow, Richard Schabacker, Robert Rhea, Richard Wyckoff, etc.  I have been fortunate to combine early research with modern principles from Martin Pring, John Murphy, Linda Raschke,  and many others.

Now that the CMT is finished, the lifetime of learning and collaboration begins.

I am proud and honored to be a new CMT Charterholder, and look forward to contributing to the field of technical analysis through my current and future research.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Intraday Elliott Wave and Flags in SPY Apr 21

Apr 21, 2009: 9:43 PM CST

I wanted to point out a 5-wave Elliott structure and two bull flags that offered trading opportunities in today’s (April 21, 2009) intraday SPY structure.

We started the day with a medium overnight gap which was quickly filled (small to medium gaps have greater odds of filling than large gaps), so that should have been the initial trade.  Once a gap fills, often the second trade is a move back down to test the lows off the open, and an evening star which formed into confluence resistance (yesterday’s close and the 20 EMA) set-up the second (short) trade of the day.

Those proficient in pattern recognition saw the ominous converging trendlines and narrow candles (dojis) of a falling wedge (which is bullish), and the trade entry came when price surged with a bullish candle out of the wedge.  This could also have been treated like a bull flag, which targeted the 50 EMA, though price surged well-beyond these targets.

Since price surged up in a strong move to new highs (price and momentum) on the day, it was a sign to experienced Elliott Wave traders that we could be experiencing a “third wave” which indeed turned out to be the case.  Remember, first and second waves are difficult to identify – you almost have to see them in the hindsight of a powerful 3rd wave.  Only then can you prepare yourself to buy after Wave 4 is complete.

Within the 3rd wave, a “Three Push” reversal pattern (triple swing negative momentum divergence) formed which led to the 4th Wave pullback into EMA support.

At the bottom of Wave 4, a doji formed (which is often a reversal signal) which was followed by a bullish breakout that began your “Wave 5″ Trade.

A unique opportunity arose – that of a Bull Flag within Wave 5.  Look closely as price formed a clean retracement to the rising 20 EMA which set-up the Bull Flag “Measured Move” trade.  Price actually exceeded the price projection into new highs on the day, though the new highs formed on a slight negative TICK divergence (not shown).

Remember, 5th waves are expected to have a 5-wave subdivision, and you can count that into the day’s close (which set-up scalp trades in the structure for very aggressive traders, particularly on the one-minute chart).

The more you see these patterns, the better you’ll be able to recognize then trade them in real time – that’s why I find “Idealized Trade Journals” and visual charting of your own patterns to be very valuable in your development as a trader.

Corey Rosenbloom
Afraid to Trade.com

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New Disciplined Investor Podcast with Jack Schwager

Apr 21, 2009: 12:25 PM CST

I was excited to hear that Andrew Horowitz’s guest this week on his Disciplined Investor Podcast series was Jack Schwager, author of the famous “Market Wizards” interview books.

When I first became interested in trading, I read both of Schwager’s books, which have become required reading now it seems – Market Wizards and his follow-up book The New Market Wizards.  I’m sure many of us had similar experiences and were enthralled by reading the experiences/insights from profitable market professionals.

Schwager wrote other, lesser known but information-packed books such as A Complete Guide to the Futures Markets (which is over 700 pages long!) and other introductory books to Technical Analysis.

Andrew had the distinct honor to interview Mr. Schwager on this week’s Podcast entitled “Schwager on Wizards and Kensianism“   I’ve also added the direct iTunes link below:

Be sure to subscribe in iTunes to make sure you get his Podcasts the moment they are released each week (for free).

Head on over and catch this week’s Disciplined Investor Podcast with Jack Schwager!

Corey Rosenbloom
Afraid to Trade.com

5 Comments
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