Three Push and TICK Divergences Signal Likely Intraday Top

Aug 18, 2009: 1:55 PM CST

I wanted to give a quick mid-day update on the current SPY structure (that of a possible rounded reversal that has formed a lengthy momentum and internal divergence).  Let’s take a look:

First, let me say this is an afternoon update and there is still over an hour until the close, but for what we’re seeing right now, it would appear odds favor the intraday high has been made… or at least that a significant new high is a lower probability outcome.

I’ll go through this all in full detail in today’s “Idealized Trades” Summary report, but for now, it might be a good idea for those who can pick up on it quickly to take this pattern into account and act accordingly.

There’s a possible 5-wave Elliott fractal structure that seems to have completed which formed a “Three Push” price pattern which is accompanied by a classic “Three Push” negative momentum divergence in the 3/10 Oscillator.

What’s more important than that is that we have formed TICK divergences off the morning TICK high of 1,200 – as price has crested to higher highs, the absolute TICK value has not reached those levels.

Plus, we’re picking up new TICK lows on the day which could be a form of the classic “Wyckoff Sign of Weakness.”

The play would be to put a stop a decent distance above the recent $99.40 high (or equivalent if trading the @ES futures or any leveraged ETF) and play for a possible “Rounded Reversal” structure to develop (particularly if we break the 20 and then 50 EMAs), which could be dominant into the close, barring some unforeseen price surge right into the close.

This would not guarantee a successful short-sale trade (price could break these developments and continue rising), but in the event price falls, the larger reward would be worth the smaller risk.  If you’re long, it might be a good idea to liquidate here at a minimum if you didn’t feel up for a short-sale.

Let’s see what happens and let’s try to learn from the resolution when the day is complete.

Corey Rosenbloom, CMT
Follow Corey on Twitter:  http://twitter.com/afraidtotrade

  • Digg
  • del.icio.us
  • Facebook
  • E-mail this story to a friend!
  • StumbleUpon
  • Technorati
  • TwitThis
  • Yahoo! Buzz
Comments
  • scrillagorilla
    Ummm.... all this stuff is unnecessary... Unnecessary, my friend... Short above the VWAP, long below the VWAP. The summer of 2009 will be remembered as the days of the Great VWAP Regression, and all your fancy analysis means nothing in the face of that.

    I shorted mid-day today, and I made money. Know why? SPY was above the VWAP, and it (almost) always goes back home.
  • It seems we traded in the same direction and both profited then.
  • scrillagorilla
    Yes, and there are two ways to estimate the price of gas:

    1) Keep a monthly tabulation of the number of cars driving under a highly trafficked interstate overpass, and use relative changes in traffic density to infer relative changes in gasoline prices.

    2) Go to the gas station and look at the sign.

    #2 is simpler, more precise, and more predictive than #1. Ultimately, though, they will both "trade in the same direction".
  • I wish trading were so easy!

    Good point though - I try to keep methods as simple as possible. I used to be very overcomplicated.

    There is a balance between over-simplicity and overcomplexity.
  • johnnywalker
    Theres one snag with shorts on the close and that is that you have labelled the move impulsive and not corrective.
  • I'm concerned with 5-wave fractals and the inherent momentum readings that follow - and treat them no differently than flags.

    This is not Elliott purism but fractal practicality.
  • johnnywalker
    I think my point is that a 5 wave up is not corrective as in the other post
  • rod_1
    Corey, I was tempted to go short, but then, what if .... If we are seeing a 5 wave move off the 98.2 lows, then shouldn't we expect an ABC correction and then another 5 wave move taking us higher than 99.4?
  • I'm using Elliott not as a purism model, but as nothing more than any standard/classic price pattern. Remember that larger corrective moves can hold 5-waves, like either an A (in a zig-zag) or a C in almost any correction.
  • I'll be interested in reviewing today's report. I saw the same divergences plus larger offers hitting the market near the 38% fib (from Friday's high to Mon. low).
  • I went into much more detail and show the resolution of the pattern, which led to a profit at close. There was one more re-test up and it was choppy, but we closed down around 30 cents from here.
blog comments powered by Disqus

Most Popular

Featured

Top Traders Reveal Their Methods in Detailed Interviews

AfraidToTrade.com

New Readers