Market Timing – 02/15/2006

Timing Market Turns - posted 1640 EST

Anticipating another long weekend, I wanted to share a couple rising time loci that may be useful for traders in the next few days.

No upward market move goes directly up or down for long without a pause or correction of a sort. We have stated previously that the move upward toward new highs could well be underway. We still believe that and see this as a likely 3rd part of the structure from the October lows. In Elliott terms, a 3rd wave is the most powerful part of the structure, and usually the longest in time. Assuming the time loci of February 24/27 is correctly a high, then SPX 1335 is easily reachable.

Along the path upward, we expect to see some pullbacks from short-term peaks. We’d like to share with you two of those time loci dates and times, and our opinion about how they will manifest.

We expect to see a high at 1107 EST on Thursday, February 16th. We then expect the SPX and other indexes to pull back to a correction low that should last till 1125 on Tuesday, February 21.

These two time loci originate from totally different price/volume algorithms in our system. So don’t associate them as one leading to the other, as it were, that they are ‘related’. They are independent points.

Assume that they both manifest in perfect time, how would we try to trade these two points? Firstly, we would try to recognize whether the first portion of the structure into Thursday looks or qualifies as complete. If so, we might sell some in-the-money calls on any of the indexes. This trade has nearly as high a risk as an open futures contract. So, it is very high leverage with high risk of ruin at the typical volatile equity and index option expiration time.

A much better strategy we use is to take a profit on long positions according to your trading and/or investment horizon. This lets things settle down. Taking profits is what this whole market participation activity is about, isn’t it? Then let the market indexes correct, meanwhile preparing to re-enter long when the low of the second time loci arrives.

Some readers may doubt what we see and what we say about timing and trading. But timing the indexes allows us to take more profits more often while reducing our risk. Reduced risk benefits from good timing might induce some traders or investors to leverage more because they are so very sure that they are going to grab the brass ring again on this trade. I can tell you that too many excellent trading opportunities are laying around for anyone, but to increase leverage and thereby raising risk is begging to be gored by the markets.

Such a deviation from a sound trading plan, using stops, getting out when you are wrong, etc., is what eliminates you from the game. We try to remain rather boringly disciplined, unemotional and thereby, profitable.

Assuming we are right about the time loci, but wrong about each loci’s nature of high or low, we then give them considerable time to ‘prove” themselves as opposite to our original opinion of high or low. Yes, we let the indexes prove that the time locus is a reversal and then we re-enter with tight stops. Very tight stops.

We will try to post if we see a need or if we have an opportunity before Tuesday’s open. Let’s see how each of the time locus points manifest .

Good Trading and God bless

W. B. Busin

Market Timing - 02/14/2006

Timing Market Turns - POSTED 1305 EST

Sometimes the markets make your trades look like pure genius and at other times makes your trades look idiotic.

Believing either case as truth is unhealthy. Each trade stands on its own like every toss of a coin does too.

The chart below shows an idea of where the barriers of resistance are for the S&P 500 Index.

Click the chart to enlarge.

Regaining a close above the thick red line will help to keep the index moving toward the SPX target of SPX 1334 on February 24th/27th. I expect a few wild pullbacks on the upward way.

I hope this helps one see what I am looking forward to in the coming days.

Good Trading and God bless

W. B. Busin

Market Timing - 02/13/2006

Timing Market Turns - 0915 EST

We are establishing a 100% long core investment position this morning.

We don't expect a vertical upward run, but the entry is enough off of the Friday high to give us some cushion.

The stop levels are comfortably below the Friday lows. The exception is the Dow and its derivatives. It is much lower due to the gap on 01/25.

This swing upward is most likely the last chance for making new all time highs on the Dow. The time locus of February 24th/27th (both days have gained prominence) could be the turn to take all your investment monies off the table and await the April lower high to create hedges or short your index of choice. March 13th now appears to be developing as a low time locus.

Good Trading and God bless

W. B. Busin