Monday, November 2, 2009

What to do?

I had posted a mid term update yesterday and wanted to restate something again to make it crystal clear. I am not turning bullish - please do not misunderstand my statements yesterday as bullish - rather look at them and realize that I am totally unsure of the markets next move. Many other traders are calling for the "primary wave 3" to begin rather shortly which will lead to the 480 SPX targets I have been talking about for a good 2 years now. Based on my original long term review in 2008 I had called for those levels to be reached towards the turn of 2010 - and lets be honest we are far from it.

Just like many other traders, I am trying to determine how I can profit from this market and what strategies work best. As a result I have changed my trade plan slightly. As some of my long term readers remember I used to be a very short term trader, and switched to a much stronger IT focus in the beginning of the year. This is not worked at all for me and I am going back to change my trade style to what I was doing in the past that has always given me nice profits =)

I am in the process of reorganizing my cash distribution between accounts and will run the following setup going forward:

25% Futures Day Trades
25% Futures Swing Trade
30% Equities
10% options
10% Forex

I will also be limiting my capital to a much smaller amount on all those accounts. I will actually create another account where I will move the remainder of my capital not to be touched.

Trade wise I will focus again on short term scalps and day trades whenever applicable and swing trades with targets of a minimum of 12.5 SPX points and a maximum of 25 SPX points. I have spent a lot of time reviewing my trades in the past 6 months and realized that if I had used my old system more actively that losses would have been much smaller. Hindsight is 20/20 I know, but looking back and reviewing my entries and exits - I wish I had applied more of my old trade style.

So enough of what I am doing - market wise as mentioned we are at a key turning point. We are nearing important fib levels that also co-incide with what I called the previous largest pull back in June/July - we all know what happened after that. The key thing to remember is the distinction of a large ABC correction that started in March OR a full 5 wave pattern. The questions we have to ask ourselves now?

1) Did we finish the C of our ABC correction?
2) did we finish W3 of 5?
3) Did we finish W5 of 5?

Once we have confirmations of either of the above we can attempt to make some longer term projections (1-2 months) of market direction. Considering that we are close to key support we need to wait to see how the 1016 plays out before we can make further calls.


  1. closed my long here. 1031 - 1048 ... =)

  2. probably has more room to run. But following my new (old) rules again =)