The market could print five up toward the 2790 region or break down in a c wave down (Alt8link) to 2681-2655 area with .764 of the move off the 2603.8 lows at 2642 . On the micro, there are enough waves in place to consider five down off the highs (Alt7link), so below 2730.7 probabilities point that the c wave down should start with initial target at 2693.
Moore’s 2C-p is at 21.7 (17.6 previous)
On AMZN, .764 for AMZN is at 1528 and .618 at 1561
On NFLX, .764 for NFXL is at 284 and .618 at 292.43
FB, would be fair to consider five up on FB (Alt7link), .764 at 141 and .618 at 144
AAPL, has a micro five up for 210, but if AAPL invalidates this micro five up and breaks below 198.17 will extend lower, with last bullish support at 194.97. Below 202 we can not be bullish on AAPL, so on a break below 198.17 our objective target is 186 at a minimum, with support at 194.97.
This is the very bulk of our portfolio, so, we have to watch these lines.
Since update is short, I want to tell you why I find shorting or hedging is not a good trading strategy:
Let me post: Livermore was the one of the greatest traders of our lifetime, he got billionaire shorting during 1929 but: Livermore lost 40% of his profit in 18 months – going long the stock market as it slipped to its lows by mid-1932. Then in 1932, Livermore switched, went short the market – just in time for it to double. The final blows were caused in 1933 when Livermore went long the market just as it fell back near its 1932 lows.
Another example of why I find shorting is not a winning strategy is John Paulson. He made 20 Billion during 2009, to underperform year after year since 2009 correction. There is a pattern in the mentality of a bear trader, which? I don’t know.
So switching might have appeared wise to us, but most important when trading is to realize where market can turn and provide a probable salvatage point for portfolios and a trader must maximize that probability; fear will make you switch at worst time. I think Livermore did not realize he was trading a c wave up, and he waited for market to double to realize about it. I find some similarities with this c wave up now being projected to 2872, with upper end of b at 2910, but not a higher high in sight for now (excepting we have a more clear five up to 2790). Shorting after we hit 2603 was not good, and with this update my objective is to avoid we short, victims of fear and we lose the only opportunity to leave this market decently. This probability is valid while the market holds 2642 and has the ability to maintain above 2603.
I want to address Hopes: APPL came into earnighs with TNA at 1.764 off the lows (Alt8link) and similar position on SPX (Alt8link). And with these low probabilities we “hoped” AAPL to report well, these were hopes… and hope is not a good trading strategy. I held onto longs and concentrated portfolios, because I hoped to be wrong at the highs and hoped market could make our case wrong.
Here as I said, better would be one more higher high to complete a more structured five up off the lows, but what have have is enough to get the 2860-2901 area. Support for VIX is at 17.6, hard to see volatility going higher once 17.6 breaks down again, but for now and above 16.2 there is nothing bearish for VIX. That should be an indication that market has probabilities to test 2680-2642.
Addressing some mistakes this year: One was to try to track this market or to beat it or to not take profits when we had them and stay on the sidelines, failing to realize the tape was being held by a number of stocks that was reducing constantly, paraphrasing Jesse Livermore: beating the market is only possible by trading at times when the market allowed one to win – during clear bull and bear markets when most stocks were moving in a single direction. We must protect gains when we have them and realize market conditions have changed and only come back to markets when is proven market attitude has changed. Losing gains abruptly in a portfolio should be an indication that something in the market is not working right. Adding to a portfolio that has lost gains abruptly, should not be advised.
Our mentality has to be readjusted to accept critical junctures and do not hope for market to do something different to what is probable. I am not bearish, ultimately, being bearish is a product of despair or good work applied with anticipation, after a b wave up is completed, better is to wait for five down to short. That is a rule. We can and should optimistic with a pattern, once it breaks, we should be realistic.
Carlos
Seeking Options Team – RQLAB Please email us if you want to be part of this group at [email protected]
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