Saturday, May 16, 2009

Another Look At The Qs


Above is a monthly chart of the Qs with my favorite MAs. As you can see the Qs stopped on May 6 right at the 12mema. While my expectations have been for a shallow correction before proceeding higher, I don't trade expectations. I trade the price. (I do adjust allocations based on expectations, however.) Price is telling us that we need to begin looking at the short side with the possibility of a deeper retracement in the next week or two.

So the question is how best to approach this. Last week I exited some long positions that had reached targets and raised trailing stops on most remaining positions. In particular I now have stops on index positions just below this week's low (week ending 5/15). I will reverse and go short 1/4 index position on a break of this week's low. If another valid pivot sets up and the downtrend accelerates, I will add to the position with an eye to exit at fibonacci targets. Hopefully, the strongest stock positions will hold up during this correction, HANS for example. I will be looking to reverse and go long the indexes again once this correction ends with a target on the Qs at the 50mema shown above, around 40.

The UNG has moved up in a clear 5 wave pattern, so I will be riding out the current pullback and looking to add on a resumption of the uptrend. The pattern in oil vis-a-vis the USO or DXO is not so clear, but still looks positive. Gold is advancing, but weakly and may not reach the recent highs. It will take a strong move above 950 for the trend to accelerate.

All the best next week.

2 comments:

dave said...

"Today's action has produced a perfect sell fractal in the Qs. If the May 13 low of 32.96 is taken out, we will have 5 waves down from the May 6 high,..."

Why can't those 5 waves be "c" of a 4th wave off the March lows ??

Stretching the rally horizontally a bit fits with Terry Laundry's late May early June projected S&P peak.

Regards,
dave

R. Craig Pritchard said...

Dave,

The 5 wave down pattern could be wave c of flat, but it could also be wave a of a zig zag. There really is no way to know at this time. We need to protect against the worst case.

I still expect higher prices, but the correct may extend into next week.

I'd rather be stopped out here and re-enter on a reversal than find out later that I was wrong about the rally.

All The Best,

Craig