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July 22, 2007

Market Update: Trade Like TTC
by Dominick

It's no secret that I've been getting closer and closer to calling a major top while maintaining the unbiased flexibility to trade both sides of the market as we approach our final destination. We've been perfectly cautious of overextended rallies, while also avoiding panic on the dips and buying bottoms. IF I could have my way from here, I would want to see this market attempt one more screaming rally to just above its recent highs and, at that point, if all things remained the same, I'd be willing to call for a substantial turn, not only in the stock indices, but in several other major markets.

As easy as that might sound, most market watchers in such a scenario would probably be talking about the breakout, and looking for a reversal would seem like going against the grain. Of course, a breakout would indeed be evident in the charts, but with many markets finally reaching my ultimate targets, I shouldn't have much of a problem calling a top from a new high, particularly as I expect clear confirmation of a turn to make the breakout a failure - or else there wouldn't be any call at all. If we can't construct a rally from Fridays close, or just a bit lower, then once price takes out some specific target levels, we'll start to get short and approach the market from a bearish perspective.

So, though it seems we are closer than ever now to a point where I would call a top, there's no confirmation at this point, despite Friday's selloff. In fact, though we didn't necessarily expect the declines because they were largely triggered by reaction to earnings, we did have the crucial levels to trade including the bottom of Friday's decline. In fact, the chart below was posted for members last Saturday, before the week's trading even began! Notice the bottom of the box is less than one point from the actual Friday SPX low of 1529.2.

Wouldn't you have liked to have that chart last Monday? Week after week for more than a year, this space has provided a wrap up of the market and trade analysis generated at www.TradingTheCharts.com. It's also frequently included hints about our forecasts in the wide range of markets we cover. But over and over the markets prove the risk of trading based on a weekly update, and this week was no exception. The only way to really take advantage of our unbiased analysis and start seeing the profits is to join and get into our daily forums and realtime chat. If you haven't made a lot of money on the volatile market this year, it's time to ask yourself: what are you waiting for?!

Members agree the benefits of the site far outweigh the small monthly fee. In fact, here's a small excerpt from a typical testimonial, one of the many I received monthly:

I am now a 2 week newbie, and, generally speaking, a permabear. I am writing to let you know that I have made more profit in the 2 weeks since joining TTC than I did the first 5 months of 2007, and ironically, the majority of these profits came from the long side of the market.

This update isn't about testimonials, but you're welcome to read more here. What this update is about is showing you the recent calls and why, if you're serious about making money trading, you need to trade like TTC.

The chart from Saturday was updated and reposted Wednesday showing a typical trade setup as we see them. Having entered the area we expected would be retested, and with the RSI approaching an upward trendline, we didn't start talking about a market crash or a top - we anticipated and took a long into the close for what became Thursday's record-breaking rally. The chart below shows the result of our setup into that day's close with, as you know, the move completing the next day at a double top.

Of course, when Friday sold sharply, our test box proved to be spot on yet again, as already mentioned. But just as important as having the right numbers to work with, keeping the emotional aspect of trading under control can make or break a portfolio, especially on a roller coaster ride of week like this one. Because we understand that trading is very much a mental game, TTC now has a new Trader Psychology forum where members discuss their experiences and share their wisdom in managing risk, setting up effective trades and generally keeping emotions in check. After all, avoiding the temptation of overly bullish or bearish sentiment is the heart of unbiased trading and has been the source of much of our trading profits.

Speaking of psychology, I should also address the issue of taking responsibility for your own trades, particularly in relation to what traders euphemistically call "the PPT", or Plunge-Protection Team. The simple fact is that the President's Working Group does exist and meet regularly, but their purpose is to protect the market against massive crashes. They have no business pushing the market to new highs, or getting involved when there's some minor selling pressure ten or twenty points below all-time record levels. As I showed above, when the market moved up Thursday, there were legitimate reasons to expect that move. Blaming bad trades on a shadowy conspiracy theory is exactly the sort of mentality we want to clear up and avoid through the aid of our Trader Psychology forum.

Now that we're closer than ever to that point where I'll be ready to call a major top in several markets, it's critical to stop trying to trade from this weekly update and get the realtime information reserved for members. As usual we think we know where this market is going and when it's going to get there. If that sounds unbelievable, take a look at just a few of the recent calls we've made.

Back when Google was hit hard by a minor earnings miss (sound familiar?), pure Elliott wave suggested the upside in the stock was done. I stuck my neck out and posted the chart below with a target of 541.

Sure enough, a year later Google makes it to the target and then sells off 40 points in globex Thursday night. Coincidence?

Or look at this chart in OJ. The down targets were placed months ago and are not Fibonacci retracement lines. This chart showed a perfect sell setup.

The next chart shows resistance to the first bounce at the first line and several weeks of vibration around the second line. This week OJ seems to have tested that line again and might be ready for an advance.

So now you can see what I meant that most major markets are currently at a critical point at or near my targets. But, even if I spelled out exactly what I see for the week ahead, there's no way this update could be of as much benefit as the realtime services at TTC. Plus, there might not be an update next week as I take some time off to enjoy with the family. Everything at the website will continue as usual, but readers of this update who understand that this is the way they want to trade will need to subscribe and get on board if they really want to trade like TTC during these crucial and potentially very profitable times. See you at the site!

Also make sure you are aware of TTC's new addition to help many keep an eye on the Forum updates without needing to constantly login to check. We made this neat feature that you open to your desktop and you will be able to see when someone posts, and who is posting. There are some handy links there as well as a small time frame trend chart.

Have a profitable and safe week trading, and remember:
"Unbiased Elliott Wave works!"

Dominick,
a.k.a. Spwaver
TradingTheCharts.com

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual. Check with your licensed financial advisor or broker prior to taking any action.

Copyright © 2006-2008 TradingTheCharts.com

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