Still looking for that wave 2 top?

EURUSD testing resistance
January 22, 2013
Will Greek shares continue their rally?
January 24, 2013

Many analysts believe that we are still forming a wave 2 top or in other words, the rally from 2009 is expected to be over very soon. Very famous elliotticians have been claiming this wave 2 top for some years now, but the market has proved them wrong in several occasions. I don’t believe traders should worry right now about which longer term scenario is correct. You should trade according to what you see now and try to make some money gaining a few points. The trap most people fall into is the following; they have lost  a big trend and now try to predict the end of it in order to take advantage of the next big trend…but this strategy has two major drawbacks….the stop loss level for such longer term moves in the market is too far away(too big) and second what if we are wrong? In the case of the famous elliottician we might see him covering up this failure by changing the subject to the value of the index in question in terms of gold. I don’t care if you got it right in terms of gold, I trade in USD and I want profits in USD or EUR now in my balance…….

This prologue is meant for all those asking me what is the longer term scenario that I see. Elliott waves is a remarkable tool but also a very difficult one to master. The best chance for small investors and traders to come up with profits before some unexpected swings wipe them out is to be fast. You don’t need to make one trade with 100 points profit in S&P to make money. It is easier and safer to make smaller less risky ones.

And we come to todays S&P chart. As expected for some time now, if you ‘ve been reading our analysis you would not be surprised that we have reached 1500. S&P contines to rise without having broken our critical support points. Lets now take a look at our updated chart below.

SPX60M

The pitchfork has supported our position for some time now, giving us profits from at least 1451. Stop would now be the 1483 level. An hourly close below the middle would be the initial sign of the start of a pull back. A break below 1475 would confirm the end of the move from 1451. It however depends on the risk profile of the investor what strategy to follow. Will I use the 1483 or 1475 as a stop. Should I reverse my position and use the high as a stop? Should I sell now as it draws near the resistance of 1495? If you need more help trading this index, you can profit from our premium services.

As always, thank you for taking the time to catch up on my thinking.

Technical analysis indicator which comprises a central moving average line with two channel lines above and below. Named after Chester W. Keltner, the central line is a simple 10-day moving average of typical price (taking into account the average of high, low and close price for that day).

Most often used in conjunction with volatile markets, the Keltner Channel identifies an overbuy when prices rise above its top band. While an oversell is indicated by a price fall to beneath the lower band.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.