The DJI opened Thursday down 450 points, rallied off those lows over 1300 points, then on Friday opened up another 400 points before dropping about 800 points into the close to be down 400 on the day. For the week, the DJI was up, barely, but every other major index was a net loser. Is there a method to this madness? Yes, it's called "pattern recognition," as Elliott Wave describes an unfolding of multiple degrees of trend, Wave 3 of 3 of 3 (and possibly a couple more "3's" - I may have lost count) . The worst is still ahead, i.e., peak downside momentum. I still believe it will start overseas and our markets will open up close to limit down marking, believe it or not, the last really good entry for new short positions. Our game plan is to ride it all down until we've seen the worst of it, than start looking for bottoming patterns. For now, those patterns are nowhere to be seen...nor should they be. DJI Above is a 120 minute Dow chart that reduces Thursday's mayhem to a simple (a) (b) (c) "flat" correction, shown here as a Wave 2 prelude to a deep 5,000 point decline in Wave 3 of (3). A serious gap down on Monday takes this scenario from "possible" to "probable." The larger the gap, the higher the probability. SPX This 4 hour SPX chart supports the DJI chart from a little different but just as persuasive an EW perspective. Superimpose the suggested gap down for Monday's Open and the bottom trend line, 500 SPX points lower, looks reachable in the next 1-2 weeks. QQQ This is a Daily bar chart of QQQ and it highlights how the Fib retracements are lasting only about 1-2 days before giving way to the next legs down. IWM IWM (3 hr chart) closed Friday @ 166.88. Its low tick on Thursday was 162.52, a good marker for what should be coming next and if you look closely, that new leg down appears to have already started. IYR IYR finally made it to the mid-70's....on its way much lower. Trade Management Here are the "official" picks of the past few months, some of which are expiring this coming Friday. Whether to replace these Oct 21st positions with new Nov 18th monthly expiration positions depends on just how short you want to be over the next critical 4-5 weeks. Rolling over doesn't have to be a dollar for dollar equivalence, as setting some cash aside for those Fibonacci retracement opportunities, has come in handy over the past few months. I'm leaving this particular trade management decision to each his/her own, I'll do my part by pointing out the set-ups, the best bets for maximizing leverage ans special situations, but execution is always up to the individual trader. Premium Service Trade Tracker PRO Service Trade Tracker
