Posted on July 1st, 2009 at 10:00 AM

Last night in Mentoring, we had a pretty in-depth time of discussion concerning the current setups in the major market indexes. The fact that there is a Type One Sell set up on the Weekly, but a Type One Buy on the Daily has a lot of people in a quandary about what to do with this scenario. It's actually not an uncommon occurrence, but doesn't show itself that often on a MAJOR scale like this in such a widely followed market. The fact that this setup is showing on both the ES and the YM means that MANY people have noticed what is going on.

So what do we do about it? How do we handle the fact that there are seemingly conflicting setups on these two time frames? To answer this, I'll tell you what I have done about it, and we'll discuss other possibilities as well.

For starters, I got out of my long positions in the S&P on Monday of this week. I did this because the Short setup on the Weekly chart triggered by taking out last week's low - a bar which closed outside of the Weekly Regression Trend Channel. That triggered a Sell setup on the Weekly chart.

Posted on July 1st, 2009 at 12:00 PM

I wanted to post a quick update on the money management plan concerning the trade that was mentioned a couple of weeks ago during mentoring . At this point, we are in the money with a couple of areas where we should have been taking some profits and thus reducing our exposure. One of the key aspects to this trade was giving it enough breathing room by using the displaced moving average as a trailing stop.

We are still shooting for the MOB Target of $21-$20 as of June 29th, but so far things are progressing in a profitable way. Good trading to those who capitalized on this Type II Setup!

~Duane Gott

Posted on July 1st, 2009 at 1:30 PM

I was running some Advanced GET buying scans this afternoon and came across some stocks that warranted being added to my watchlist.  I've added some quick notes to each respective chart as things to consider.  I'll continue to update these ideas as events warrant.

Trade Smart

~Duane Gott

Posted on July 1st, 2009 at 2:20 PM 

As most of you know the Daily chart of the the SPY has presented us with a very nice Elliott Type One Buy and was triggered on June 25th using an aggressive entry.  As a reminder an aggressive entry means that we are simply waiting for a break of the regression trend channel and not necessarily a close.  While during mentoring we have talked in length about the conflict between the daily and the weekly charts this trade should still have been triggered and entered as all 4 rules of the Elliott Type One were met.  My colleague Nate McCartney made an excellent post on the conflict a few days ago and I highly suggest you read it as it has been a focus of discussion in most mentoring classes it seems. http://ragingbull.quote.com/bullseye/node/1504

As far as the Type One goes we are now hitting some very key resistance levels that you should be made aware of.  In mentoring we have covered how to use the Ellipse (to steal a term from medicine) in an off-label use.  By drawing the Normal Ellipse from Wave 3 to Wave 4 we can get an idea of where our Gann Resistance lies in the Wave 5 Rally.  As you can see we are at a level of concern for multiple reasons.  First it is a match of the previous highs from early and mid-May, second we could be forming the right shoulder of a classic head and shoulder pattern which could signal a reversal.  Either of which tells me to take initial profits on our longs and to adjust stops in case this reversal occurs.