Sunday, August 3, 2014

Market Dashboard - Corrective Wave

The last week gave a false entry signal into the corrective wave.  Those are extremely rare for RUM Wave analysis which was cause for significant concern.  However, after additional analysis it appears that we experienced a whipsaw entry.  Since 2008, whipsaw entries occurred approximately 75% of the time.  For this reason, protective stops are a good way to clear out of trades that whipsaw.

Regular readers will know that I also like to review Elliot Wave (EW) analysis; not as a predictive measure, but as an assessment of possible current states.  Below, I have greatly simplified current S&P 500 EW count.  Most of the EW analysts I follow suggest that we are at a medium term corrective point.  The problem with EW is that it (usually) can't make predictive assessments.  This is where RUM Wave is helpful in finding a market bottom.  My favorite EW blog can be followed here.

The daily chart of the SPY (below) shows price approaching a point of low volume, which could be the exhaustion point for bears.  That would correlate with EW analysis and will probably create another RUM Wave entry point.  

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