S&P short term cycle swings

[SyndicateTwo]

833 was the 1st swing high from the March rally point. That taken out means this isn't a new leg up but rather a continuation of the 1st wave. However, I'm with someone else that says, 'wait a minute, everyone is counting this wrong'.

This is a B wave rally off the larger first decline being an A wave down. B waves are corrections made up themselves of an ABC. So, that makes this a A of a B. Make sense? That's why we didn't get a fibo pullback.

But that's all speculation. Personally, I don't really trade that way anymore. I read Larry Connor's book 'Short Term Trading Strategies That Work' from Tradingmarkets.com in which they backtested all kinds of strategies to 1997 and basically came up with one that does work -- mean reversion.

Simply put, it's trading against the trend. The key to making it work is timing the entries. They came up with an RSI of 2 on daily charts and 5 for indexes for bottoms and 98 on tops.


But I use that only as one. The other is linear regression. The idea is the same as using extreme RSI readings being that prices can only go so far on each leg up or down before they need to pull back.

The trade is to trade for small gains the other way. Using options, you magnify that.

Here's 5 PUTs I'm going to buy tomorrow. Maybe even put spreads.


CHG
BBOX
JNPR
RVBD
ELON



Go here --- http://www.prophet.net/analyze/sc.jsp?size=468,400&pricedisplay=3&duration=3m&frequency=0&log=1&redbars=0&showSpreads=&hidevolume=1&hideevents=1&ustudy=&lstudy1=&lstudy2=&lstudy3&MA=&MAPars=&studies=CCI=14,,;LRC=100,,&scheme=blugray ----


Enter those stock symbols and you'll see how each have their prices at the upper end of that channel on the 3 month charts. The key to timing these types of trades is to wait for those extensions to get reached before even considering trading against the trend. That way you know you're not early.


Let's go with $1000 into each of those trades:


SHORT:

23 shares CHG
38 BBOX
59 JNPR
65 RVBD
118 ELON



Let's see what happens!

Oh, of course short BRCM.