Stock, Option and Futures Trading

Stock, Option and Futures Trading

TF Bigger Picture


May 31st,2011

It is easy to get consumed with the smaller time frames but it is important to always step  back and look at the bigger time frame charts. The bigger time frames is what drives the market not the five and ten minute charts. We go over the bigger day trading outlook each night with our members to give exact levels to watch for and why. This is important for the trader that is trading every day but lets take a minute and look at the bigger time frames.

Starting with the weekly chart the 863.00 level which was the July 07′ highs was taken out the week of 5/2/11. It was only taken out by a few points but it was taken out. In March of 09′ I bet most people would not think we would be back at this level this quick. I agree, this move up has been pretty wild when we think back on the economy. Why is it this high this fast? Who knows and who cares we will let all the other people try to figure that part of it out.

We have found that the people that try to convince you of WHY things are happening will lose you money, why? Because they write huge articles explaining why it is happening and at the end of the day these people cannot go back on their thinking because then they would be wrong. I have seen it too many times and these are the people that have been long SKF since $150….OUCH..!—–and still holding….

We look at the charts because the charts are the most important piece of the puzzle not the economy. Our point should be taken when you look at this TF weekly chart. Who cares why its is going up just learn how to get in and go with it, right? Right.

From the March 09′ lows we did not have the best long signal but we did have a lower target on the DOW at 6,400 which we were off by less than 100 points. We had this target from the 14k level. It was the .618 from 87 low to the all time high. It was nothing special but it worked and so far the move up is in line with what happens off of a .618 buy level. If you were trading the TF at the time the long signal would have been the green bar coming off the low at 450.00.

The 6,400 low was a Monthly target then you go down a time frame to get the green entry bar. We have specific time frames we use for swing trading and day trading.

There was another long signal at 645 to where we are now. Since we are this far up the odds of going to the next higher target are very high. That would put the TF at the 1010 area the the 1200 area. Sound impossible? So did going back up to break the highs of the 09′ low , didn’t it?

Going down to the daily chart we have Yellow bars which means a big move is about to occur. The first target area on the daily chart is the 900 area. Could the Yellow bars mean a big move down? They could but the Monthly and Weekly trend is still up so right now we would have to say the big move has higher odds of being up.

How we trade we do not think the market goes straight up and down so we know there will be minor waves inside of these bigger levels. I can say as long as the 800 low holds 900 should be hit if not higher sooner than later. Going back on this daily chart we have heard big players saying “This is the high” if not “This is the ALL time high” and they have been wrong each time. Looking at the Monthly levels we still have 200 points to go on the TF before we can even say we would be at a point of a “All time high”.

The more people that pile on short the faster the upper targets get hit. The main thing to think about when looking at any chart is two things:

1. Are these waves impulsive?- non overlapping

2. Are these waves corrective?- overlapping

You can see from the 5/2/11 high to the 5/25/11 low the waves are clearly overlapping which means they are corrective. This is basic trading 101 but it is very powerful if you obey just those two simple rules. These simple rules apply on every time frame. Go back on your charts and look at these two rules and you will see it should not be a surprise we are making new highs each time.

We have been saying to our members that the main chart to be watching is the NQ monthly chart. As long as that chart is bullish the monthly targets will be hit and the targets are much higher than where we are now. When we look back a six months from now the highs we are at now will most likely look minor on the Monthly chart.

In our course we talk about how it is the bullish pattern that fails is what starts the new direction. So far all bullish patterns have stayed true so until the last one fails it is best to still think long and know that even a daily chart is minor. Why is it minor? Because if there is a time frame that is bigger than it by default it is minor in the wave count.

We will look at the NQ tomorrow night,

Happy Trading,


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