Stock, Option and Futures Trading
NQ Follow up on Fib Time
June 8, 2011
On June 5th we did a post on our other blog called “Fib Time” we noted that we were most likely in the .382 time portion of the current pattern. What this means is we are in the fastest part of the pattern and so far that thinking has been correct as the market has went straight down without even a 10 minute correction. We use multiple time frames with how we trade and we are always looking at which time frame is “In Play” and so far the daily time frame has been in play consuming all the smaller time frame patterns. To see this look at a 10 minute chart and it will seem very extended to the downside but just saying that it is extended is to basic of a thought , isn’t it? Yes, and using multiple time frames is not to just confirm entries it is to give you the potential strength or weakness of the pattern that could last for days into weeks.
When we hit the 2375 level on 5/31 that was a important pattern completion to the entire pattern that started back on 5/1. Since we trade pattern to pattern we noted this level in our member videos on 5/26.
When I count in time we still have 2-3 days until the timing for a low would kick in. Know that timing is a tricky component of the market and we only use it to confirm levels not as a stand alone method. The downside right here is we are so low in this correction we do not have enough time for 2-3 days worth of weakness. If the weakness occurs for even 2 more days all support will be broken and we could be sitting at the 2100 level. Of course that is a the bigger levels and there will be waves within each other before that level is hit.
Right now the NQ are only 36 points away from the 200 day moving average so I would keep a eye on that level if you are short. We do not really use this moving average we trade the patterns but since the 200 day is widely used there is value in it.
We have a rule that we wait for a specific time frame to turn the market and so far we have not had that occur so the short term trend is still down until we get that pattern. We could get the turn pattern tomorrow or we could not who knows but it is best to wait for it before trying to day trade long. This simple rule can slow the market down and keep you on the right side of your trading.
Since we have the .618 and .382 time pattern here I am looking for a bounce that will seem like it comes out of nowhere but in reality there is a reason for it. Technically the correction so far is minor because it is only retracing the last daily wave up which is minor when you look back to the last wave that started on 8/26/10. Could this minor correction turn into a major correction? Yes, and that is why we play it wave to wave. There is no reason to have to make a bet out further than 1 week if you are trading it this way.
The next few days will be important to the next 3-6 months in our opinion. Even if we have a major correction it is still labeled as a correction so that means until proven wrong and we will have plenty of time on the bigger pattern. Anytime I do a update that says “The bigger outlook” we are talking about weekly and monthly charts that go out years. The NQ can come all the way down to 2000 and still be a buy area.
Right here is not a good stop to enter swing trades in either direction in our opinion. Right now is best to day trade and scalp and not take the over night risk. Where we are now going into the next few days is when gaps to the upside occur and we would NOT try to short it for a gap fill.
For the video we did on June 5th on Fib Time click here and scroll down to the video called Fib Time: http://www.eminischool.blogspot.com/