REPRINTED FROM THE 20-FEB. WEEKLY BRIEF
Through a series of quick snapshot visual representations, this issue intends to graphically convey what each of our strategies strive accomplish in practice.
LEVELS-I & IIFrom its historic 2007 highs, we observe Level-I and Level-II strategies in this daily chart of the Dow. The bright purple arrowed lines represent our largest core speculative stance at Level-I.
Note how Level-I core positions maintained long exposure throughout the first leg of declines from the October 2007 top. It is not until early 2008 that core bias shifts to the downside.
Circled in bright purple, are general periods of drawdown or non-performance relative to Level-I positions.
On the same chart, we illustrate operations at Level-II with dark purple arrowed lines. Note how Level-II short positions established in July of 2007; preserves the last portion of profits relative to Level-I maintaining its long side exposure. In kind, the dark purple circles illustrate general periods of drawdown or non-performance relative to positions taken at Level-II.
LEVEL-IIIIn the above 60-minute chart of the Dow, the blue arrowed lines represent the general types of swings intended for capture at Level-III. Despite attempting to capture shorter-term swings that Level-II hedging operations simply ignore, the areas circled in orange represent typical periods of drawdown or non-performance relative to positions taken at Level-III. Though this is a purely speculative strategy, in some sense, one may consider Level-III a hedging operation against positions taken at Level-II.
LEVEL-IVThe chart above illustrates the visual landscape of bullish and bearish trade-trigger set-ups considered for capture at Level-IV. Varied in point-value, size, success, and failure, this purely speculative strategy is somewhat impartial to trends, and instead focuses on chart patterns that present a continual menu of measured speculative opportunities. As illustrated, one can see that price followed direction (free of drawdowns) in more than half of all the arrowed triggers. It is important to note however, that even though they may have provided substantial open profits at one point, at least three of these triggers failed to reach their measured targets.
The chart above illustrates the (IPV) portion of our extremely short-term LEVEL-V counter-trend strategy. When the market cooperates with this strategy’s mechanical protocol, it intends to capture one to three day trends from counter-trend reversal pivots.
Note that this “always in the market” mechanical approach will be heavily taxed with controlled losses amid sustained stretches of overbought/oversold extremes, general sideways short-term price action, and/or during extreme episodes of pronounced and sudden whipsaw reversals. We illustrate such tax in the two failed reversal signals circled.
The chart above illustrates the (MV) portion of the LEVEL-V counter-trend strategy. As illustrated, this strategy is much faster moving, and makes every attempt to capture as many meaningful pivots as possible. When the market cooperates with this strategy’s mechanical protocol, it intends to capture intraday trends from extremely short-term reversal pivots.
Note that this always in the market” mechanical approach will also be heavily taxed with controlled losses amid sustained stretches of overbought/oversold extremes, general sideways short-term price action, and/or during extreme episodes of pronounced and sudden whipsaw reversals. We illustrate such tax in the five failed reversal signals enmeshed amid the areas circled.
ANCILLARY STRATEGY REVIEW
Weekending 20-Feb. 2009
LEVEL-III Medium-Term Swing Trade (NTST)
Dow trades – UP 10.7%
S&P trades – UP 10.9%
NDX trades – UP 8%
Total Dow trigger-points CAPTURED – 680-pts PROFIT
Total S&P trigger-points CAPTURED – 666-pts PROFIT
Total NDX trigger-points CAPTURED – 92-pts PROFIT
LEVEL-V Short-Term Counter-Trend (MV) (IPV)
Total Dow Level-V points CAPTURED – 17-Feb. 242-pts PROFIT
Total S&P Level-V points CAPTURED – 17-Feb. 32-pts PROFIT
Total NDX Level-V points CAPTURED – 0-pts Captured
Following respectable sell side Profits Booked at the start of the week, subsequently sustained oversold conditions failing to incite a rally lasting more than 90-minutes, has since taxed the Level-V counter-trend strategy with a succession of controlled losses in search of a tradable bottom.
We hope that you have enjoyed this Weekly Brief, and have gained some insight into strategy application and current market conditions.
Until next time…
Trade Better / Invest Smarter…
Joseph RussoPublisher & Chief Market Analyst
ELLIOTT WAVE TECHNOLOGY