I have published tonight's update for Monday morning and am sending it to everyone on the ShepWave email list.  I am also putting the update (with charts removed) on the BLOG.

 I receive emails asking about how ShepWave does analysis etc.  Let me point out first of all we are NOT a 'black box' system.  Wise Trade and other 'black box' systems 'do' work if the trader has discipline.  The purpose of ShepWave is to show our 'preferred' Elliott Wave Theory counts and the alternate counts.  We show the areas that either need to be hit or need NOT to be hit to confirm the different counts. 

We show, over the course of time, different strategies that can be used by any investor/trader from Day Trader to Long Term Investor.  We stress discipline and trading with a stop/loss that fits the individual traders 'Risk Tolerance' factor.  Keep in mind that we do show some of our trades; but, always evaluate your trades to your own style and risk tolerance.

[charts removed]

 I want to show the same chart we showed in our Thursday Morning Update which was published Wednesday (LATE) Night last week.

We stated that the index 'could' hit a target of 12,490 (or higher) before turning down.  The index had closed Wednesday at 12,442.   This upward target was based on 12,490 being a Fibonacci 61.8% retracement of the move down from the recent high.   The market rallied and closed Friday at a price of 12,556... Over 100 points higher from Wednesday's close.  Short term traders had an opportunity to go long, keep a tight stop since there was no guarantee that higher action was coming and profit.  Notice the 50 period moving average was broken (to the upside) on Wednesday.  In fact it met the criteria taught by ShepWave to wait for a double break of the trend with the second breaking bar going higher than the first breaking bar.  This is a BUY Signal in this case.  That is why we gave the upward target of 12,490 (or higher) for potential profits to be made on the LONG side.

Now we are dealing with the preferred Elliott Wave Theory counts being used in the chart above possibly being negated.  This would happen if the recent high of 12,680 is broken.  If the high is NOT broken then the above count 'could' work out.  In Wednesday's udpate we also gave the possible count of the Down move from the high of 12,680 to 12,337 as a three wave move (A,B, C), Corrective in nature and once confirmed to be finished 'could' lead to a rally with a new all time high in the index.

The case is still strong for the BULLS to start out this next week.  The analysis is basic.  If LONG (or wanting to go LONG)  ... stay LONG and use a stop/loss to at least lock in profits.  If we get a double break of the up trend line (blue dotted line) from last week with the second breaking bar going below the low of the first breaking bar then that would be a Sell Signal.  [ You can also use the 50 (40,30,20,etc)  period moving average as your breaking point but in this case the trend line 'should' provide the quickest entry.]  The actual STOP/LOSS according to ShepWave strategy for cautious traders would be the high of the first breaking bar.  Keep in mind that this set up is possible because of the 'bearish divergence' as indicated by the MACD and RSI.   A cross downward on the MACD would also strengthen SELLING the index.

Keep in mind that this strategy can be used on any time frame.  Short term or day traders can use 1 minute charts to get in and out of trades SAFELY, keeping stops adjusted to avoid any large losses.

 [charts removed]

 The weekly chart of the Dow Industrials index above shows why ShepWave is not currently overly BULLISH the markets.  Notice that since the rally began from the lows of October 2002 we saw an increase in strength on weekly charts for the initial leg of the rally labeled W in the chart above.  Then from the beginning of 2004 to the recent rally the index actually showed less and less strength in the rally.   ALSO, the formation of the rally from October 2002 is a a five wave overlapping move.  The internal structure of the wave is three waves each.  The 'over throw' of the upper trend line was expected and SOP for ending diagonal patterns.   This leads us to believe that this is an ending diagonal and once this pattern is over a quick reversal move is to be expected.

So,, once the confirmed  break is in the real test for long term investors is the 9,370 area.  This area may be adjusted later.  Once again, charting analysis is always 'fluid' and has to be checked and maintained on a regular basis regardless what time frame you trade.

That is all for tonight.  I will post charts and analysis for the Dow Industrials,DIA, Nasdaq, QQQQ, S&P 500  for subscribers as the week progresses.

Have a great week and make money!!

Shep

 

I just checked out the Investor E-book that CLUB EWI is offering to all members.. very informative and covers a lot of basics of Technical analysis and Elliott Wave Theory.

 

Click the image below to Download your copy or to sign up for CLUB EWI for FREE to get your copy.

 

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