Bear Marketing

Let’s try to solve most of the problems you have been having with trading in one single article.

First, a practical example and then the theories later.

This bottom had developed by the morning:

This meant that the bears were spent for now. The red circles are the 3 largest wicks.

I was busy in the morning and missed out on the long entries, although I knew what the target was going to be. You see, there is no random stuff here, things happen methodically and with a reason.

There is a lot going on in this image, but what matters for now is that the target was the Fake Out of Mr. Maroon, and the wave structure is important as well as the wave 4 landing yet again on E-16 and the same time on the top of wave 1. Notice that the legs up tend to be about 2.5 hours long.

I put in some pending orders and traded on the fly while I was commuting home from work.

Knowing the things I know can virtually guarantee you daily 5-10% gains, and nominally this is more what a Plant Room Assistant makes on a daily basis – believe me, I know. This in on a 1k basis – I would be closing the week with 1,652.61.

So, what are the reasons behind the generic unconscious incompetence?

  1. Not knowing / not acknowledging the type of market you are in.
    There are markets with edges, which are the embedded markets and markets with no edges / leveled play field.

When a market is embedded, that means that either the bulls or the bears have advantages over one another. This imbalance in the game rules results in bull or bear market.

Whenever people yell bear market on TV, they clearly do not know what they are talking about. 25% correction? Based on what? Price of the index/stock? 25% compared to the range top-range bottom in the last year? Losing the overbought status gives the opportunity to the bears to utilize their surprise/time advantage and make some major damage by i.e. taking the ball from the overbought court to the oversold one, but this move does not have to result in a bear market setting in: for the embedding to develop price not only has to go down, but also stay down for a prolonged period. Becoming freshly oversold does not give bears any advantages, it is quite the opposite that is true.

for more on this please refer to my articles based on my Comfort Levels indicator

  1. Not understanding the rules of embedding.

Let’s discuss the EUR/USD that has been in bear market for a month.
What rules apply here for the bulls?
They are playing with handicap. In bear land, the objective of a bull is to score a Wave 1 out of the first 3 tries. Their time is restricted for each leg, they get less than 3 hours of try below E16. Once the 3 attempts are up, the bears get to go hard for 5 waves (3 pushes) down.
The bears objective is to keep making lower lows.

Let’s talk about what went down after the market printed an end of wave 5 of Wave 5. There was a strength/measure attempt. It did not qualify. Although this is not a wave that gets a count, it still has a wave-like structure to it.

You can’t see the Whoop-Bam-Boogie structure, not even on this 15-minute zoom.
The 5-minute RSI2 could help spotting this SOS print.

A Sign Of Strength is what it’s name says, a visible measure of buying, yet since it falls short from being able to fake out Mr. Maroon, it is a short term, immediate sell signal (all the attempts to the upside got broken 3 times in a row) for five legs down – which aren’t expected to get very far, after all.

Mr. Maroon is the 135 High and Low EMA pair on 30 min. A fake out on the upside is a hit between -3 and +8 pips of the High EMA.

What happens next? 3 opportunities for the Bears to try to push this down. The shallowest kind of pullback would merely do some faking out on the Low end of Mr. Maroon, and there would be the bulls turn again for Wave 3 up, all five legs of it. I don’t expect the E16 violated by much on the following 2 more attempts down, but we shall see. 3 pips below is the algo buy area. The Bulls have registered a right for a Wave 3 and a Wave 5 to the upside. And this time with the 2.5 hours per leg time restriction lifted.

This image shows the 3 Full Lambda moves down (cyan markers) plus how the red “R” that got broken became the green “R” – rebound – to buy.

Hi, 5!

In trading you need to outlive, outlast, outperform.

To stay in business, you must mean business.

There are things to grab on to in order to get the wave count right.

One of these things is the 1st return to the E-16 after a 9-sample separation.

If Wave 4 gets a kick in the face here, you would see a violent Wave 5.

I mentioned earlier about the Shape that it followed a Wave 5.

There you go, in nice magenta.

And today, another one?!

Wave 4 was a liquidity break – hence the purple stripe. When would this Wave 5 end? I mentioned it enough times, there should be a divergence between the measuring leg and the divergent one. Currently the measuring leg is printing.

There was a common thread, trending. That is what I store in the E16NRed array (thick orange on the plots). Empty=no trend.

if (High[i+1]<E16[i+1] && High[i+2]<E16[i+2] && High[i+3]<E16[i+3] && High[i+4]<E16[i+4] && High[i+5]<E16[i+5] && High[i+6]<E16[i+6] && High[i+7]<E16[i+7] && High[i+8]<E16[i+8] && High[i+9]<E16[i+9] && E16NRed[i]!=EMPTY_VALUE && High[i]>E16[i]){
                 ObjectCreate("Five"+i,OBJ_TEXT, 0, Time[i], High[i]+80*Point);
                 ObjectSetText("Five"+i, "5", 53, "Impact", clrWhite);
                 ObjectCreate("Fivez"+i,OBJ_TEXT, 0, Time[i], High[i]+80*Point);
                 ObjectSetText("Fivez"+i, " 5", 53, "Impact", clrMagenta);
}


if (Low[i+1]>E16[i+1] && Low[i+2]>E16[i+2] && Low[i+3]>E16[i+3] && Low[i+4]>E16[i+4] && Low[i+5]>E16[i+5] && Low[i+6]>E16[i+6] && Low[i+7]>E16[i+7] && Low[i+8]>E16[i+8] && Low[i+9]>E16[i+9] && E16PBlue[i]!=EMPTY_VALUE && Low[i]<E16[i]){
                 ObjectCreate("Five"+i,OBJ_TEXT, 0, Time[i], High[i]-80*Point);
                 ObjectSetText("Five"+i, "5", 53, "Impact", clrWhite);
                 ObjectCreate("Fivez"+i,OBJ_TEXT, 0, Time[i], High[i]-80*Point);
                 ObjectSetText("Fivez"+i, " 5", 53, "Impact", clrGreenYellow);
}
Daily fuel limit values
Wave Structure

So, how can you get two wave 5-s in a row?

It is quite simple actually.

There is Wave 5, as in Wave 5 down and there is wave 5, or the 5th wave of Wave 5.

The Shape – on a Close Up

The Shape is an ABC structure.

Since it is a counter-move, the likelihood for its starting point is in Bear Zone 1 or Bull Zone 1, after a Wave 5.

The shape develops as a result of a “Stong Off The Bottom/Top” move.

///Strong Off The Bottom
RSI[i+1]>RSI[i+4]*3.5 && RSI[i+2]<RSI[i+5]*3.5
///Strong Off The Top
RSI[i+1]<RSI[i+4]*.28 && RSI2[i+2]>RSI[i+5]*.28
///where RSI is an 8-sample HL2
The last cyan tilted line up is a shot over the bow / “full lambda move”. After a move like that, within reasonable time a deep pull back is to join in on (see red R earlier) or a B represents a break out.

The following image shows the ABC structure beneath the shape.

A, B and C waves each end up when they have printed a measuring leg (blue/red) and a divergent leg (yellow) that makes a (near) higher high / with still overbought/oversold RSI2 reading, but with a rather divergent value.

As you can see, the pullbacks are very muted, and throughout the whole structure it is virtually suicidal defying the shape’s direction (during this 5% correction), for the maximum holding time of a short was less than 1h on average.
The long wick on the spike up did not register an overbought RSI, but it did clear orders out of the way making way for the last thrust up.

The last image shows the reaction that occurred from the spark zone, the subsequent trend line that was printed by the pullback and the break that was to happen in this current, trending state.

So, how is this market gonna reverse after all of this?

  1. Measuring leg + divergent leg closes down leg C
  2. You would see a full lambda move down
  3. a) that would provide an entry either upon the break of the low or b) upon a deep pullback (>65)

When the sequence does not play out like this, you may end up getting liquidity breaks followed by more pronounced divergences (higher highs) on new divergent legs.

Full Lambda Break

I’m still trending, ye-ye-ye!

Wave 4, the Ambitious

Second time in a row I get tricked by a Wave 4 to believe that it was over already. Needless to mention, this throws off the wave count.

I made this image yesterday.

I put a #5 where I should had put a “b”.

And that previous Wave 4 with its a-b-c was also longer than anticipated.

You see, Wave 2’s RSI2 extreme is the reference to the end point of Wave 4. Since Wave 3 has a tendency to expand on volatility, Wave 4 may end up showing up as three legs while the volatility starts contracting again.

The red circle shows the end of Wave 4’s A leg beating the reference reading of Wave 2, but also maxing out. At the same time, E16 (in blue) was deeply undercut (by more than 9 pips).
The Orange Oval are the ending, divergent thrusts of the C leg of Wave 4.
Wave 5 used the reference point of Wave 3, but it also went out on a limb by maxing out on the first try (Whoop). The “within six” reading should arrive in the right rhythm: on Boogie.

From what I see here, I can say that if the Wave 4 ends up violating E16, then you can expect one more leg out of it. One sign, that a follow-up is likely, that the RSI2 hits its limit on the pullback (0 or 100 on RSI2 30 min).

Another symptom of the 3 legged correction is that the 3rd leg takes a lot shorter time to print, because most of the orders already got filled on the first leg in the overlapping area.

In closing, I would like to share a few things about trend lines.

  1. Avoid connecting the maxed out RSI2 readings

2. Using two colors can help you grasp the following thinking: when price is above the red line, it is in break out mode: trading above resistance. When price is trading below the green line, it is trading below support.

3. Trend lines can keep you in a trade longer, so it is beneficial to plot them.

4. Why don’t you make the plots automatic?

The gray ones are not “valid” trend lines, they are time out ones, which means that there were only 5 trend lines were printed in the last 3 days.

The Principles of Wave

Wave counting is as good of a pseudo science as any (Gulliver Wave)

“The Principles of Wave

Are difficult to understand

Do what you love and in the end you’ll find

Wave”

I have got to give credit to my brother Elliott for counting to five and reciting the first three letters of the alphabet successfully – and I just ran out of credits.

Let’s examine the crazy volatility-event of Thursday, that was easy to misinterpret in the making I you were unprepared and were looking to closely.

This was a Wave 5 down that came out of a wave 5 of a Wave 4 and had a corrective ABC structure and was followed by an impulse wave 1 of Wave 1 up.

Right off the bat, there is a lot to digest here. How can a B end point take out the starting point of an A? It just can. (Think volatility talking into a megaphone).

Now, watch carefully, for as any good Kamikaze teacher, I’m only going to show this to you once.

It is a 15-minute chart you are looking at a Wave 3: it started when the RSI2 line kissed the 0 and set up the dive5gence on the left. Wave 1 of Wave 3 ended right before the vertical tie off of wave 2 touching 7 on the scale. Wave 3 of Wave 3 was weaker than wave 1, and it ended when the vertical drop (this time) matched the 7 read. Wave 5 of Wave 3 was a tiny flame; wave 5 had to measure in the vicinity of the RSI2 read of w3/We (“within 3”) and the current drop has to match/surpass the Wave 2 drop on the 30-minute chart. Wave 2 hit a zero. What will you get after the Wave 4 print? Wave 5 obviously (to be exact, wave 1 of Wave 5 of Wave 1 UP), that would have to make an RSI2 comparison of its own, a read of within 6 to whatever RSI2 peak was managed by Wave 3, wherever price would be at that time.

I hope you learned something new.

Strong off the bottom -> the Shape -> fully consolidated or not, it will be keep on going until it ends in parabolic tail before the correction

When Is Price

Do you ever consider the possibility that when is the price may be more important than where is the price?

By when, of course I mean the wave structure.

This morning’s wave 5 was a short one and it made a divergent double top with wave 3. I can’t draw from here, but I’ll walk you through it.

See the RSI2 peak in the middle reaching above 85? That was the measuring leg of wave 1up that was followed by a lower peak making the wave complete. Wave 3 kicked in upon taking out the pullback low of wave 1. Wave 3 made its measuring leg above 93 followed by the divergent higher high / equal RSI2 read. Wave 4 was the pullback to E16 (in blue), and wave 5 had a no strength push for a first leg and the second – that set up the double top, deepened the RSI2 divergence further.

What the market is doing now is setting up the first measuring leg of wave 1 (whoop) down.

The following applies in Fading Market

Bam can be faded: on the way back it would take out the back swing of Whoop.

You are looking at BAM to the upside – the expectation is that the pullback of BAM would undercut the pullback of Whoop by either price or by RSI2 reading.
This time it was price. My RSI2 cropper routine cut the 2 positions at market – that is how they ended up a little higher with the spread and the slippage.
The lastflow isn’t equal to 500 if it found an RSI2 divergence in the last 500 samples.


Close it out beyond whoop upon an RSI2 divergence or upon the RSI2 swing surpassing the previous reference.

The WBB count starts from an outer stretch beyond E16.

Fade the struggle

Boogie has to make a measuring leg first and then beat it with a divergence, thus you should load up for the counter move on Boogie when it is applying pressure on its thrust peak failing to get something stick beyond.

Good going on this tiny account with 40%+ gains both days this week since the funding.

My best daily gain in September was 92.5% on a different account.

I did want to mention about how ominous the looks of the triple resistance above is on EUR (the Moat in Red, the median in white and the sample high in red – never seen this looks before, EUR may get creamed in the near future.

Price may be at a stretch here for a fading market (brownie points) but we at Whoop Bam Boogie Trading cannot advocate fading an opening move while the measuring leg is still printing. If short, consider a partial cover.

Thesis: Silver Surfer

So, there are two types of markets.

E-16 I have had a long lasting fascination with. I used to call it the “Water Line” and plot it in blue accordingly. Waters can have current, but this white blog paper is about the electric current that E-16 gets to be charged with in order to act as a magnet that repels or attracts.

The two types of markets this causes are the Smooth Sailing (Surfing) market and the Fading market.

Try to picture for a second, that the price has a positive charge, and our Electromagnet, E-16 has a negative charge.

The magnet itself has a direction, but what is important is the “wrapping” around it: price gets pulled away and it naturally falls back… until hitting a breaking point – the point of no return, where the attraction is too low for the price to be naturally drawn back from.

The when the point of know return gets tripped, the electromagnetic current changes direction causing the E16 to start acting as a repellant.

The characteristic of the positive (price) – positive (E16) market is that supports and resistances get surpassed with ease, and ultimately count for naught. I mentioned in the previous article, that what you have to work with instead is the degree of stretch and time.

You can witness on the following image how all resistance levels accounted for nothing until the mean reversion was complete, and then the momentum (polarity) carried price further.

The only actual stalls were upon tiredness, upon reaching the daily fuel limit (I am pretty sure I shared the formula for calculating this a number of times) for regrouping.

The next thing to talk about here is the point of going too far. This time not in relation to the rubber band, but in relation to pushing the positively charged particle (the price) to the other side of the positively charged E16. Of course, the rubber band stretch helped. Remember, that the flip happened in Bear Zone 1: between 1x and 3x from the mean.

What happened on the upside is that we ran out of current. The interrupted line is what I call the “computer buy”, and even that changed its mind before price got to it.

The market transitioned back from surfing/sailing mode to fading mode.

The characteristic of the positive (price) – negative (E16) market is that the price keeps on falling back to the the attractor current.

Due to the wrapping around the E-16, you cannot expect any move to exceed a full fluctuation size (until a point of known return shows up), and if you want to make money, aim for 1/2 fluctuation size bites (i.e. from the green and the orange stripes).

Boogie mans have the potential to turn into something more, yes.

I use the arranged LEMA fan (30min, 1H and 2H) plus the 30MA (hourly) to detect for “charged market”, and based on this, it would not take much to re-instate the positive current, the orange line would have to go back below the Green River, is all.

I wanted to insert here a video from the Powerpuff Girls Series (the old one) where Mojo Jojo rambles about

“Magnetically inducing magnetism, thus creating a Total Meltdown” – but I could not find any trace of it, so you would have to entertain yourself with some of the cartoon scenes I worked on instead.

My compositor portfolio

…would be testing for the rest of the weekend…