Wednesday, May 23, 2018

Flipped Back to Short

The model was long NQ for one day and lost a little (it remained short ES, surprisingly). Now it has flipped back to short. Given yesterday's post, I'm still thinking this is a limited correction. Here is a possible interpretation based on Elliott Wave Theory:



We are now in wave C of 4. Based on Elliott Wave Theory that wave should stop before price falls below the maximum point of Wave 1, as shown on the graph. I find Elliott Wave very useful in understanding the different things that might happen, but I don't think it is an exact fit to what the market does, especially on very long and very short time scales. Over the time scale shown on this chart, it is particularly useful. On the other hand, Eliott Wave is notorious for continually morphing and following what the market does, rather than predicting it.

Of course, my model has nothing to do with Elliott Wave Theory it is just nice to have some other approach that does not conflict with the model or confirms it.

If you look closely you'll see I'm short from 6911.5 and up quite nicely, but I was up $500 when long yesterday evening too and that reversed...

P.S.
The downside didn't last long! Market turned around in the morning US time and went up, eventually reaching above the top of the triangle in the chart above. At one point I was up USD 1500, but unfortunately I didn't take profits as I was sticking to what the model said to do. Now I am considering doubling my position during the Australian daytime - the US overnight and then closing half in the US morning. If I had done that yesterday I would have ended up on the day. I am going to backtest the strategy of course. 10 years back when I previously was trading futures, I did look at "overnight trading" as a strategy, and now it has come up again.

Model has now flipped back to long. S&P model was short till today, and now has also gone long.

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