photo illustration tyre marks in the send

SPY (SPX) lines in play

We often hear objections like, “It’s too complex,” or “It takes too much effort” with regard to Elliott’s wave theory. But, anything worthwhile usually takes effort, and is complex, and those that endure the learning process to undertake such endeavors are generally rewarded. We use Elliott because it is effective at classifying market moves, but it’s deeper than that, sort of a metaphysical reason. Elliott, and its underlying Fibonacci-based mathematical structure is a law of the universe. We talk more about that for example here in the previous “From Dow to Broccoli” post.

We use Elliott waves to find a good handle on the context of prices, or understand the price structure. One way to simplify Elliott is to master trend lines, channels, horizontal support and resistance lines.

Today, I’ll show you the last two weeks of the SPY ETF with trend lines alone. They don’t predict what is going to happen, but they show what areas are worth watching and what scenarios are the most likely considerations. Currently the thick orange and blue lines are in play.

 

The 30-minute time frame bar chart of the SPY ETF with trendlines on February 12, 2014

There’s a couple of items to note here, setting Elliott aside for the moment. First, RSI found bullish support at the pullback on Monday when it formed the double bottom, and has now pushed into “sustainable bull territory.” That means we should be viewing any smaller time frame decline as a corrective pullback, not an immediate change in trend. That’s the case regardless of the Elliott count we may have.

Secondly, prices are still in two channels, and both need to break and have to be successfully tested before we seriously consider something larger to the downside.

If you’d like to learn more about combining Elliott with Momentum into a trading process check back in with us, because our trading process booklet will be released soon.

The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.

About Laszlo Nagyferenczi

Laszlo Nagyferenczi is a day trader, analyst and instructor as well as the creator of the proprietary Context-Momentum-Signal concept. He has authored over 200 blog articles about his unique approach to trading and the Elliott Wave Theory. His clients appreciate his ability to go from the theoretical to the practical i.e. all the way to the actual trade set ups. Originally hailing from Hungary, Laszlo is fluent in English and Hungarian with a long list of education credentials including BA in Economics, Certified Elliott Wave Analyst (CEWA), Certified Adult Educator for T-Groups, Professional Co-Active Coach (PCC) at CTI. The real education, though, has been the trial by fire in the markets, with real capital at risk.

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