We've been blessed with a great trader's market the past few months.
Had we simply held our
April 2 shorts (at 1422), then covered and gone
long on May 23 (at 1298, I was early), we'd be up a respectable 215
points (15%) as of Friday's close.
There's certainly nothing wrong
with a 15% return in 4 months. It beats the heck out of a buy and hold
strategy which would have left us down 33 points (-0.49%)
By paying attention to harmonics and chart patterns, however, we registered
685 points over the same period for a
49.25% return.
Looking
back, our forecast was crazy accurate. Here's the chart I posted on
June 11, a slightly revised version of the June 1 forecast [see:
Mixed Signals.]
The
forecast line is the solid purple line rising diagonally across the
chart in the middle of the red channel. I was expecting a quick decline
from 1335 to 1308, then a rise by July 25 to 1389. I punted on the
likely wave shape, drawing a straight line down the channel midline from
June 22 on.
We got the decline the next day (to 1307)... and
followed that with a rise to 1389 by July 27 -- only two days later than
expected. Here is the exact same forecast, superimposed on the actual
market results.
I'm
not aware of anyone who correctly anticipated the wave moves. Fortunately,
I didn't embarrass myself by taking a wild guess. But, the channel
worked very well -- until the July 12 dip necessitated a slightly tamer
slope.
Earlier today, a friend recounted his attempts to
capitalize on the rise since early June using options. He had the right
direction, the right target and nearly the right timing. Yet, profits
had been elusive.
I attribute the difficulty to the
crazy wave structure we've seen since the bottom. It's been very challenging staying ahead of the daily swings. Only 3 of the past 38 sessions since June 4 featured daily swings of less than 10 points. Fourteen had
daily swings of 19 points or greater.
So, what's next?
* * * * * * * *
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