Trade Ideas for 05/01/09

The S&P gapped up yet again at the open, running/staggering to new uptrend highs at 889 before dropping into the close at just below breakeven. The move down closed this morning's gap. So far this run has been from 667 to 889, or if you prefer, 666 to 888. (Begging the question, is 777 or 999 next?) Judging from subsequent market action, there's a good chance the high was put in today. First, let's consider the idea that a new high is yet to come. The most straightforward explanation for such a scenario is that an impulsive move is forming.

Under this count, we have today's high as wave 3 of 3, meaning at least two higher highs are to come—(5) of 3, and 5 itself. However, under this count waves (1) and (4) overlap, which is disallowed (strictly speaking, it's strongly discouraged) as mentioned yesterday. The conclusion here is that this is a corrective advance, despite its seeming 5-wave structure.

Above is the simple corrective count, which shows the B wave ending today. It is plausible that the B wave will continue. Such a count would have today's peak labeled as iii and today's lows as iv, in which case another higher high is in store. Continued downward action would (eventually) rule this count out; a strong opening move tomorrow would favor it. Regardless, by either count it appears we are close to the top, if it hasn't passed already.

No trades today.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DGP	18.68	18.37	-2.2%	17.96	N/A	Chart
GOLD	45.56	48.40	+6.2%	46.14	N/A	Chart

Tomorrow, more short-side suggestions. We've been burned on the short side the past two weeks as this resilient corrective wave has progressed. However, tomorrow the opportunity is better than it has been thus far. To reiterate, there's a good chance that the high was put in today. I'm going to do something out of the ordinary and provide two different entry prices for tomorrow's ideas. The first, lower, entry price is more aggressive and doesn't rule out the possibility that another high is in store. However, the potential reward is commensurately greater. The second entry price means paying a bit more but would render another higher high unlikely. (But not impossible.) Note that FAZ is intended as a one-day hold; sell by the close.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
SDS (Ultrashort S&P)	64.71 OR 65.61	61.49	N/A	Chart
TWM (Ultrashort Russell 2000)	49.84 OR 52.11	46.58	N/A	Chart
FAZ (Financial Bear 3x)	8.66 OR 9.01	7.57	N/A	Chart
DXD (Ultrashort Dow 30)	53.94 OR 54.81	51.59	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.