THT’s Market Analysis Part 3

In part 2 we looked at trading with precision using Elliott Wave and we found that sometimes it worked spot on and at other times it failed – forcing us to alter and amend wave counts, take losses and rework our charts – this is of course a very subjective way to analyse and trade the markets, for some it gels for others the concept sounds fantastic but they can’t apply it.

This lesson focuses on my trading set-ups and analysis, including TFT Propulsion, Gann Pullbacks, Pattern, Price, Time and using the DTosc indicator.

Once again a wealth warning – “Nothing works 100% of the time, we will have losses” I hope that after reviewing this post that you can see and understand that there is NOT a one size fits all trading set-up – The markets can only move 3 ways – Up/Down & Sideways and out of those 3 movements the market can only do 2 things being in a Trend or a Correction of which can come in varying sizes.

If your trading set-up only works during Trends then you will endure a string of losses during the corrective, non-trending parts of the market unless you have 2 systems that you can employ.  Then comes the hard part of knowing for certain you’re in a non-trending section!  i.e. Elliott Wave 5 wave impulse should be followed by a non-trending corrective phase of ABC as a minimum, the hard part is identifying the 5th wave and being on guard!

The general concepts and strategies I use are on this site already (apart from THT Trampoline – I’m still debating about whether to reveal it), so forgive me if I brush over key areas – I don’t intend to reprint my trading rules as they’re on this site already and we’ll focus on the recent S&P500 market as previous, although I’ve zoomed into the charts for clarity.

TFT Propulsion

Details on the chart – Ignore the assumptions to Elliott Wave as previous post and as you can see would have resulted in trading the complete OPPOSITE side of the market to our Elliott Wave assumptions! (see THT Market Analysis Part 2 for EW counts)

Gann Pullback

Details on chart – again as the trend started to become positive by way of rising higher highs and higher lows and bullish 8/21 EMA trades to the long side only. Trading ranges will murder this set-up just like TFT Propulsion

The Gann Pullback noted on the chart above would of been a losing trade as the next bar (Thursday 30th Aug 2012) would of stopped the trade out – nothing works 100% of the time.

DTosc Indicator

Details on the chart, but in essence we use the DTosc to buy corrections in a confirmed uptrend (Bullish 8/21 EMA) and we sell Rallies in a confirmed downtrend (Bearish 8/21 EMA)

We can also use the DTosc to buy or sell when a Trading Range is forming/formed (8/21 EMA flat lining) – remember though that oscillators don’t work that well when Trends unfold, BUT, they can be used in specific instances within trends to trade with

Dual Time-Frame Momentum

Effective use as a filter to identify exhaustion points and manage existed trades

Price, Pattern & Time Analysis

Without a shadow of a doubt, If I you have a price swing and price retraces part of that swing it WILL find resistance around the 31.2% or 61.8% level – that does NOT mean price will definitely reverse from those levels, just that price will hesitate. You can see the market (in the above graph) hesitated @ 31.2%, 50%, 61.8% & 78.6%

Timing also played a part – please note the range used to calculate the Fib levels and Time is March High to June Low, so the fib price levels are moving UPWARDS (not downwards!)

Reversals at these levels along with valid DTosc reversals are very high probability trade set-ups

You could still of made money on that trade, albeit not much

If this markets heading higher, where are the next resistance levels?  Pink line and 1st Green line!  Could of been on the chart by mid June 2012! – We can put these levels on the chart way in advance, but we can NEVER know that price will reach those levels, however, if price does those levels could act as resistance and stop a market in its tracks – as happened here and backed up by bearish DTosc’s of 2 time-frames.

I personally use these fib levels as target levels, as you are never 100% certain that price will reach them – holding out for the top level and not taking profits along the way at lower fib levels to me is not an option – we cannot know for certain which level will provide the strongest resistance.

If price reaches these pre-determined levels it is NOT guaranteed to stop price dead in its tracks, BUT, they are there to alert us that active resistance/support levels COULD potentially halt price action and reverse – we use the DTosc to help confirm our assumptions.

Please don’t think that I trade all these set-ups all the time I don’t, what I’m showing you is how various set-ups work and others fail on the same piece of market price action – in this instance its easier showing you using past market data.

The set-ups that I trade most often are THT Trampoline & Price, Pattern, Time & DTosc. (I’ve not disclosed THT Trampoline on this site yet – 6th September 2012)

I’ll stress once again – If you trade using a set-up in the wrong type of market it will not work effectively i.e. TFT Propulsion only works is well trending markets, If it were easy to predict when a trend is going to start or end then this lark would be easy.

Therefore I personally try to keep my trades to only that of THT Trampoline & Price, Pattern, Time & DTosc set-up – 2 in total, that way everythings kept simple and your entering a trade based on one particular set-up.  If you have the confidence and skill to multi-task multiple set-ups there’s nothing wrong with you doing so.

Remember – We are gamblers, we trade probabilities, by controlling risk and by using our edge over time we aim to beat the markets hands down. No-one and I mean no-one can predict with 100% certainty what the market will do tomorrow.  Therefore EVERYBODY that commits money to the markets are gambling, 90% of them don’t realise it and I would guess that 85% of that 90% are long-term buy and hold investors who probably think that their the safest group of investors where in reality they’re actually one of the riskiest groups!

Part 4 will contain my outlook for the weeks ahead.

I’ve deliberately positioned this Analysis series from a market education point of view and not a market prediction post, the reason for this is that the concepts shown will not age, If you stumble upon these [THT Market Analysis Parts 1,2,3 & 4] in 20 years time then the concepts can be applied to ANY market and ANY time-frame.  Part 4 WILL contain specific market price levels so can be used as a reference aid.

In the meantime safe trading/Investing

The Hovis Trader

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1 Comment

  1. THT Market Analysis Part 4 is currently being compiled – It may be a few more weeks by the time I get chance to post, bear with me

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