The first week of 2010 brougth the breakouts to the upside in many important indexes and commodities. From what we follow here copper extended its previous break:



... and crude oil finally broke through the line it unsuccessfully approached so many times in the past:



These are clear breakouts that need to be respected. Barring a fake breakout which on such scale is hardly conceivable, they most probably show the direction of the markets for the coming months irrespective of the fact what majority of us think about the origin of the current rise.

ABCD ?
With 0.382 from bottom




Mats

And on globex, both 0.382 and 0.447 is involved in this area





Mats

stopped the epmove right at 0.382 0.447



Mats

I think some people in here are not getting my point. roofer's comments alone, if I'm interpreting them correctly, support this.

I was all over this drop, and given the chart jarek showed, you can see what allowed me to be on this. But on the daily/weekly timeframe the trend is still manifestly up. Read the last line on page 65 in AFTC. Yes, there is a big area here, but it's been slightly breached. And it is a key line area, but where's the ABCD? Without the ABCD, the setup is much less effective, in my opinion. Hence, I start being interested not off the turn, but once the trend is established a bit.

I can't make it more clear than the quote above from the book. I'm not in to calling ends to trends. The end to this trend has been called at least a million times on the way up by lots of people, and each time it wasn't the end. What is the point to that? I trade with the trend. Now that this has pulled back in here, it is once again at the first of several key areas. And up until now, every short call pulled back to a key area, and then up to new highs it went. If you keep shorting every time it hits an extended area eventually you'll catch the real turn. But, in my experience, you'll make a lot less money than if you followed the trend.

Every time you catch a put as it rolls, if you hold that after it reacts to a pullback area that goes with the trend, you start giving back. Not only that, you are not on the long side making additional profits. So, as I have said endlessly, my play is puts as it rolls down off key areas worth taking shots at, then if it goes right to a key area and reacts, back to the call side for the next push up. So far, this has been a good approach, I think. What is gained from trying to call the final top? I'd rather be on the right side all the way up, then be wrong at the turn, than be wrong all the way up and be able to say I nailed the turn exactly to the minute. I'd make a lot, lot less with the latter.

Understand, though, this is a timeframe issue, and if people don't understand what I mean by this, then my point is lost, and I'm getting a feeling few are grasping the endless semi-sarcastic rambling to make a point I've been doing lately. Unless I have 'pattern-line-Fib' (which I don't have here), I can't attempt to call the end to the run up from March, and I wouldn't even try. I 'buy the dips' until the market proves me wrong. Occasionally I might try some puts at key areas, but I'd want to be very quick to close those and get right back to calls. This is all on a timeframe that encompasses the entire move up from March.

Intraday I will trade whatever sets up. The timeframe is entirely different. I am in 100% agreement with the short side call roofer made, and with the setup jarek posted. We are now at the first key area in the ES I was looking at. And roofer's area shown for IWM, his target, gets hit at the same time. Coincidence? I doubt it. We are playing the same exact geometric play, so they should hit concurrently. But what I am saying is, this play in no way indicates to me an intermediate top is in. It may be, but so far every setup like this has failed to continue down. Someday one will.

Maybe this one, maybe not. But the technicals are not saying this one is it. It will happen when it happens. And if we hit 1400, what then? I will play this uptrend until it breaks. I will still take short plays like this one all day long. As I said, I sell retail and buy wholesale. But I do it with the trend. Hence, a short ends somewhere in here or just below. If I miss a big chunk of the first short leg, fine. At least I won't be giving up all those up legs I'd give up holding past the area.

So, as far as I can see, the plays roofer and I 'targeted' here were identical. I just am not saying this is likely an intermediate top, in fact, I'm saying it's likely not, and possibly 1400 or higher is in the cards. Who knows. The point is, I want to be proven wrong. That's the style, the plan. Trade 'up' until proven wrong, then trade 'down'. Don't try to call the end to a big trend. Play countertrend all you want, until it gets back to support for that obvious trend.

Stop trying to call the end to the trend. It's a losing game, I think. Again, countertrend on a lower timeframe back to support is not a losing game, trying to fight against support and the trend is a losing game, in my opinion. I can't be any more clear than I am right now. That is what I have been trying to point out to all the top callers in the forum, it's just not what the KT methodology is about at all. It's a trend following approach.

As a fun aside, if you want to see a near perfect 'Kane Pattern' from the book, look at KBH on a 5-min. Reversed at the 1.460 to the penny. Not that I put a lot of stock into 5-Point patterns, but it's a pretty one.

Now, you want to see why I think it really reversed? Go to a 60-min and put the key .382 and key set on there. Throw in the KP into that area, and there you have it. My mentor students can also throw one more thing in there to support that area. A nice 4.6% move off that low just this afternoon.

Anyone long off the ES area today? This one is interesting because it gives some very clear areas to watch in here as it rises. Lots of places starting right here that should send this back down. If it doesn't, those will be big clues.

That's the concurrent setup for my long post about today's low.

Where is everyone? This forum was going so good for awhile...

Is everyone watching this ABCD at a line in here? Big clues as to whether this is headed back for new highs or needs more downside. It 'sees' the area, but it's not acting like it cares much about it so far. Fed Beige book in the area didn't matter much to it.

Sure looks to me like it wants more 'up'.

The last post by jarek is especially useful for us here. It is a great 'context' example. That's a primo choice, great looking setup, with many of the factors I look for. But, this is coming off a large flat ABCD which is not only a much bigger pattern, but is also in line with the main trend, which is up. So, would I play a small short setup in here, set up to fade the bigger pattern? Only if I thought the larger setup was likely to fail. I don't feel that here. It may fail, but I surely don't want to fade it. In fact, the long side has been triggered already.

So, how do I read this, what's my play, so to speak? As I mentioned, this triggered beautifully with multiple setups on the way down, as already discussed. It went right to the key area I was watching, and started up. The short side is closed, and the long side triggered. May this roll down to a DT ABCD area, or even be a major top? Sure. But the last eighteen or whatever times it did something like this, and the top callers said the top was in, it went right back to another new high. I want to play that until it breaks.

This means I want to be proven wrong. That means I am playing with the trend until it breaks. There will be plenty of time to play the short side once a top is in. As I discussed and explained several times, this does not mean I never trade the short side, as I felt the last two drops were get setups and plays. It just means when it goes to a likely support area and reacts I'm done with the short side, and back to the long side. I will repeat this until I miss the top. When I close my long side out and it drops down further and all the top callers are laughing at me I'll be smiling. I stayed with my 'Trading Plan'. Then I can start looking on the short side at resistance, and countertrend only back to resistance.

You see, at some point a top will form, and I'll 'miss it'. That's by design. That's what I am trying to do. To look at the one time when a top caller catches the top, and then say the plan should be changed based on that success makes no sense to me. Even a stopped clock is right twice a day. One must account for all the failed attempts and missed trades on the way to catching that turn right at it's inception. It may be a nice trade there, but overall I find it a lot less procuctive than the approach I have been describing.

I say all this not because I am upset with anyone, or anything like that. My 'job' in here is to help people understand the KT methodology. That's all I'm trying to do, explain the philosophy. Make it clear what my approach is. Everyone can trade however they want, but if someone is in here, I assume it is to try to understand more about this methodology. If I see some key concepts aren't being grasped, I will try over and over to make those concepts more clear. That's all I am pointing out here.

The bottom line is, I am not going to trade this little bearish ABCD, I'm already triggered on the long side. If it rolls down on Sunday night, that's fine. At some point this will correct further. If I'm long, I'll be stopped out. The top callers will win this battle, but I think the war will be lost with that approach. I hope this one rolls down. I hope they crush this market, unmercifully. But until they do, I'm going to stay with the trend until proven otherwise, or until I get a big bearish ABCD setup. Along the way there will be areas worth taking shots at, followed down until a reaction happens at support, then it's back to the trend.

And after the fact, if this bearish ABCD here plays out fantastically, would my opinion change? Not at all. One case doesn't matter, only the aggregate. One of these bearish patterns will follow through, but the point is follow the odds, not the one case. And that all depends on the 'context'. If I thought an intermediate top was in, I'd already be short and holding here. If I thought the 'context' favored the resumption of the uptrend off this big pattern, I'd be long. But to start a new short this far down on that small of a bounce, right on support, that doesn't make sense for me, 'context'-wise. Make sense, I hope?