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.

A wave 5 in the USD would help the premise of a correction

Important moment. If it doesn't bounce here, it may go straight to the lower ML:

Keeping an eye on the big flat that forms at today's low. If that doesn't turn it back up, also looking at the DT ABCD area below.

Jim - I understand that you are talking about this setup:



Lots of important fibs coming together in the 1122 area. If both flat and DT ABCD would fail to stop the decline then we probably have our intermediate top in.

I have this

That's the setup. I have three lines coming together for that on my chart. It sure 'sees' it, but after such a sell today the reaction off an area like this (if there is a reaction) is usually one of two: a V-spike reversal or a small bounce and just chop sideways. It looks like the latter here. That can also imply the area is about to fail. But overall I'd be surprised if this can gain any traction today, and the lack of follow through is warning me that the odds of failure are increasing. We'll see. If this doesn't gap up and follow through Sunday night, then that pattern has one more to add to the column of not being up on Sunday night into Monday. Keep in mind, if my information is correct, we are at 16 for 18 of the last Sundays with that pattern playing out.

nice 4PC on nq so far

Nice little 'W2' off the low. Just staying long side bias for now, intraday, seeing if it has any legs at all. Sweet, sweet week. Plenty of potential opportunities, in my opinion, to catch this plunge down (as I briefly discussed in Al's Charts), right to a key area, then a shot at up. I'm watching the 34 area here very closely for clues.

Three ticks from 34, but the main .382 was 33.75 (rounded), .300 off the 'bull' high at 33.43 (33.50 rounded) and the line is downsloping, so it actually hit at close time at 33.50, so it is clear to me why this is struggling here.

This is all set up for a continuation up to keep the Sunday night/Monday pattern going, but it's closing at a minor key area, so if they wanted to run it down more, this was a good spot to leave it at. I think it needs a bigger bounce for any more downside, but if there is a big net seller or news item, all bets are off. Looks like an exciting trading week is on deck. Man, I just love this stuff.

And what about this nice small ABCD with BC leg centered beautifully around the ML of a downsloping set:

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?