The S&P may be in the process of forming a 1-2-3 reversal. It broke the down trend line during the recent rally and is now in the process of testing support. For you trader types this is the lowest risk entry on the long side. You could place stops slightly below the previous lows at 1040 and risk less than 2% on the trade.
If the market does hold support and rally from here your risk reward ratio would be very large. There are large momentum divergences forming in RSI and and MACD.
Hint: The least risky trade is to buy below support. If you end up being wrong your risk is even less than 2% and you may catch the bottom of a 2b reversal.

58 thoughts on “1-2-3 REVERSAL, LOW RISK ENTRY

  1. Gary

    Usually not. But it is a low risk entry for anyone who’s foolish enough to try and trade the stock market.

    Hopefully 95% of the people who read this blog are smarter than that but hey I thought I would give something to that other 5% today 🙂

  2. Anonymous

    After all the warnings Gary has given against trading the stock market you guys can’t seriously be long stocks.

  3. Anonymous

    Ya, we’re just here day in and day out to chat. Sheesh! That’s like seeing a hot naked chick in your room and not masturbate. Sorry, we’re not the last airbenders.

  4. Gary

    Actually if the market breaks 1040 it would perfectly time what could be a daily and intermediate cycle low.

    If one just simply looks at price action the May 6th low would mark a very extended daily cycle. From that bottom we would then have entered a very left translated daily cycle that is now on day 37. The normal timng band falls between 30 and 40 days.

    For this phasing to work though the market must make a lower low.

    That would surely trigger massive sell stops and virtually every retail trader in the world would short expecting the break of support to lead to a market collapse.

    If however the cycle count is correct we would be within days of an intermediate bottom and all those retail traders would lose their shirts trying to sell short at the bottom.

    Now do you see why it’s so hard to make money in bear markets? (Not that I’m completely convinced we are back in a bear market yet)

  5. Anonymous

    Silver is down 14 cents.

    How is that gold short going for you DG? Have we learned our lesson yet?

    Sheesh just like a mouse in a maze running down the same path over and over.

    Tell us the truth are you really TK?

  6. Anonymous

    Got out of stocks awhile ago…just PMs now….But if the market does collapse, and since gold HAS decoupled, perhaps this may push into a final C-wave advance. People run scared into the only asset class going up, we get momentum, then greed, etc….

  7. Daniel

    There is your new lower low on the S&P. Hope the intermediate bottom comes soon (as in days) for all those stock investors out there!

  8. Ryan

    Miners are taking a hit too. I’m trying to become a old turkey but I’m getting worried and it’s hard not to hit the sell button for my miners.

  9. Gary

    quit looking at your computer and go on vacation. Otherwise sell your miners and buy physical and be done with it.

  10. Gary

    If the cycle count is correct the next swing low would have good odds of marking the bottom although I would want to see another day of heavy BOW also.

  11. Daniel

    What (money flow indicator– (Money flow index?)) do you use for your BOW and what levels do you consider important?

  12. Daniel

    I know PM’s and PM stocks– I am on board but the Stock Game intrigues me beyond explanation! I am a glutton for punishment– Do you place any significance on the dip down to 1035 but closed above 1040?

  13. Anonymous

    Danny is looking for a bargain in stocks, when he should just buy Gold.

    That’s the message.

  14. Anonymous

    Yeah Daniel, it changes EVERYTHING that stocks dipped below 1035 and closed above 1040. You obviously have your mind up to buy stocks.

  15. Daniel

    Hey Guys
    I know– I know-
    I am relatively new Sub and have positioned myself nicely with PM and PM stocks– Happy-
    However, I did have some stocks before I subscribed and have (stupidly) held on.
    Thank you immensely for the wake up slaps– (my head is ringing)
    I feel as though I am part of the family now!!!

  16. Anonymous

    Gary you’re cycle nonsense doesn’t seem to be working. Any thoughts? To think I was going to devote my time and money to this scam technique. Oh my!

  17. Anonymous

    I don’t get it. I thought we hit bottom and bought just about every dip. Even PMs are down.


  18. Anonymous

    Hey dumb ass read the post. Gary is just giving you morons who are dumb enough to trade the stock market a low risk trading entry.

    It doesn’t mean it will be a winning trade although if you did as he suggested and bought under support you are now positive at the close.

    Sheesh some people aren’t happy even when you make them money.

  19. Anonymous

    I like Gary’s cycle work. It isn’t always right but it is consistent and elegant.

  20. Anonymous

    TK should be about due for a bearish call on gold, thus guaranteeing more upside for us.
    I love being long gold, but hate being on the same side as TK.

  21. Anonymous

    S&P 1000 tomorrow or within 3 trading days.

    No buyers down here…we should have bounced by now.

  22. Anonymous

    Miners seem to be trading in synch with the stock market rather than with gold price. They are dropping much more than gold.

  23. Anonymous

    Gold isn’t even dropping, but instead bumping higher.

    The Gold goes MUCH higher. Better get some while it’s still cheap. IF we get a pullback, I intend to start using margin to add to my position.

  24. LowTax

    Too bad all the small miners are getting hammered – they still refuse to decouple and probably won’t unless gold really starts to leave the current resistance level behind. Oh well, back to work 🙂

  25. Anonymous

    Dawler guys long the PMs – quick, everyone get out or get short!!! Hey has anyone notice that even though gold has rallied the miners have done new jack shit! Reckon we’re heading for a correction, too many excited small fish bullish , plus dawler guys confirmed it for me.

  26. Anonymous

    Based on Gary’s chart a reasonable course of action for active traders might have been to buy a straddle or strangle. Why do nearly all forum posters online seem to be only short or long? It’s like no one has ever heard the concept of hedging.

  27. Gary

    I personally wouldn’t suggest hedging for 99% of retail traders.

    What’s the point of throwing away capital into a wasting asset?

    Just put stops on your positions and keep position sizes small enough that you never lose more than 1-2% of your portfolio on any one trade.

    Hedging just means you now have to managing two positions and of course your broker will skim off his cut (which tends to be much larger when playing with derivatives).

    Hedging is useful if you are a large fund and entering or exiting positions would move the market. I dare say that’s not going to be the case for the vast majority of us.

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