There is No Emergency; Stay Calm

Unlike others trying to sell subscriptions, newsletters and trading services that try to get your emotions going so you will buy their products & services, we have always just urged calm and an educated approach to try to count waves in the best spirit of the wave principle as aligned with the rules. If you would have listened to every time a major EW service 'screamed from the top' with suggestions to go 'double-short', 'or max short', the market would have proved them wrong and your account would be the worse for it. Part of staying calm is to actually take the time to review the information at hand. There just aren't that many pieces of available data on which to make a judgement, but one should not throw away the key ones by forgetting to consider them. The chart below is an example.

Daily Put-Call Ratio Five & Twenty Day Moving Averages

This chart shows the 5-day (blue) and 20-day (red) moving average of the equity only put-to-call ratio (symbol $CPCE on Stockcharts.com). And one can see that the 5-day (blue) made a new yearly low during April. OK. But now the 20-day (red) has not only made a new yearly low, it has also made a new three-year low. That means for about a month of trading days options players have been aggressively purchasing more calls than puts. And more so than in the past three years. So, it is becoming clear there are more players on one-side of the boat (as they say).

Keep in mind this is a market-related measure. It is timely, and it is not subject to the wave counting techniques of an individual or company. It simply is what it is.

Am I urging you to do anything with this information? Well, nothing more than put this information arrow in your information quiver as you make decisions.

It is much like the fact that the daily ES (and the weekly) are bumping up their upper daily and weekly Bollinger Bands - like in the daily chart below. More arrows for your quiver. 

ES Futures - Daily - Bollinger Band ~95% of the Time

The chart is only telling you that the odds of closing outside of the band are about, roughly, nearly only 5% of the time. This is a statistically based approximation founded on the standard-deviations from a moving average, adjusting for market volatility. It's not exact. Nassim Nicholas Taleb, author of The Black Swan, would argue with the loose statistics involved and blow them out of the water as not properly accounting for the market's tendency to make 'fat-tailed distributions'. OK. I get that, too. But when used as a 'rule-of-thumb' the algorithm does a good job of containing the market 95% of the time or more. The algorithm doesn't regard the market as an 'emergency'. You shouldn't either. And if you combine it with knowledge of what Ira Epstein determines as "the strongest market technical signal", that of the embedded daily slow stochastic - also shown above - you might avoid some pre-mature market signals, too.

If you want to be a trader that FOMO's in and out of the market, then listen to the subscription services and the financial news networks for recommendations (as opposed to just for information) and let them make up your mind for you. You'll be like a weathervane snapping back & forth in the wind.

But if you want to make more confident decisions, then learn to do the work for yourself. Learn to count. Review the few indicators the market has of sentiment, and of momentum-strength and make your observations in an organized and documented manner. Practice counting. Maybe put some of your counts out in public to get feedback on them (from a counting viewpoint).

Or don't. The only difference between traders and investors is their timeframe. Maybe investing is better for you. Maybe some of both. But I thought an investor was supposed to "buy low & sell high". The market is making all-time highs, not recognized bear-market lows.

Have an excellent rest of the day.

TraderJoe