After 5th wave extensions, the market corrects sharply to the the top of the 2nd wave of the extension (Source: Elliot Wave Principle by Frost & Prechter). Over time, this has proven to be an accurate and useful guideline in wave theory. Can it go higher? Sure, but this level is a high percentage target. For the S&P, this is around 1113 to 1115. I’ve gotten back in the game of late and am looking to short aggressively at this level. As you may know, wave 3′s are usually the most powerful waves of a 5-wave impulsive move. Wave theory may be offering a very helpful clue for getting short near the start of wave 3. I’ll be buying out of the money February puts on popular index ETFs. I also think AAPL looks like a great long-term short position given the huge volume doji candles in conjunction with climaxing positive news flow. Most of this is borrowed or summarized from DanEric’s blog, which I plug shamelessly because I think he’s the best. Happy Trading!
Craig, I’ll take the other side your trade (not really but in theory). You need to forget elliot wave and go read Bo yoders book on finding edge. I come to this site (and others) to get a sense of what the crowd is doing and then I trade against them. The answer is understanding your opponent not in a bunch of over-complicated chart analysis. You know when you started this site I was trading in 100 or 1000 share blocks, now its 10,000 share blocks. Take my advice and ignore my arrogant tone for once — read that book and read REMINISCENCES OF A STOCK OPERATOR (its free online).