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Talking Specifics: Third-Wave Set Ups, and ETFs vs. Indexes

Our Pro Services Editor on "The Hunt for Opportunity"

by Jordan Kotick
Updated: June 07, 2018

Let's face it: The hunt for opportunities can be more painstaking than making a move once you find it. So, how can you get the most from your time and effort? ElliottWaveTV put that question to U.S. Intraday Stocks Pro Services Editor Robert Kelly: He says Elliott Wave Set-ups -- and the right trading tactics -- can make a big difference.

Dana: Hi, I'm Dana Weeks and I'm here today with Robert Kelley, Elliott Wave International's Editor of US Stocks Intraday Pro Service. Welcome back, Robert

Robert: Hi, Dana. Thank you so much.

Dana: Today, I'm gonna focus on finding opportunities, and if, for example, you believe a potential third wave is on the horizon, is the wave pattern likely to be similar in all the intraday indices, or can one market move aggressively on its own?

Robert: Obviously, you can have situations where one index is kinda of an outlier. Those tend to be harder situations to trade. The higher confidence setups come when you have all the indexes generally doing about the same thing, because that indicates a solid, strong underlying trend in the market, and one that is likely to continue. So, if you do happen to catch the right side of a move, it's more likely to be sustained than if you have a couple indexes making new short-term highs, a few others not, it's a much harder trading environment. So, ideally you look for the higher confidence situations where all indexes have very similar patterns, I would say.

Dana: Sticking with the third wave idea, what are the ideal setups in terms of momentum and sentiment?

Robert: Well, I would say if you're gonna look for a third wave advance, let's just say, you had a nice rally off a bottom for a wave one, and then you get a modest pull back in momentum, hourly, sarcastic, let's say, work off an over-bought condition, become oversold with like minimal price damage, and then you see a trend starting to turn up, that's a good sign a third wave is likely getting started. Also, if you have some high put call ratios, in a case of it, I'll also get a pull back, where you see sentiment, showing a lot of fear and skepticism, and the market starts to turn up, and also when you see a gap, in many cases. That's a good sign that a third wave is maybe just getting started, or, at least, has a lot more to go.

Dana: Moving over to ETFs. Do they tend to move together, or alternatively, are there a few that generally trend in the same direction?

Robert: Well, again, kinda like with the indexes, sometimes they do move in the same direction, by and large, and other times they really go their own way. So, I would say that in terms of ETFs that tend to go together, I've noticed that like the tech ETFs, biotech, healthcare, those can kinda go in the same direction, by and large. But really, you can have different sectors doing different things, and that's kinda the beauty of looking at the sectors. When you see the ETFs going in different directions, it really indicates sort of a disjointed market. One that may be in a corrective pattern, a chopping sideways thing, and the S&P, where you have some sectors going up, some going down, some going sideways. But when you do see them all generally going in the same direction, again, that's kind of an indication of a market that has a, an overall market that has a sustainable move ahead of itself, most likely.

Dana: Valuable tips for any newcomers. Thank you, Robert.

Robert: Alright. Thanks, Dana, good talkin' to you.

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