Friday, December 30, 2011

Wave 2 or C?



The market corrected today and technically it could be seen as a W2 of the wave that started from 1249 or the beginning of the C wave to finish an ABC correction that started earlier this week. So the wave details are not all that clear. However, with today's close we should see the Golden Cross but the market has to follow through next week.

Have a Happy and safe New Year!

Thursday, December 29, 2011

5th Wave in Progress?



The market bounced as I expected on my post yesterday and I am inclined to think this is the beginning of the 5th Wave, although this has to be confirmed with a strong lift off wave and break the 200 day MA area for good. Until then, there is still less likely possibility of this being a B wave of a correction. Some posters asked me to clarify the ABC wave form so I am posting the basic wave counting structures. Corrections usually happen at the end of 5 waves within an impulse wave and more often than not they have an ABC or an Complex form look to them.



Today's close puts the market again above the 200 day MA and the Trend Average is at 1245 which are both bullish, so we'll see if the market can follow through tomorrow to the upside.

Wednesday, December 28, 2011

Correction



The market started its correction as I had predicted yesterday but it holds the potential for a deeper correction as today's bearish leg could be considered the A leg. However, the market will bounce as soon as tomorrow and we should see if it is a B leg or the start of the W5 to 1300. The market just needs a minor excuse to rally again since all the overbought conditions have been somewhat worked out today. I guess we'll see what headlines the market will grab on to..

Tuesday, December 27, 2011

Time for minor correction



The W3 of C or W3 should now be finished (or about to finish) and we should go into a minor correction. I assume this correction will be sideways but one never knows, whatever its form it should complete a W4 before launching higher on a W5 later this week/early next week. The 13:34 cross should happen next week so that will give the bulls a good platform to start 2012.

Friday, December 23, 2011

Close Above 200 day MA - Imminent 13:34 Cross



I first speculated about the possible market turns in early November and it seems like the market has done exactly what I had envisioned. The close today is the first one above the 200 day MA since the end of A or Wave 1, so I am expecting this wave to go on for a while. Also, there is an imminent 13:34 cross coming as soon as next week, a likely golden cross and an inverted Head and Shoulders on the DOW that targets 13200. So unless there is something cataclysmic on the horizon, the path of least resistance is way up. I could get into the tech analysis tools that support a bigger rise coming but I think keeping it simple works best. The market is well above the TA and like I said couple of months ago there is a possibility of seeing 1370 challenged on this leg so we'll see what next week looks like. I'm staying margin long until I see any signs of reversal.. for now hope everyone that is long is enjoying this ride.

Have a great weekend and Merry Christmas!

Thursday, December 22, 2011

200 Day MA



I mentioned yesterday that the market was going for the 200 day MA and we got somewhat close at 1255. I am still not sure if the wave labeling is correct but I am inclined to favor a W2 correction now before seeing a big rally breaking the 200 day MA. It we get a big gap up tomorrow, then I'll revert to labeling the current wave as W3, but for now I am assuming W1 has ended or about to end.

Wednesday, December 21, 2011

Short Term Confirmed Bullish



Prices closed above the TA again and now the short term trend has turned bullish.
The market tested the TA today as I indicated on yesterday's post but I am not 100% sure if the low was a W2 or a W4 of W1. Ideally, I'd like to see W2 correct to the Fib retracement area so we should know in the next couple of sessions. Whatever the wave label, the bottom line is that the market is going to challenge the 200 day MA next at 1259. Once that breaks AND holds, it will most likely be a bullfest.

Tuesday, December 20, 2011

Beginning of a Big Rally?



So we got the rally I was talking about yesterday and now I really wonder how is this stuff even possible. Technically speaking no one knows the future and I still can't accept the idea of waves being able tell the future either. So that leaves the media picking up on stories to create rallies or corrections.. still, this stuff borders on the weird. But I think the market is indeed somewhat predictable and anyone who has been a reader of this blog would know.

Anyhow, I see the bullish impulsive wave today was a W1 of either a C or W3. We'll probably see a retrace to the TA or 50 day MA and then we should see another big rally that will challenge and most likely break the 200 day MA. So it seems like Santa has indeed arrived :)

Monday, December 19, 2011

Ready to Rally



The market put in another bearish leg almost following the red line I drew on Friday and now I think the market will start to rally. Perhaps we'll see 1199-1200 tested first but I am going with the Santa Rally. Obviously, this is completely against the TA system which call to stay in cash or short at 1249 and the fact that we are trading under the 50 day MA. However, it's been an 11 days of corrective waves and we have yet to retrace 61.8% of the rally from 1158. So any hint of positive news can spark a violent rally. I will go margin long again once the TA gives the signal, as of today the TA has fallen to 1229.

Friday, December 16, 2011

Rally is coming



The market continued its correction today and I think it is over or should be over early next week. The TA is at 1235 so we would need to see trades above that level to change the short term trend to bullish. If there is a Santa Rally, it will start next week so nothing else to do but wait..

Have a good weekend!

Thursday, December 15, 2011

Correction Continued


The correction continues and I am inclined to think there will be one more leg down until the correction ends. Whatever the market decides to do, so far all these waves from 1267 look like corrective waves so we should see a chance of mood to the positive side sooner rather than later. In a way, this type of market is great for swing traders as the European issue will be used over and over for sell offs and for rallies. It really depends on the current social mood. Hope we'll get more clarity tomorrow or Monday.

Wednesday, December 14, 2011

1200 to be tested?



The 50 day support broke today and went to the 50% retracement level of the rally from 1158. The next level of support is 1200 and we might just test that before seeing if we have a rally from there or just a bounce. The way I see it the next bullish wave has to start with a strong impulsive wave, weak waves would imply lack of conviction, especially if there are no closes over the 200 day MA. With this said, I still see this as a correction and a rally should start sooner than later so the market needs to re-capture the 50 day MA asap or risk a sell off.

Tuesday, December 13, 2011

50 Day MA



I talked about the market targeting the 50 day MA last week and today the market finally tested it (1224). I was almost sure the wave from this morning was going to be the beginning of an impulse wave but all it did was test the TA and now there is a possibility the market will test the next important level which is 1215. Also, the market is now in a confirmed bearish trend since it closed again under the TA so I closed my margin longs at break even and I'm trying to see if the 50 day MA will hold in the next few days. For a rally to take place this level must be mantained so we'll see how the market handles these next few days.

Monday, December 12, 2011

Correction Over?



The market corrected in a strong C wave as I predicted last week but it did not quite make it to the 50 day MA which was at 1222 today. However, it did retrace into the Fib territory and in turn confirming the correction from the wave from 1158-1267. So I am now leaning towards seeing a big market rally from here. Obviously we could correct some more but if the 50 day MA holds then we might see 1300+ fairly soon on an Intermediate C wave or 3rd Wave. The TA is at 1249 so this can potentially turn into a bearish trend but I think the market will recapture it tomorrow or the next couple of sessions. What is interesting is what the market will do after we get to 1300. If it's a W3 then we will rally into January and possibly see 1400 but if it turns out to be a C wave, watch out below!

I closed my shorts towards the end of the day and went margin long and using the 50 day MA as the pivot for this trade.

Friday, December 9, 2011

200 day ma again?



The market bounced today as I was expecting but it was stronger than I had imagined. Should the C wave come Monday or Tuesday, it would have to be an equally strong bearish wave that should take us to the Fib retracement area. And like I said yesterday, the ideal level to start the new rally (the Santa Rally) would be the 50 day ma so we'll see if it happens early next week. I ended up shorting to hedge my longs at 1256 and I will be setting my stop to break even as soon as it moves to the 1250 area in case the market plans to start the rally without the retracement.

Have a good weekend!

Thursday, December 8, 2011

More Downside



So finally we get a clearer picture of where the market is going. And now I can put some labels on the waves and predict the next move with more certainty. So far I was right on a lower low in the upper 1100's, on where the market would bottom and where the top would be likely so let's see if I can keep the streak going. The odds of me guessing all these moves are minuscule (1/1000's) so I might be very wrong on my next guess but we shall see :) I think the market is doing a double ziz zag from the top of Wave 1 or A and we should see some sort of bounce or sideways trading before going into a proper Fib retracement area. The level I think will provide the bottom will be the 50 day ma which will probably be around 1220 and this level holding is a must for the rest of the rally to continue. Today the TA is at 1237 so the market closed below it and another close tomorrow signals a change of trend. So the plan is to stay put and load up on margin long at the 50 day ma.. once we test that level, I think we will see a rally to 1300+, perhaps even 1400.

Wednesday, December 7, 2011

Sideways Correction Continued



The longer the market keeps trading sideways the higher the chance we're going to see a rally to break out of this range. But anything is possible at this moment since the market is waiting for the outcome from the EU meeting. By looking at the market I'd say there is money on the sidelines ready to jump in as soon as good news come out of the summit while those with positions are in a wait and see mode. So we'll just have to wait for couple of more sessions to see what happens next. So far the 200 day ma has served as an area of resistance and should the market break convincingly above this level, we might see 1300 next.

I am staying put with my longs until I see a good selling spot or until the market breaks the TA which is currently at 1229 and rising.

Tuesday, December 6, 2011

Sideways Correction?



The market challenged yesterday's high again today and unless it drops hard from here, this is starting to look more like a sideways correction/consolidation before another hard push up. That would change the labeling of the wave structure and the estimated downside on the correction so I am watching how the next wave unfolds. I said couple of days ago that if the market made another push up I would probably sell all my longs so we'll see how far up it goes IF it happens. As a general rule, if the market were to go up 90 points above the TA I will sell everything automatically and wait for the TA test to re-enter.

Monday, December 5, 2011

200 Day MA Reached



So the market finally did make it to the 200 day MA as I had been predicting last Wednesday and I am again assuming the waves are now complete or near completion and we will see the TA tested along with a proper Fib retracement. Obviously the market could put in one or two more bullish legs but odds favor a break imo. I took more profit today at 1265 and should the market put in another bullish leg I will sell all my longs, two more bullish legs and I am going short as it will be a no brainer. We just need an excuse to start selling and it will happen tomorrow or the next few days.

Friday, December 2, 2011

Correction



The market attempted to make a run towards the 200 day ma at 1265 and it almost got there in the W5 I was posted about yesterday. So I see now a 5 wave structure complete and the correction has started. Ideally, the corrective wave would take the market down to the 1197-1221 area before launching another rally to 1300+. Alternatively, the market could trade sideways to consolidate and then go to the 1300's. Whatever the case, December should a good month for stocks. I used the early morning rally to take profit on all margin positions and will be buying everything back at the test of the TA hopefully next week? I am hoping to see a big rally, sell all positions and end the year in cash. We shall see..

Also, today I updated the TA signal which should have been updated couple of days ago. The return of this signal since July is 31% without leverage, an amazing return if you think about it..

Have a great weekend!

Thursday, December 1, 2011

More Upside



The market has been consolidating and it seems like we will see a bullish wave starting tomorrow or Monday to challenge the 200 day ma at 1265. That's assuming this is a normal W5 and not an extended one. However, bulls are free to take this all the way up to 1275 or even 1292 before going into a real correction down to the 1220-1230 area? so I'm looking to take profit on the next bullish wave and reload at the test of the TA on the correction. The TA is currently at 1200, so once the correction starts it should take a while to get there.

Wednesday, November 30, 2011

What a Rally! - Next Target 200 Day MA



I like being right, especially when I am right and making money :) The W2 retracement I was looking for yesterday technically happened after hours and today we woke up to a beautiful rally. I had been posting for weeks, actually for more than a month that the wave that had ended at 1292 needed a proper Fib correction before the market could rally higher. The past few weeks we saw the ABC move from 1292 and the market is finally revealing itself. So I am looking at this move as a potential 200+ point run from 1158 so technically we could see the highs for this year challenged in December. I could be wrong obviously but we're comfortably above the TA and I don't think we will see a test of the TA until we reach the 200 day MA. I am loaded margin long and looking to start locking in some profit soon.

Tuesday, November 29, 2011

More Upside to Come



The market rose as expected following the blue line I drew yesterday and it seems like we will now enter a correction for this wave. I'm not sure what degree of a correction we will get but I see a possibility of this bullish wave from 1158 just finishing a W3 and if that is the case we will see a mild correction and then see a bullish W5 to finish the wave. The alternative is that we retrace about 20-25 points and call it a W2 or a B, which would then set the market up for a bullish wave that will take the it beyond 1220. Today the TA was finally tested and the market close barely below the TA, so I am looking for a change of trend in positive consecutive closes in the next few sessions. The bearish TA signal was given 3 weeks ago so maybe it's time for it to turn bullish.

Monday, November 28, 2011

Rally or Rebound?



"this sideways move resembles a W4 of a W5 so I am going to assume it is going set itself up for a final sub-wave down to perhaps 1157 to finalize the correction and start a rally from there.".. This was posted about a week ago and the market ended up going down to 1158 on Friday and today we saw the rally I had been expecting. The market should test the TA and the 50 day MA soon but what remains to be seen is if this wave is an W1 of a rally that will take us beyond SP 1300 or an ABC bounce to the 1200-1225 area. So how the market behaves at the TA (which originally gave the bearish signal weeks ago at 1259) should give us an idea for December. I favor a big rally due to the 1074-1292 wave but I'll let the TA be the ultimate signal on this..

Wednesday, November 23, 2011

Friday Rally or Bounce?



The 61.8% retracement level was almost reached today and now the conditions are ripe for a rally (or bounce?) starting this Friday or early next week. The intermediate trend is still UP and the sell off that started in late October is still considered a correction. After all, the TA which is currently at 1220 is still above the 50 day MA at 1207 and I expect the market to test the TA at the very least (should Santa not come this year with a year end rally). However, I lean towards seeing 1300+ so it will be interesting to see how the news will change over the next few days. The media usually trails the market as it tries to explain the reasons for rallies and sell offs. And not that the European problem is not real (it is) but we had that same problem when we rallied almost 20% from 1074.

Happy Thanksgiving and Drive Safe!

Tuesday, November 22, 2011

Holiday Rally Set Up?


Not much to add today as the market didn't do much in thin trading. However, this sideways move resembles a W4 of a W5 so I am going to assume it is going set itself up for a final sub-wave down to perhaps 1157 to finalize the correction and start a rally from there. If you look at the black markers on the chart, these are the Fib retracement levels I first started posting over a month ago. Notice how the first drop stopped at the 38% level and how the 50% has held, should another bearish wave come tomorrow it could probably hit the 1157 level or 62% and rebound from there. Also, my goal is to go margin long on trade above the 50 day ma but if we get a sell off early morning to the 62% level it will be very tempting to buy at that spot.

Monday, November 21, 2011

Correction Completed (or near Complete)



The market ended up putting a 5th leg down and tested the 1180 level as I first started speculating 3 weeks ago we would. And now I see a complete or near complete ABC move from the 1292 high. So I think the market has reached the necessary Fib retracement in this correction and now there is enough room for a big rally that will take us well above 1300. I've missed maybe a couple of moves since the summer so I might be wrong about this coming rally but so far I've been very accurate on the majority of waves. I am already long as of late last week and will be adding margin long on trade above the 50 day MA at 1207 and using this average as a stop. The whole European problem and the budget issues will be again forgotten only to be remembered again by the time we need a correction.. when I first predicted 1180 and the test of the 50 day ma 3 weeks ago everything seemed dandy which made my target seem far fetched. But I said it then, the European issue is going to be used as an excuse to buy or sell and the losers are going to be the overly excited crowd (those that sell in panic or buy in euphoria). We'll see if there is a 5th of a 5th in this current bearish wave but I am betting on a big rally coming at any time.

Friday, November 18, 2011

One more push down?



The market bounced just a little today and could continue on Monday. But so far it is looking like the 4th wave (corrective) before going into another leg down that will possibly test 1180. Usually bottoms come after a sharp sell off (or capitulation) so maybe we will see it early next week or maybe it will happen in pre-market hours. The market is already oversold (but with some more room to go), so a rally could happen at anytime. I favor a rally after Thanksgiving that could possibly last all the way until January so we will soon find out.

Have a great weekend!

Thursday, November 17, 2011

Now the Bounce



The market did exactly as I predicted yesterday and it will probably test the 50 day ma after hours or tomorrow before bouncing. What's not very clear to me is if we will just correct a bit and then put in another leg down to 1180? or if this is the intermediate bottom. Whatever the case, I see an ABC move that started late last month ending between now and the next week or so. Just in time for a year end rally that should put us above 1300 again. All of this is speculation of course and the only reason I say it is because of the massive wave that started from 1074. And just to make something VERY clear as some Elliott Wave purists have been pointing out my unorthodox way of looking at waves, I DO NOT FOLLOW ELLIOTT WAVE THEORY.. I believe in short and intermediate wave counts but anything beyond in a few weeks is useless to me as a trader looking to maximize returns and minimize risks. There is no point in having a scenario 1,2 or 3. I might as well flip a coin for that. I follow 1 scenario only and that is the Trend Average, which familiar viewers know is what dictates the trend and which has proven to be 90% correct from the time I have been tracking it (On the right hand side). So if you are into Elliott Wave counts, I recommend Dan's blog (Daneric Elliott Waves) or Wave Principle. They are listed on my blogroll and they are the best at what they do. And they do all of it for free (just click their ads please) so go check them out if you prefer an orthodox view of EW.

Anyway, today I put my cash at work so I am all long now. Technically, I could be more patient in case another down leg follows but at this point the main W3 of the C is here, so I am ok if I don't pick the perfect bottom.. just hoping Santa will be good to me this year..LOL.

Wednesday, November 16, 2011

50 Day MA Test - Lower Low Tomorrow?



The market is finally revealing its intentions and confirming we are on our way down. There are different ways to take a look at the triangle but I see the pattern completed and a gap down tomorrow or continued selling would confirm a bearish 3rd wave (which I had been expecting since Monday). So I am inclined to think the market is setting its sights on the 50 Day MA which is at 1205 as of today, that would be a logical spot for a bounce. However, in an ideal world we would get a correction until Thanksgiving and then see a beginning of the year end rally. So we'll have see how the week ends. I am still in cash and being patient.

And btw Gold seems like it's topping so this is a good time to take profit. I mentioned the bottom couple of months ago when it was around 1600 and I think it's headed back to that level again.

Tuesday, November 15, 2011

Triangle



The market did not turn down impulsively as I was hoping and instead it is still stuck in the triangle. Technically, it broke to the upside but not enough to attain a higher peak to confirm the break out. So the suspense continues but we should see which way the market intends to go tomorrow or Thurs at the latest. The market has yet to do a proper Fib retracement and continues to trade under the 200 day MA, that and the fact we have a confirmed bearish short term trend in place. But if the market closes higher and above the 200 day MA, then we are on to the 1300+ most likely.

Cash continues to be my friend and I'm not trading until I see some resolution to this triangle.

Monday, November 14, 2011

Triangle - Nested 1-2s



The market ended up testing the 200 day MA in pre-market, reaching the equivalent of 1272 and then falling throughout much of the day. And now we have what seems to be like a bearish nested 1-2 set up inside a triangle. So in the next session or two we should see prices break out impulsively from this pattern. The market barely closed on the TA which is currently at 1253 and I am still in cash waiting for opportunity..too bad the test of the 200 day ma was not in the cash market as it would have been a good trade.

Friday, November 11, 2011

200 Day MA to be tested Monday?



So the market decided today to go for the 200 Day MA as I mentioned yesterday and it almost got there. However, looking at how the wave looks it seems like it might do so Monday (there's a bull flag in place) before reversing. The 200 MA is currently at 1272 and closes over this level would indicate a real market turn around (as in the beginning of a true bullish trend). However, I lean bearish and I don't think the market will be able to overcome this level without first making a lower low so we'll see what the answer is next week. The TA is at 1249 so the close today has the potential to whipsaw the bearish signal from yesterday. I am in cash and waiting for something I can trade with comfort.

Happy Veterans day and have a good weekend!

Thursday, November 10, 2011

TA Tested Today



So the market tested the TA today (1247) as I was expecting yesterday and was not able to trade over it. Given the fact that I was expecting a corrective bounce, the waves look like they are not done yet. So we might see some more upside, perhaps even test the 200 day MA again before going down to 1200. The bottom line is that the short term trend is confirmed negative and I don't think the low is in yet so it's best to be patient. I sold my longs today at the open and was very tempted to short but I am staying in cash instead until I see a tradable extreme. The Italian problem is lingering in the background and can be used as an excuse for a sell off anytime. In addition, if there is a conflict in Iran we could see oil skyrocket and stocks tumble.. better to be safe.

Wednesday, November 9, 2011

Correction to 1180-1200?



The bearish C wave I had been expecting is finally here and although the market came close today at testing the 1217 level in the cash market (the market is testing in afterhours), I think what we saw today was W1 so I think this wave should exhaust afterhours and bounce on a W2 to test the TA currently at 1252, which should fail and resume the bearish trend in an equally strong W3 to test 1200. So ultimately, I think the waves look like it has the potential to end in the upper 1100's area. This is assuming we get the W2 bounce tomorrow, if not then this wave an carry the market lower. I cover some shorts today and went long on China's FXI to play the bounce. I think after the 5 waves are completed we will have an end of the year rally, so I will be loading up when that bottom comes.

The market used Italy as the excuse for the sell off today (as I speculated in the past), as if Italy's problem wasn't apparent in the last month or so. But once the situation becomes "resolved" and we rally, we'll be dealing with Spain and Portugal. It doesn't take a rocket scientist to see what's going on.

Tuesday, November 8, 2011

Correction coming



The market continued to climb today but not in a impulsive way, so I continue to believe this wave from 1217 is corrective wave and will end relatively soon. The next bearish wave should be a stronger wave that would take us take us to the lower 1200's. The market needs a catalyst for that and maybe the current confusion in Italy and Greece will help the bearish case. The markets started the rally supposedly because of the perceived solution to the European problem but 200 points later I don't see anything solidified, so the same issues that cause the sell off in the first place are still present.

Monday, November 7, 2011

Market Update



I guess the signal on Friday was legitimate in that the trend starting turning up again. And from looking at the wave structure it seems like the market is working on a B wave after the A wave from 1292 to 1217, so this B wave could go as high as 1292 or a bit more (in case of an expanded flat). Once the B wave completes, we should see another big bearish leg to finish up the C leg and then perhaps launch into a big bullish wave just in time for the Santa Rally. I am in cash in my trading accounts and will look to short at the next bearish TA confirmation and then go very long for the end of the year rally.

Friday, November 4, 2011

Correction



The market closed over the TA but only during the last minute of trading so the signal is not confirmed. If I were to trade it mechanically I would have gone long but since I am doubtful, I covered shorts to wait what Monday brings. I am looking to trade short under the TA or stay in cash on trades above the TA at the moment given the fact that the market can surprise to the downside given the fact that there seems to be missing a leg down and there hasn't been much of a correction from this last bullish wave.. patience usually pays.

Thursday, November 3, 2011

Retracement Target Met



We reached the 1250 level and more today and now we have a nice potential Head and Shoulders set up. However, prices need to turn down ma├▒ana for this formation to be valid (or at least respect the 200 day MA). The market did close above the TA at 1251 which potentially reverses yesterday's signal. However, I am inclined to think selling will resume and we will probably test the 1218 recent low or even go into the 1180 area. We just need to see a catalyst which most likely will be Greece or Italy. Also, if 1218 holds it will be enough of a correction to launch another bullish wave past the 1300 mark.

I went short today at 1256 and using the 200 day ma as stop. I also unloaded some londs I had re-bought the other day for a good profit and will be going long again at another bearish extreme.

Wednesday, November 2, 2011

Head and Shoulders in the making?



Today we had a counter rally that so far is forming a potential bearish Head and Shoulders. However, looking at the wave structure it's not clear to me if the W5 ended after hours yesterday or we are currently on a W4 with the W5 coming to test 1200. So not sure if we will see 1250 first or 1200 at this moment. Whatever the case, the game plan is to go short in the 1250's and use the 200 day MA as stop. I think it's unlikely we will revisit 1292 at this point due to how overbought we were last week but it all depends on whether the 200 day MA can be re-taken.

And btw the TA has a confirmed bearish today with 1246 as the pivot. Total gain by going with this signal has been +27.25% since July 28th vs -7.3 for the SP500.

Tuesday, November 1, 2011

Sell Off


The market sold off hard as I expected (when 1255 was broken) and now it seems like it has another wave down to test 1200 before rebounding to the 1250? area (Watch for Head & Shoulders if that happens). But again, the fact the market has sold off 70 points after 220 point run is essentially expected and not much of a surprise. All the market needed was an excuse. The real question going forward is whether the market is going to continue the bear market or bounce back above the 200 day MA. So far we have 4 waves down and once the 5th is complete we can start speculating on whether this is an A of a correction or a W1 of a continuing sell off. I lean bearish as long as we trade under the 200 day MA. I did not hedge today as I rather wait for the bounce and do this at the TA.. too bad the sell off started yesterday in the last few minutes. I assumed 1255 was holding since I checked 15 min before closing.. oh well, it was Halloween and that was actually more important.

Correction or Sell Off?

I was too busy today with Halloween stuff so couldn't write an update. However, the market reached the 1260 level I was hoping to trade and in the last few minutes of the day the market went thru the 1255 level. So right now I am looking at a possible sell off instead of a minor correction. We'll be able to tell clearly if the market closes under the TA which is currently at 1246. I jumped the gun today by taking profit and went long at 1260 since I didn't see the last few minutes coming but I am going hedged if we start trading under the TA. I wrote last week the market was ridiculously overbought so a swift sell off is not exactly unexpected.

Friday, October 28, 2011

Correction



The market is technically correcting and it seems like it still needs to put in another leg down before one more bullish wave. Wave 4s sometimes get MACD crosses but limited price corrections which is what seems to be happening at the moment. So maybe early next week we'll get the C leg of the correction and then we could see a wave to 1300's. The market is very overbought short term and I've seen articles already on the media on how overbought the market is so before you know it we will see a sell off. I read yesterday that we've seen the best month for the SP500 in 37 years! I am holding short over the weekend..

Have a great weekend..

Thursday, October 27, 2011

Expect a Pullback



The market did have a more upside indeed and it managed to closed comfortably above the 200 day ma as I had been speculating for weeks. What has caught me by surprise is the absence of a Fib correction which ALWAYS happens at some point. At current levels the market is back to overbought so I expect a pullback as soon as tomorrow to the 1260 area perhaps? Once there, the market could put in one final leg up to 1300+ and complete a 5 wave move from the sideways correction period. And if we get there, I'd consider not only shorting but going leveraged short as it will be a predictable sizable correction/sell off. One of the indicators I follow, the average of stocks over their 20 day ma it's basically at a 5 year high. The only time it was this high was around the end of March-Early April of 2009 when the market was recuperating from a huge 60% sell off. This time, the market is recuperating from a 15% correction so there is a big difference between then and now. And while it's hard to say if the bear market will continue or we will get a pullback to then resume a new bullish leg to 1400, the market will pull back substantially enough in the next week or so.

I initiated a short position at 1282 and will probably cover around 1260 to gain some points. If we sell off and 1255 breaks hard then I'll keep them. But for now, I expect another leg up. I also sold part of my long China position and looking to buy a bit later as it has run up 30% in less than a month.

Wednesday, October 26, 2011

More Upside?



The market managed a successful test of the TA this morning as it bounced right off from there. And unless the market reverses hard tomorrow, I think the market will keep rallying to the 200 day ma without any more significant pullbacks. I would have never guessed one single wave from the panic low of 1074 would reach this level. And it goes to show that whenever there is panic there is a lot of cash on the sidelines just waiting for the scared ones to sell. And just when the scared ones are probably buying back what they sold, they are going to get a big surprise to the downside.. unfortunately, the ultimate losers are usually the unsuspecting retail traders.

I took some shorts today and made some of my points lost on my previous short back. And I'm waiting for either the 200 day ma or a bearish TA signal to short again. Fortunately, I have a long portfolio that I don't trade and that has been going up nicely. But on this trade account, it's hard to go long at this point unless there is a substantial pullback.

Tuesday, October 25, 2011

Correction



The correction I was looking for started today. However, the trend has not been broken and we won't know until the wave tests the TA. If the market tests the TA and bounces from there then we're on to higher highs on this wave. But if the market makes consecutive closes under it then we are probably on to the Fib retracement area which I have anywhere from 1075 to 1186 but most likely 1140-1186 before another big rally takes shape. I think once the EU meeting is over we'll see what the market really intends to do. As of right now I think the market has priced in any good news and anything less than expected will cause a sell off.

Monday, October 24, 2011

Correction tomorrow?



The market continues to go up despite an overbought condition and I suppose we'll have to wait until the news from EU comes out for a correction to start. This is about the most overbought the market has been since the 1370 top and it's a matter of time before it corrects 50% of the rally. Who would have thought a rally of this magnitude would start the same day the market touched the lows for the year.. crazy market. The TA is at 1219 and rising and I am looking to see if the next test will hold or not. So far the market has tested the TA only once at 1201 only to rally 50 points. The FTA is at 1235..

Sunday, October 23, 2011

Overbought



The market confirmed it had been correcting sideways for the last couple of weeks and we probably saw either a W1 of another bullish leg or alternatively a W5. I personally think it is a stretch for the market to go all the way to the 200 dma without any Fib corrections but obviously anything can happen. I've see overbought getting even more overbought in the past, so I think the safest way to trade is to trade the trend at this point. I had to exit my shorts at 1226 as this hit my limit and I will start trading again once the TA hits. Persistent trends are too risky and trade so it's just better to wait.

Thursday, October 20, 2011

Triangle



The sideways correction continues and the market is drawing a triangle in which the market will eventually break out of to the upside. The TA was successfully tested today so we are now at what could be important levels for the next wave up. I do however have to point out that we continue to be overbought so I can't really picture what sort of rally could come out of this triangle. I think it would be best for the market to make an Ascending triangle so that we can at least project part of the next bullish wave. Maybe we'll get to the 200 day ma and then do a proper Fib correction.. hard to say at the moment but I am looking at the test of the lower trendline or the next test of the TA to go long and stay with the TA.

Wednesday, October 19, 2011

Correction



Not much today other than the correction continues but sideways. Unless we get a strong sell off that will break 1190, I see this period as consolidation to move much higher. And then we'll see a proper Fib correction so I am looking at the TA as a guide to start adding longs. I assume the market will break the TA this week so we'll see what happens then. The TA is at 1202 and the FTA at 1213.