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 maƱana 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.