Wednesday, October 24, 2012

Counter rally, emerging markets, gold

The market staged a mild counter rally that was reversed by the end of the day. So going by wave structure alone, this could be another W4 before another lower low. If a descending triangle develops, we'll be able to project more or less where is the downside target. Normally, a wave proportionate wave is able to project downside, like the "perfect 5 wave" count I posted couple of weeks ago. But when you get an odd looking wave, there is no projection until key support levels are hit and certain patterns appears (forget RSI, oscillators, etc. they are not accurate when it comes to stronger waves). So with that in mind, the structure looks complete to me and perhaps the market is just doing an ABC Flat or an expanded triangle before rallying to the TA/Fib retrace area. I am still holding my XIV so I can sell hopefully at break even or at profit on the "real" counter rally.

Also, I wanted to add the chart tonight for Hong Kong (My favorite emerging market). It has gone up for 9 sessions in a row and if it rallies again today that'll be 10 for 10! that's a real bullish W3 there and it makes my point of oscillators, RSI, fan lines, etc. being useless on stronger waves. Anyone would be tempted to take profits at this point but I am not touching it until 5 waves are done there. Money is obviously flowing to undervalued emerging markets and this is where money is going to be made in the near future. Also, gold is almost a buy if you believe in the cup and handle pattern. I'll probably add some gold positions on some more selling. Assuming this bearish wave in the US is an "A", then the time to buy gold will be at the end of "C".. Easter Island here I come! lol.

Long Term Portfolio: 100% Long (Emerging Markets Only)
Short Term Trading Strategy: Bought XIV @17.64 as of 10/19. Selling XIV position on the counter rally.

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