Monday, October 1, 2012

Expanding Diagonal - Ascending Broadening Wedge Pattern

The market managed to breach the trend average today but it could not sustain that level. And at the same time the traditional 5 wave count I was posting was essentially invalidated so instead the market has an expanding diagonal form targeting a bit more downside. At the same time, we can also see the Ascending Broadening Wedge marked as W4 and although the bearish target is the W3 low (essentially favoring W5 truncation), this pattern usually appears in bull markets. So odds are now starting to favor a continued run towards 1500's. And in light of this, I decided to let me hedge stop out at break even (these VXX are extremely volatile and not good to hold for more than a few days) despite having a close under the trend average and a good probability of some more downside. I'll re-evaluate the hedge depending on how the W3 low gets taken out (if at all).. so I guess you could say I am letting my instinct run on this one instead of my mechanical TA trade.

And considering what I posted on Friday, odds do favor the bullish side. That and the fact that mortgage rates on a 30 year fixed loan are now BELOW the historical rate on inflation for the United States, which is financial history in the making. With rates like these, people can borrow or refinance and and basically pay 0% interest (when accounting for inflation). This in turn encourages consumer spending, investing, etc. I'd love to see 3.15% on the 30 year. That is where I refinance my loan with a big smile on my face :) Btw I mentioned that if my emerging market guess was accurate that I would "retire". And what I meant by that was not retire as in not doing anything, retiring to me means having the freedom to do whatever you want without having to worry about income. I'm not exactly a "workaholic" but I could never quit being in business, investing or just being productive in general regardless of age or how much money I have saved. I guess being productive could be considered a hobby in itself.

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Closed VXX @8.98 as of 10/01 at break even.

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