Thursday, June 13, 2013

Bullish Engulfing Pattern

"However, the bullish count is still  very much alive and so is the IHS I have been tracking but time is running out so bulls need to step in force starting tomorrow. One thing I forgot to mention yesterday was the 50 day moving avg, where the market found its bottom today. Every single time the market has tested the 50 day ma this year, the market has managed to mount a strong rally within a day. In addition, the NYMO is now again in a territory where the market usually finds a base to rally."

Just when things started to look dim for the count, the market came through today. So just as yesterday, the IHS target remains and so does the bullish count and what we have to pay attention to now is whether this is the start of a C wave of an X or a W3. The market put in a Bullish Engulfing Pattern, which people who have been on the blog for a while have seen already. This particular pattern is found at bottoms (look at the chart) and a follow though day will make the W3 scenario the most likely. Also, look at how much the daily MACD has reset (last time it was this low was in December) while the market is just 3% off its all time high. Should the MACD make a bullish cross, there will be a very good chance the market will be headed past 1700 comfortably. Now, the only issue that remains unclear to me as there are no rules on this and no precedent that I can personally remember is what happened in the futures market. The whole Japanese excuse to sell tanked futures after hours to just a fraction below June 6th (so I have been told, have to check it myself) so technically a W3 would be impossible. However, since this was not reflected in the cash market, then W3 remains a possibility. I guess we'll deal with it when the time comes and adjust the count as needed.

Now, the next point on the whole Japanese sell off. Personally, I think this has to be one of the most absurd reasons for a sell off for markets outside of Japan. If Japan has a much stronger currency, their products become less competitive in the world and in turn the Japanese market is bigger for imports for countries that export to them. So our economy benefits from a strong yen NOT the other way around. The only ones that benefit from keeping a low yen are only the Japanese and nobody else. So the Nikkei selling off, has more to do with how traders are emotionally affected than anything else. More often than not, traders feel but don't think much which is why counting waves works in the first place. Warren Buffett said it best: 

"Be Fearful When Others Are Greedy and Greedy When Others Are Fearful"

Main S&P 500 Trends*

Short Term Trend = Neutral
Medium Term Trend = Bullish
Long Term Trend = Bullish 

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use or recommend them to initiate or close positions in the market.

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