Monday, July 29, 2013

Inverse Head and Shoulders targets 1706

The market corrected and put in the low of the day in the 1680-82 range I mentioned on my post on Friday and now we have an Inverse Head and Shoulders set up targeting 1706. Obviously there are other options available which includes the bounce wave being part of the final leg of a B with a C to come to test the 1676 low or a bearish nested 1-2 set up. But I usually tend to favor and trade one count so I am going with the IHS set up until it is proven otherwise. The great majority of IHS patterns this year have been completed (I can only think of a couple of times where it did not) so maybe this one will too.

I ended up selling the VXX position to position trade as planned, so I will be buying back the position on (hopefully) the completion of a 5th leg. Also I went long at the low of the day and this time I bought SPY which tracks the index directly unlike that crazy VXX. Btw the reason I buy VXX sometimes it's because I want more "bang for the buck" and the fact that my account does not let me buy triple or double leveraged ETFs on margin. My core capital is 100% invested in long positions since last year and those are rarely traded. The trades announced here are done with the margin offered on one of my accounts. And apparently, one can buy volatility (which is as dangerous as the double and triple ETFs) but one can not buy anything that is further leveraged. So that gives me the options of SPY, SH or volatility. In the end, more than making money on the margin account, I am real time testing all these trade combinations to see which one yields the highest return on capital being risked. If I can get a consistent 10% + annualized on capital risked I'll be very happy, 20%+ I'll be ecstatic.. Warren Buffet, who is without a doubt (in my mind) the best investor that has ever lived has an average return of 20% on his holdings. So one side of me tells me maybe we can beat this 20% using these TA tools and wave analysis together but at the same time I am well aware it is a very long shot given the fact that few Wall Street professionals even come close (never mind people who use traditional TA tools or Elliott Wave). But one never knows without trying, so maybe all this real time testing and effort on deciphering the markets will yield a clear advantage. I guess we'll find out in a few years where I will have enough data to compare to other methods.

Main S&P 500 Trends*

Short Term Trend = Bullish
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 nor recommend them to initiate or close positions in the market without taking into consideration other factors.

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