Saturday, August 24, 2013

Close above the 50 DMA and TA

I had a very busy day yesterday but I finally got around to look at the charts today. The market did not retrace for a right shoulder for the potential IHS as I was hoping and instead it has continue to climb. But most importantly, the close was above the 50 day moving average and the trend average so more bullish momentum could turn this into a full on rally if we go by those factors alone. Looking at the waves, we have 5 waves down of what could be an A or a W4 correction (since 1626 did not get breached), which implies we are either on a B wave or the final W5. Alternatively, the recent low can be a W2 of the LT Int W5 that targets 1800-1900. Whatever the case. the trend continues to be up for both long term and intermediate so I am expecting higher highs. This all goes in line with the fundamental picture for the world economy which seems to be gradually improving. Lastly, I wanted to clarify what I meant about the how the signs of a recession is what will cause the market to eventually sell off. I know many people feel fundamentals are lag indicators and they are technically right, but what I should emphasize on my statement is on the "sign" part. Usually, the stock market starts selling off before the recession officially occurs and by that time it is already too late to get out. But in looking for signs, I am looking at unemployment claims, monetary/economic policy and consumer related reports. I remember back in early 2008 the Bush administration was sending out $200 to everyone as an "economic stimulus"(and some people thought it was out of the goodness of the heart). That to me (in addition to other reports) meant the recession odds were very high as it seemed to me as a last ditch by the government to prevent a recession but we all know what happened next. So next time recessionary forces resurface, we will see similar signs and that coupled with trend confirmation will save people on here a lot of money. But in the meantime, as I said the other day, the markets will continue to go up until there are any hints of a slowdown.

I ended up closing my VXX position at a loss once the market crossed the 50 DMA. I will reconsider buying if the market gets up to the 1680-85 resistance.

Have a Great Weekend!

Main S&P 500 Trends*

Short Term Trend = Bearish trend being challenged
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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