EW Portfolio

I am planning to start a portfolio to start tracking all the trades and results of my trading methodology soon. I will announce buys and sells on this portfolio and my goal is to simply beat the S&P 500 by using a combination of Trend analysis, Traditional Technical and Elliott Wave Theory. I believe the methodology I've been practicing will yield superior results and the only way to prove it is by comparing results with the indexes money managers usually try to beat. If this experiment turns out well, I will eventually write a newsletter with real time buy and sell recommendations for investors who are interested in my system.

If anyone has suggestions for a good site or tool to track portfolios online, please let me know at vtraderemail at gmail dot com

Elliott Wave Update

Today's chart is basically yesterday's chart. The 5th wave did happen as I expected and it closed a hair over the 1089(1090.10) level I had projected on the chart. And now we will put Elliott Wave Theory to a test, since the structure is complete we should see a retracement tomorrow. But since tomorrow is no regular day due to the job numbers being announced, we're in for either a big sell off in a 5 wave impulsive Minute wave or we get a zig zag Fib retracement which will translate into 1131 being challenged again by another bullish Minute wave. And obviously, if the numbers are so good tomorrow we keep on going up without retracing tben the 5th will be extending but sooner rather than later a Fib retracement will be coming.

This week's rally has many "orthodox" EW practitioners scrambling for new counts and which count is the right one in the larger scheme of things is really anyone's guess. As a trader I focus on Minute waves and try to label impulse and corrective waves only. Trying to label waves of higher degrees makes people develop a bias and I don't think EW would be as useful as a trading tool used in this manner (That's what MA and EMAs are for). This thinking goes against the whole "fractal" theory of the Elliott Wave Principle and this is where I differ with pretty much everyone I know of practicing Elliott Wave Counting. I believe EW is a predictor of human emotion and NOT a predictor of prices, they are both co-related but it would be wrong to assume that emotional panics of the same degrees that are years, decades apart, would result in the same prices. Economic and social conditions have to be factored in and that is why I don't agree with higher degree labeling. One of these days I'll get into this subject when I find the time.

With that said, we continue to be in a bear market and I am now fully leveraged short until we get an answer of what the next Minute wave has in store for us.

Portfolio 1:

100% SDS

Portoflio 2:

100% SDS

Elliott Wave Update

"The rally we saw today has the strength to become a real rally, so I am expecting a further rally to challenge the 50 day MA at 1086"

This is what I wrote last Friday after Bernanke spoke and seems like this is exactly where the market is headed. The difference is that the 50 day MA is currently at 1081. However, it seems like the market still has one leg left and if w1=w5 then that projects to 1089. The triple bottom reversal projects to 1085, the 13 day EMA is at 1087 and the 34 EMA is at 1093. So we'll probably see the 5th leg stop in that price range. I sold all my longs today at 1075 and took a full short position. However, by the close it seemed clear the market wanted to go higher so I sold half the SDS position I had taken at 1078 and looking to buy it back around the levels I mentioned.

EW Portfolio Update

Portfolio 1:

1/2 SDS

Portfolio 2:

1/2 SDS

Combined return 19% since 07/10 vs 1% for S&P 500 long or -1% short.

Trade Update

I entered a leveraged long position in the morning at 1041 and I sold half position at 1050. So now I am holding the other half with a stop at break even (1041) and my FXI position taken as an hedge at 1070. I am planning to short again when the count becomes clear. If today's low holds, this would raise the probabilities that we are indeed in a reversal so shorting without being certain of the wave count would not be a good idea.

Portfolio Update

Covered all shorts taken Friday (1060) exactly at the 38.2% retracement at 1055.50. I have no idea what wave this is but my guess is that we are going higher as this one looks corrective. I am expecting the market to challenge the 50 day MA.

Minor Wave ?

One of the best lessons I got from being a subscriber to EWI was not to take any count too seriously(after following their official bearish count on a massive bullish rally). I covered all my shorts yesterday and kept my FXI long hedge because I wasn't sure of the waves. My count pointed to an ABC move to where we closed today but almost every single count I saw (with the exception of one other waver) had a 5th wave of a III to break the 1040 support. And being conservative worked out well today as this "C" wave throws a wrench in most waver's count.

The rally we saw today has the strength to become a real rally, so I am expecting a further rally to challenge the 50 day MA at 1086 once it's done retracing. I am not sure of the exact labels for the Minute count so I am going mostly by Technical Analysis at this point. I took a 1/2 short position at 1060 (the one I sold I sold at 1053) and I will sell at the retrace of this "C" wave.

Portfolio 1:

1/2 Position SDS at 1060, Full Position FXI taken as an hedge at 40.36

Portfolio 2:

1/2 Position SDS at 1060

Up 17% since 07/10 inception vs -0.5 S&P500

5th Wave Finished

So we got to 1065 after all and I sold 1/2 of SDS position, which leaves me technically speaking 100% of my cash portfolio short. In addition, I went on margin and placed 100% of the portfolio value in FXI.

So the updates on the portfolio are:

Portfolio 1:

Bought all FXI I sold at 40.90 for 40.36. Sold 1/2 short position with cost basis @1098 (technically 1113 adding the position trades omitting FXI contribution) at 1065 for a 33 point profit.

Portfolio 2:

200% short with cost basis @1096 (technically 1141 adding the position trades)

Raised stop loss to 50 day MA which is 1089 at the moment.

Combined performance since Inception Date July 21,2010 = 12.5% vs 0% for S&P500 (traded at 1070 that day).

Minor Wave Finished?

Seems like the Minor wave that started couple of weeks ago is now finished with the low at SP 1069 (4 points shy of the 1065 target). And now we've had the A at 1082 and working now on the B. Therefor if A=C and the low of B is at 1075, then the target for a corrective minute wave would be 1088 or exactly where the 50 day MA is at. However, considering the minor wave proper retracement, I would assume a C wave would take us above 1090 and all the way up to 1103. Therefore, the strategy should be to start going short at the 38.2% retracement mark with a stop at the 200 day MA at 1116.

I have not made any trades on my Elliott Wave Portfolio which currently has:

Portfolio 1:

SDS taken at 1125
FXI taken at 1090 as hedge, and which btw has actually gone up almost 1% (that's I love this ETF as an hedge)

Portfolio 2:

SDS sold at 1080; profit 45 points and waiting for the 38% retracement to buy back position.

Recap of 08/12/10

We have two possible scenarios:

1 - 5 waves ended at 1076 and today's high at 1087 was A and we are currently working on B or starting C to the Fibonacci retrace.

2 - There were 5 waves down on a W3 and we are now on W4 with a W5 target of 1062-65.

Portfolio Update

I sold another short position at 1080 and that netted me 55 points on 2000 shares of SDS and went long on FXI but got stopped out at break even on a backtest of today's low. I am currently holding 3000 SDS from 1125 and FXI long at the 1090 level to hedge. I waiting on the retrace to buy a total of 5000 SDS and sell all FXI.

Portfolio 1:

SDS net 9 points. Unrealized SDS (52 points), FXI - 7 S&P 500 points.

Portfolio 2:

SDS net 55 points