Correction coming

The market continued to climb today but not in a impulsive way, so I continue to believe this wave from 1217 is corrective wave and will end relatively soon. The next bearish wave should be a stronger wave that would take us take us to the lower 1200's. The market needs a catalyst for that and maybe the current confusion in Italy and Greece will help the bearish case. The markets started the rally supposedly because of the perceived solution to the European problem but 200 points later I don't see anything solidified, so the same issues that cause the sell off in the first place are still present.

Market Update

I guess the signal on Friday was legitimate in that the trend starting turning up again. And from looking at the wave structure it seems like the market is working on a B wave after the A wave from 1292 to 1217, so this B wave could go as high as 1292 or a bit more (in case of an expanded flat). Once the B wave completes, we should see another big bearish leg to finish up the C leg and then perhaps launch into a big bullish wave just in time for the Santa Rally. I am in cash in my trading accounts and will look to short at the next bearish TA confirmation and then go very long for the end of the year rally.

Correction

The market closed over the TA but only during the last minute of trading so the signal is not confirmed. If I were to trade it mechanically I would have gone long but since I am doubtful, I covered shorts to wait what Monday brings. I am looking to trade short under the TA or stay in cash on trades above the TA at the moment given the fact that the market can surprise to the downside given the fact that there seems to be missing a leg down and there hasn't been much of a correction from this last bullish wave.. patience usually pays.

Retracement Target Met

We reached the 1250 level and more today and now we have a nice potential Head and Shoulders set up. However, prices need to turn down mañana for this formation to be valid (or at least respect the 200 day MA). The market did close above the TA at 1251 which potentially reverses yesterday's signal. However, I am inclined to think selling will resume and we will probably test the 1218 recent low or even go into the 1180 area. We just need to see a catalyst which most likely will be Greece or Italy. Also, if 1218 holds it will be enough of a correction to launch another bullish wave past the 1300 mark.

I went short today at 1256 and using the 200 day ma as stop. I also unloaded some londs I had re-bought the other day for a good profit and will be going long again at another bearish extreme.

Head and Shoulders in the making?

Today we had a counter rally that so far is forming a potential bearish Head and Shoulders. However, looking at the wave structure it's not clear to me if the W5 ended after hours yesterday or we are currently on a W4 with the W5 coming to test 1200. So not sure if we will see 1250 first or 1200 at this moment. Whatever the case, the game plan is to go short in the 1250's and use the 200 day MA as stop. I think it's unlikely we will revisit 1292 at this point due to how overbought we were last week but it all depends on whether the 200 day MA can be re-taken.

And btw the TA has a confirmed bearish today with 1246 as the pivot. Total gain by going with this signal has been +27.25% since July 28th vs -7.3 for the SP500.

Sell Off

The market sold off hard as I expected (when 1255 was broken) and now it seems like it has another wave down to test 1200 before rebounding to the 1250? area (Watch for Head & Shoulders if that happens). But again, the fact the market has sold off 70 points after 220 point run is essentially expected and not much of a surprise. All the market needed was an excuse. The real question going forward is whether the market is going to continue the bear market or bounce back above the 200 day MA. So far we have 4 waves down and once the 5th is complete we can start speculating on whether this is an A of a correction or a W1 of a continuing sell off. I lean bearish as long as we trade under the 200 day MA. I did not hedge today as I rather wait for the bounce and do this at the TA.. too bad the sell off started yesterday in the last few minutes. I assumed 1255 was holding since I checked 15 min before closing.. oh well, it was Halloween and that was actually more important.

Correction or Sell Off?

I was too busy today with Halloween stuff so couldn't write an update. However, the market reached the 1260 level I was hoping to trade and in the last few minutes of the day the market went thru the 1255 level. So right now I am looking at a possible sell off instead of a minor correction. We'll be able to tell clearly if the market closes under the TA which is currently at 1246. I jumped the gun today by taking profit and went long at 1260 since I didn't see the last few minutes coming but I am going hedged if we start trading under the TA. I wrote last week the market was ridiculously overbought so a swift sell off is not exactly unexpected.