Correction

The market is technically correcting and it seems like it still needs to put in another leg down before one more bullish wave. Wave 4s sometimes get MACD crosses but limited price corrections which is what seems to be happening at the moment. So maybe early next week we'll get the C leg of the correction and then we could see a wave to 1300's. The market is very overbought short term and I've seen articles already on the media on how overbought the market is so before you know it we will see a sell off. I read yesterday that we've seen the best month for the SP500 in 37 years! I am holding short over the weekend..

Have a great weekend..

Expect a Pullback

The market did have a more upside indeed and it managed to closed comfortably above the 200 day ma as I had been speculating for weeks. What has caught me by surprise is the absence of a Fib correction which ALWAYS happens at some point. At current levels the market is back to overbought so I expect a pullback as soon as tomorrow to the 1260 area perhaps? Once there, the market could put in one final leg up to 1300+ and complete a 5 wave move from the sideways correction period. And if we get there, I'd consider not only shorting but going leveraged short as it will be a predictable sizable correction/sell off. One of the indicators I follow, the average of stocks over their 20 day ma it's basically at a 5 year high. The only time it was this high was around the end of March-Early April of 2009 when the market was recuperating from a huge 60% sell off. This time, the market is recuperating from a 15% correction so there is a big difference between then and now. And while it's hard to say if the bear market will continue or we will get a pullback to then resume a new bullish leg to 1400, the market will pull back substantially enough in the next week or so.

I initiated a short position at 1282 and will probably cover around 1260 to gain some points. If we sell off and 1255 breaks hard then I'll keep them. But for now, I expect another leg up. I also sold part of my long China position and looking to buy a bit later as it has run up 30% in less than a month.

More Upside?

The market managed a successful test of the TA this morning as it bounced right off from there. And unless the market reverses hard tomorrow, I think the market will keep rallying to the 200 day ma without any more significant pullbacks. I would have never guessed one single wave from the panic low of 1074 would reach this level. And it goes to show that whenever there is panic there is a lot of cash on the sidelines just waiting for the scared ones to sell. And just when the scared ones are probably buying back what they sold, they are going to get a big surprise to the downside.. unfortunately, the ultimate losers are usually the unsuspecting retail traders.

I took some shorts today and made some of my points lost on my previous short back. And I'm waiting for either the 200 day ma or a bearish TA signal to short again. Fortunately, I have a long portfolio that I don't trade and that has been going up nicely. But on this trade account, it's hard to go long at this point unless there is a substantial pullback.

Correction

The correction I was looking for started today. However, the trend has not been broken and we won't know until the wave tests the TA. If the market tests the TA and bounces from there then we're on to higher highs on this wave. But if the market makes consecutive closes under it then we are probably on to the Fib retracement area which I have anywhere from 1075 to 1186 but most likely 1140-1186 before another big rally takes shape. I think once the EU meeting is over we'll see what the market really intends to do. As of right now I think the market has priced in any good news and anything less than expected will cause a sell off.

Correction tomorrow?

The market continues to go up despite an overbought condition and I suppose we'll have to wait until the news from EU comes out for a correction to start. This is about the most overbought the market has been since the 1370 top and it's a matter of time before it corrects 50% of the rally. Who would have thought a rally of this magnitude would start the same day the market touched the lows for the year.. crazy market. The TA is at 1219 and rising and I am looking to see if the next test will hold or not. So far the market has tested the TA only once at 1201 only to rally 50 points. The FTA is at 1235..

Overbought

The market confirmed it had been correcting sideways for the last couple of weeks and we probably saw either a W1 of another bullish leg or alternatively a W5. I personally think it is a stretch for the market to go all the way to the 200 dma without any Fib corrections but obviously anything can happen. I've see overbought getting even more overbought in the past, so I think the safest way to trade is to trade the trend at this point. I had to exit my shorts at 1226 as this hit my limit and I will start trading again once the TA hits. Persistent trends are too risky and trade so it's just better to wait.

Triangle

The sideways correction continues and the market is drawing a triangle in which the market will eventually break out of to the upside. The TA was successfully tested today so we are now at what could be important levels for the next wave up. I do however have to point out that we continue to be overbought so I can't really picture what sort of rally could come out of this triangle. I think it would be best for the market to make an Ascending triangle so that we can at least project part of the next bullish wave. Maybe we'll get to the 200 day ma and then do a proper Fib correction.. hard to say at the moment but I am looking at the test of the lower trendline or the next test of the TA to go long and stay with the TA.