Ending Diagonal Confirmation

The market hit a brick wall at 1597 and the Ending Diagonal (Rising Wedge) was confirmed with the bearish reversal. But now that it looks like structure seems to be complete, I can add labels to the waves and figure out where I think the market is. I have the wave from 1536 to 1597 as W1 of W5, so I am expecting a Fib retracement and a continued rally in the next week or so. Should the market break key resistance levels such as 1552, I will start looking into other options. I am aware that some are calling 1597 "the top", while others are calling for an Int W4 correction. But I have to assume the most bullish count until the Trend Average gives the signal. As it is, the market failed to even test the TA on the last correction. So we'll see how the TA holds on this/next bearish wave.

I continue to be on the sidelines on my margin account. But now that 1597 is marked, I will be buying VXX on the bounce and using that as the stop. So hopefully it will bounce tomorrow, unless there is bearish nested 1-2, in which case I'll have to wait some more.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

More all time highs in May for SP500

The SP500 has made an all time again today in the last minute of trading and I suspect there will be more highs ahead as I lean towards seeing 1600+ before a summer correction. What is not clear right now is whether the market is in a nested bullish 1-2 with a W3 about to show up (thus making 1577 a W2). Or if there is an Ending Diagonal or Rising Wedge for the 5th leg of this W1 of Int W5. The short squeeze theory I talked about yesterday would result in a bullish W3 but it's hard to tell as this is uncharted territory for me. In the past there were clear defined resistance levels from the previous bull market (like 1575) but now there is nothing, so I am just assuming many traders went short or sold thinking 1597 was the top, specially when 1538-39 broke. But now that they see it is not the top, traders might jump back in and shorts will be forced to cover. That of course assuming people trade using technical analysis, which in itself is pure speculation. So we should see an interesting couple of days starting tomorrow.

I am patiently waiting for more clues before going into a short term position.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Another Short Squeeze Coming?

The C leg I had been expecting has not materialized and if we are still in a correction then the market would be on a B of an expanding flat. However, I am leaning towards labeling this leg a W3 with the A leg being a quick Zig Zag correction. I'll have a better idea tomorrow and I'll label accordingly. I started leaning bullish once the Short Term Trend went bullish so just have to find a count that fits to hedge/take profit/short accordingly when the time comes. Also, I posted the Int Chart so you can see how I've labeled the waves. The bullish daily MACD cross and the corrected RSI leaves room for substantial upside in May. There is a good chance if 1597 breaks, bears will be running for the hills once again and see another big rally.. If I was short I would set my stop at 1597-1600 so we'll see what happens if this level clears.

I ended up selling the VXX position for a profit when the index broke the trendline on the cup and handle pattern and perhaps I will buy it back at low 18's or even 17's? When the structure is complete, I will load up on a lot of these things to enjoy the summer correction :)

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Potential Cup and Handle Pattern

Market started its retrace as I had been expecting and so far it is looking like the Trend Average will hold. And if that is the case then there is a good chance we will see another all time high next week or early May. There is also a potential cup and handle pattern, which will targets 1658 if the "handle" is completed and the market breaks out. This all lines up well with the 5th wave completion of a III and a summer correction.

I ended up position trading VXX again and improved it by a few cents so that trade is looking good so far. It is up almost 3% from my net price but the index is actually 4 points higher from where I bought it (1578). Goes to show how volatile/crazy this ETF is. Hopefully, we'll see the TA tested early next week and I will be closing out the position.

Have a Great Weekend!

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Going for 1600

I think we now have an obvious bullish 5 wave count and the bearish case looks dim given the bullish momentum. However, I think the structure from 1536 is complete or almost finished so now I am just looking for a test of the Trend Average which currently is running at 1566. If this 5 wave count is the W1 of the final Int W5 then I project 1640-1662 as the ideal target level. Last time I projected 1600+ the wave from 1539-1597 was reversed completely but now that the market has somewhat corrected, odds favor 1600+ after a correction. I guess sell in May and go away will be the right thing to do this year as well.

I am keeping my VXX position until the TA test and so far it has actually gone up despite the market making new highs for the 1536 wave. So maybe I'll able to squeeze a buck or two if 1560 gets tested? at that point I will most likely go margin long. Also, the HSI is in a confirmed W3 (of W1?) so that helps global mood for bulls. Also, now that FXI has rallied 7% in one week from its 2013 low last week maybe the correction is done there as well. Ironic that short interest on it was at the highest since 2007 and someone made a $16 million bearish option bet (largest single option trade of the year) before this big rally from nowhere.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Market Update

The market triangulated most of the day and put in another higher high for this wave which is now starting look better as a 5 wave count than an ABC. But since C waves can extend 1.618 (1586), I am still assuming a strong bearish wave will come. However, if this wave ends in the 1590 area or higher, odds are this is an impulse wave which will not be retraced completely, meaning 1536 is the low for the correction and we're seeing a higher degree 5 wave count unfold from that low.


I position traded my VXX in the morning to get a better cost average and now I am getting tempted to close the position at the test of the Trend Average at 1566. But I'll see how the bearish wave evolves after the market finds a top. Anything less than a strong sell off, makes the bearish case suspicious. Especially if the TA turns positive, which it will tomorrow if the market closes above it again.

Main S&P 500 Trends

Short Term Trend = Neutral

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Bearish H&S or Bullish IH&S?

The market rallied as I expected (despite being down as much as 7 points in pre-market) to the 1570-1575 level on positive earnings. And now that the right shoulder of the Head and Shoulders is there, we'll have to see the magnitude of the coming bearish wave to get an idea of  when the correction will end. Going by pattern alone, the target is 1478 which should coincide with the 200 DMA assuming it takes couple of weeks to get there. However, there is also that potential Inverted Head and Shoulders I've been tracking so watch out for the 1552-1556 level. If that level holds then that pattern targets 1618 (Nice Fib number there). Therefore, we have another case of one of these patterns eventually failing (Bullish wave going beyond 1597 invalidates the H&S), which one will fail is anyone's guess. But at least we are aware of what key levels to watch. I am still labeling the waves a double Zig Zag and should the Y wave equal 1.618 of W, then we will be looking at 1480 exactly which will fit the H&S target and 200 DMA nicely.

Per my plan from last week, I loaded up on the same number of VXX I've been trading around the 1578 level. And the real challenge will be to take profit or not to take profit when 1552-1556 comes. I hope they market will make it easy  for me and just gap down that area.. lol.

Main S&P 500 Trends

Short Term Trend = Neutral Leaning Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades