Will the next correction confirm a top?

The market made it close to the 1675-80 target area I mentioned on my last update today but it seems like there is one more push left before the next correction begins. But what really matters is whether the next correction is just another minor top or "the" top for the entire wave from 1345. Top calling is hard but I think the market is getting close.

I am holding my VXX position as well as my longs. The HSI and the SECC seem to be resuming their uptrends so now it's time for them to play catch up.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

New 5 wave count targets 1675-1680

The market broke out of a broadening triangle formation today (the same exact ABC pattern in the long term chart) and it seems like it is going for the 1675-80 area. The 1.618 level of W1 happens to fall on 1681 and if the market makes it there then we will have a very ideal LT Int W3 wave. The 5th wave is now extending it is about to overshoot the most optimistic revised estimate I had from April which was 1668. So all I can say is WOW.. it has been a crazy bullish rally on no substantial earnings or economic growth, somewhat similar to Japan. When I speculated late last year on a rally until May based on the LT Int count, I thought it was going to be a rally based on accelerated improving fundamentals. But I guess it is all about the power of QE, which btw I should add that the Feds stock market model has the SP500 at 1700-1750 so they are executing their plan very well.

I ended up buying the VXX portion earlier today and in retrospect I should have waited a bit more. But it's ok, can't always have it my way. What I need to see now is the real top correction to 1580! lol.

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

Correction

The correction that I have been expecting has now materialized but obviously it is still not clear if the market will correct on a W4 and launch again to a new high. Earlier in the day, the market seemed like it was forming a triangle which is a typical W4 formation. But towards the end of the day the market lost yesterday's low in what appears to be like a bearish W3 or a C wave. If this is a W3, prices will need to go down to the  Trend Average and preferably close below it tomorrow. If this is a C wave, then it should be done as a flat or perhaps test the Trend Average successfully and rally again from there. The market has not had 2 consecutive red days in a month, so a red day tomorrow would mean sellers are starting to show up. This is now a market where some people think it will go up forever which in a way is an ideal area for a top.

I also posted the long term chart, so you can see the targets I currently have for the current structure. The 1941 number I posted earlier is for the structure from 1076, the targets posted are for the structure that started at 1266.74.

Today I did good on my VXX position but I ended up making a mistake. I closed and took profit at 18.62 and then bought them back in the 18.30's.  However, because I had been trading a 3k  position for the last 2 weeks, I ended up buying back 3k and not the 5k I was supposed to. So I missed out on 2k of VXX and will close that position and start a new one for clarity purposes. My old position has now caught up to market price and already ahead on that one. Should the market bounce tomorrow, I will be buying the 2k position or one the rebound if we get the bearish 5 wave count.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Correction and Levels to Watch

The market corrected and rallied following the count I posted yesterday and now there is a good chance of a not only a correction but a top. But as I said yesterday, should the market put in another W4 then the last 5th wave just extends but I think this is the topping area more or less. The Cup and Handle target was met today and the market is now at the upper end of the revised target range ( I should add that 1685 is 1.618 of Int W1 so an extension is very possible). I am looking at couple of levels for support and they are 1636 and the 1623-26 area. Which level ends up holding will probably give us clues as to how this correction will evolve. The less severe the initial correction, the higher the chances of a zig zag or double zig zag. But if we get one big sell off to the 1585-1597 area then I will favor a triangle. Also, I expect the Int W4 correction to take some time to work off the overbought conditions (and make no mistake the market is very overbought at this point). The Trend Average will give us confirmation but as in most W4s, I expect the TA to get whipsawed by the nature of W4 corrections.

Today I worked on some calculations for the ultimate target for the potential long term 5 wave impulse from the 1074.77 low in late 2011 and I am getting 1942 by the time all waves are in around the end of 2014/early 2015. Also, the ideal bottom for the coming LT Int W4  is 1581 with the top of the entire 5 wave LT Int structure from 1266.74 at 1791 to be completed most likely in early 2014. These calculations are based on my own formulas that I have been tweaking now for a few months. The targets I have mentioned in the past few months are based on this same formula. So as far fetched as these targets might sound, that is what I am getting. Then again, who would have thought the 1642-1668 target I announced in April for the end of the 5th impulse by this month was even possible when the market was having a hard time clearing 1560's in April?? This has been a huge rally that has steamrolled bears, specially those who traded on fundamentals.

Today I executed my VXX plan and bought the other half at $18.31. And btw, I will assume I am wrong as I always do when I take positions against the TA until the TA turns red. So should bullish patterns evolve I will be trading in and out of the position for cost improvement just as I have in the past couple of weeks. The main indicator on this blog is the Trend Average, waves and all the other stuff comes second so if you are shorting respect the bullish trend!

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Targets met, significant top is coming

I posted yesterday's update late last night and when I looked at the futures the projection for 1640's seemed optimistic. But to my surprise, the market was trading at 1647 when I woke up so it is now clear to me the market is putting in a 5 wave count before another correction.

Last week I posted:

But if this is a W1, we should see the 1626 level hold for a W2 and then up from there to about the 1650 level, which goes in line with the Cup and Handle projection from couple of weeks ago.

Wave 2 did bottom at 1626 and I think the market is completing W3 for Int 5. So it seems like there is some more room to go and the ultimate revised projection for the entire structure from 1345 might end up being correct:

http://elliotwavetrader1.blogspot.com/2013/05/flat-or-correction-over.html 

Target for final W5 1642-1668.
http://elliotwavetrader1.blogspot.com/2013/04/target-for-final-w5-1642-1668.html

I have been doing these price projections based on my own calculations (If you know of anyone doing price projections based on the initial stages of a wave please let me know as I'd like to see their work) and I try to be conservative with the numbers, meaning I assume 5th waves will not extend. But if they do, then markets will continue higher before a top is in. So while I am sure the market will correct soon, it is hard to tell if the coming correction will be "the top" as we could see W4 after W4 until exhaustion. Based on the most recent multi-week count (the one that started at 1536). If W1 was from 1536 to 1592, then the market might overshoot the higher end of the target range. You guys know I seldom call tops, but going by the waves, the market is about to take a significant pause. The top will be confirmed by the Trend Average turning red.

I ended up buying back my VXX position at $18.24, so I've improved my cost avg substantially from the initial position taken when the market was at 1597. I have to count how many times I've traded this ETN but after being initially squeezed, I've brought down the cost avg from $19.30 to $18.59 and should the market follow the path on the chart, I will buy the other half and have myself a nice summer :) I am assuming the market will do at least a 5% correction which will translate into 80-100 SP500 points. That in turn should net about $5.20 to $6.50 on VXX.. we'll find out soon.

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

1640's coming soon?

The market found support at the 1626 level today and as I mentioned last week, if that level holds then we might see a bullish W3 break out in the next session or two. So it seems like the Wave IV is done and the market will be trading over 1640's soon. The markets had 3 days to correct after rallying to overbought conditions for 5 days but the lack of bearish advance just signals strong demand.

I ended up selling VXX again after seeing the 1626 level hold. So now I am in cash for that position and waiting to re-enter at a better price, perhaps in the $17's?

Main S&P 500 Trends

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Flat or correction over?

The market has been bouncing on what seems like a B wave from the 1623 low and it has now retraced most of the initial sell off. So I think the market is either putting in an ABC Flat correction or a bullish W1.  If this is a flat then prices should stop rising at the 1635 level and then head down to 1623 and resume the rally. But if this is a W1, we should see the 1626 level hold for a W2 and then up from there to about the 1650 level, which goes in line with the Cup and Handle projection from couple of weeks ago. I have been able to call corrections fairly accurately over the past year but it's very hard to tell which one ends up being a "top", so I will be watching key levels in case the market continues rallying and adjust my hedge accordingly. 

I traded in and out my VXX position couple of times for a minor cost improvement and I was originally going to close the position and wait until Monday. But since I've been able to improve my cost average substantially since the 1597 short squeeze, I figure I'll stop loss the position if the market makes it to 1637 or better yet sell at a profit at 1623. Good thing I also have a long position to make me feel better when the market refuses to go down..

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