More downside ahead

Now that May is over and a significant top has been confirmed, I think the market will be headed to the revised area I mentioned yesterday for the C wave, which I forgot to add coincides with the 1580 "ideal" target for the LT Int W4. How long it will take for the correction to end it's anyone's guess as I am more concerned with price. However, I first started warning about a significant top 2 weeks ago (the first time this year I called for one I might add) when the naive 5th wave crowd were buying like mad and I wrote the following:

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). 

So if we get to the target in the next week or so then I will be looking for a triangle as possibility for the LT Int W4 correction. Obviously the market is free to start the LT Int W5 once the target is reached but I think the market needs an oversold base to start a nice rally. When all those bearish "experts" start ringing alarming bells that's probably going to be the bottom of the correction.. so be on the look out for Marc Faber, Roubini and Pretcher.. lol.

I had a very nice VXX day today and I think made enough for a vacation and coffee too. However, my plan was to sell half at the close to lock in some profit but because I was in a rush to go meet a friend for lunch, I closed the position 3-4 minutes before the close around 1636-37 and missed out on a good chunk of profit since the market dropped 7 points in the last 3 minutes. But profit is still profit plus I still hold the other half, so not like I am complaining.

Have a Great Weekend!

Main S&P 500 Trends

Short Term Trend = Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Downside target revised to 1590-1600 for C wave

The somewhat conservative bearish 5 wave count is now out since the market made a higher high but the chart now looks actually more bearish. I wanted to write about this alternate scenario yesterday but I didn't have time. I was going to say that the 5 wave count I had been following was considered conservative given the fact that the alternative called for the bearish W4 I was tracking to be labeled a bearish W2. So now that this is the main count I am following, the new projection is 1590-1600 which would put the C wave around the 1.618 level of A. The alternative bullish possibility is a W4 triangle but since I follow the trend, I give the bearish possibility a higher chance.

I ended up position trading VXX in the morning and sold within a few minutes for a decent profit. So I closed that position and started a new one at $18.60, which is couple of cents better than the one I had before. Now I just need the very bearish count to materialize to test out the calling system I set up over the weekend and make some vacation money!

Main S&P 500 Trends

Short Term Trend = Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Market Update

I almost got a call this morning from TD Ameritrade when the market gapped down and put in a low of 1640 but it was not within my trigger range (below 1637), so the market continued its bearish advance from yesterday as I had been expecting. However, the 3rd wave down was not as strong so we'll see if the 5th wave will make up for it. The market bounced from the day's low in what appears to be a W4 and it came within a point of invalidating the 5 wave count, so any more upside beyond the counter rally's top would signal a bullish wave coming. For now, I am assuming we will see a bearish wave to finish up the 5 wave count and challenge the 1625-1635 area. Adding to the bearish view, the Trend Average has turned negative with today's close and that has not happened in almost 2 months. Also, there is an arguable Head and Shoulders formation targeting 1602. It's a perfect looking H&S but since it was not formed at a top but a middle of a downtrend, I am not sure what are the probabilities of it materializing, 

I was tempted to position trade VXX when the market hit 1640 but abstained. So I am looking for a good level to lock in profit.. maybe tomorrow I will get the call!

Main S&P 500 Trends

Short Term Trend = Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

1625-1635 to be challenged?

The market looked bullish today by gapping up big early morning today and ending the day green. However, the substantial reversal that took place after the gap tells a different story. For the first time in quite a while, rallies are being sold into to which a sign of distribution (from the big guys to the unsuspecting future bag holders). So while the market managed a close above the TA, I am leaning bearish betting there will be more closes under the TA. Also, if the reversal wave we saw today was a bearish W1 then I am expecting 1625-1635 to be challenged again but this time it would be the lower end of the range. If this is not the beginning of a bearish 5 wave count then there will be more choppy trading until possibly challenging the 1687 high for a flat correction. If the market is able to regain the TA firmly I will look for bullish set ups and trade accordingly. Until then I am wearing my bear suit for the SP500.

I ended up position trading VXX today and improved its cost average by 10 cents so it is now $18.62. I guess I should have stayed in cash over the weekend!! But it's all good, I enjoy the challenge of being underwater and trading my way out. Last but not least, thank you for all the input on what I could use for phone alerts. I ended up buying a $5 phone (I can't believe they're that cheap) on a pay as you go plan and I signed up for fax2me to get call alerts by emails. Tonight I will be setting it for 1636 and I am hoping to get a wake up call early morning :)

Main S&P 500 Trends

Short Term Trend = Neutral Leaning Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Another close under the TA

The market closed again under the Trend Average and this is the first time the SP500 has had 3 red days since March, so it has been a long overdue correction. However, the TA is still trending up so the signal is still neutral. I am adding an "Alt W3" to the A label to the chart until we get a clearer picture as the market could in in a bearish 1-2 (of a W5), triangulating or putting in a WXY correction. Also, I wanted to add that since we will most likely see an Int W4 to expect the TA to get whipsawed. So while we might get a change of trend confirmation next week, the market is free to go back to the 1660-1670 area on just a regular bounce.

I ended up selling VXX at 19.06 in the morning for a very nice profit, went long FXI, sold it as well for a profit at the end of the day and initiated a new position in VXX at 18.72 (technically I should have stayed out of the market but I guess I need that pre-market adrenaline rush). So a pretty good day and hopefully I'll squeeze another $0.75-1.00 out of VXX next week... Last but not least, if anyone knows of a service that can convert email alerts to a phone call please let me know. I currently get trigger alerts from TD Ameritrade by email but since I am in the west coast and sleep late, I pretty much miss most of the early morning action which has been very costly in terms of lost opportunities since an email alert doesn't wake me up. However, a phone call to a dedicated phone would do the trick. I searched for this service but couldn't find anything and if I don't see a service available, I will have one programmed and possibly offer it on here for people like me.

Have a Great Long Weekend!

Main S&P 500 Trends

Short Term Trend = Neutral

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Potential Trend Change

The market put in a bearish 5 wave count with today's low and the short term trend should go negative with another close under the Trend Average. The W4 bounce was the one at close yesterday and W5 materialized overnight to challenge the 1625-1635 area I had posted yesterday. And now that we have a very likely top, we need to figure out how this correction will unfold. I have been posting the 1580 area as a target because I see the Int W5 as part of a LT Int W3 of a LT W3. So going by that count, the market is now starting an LT Int W4 and if that level holds then I am expecting LT Int W5 to target 1790 by the end of this year or early next year. There are obviously other counts floating around but those who are familiar with this site know I count according to trends. That is why I avoid trying to count anything longer than LT waves as I think it doesn't really help someone who is trading. The "bearish" EW crowd will label the most recent 5 wave count as a bearish W1 (as opposed to my A) as they are seeking/wishing for a bear market. Personally, I welcome both markets as my primary purpose is to make money. But based on trends, this bullish rally is just catching break and it well should be after rallying like mad this year. I am sure once further downside materializes on this correction we will see the usual bearish fear mongers on the news again, the Roubinis, Pretchers, Fabers, etc. of the world and that will probably a good time for the correction to end..lol. Just today I saw Doug Kass (who had virtually disappeared from the news) on CNBC arguing why Goldman's Sachs call for 1750 and 2000 eventually was wrong. Problem is Doug Kass has been shorting the market since Jan 1st thinking the market's fair value is 1425.. DK btw doesn't use stops so he has gotten steamrolled by this rally big time. How a professional trader like him trade like this is beyond me. And don't get me wrong, I respect him for putting money on the line as opposed others who just wants to sell newsletters but that is a crazy way to trade.

I position traded my VXX and improved it 22 cents so back to $18.31 as my cost avg.

Main S&P 500 Trends

Short Term Trend = Bullish trend being challenged

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Bearish 5 wave count or ABC?

I was wrong in my assumption the market had topped yesterday but still right on the correction and very possibly the top I have been calling for the past week for the wave structure from 1343. In the morning, it seemed like the market was headed for a bullish breakout I mentioned yesterday as a possibility but then the reversal was so swift and strong that all gains were given up and the 1662 support seemed like it wasn't even there. However, the market did manage to hold on the second support level and close right on the Trend Average, a level which by the way the market has not seen in 3 weeks. At this point I am looking for a top confirmation by the Trend Average, so ideally the market will bounce in a bearish W4 and then go down some more to test the 1625-1635 area. That would allow the TA to turn bearish and confirm what I had been expecting since the rally started in January, an LT Int W3 top in May and if that turns out to be the case then I will be watching 1580 as the end of the W4 correction as that is the ideal target. Lastly, I forgot to add a bounce that rallies past 1674 will invalidate the bearish 5 wave count but I doubt the market will rally that much.

I ended up selling my VXX position at break even at the break of yesterday's high since I assumed we would see 1700's. But once the reversal came and lower lows were put in, I waited until the end of the day to load back up on VXX at a higher price (unfortunately). It would be a shame if I were to miss a substantial correction which I had been calling for weeks. So my new VXX price is $18.53 as compared to $18.32, not too bad considering the market dropped almost 40 points in a single day.

Main S&P 500 Trends

Short Term Trend = Bullish trend being challenged

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades