Potential Inverse Head and Shoulder in the works

Before I add today's market analysis, I wanted to give an update on the shooting on Friday. Unfortunately several people died and this particular event happened right in my area, in fact the nut job lived half a block down the same street from my old address. It just goes to show that this gun issue debate affects everyone because no matter where you are in this country, there is always the danger of some lunatic going around shooting. And it is just sad that this is a reality we now have to live with. My area happens to be very strict with guns but when you can just drive a few hours and get an AR-15 and all the needed munitions legally, gun control doesn't mean all that much. I am just glad the gunman was neutralized before he could use what he had with him. People got lucky it was a Friday on a finals week with few students around, had it been just a week earlier it would have been a much bigger tragedy.

Anyway, the market.. as expected the rally continued to show its strength and I am hoping but not all that sure at this point the 1623-26 will be tested at all. As it is there is a good chance of an IHS forming that targets 1696. So bears better show up tomorrow or else we will see a break out to new highs and that won't be all that hard with all the short covering that will take place when key resistance breaks.  We've seen it several times already this year, so just be ready to position yourself accordingly. The TA is still neutral/bearish but it will turn bullish fairly soon if a reversal doesn't come soon.

I ended up buying VXX at $19.25 last Friday and I position traded FXI to better my cost to $35.97. Both positions underwater I might add but as I've said before, I enjoy a good challenge so I will try to make them profitable with the coming price swings.. we shall see.

Main S&P 500 Trends

Short Term Trend = Bearish Trend Being Challenged

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Corrective or Impulsive Rally?

The strong rally I posted about couple of days ago is here and now that the market has put in a strong wave, the main question is whether this is W1 of a 5 wave count or an ABC. Barring any surprises, an ABC move should take the market to the 1662-1674 level I mentioned couple of days ago and maybe sell off again 90 points? However, if this is a 5 wave count then I expect the all time high to be taken out and possibly end around 1700-1710 more or less. The market closed above the Trend Average and one more close above it will most likely turn it bullish again. So the TA might get whipsawed but when everything is settled, we'll have a good idea of where the market is headed next. But do keep in mind all those quick and simple corrections we've seen this year, this one might turn out to be just a bigger version.

Now I've got to go and talk to my ex since there was a mass shooting couple of hours ago at the library where she was just yesterday. Which happens to be the library at my old school and a place where I spent countless hours in my college days.. I hope nobody was critically injured and I wish there was a way to stop all these idiots from hurting innocent people.

Main S&P 500 Trends

Short Term Trend = Bearish Trend Being Challenged

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Rally to the Trend Average

The market started to rally today as I had been expecting but it decided to first test the 1597 level I mentioned a few days ago by putting in a low of 1598. And with that the original target of 1590-1600 I had when the first bearish appeared and the head and shoulders target have been met. Just too bad the market got there in a zig zag and not in the 5 waves I had been hoping for as I would have made a lot more holding VXX. Nonetheless, I will enjoy the ride on the way up and will load back up on VXX for perhaps another round of selling? But before I get ahead of myself, the market needs to get back to the TA level and overcome it in order to put in a decent rally. The TA is currently at 1637 and perhaps the market will find resistance and retrace on a W2/B wave then. If the market makes it to 1646 without a pause , then there is a good probability the all time highs will be taken out. As I said yesterday, I am labeling this bullish wave an X but we have to keep in mind the market has already corrected enough and gotten close enough to the 1580 ideal level, so it is free to zoom its way past 1700. The answer will be on the next bearish wave.

Main S&P 500 Trends

Short Term Trend = Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Strong Rally Coming?

The market broke the 1623 support today and as expected it sold off as there isn't much support except the 50 day ma at 1604 and 1597. At this point the market might start to stage a counter rally or test the 50 day ma/1597 first and then mount a potentially strong rally. The market is very short term oversold so I wouldn't be surprised if we see a rally back up to challenge the 1662-1674 area only to start another round of selling. The NYMO is at the most oversold level in the past year, which is interesting considering we had events like the Fiscal Cliff, Cyprus, Italy, etc. which were good excuses for a sell off. Right now, I don't think anyone is very clear as to the reason of the correction other than change in sentiment. The Feds cutting back QE is supposedly an excuse but with weaker economic data, I don't think that's happening. The Nikkei sell off is also in the background but considering that market rallied 80% in less than 12 months, why would a 20% sell off be a big deal? so in my opinion, this is just an opportunistic correction that was well predicted and it is just a matter of time when sentiment will switch again and then all of a sudden good news will be good news and bad news will be great news. Also, I should add that I am expecting the next wave to be an X wave but given the fact that the 50 day ma has been technically tested and the low today comes somewhat close to the "ideal" 1580 level I first talked about before the correction started. The coming bullish wave might turn out to be a W1 but I still think it'd be better for the market to rally after another round of selling so we'll be keeping an eye on the main indicator, the Trend Average.

I ended up selling VXX again for a profit early morning and went long FXI (China ETF) at $36.08 but before 1623 broke. But again, profit is profit so life is good. I also initiated and closed a small XIV position, which I will take a small loss should the market start the rally from here. If not, I will be buying back at support.

Last but not least, another sign a bottom is near..

Main S&P 500 Trends

Short Term Trend = Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Market Update

The market continued its bullish bounce this morning only to be almost completely reversed by late afternoon by testing the 1623-1626 level again. It remains to be seen just what the market intends to do but so far it's looking like a double zig zag correction. So there's a good chance the markets will move sideways or trend slightly bearish for some time and setting a base for another multi-month rally. At times like these, the best is to be positioned according to where the Trend Average is.

I ended up day trading and made some money. I was planning to stay out until seeing a good trade set up but I bought 1/4 of my normal VXX position for the thrill of it (and the fact that the TA is red), so we'll see how the market holds if 1423 gets tested again. If 1623 breaks, there isn't much support until 1597.

Lastly, as I mentioned couple of weeks ago when the correction started. When we start hearing from fear mongers on the news, it will be a sign the market will be getting to rally.. here is Marc Faber who has recently popped up again on the news (as predicted!). He was "100% sure" of a worldwide recession for 2013 and scaring everyone last year.

http://www.cnbc.com/id/100788714

On this interviews he doubts there will be new market highs.. which means, there WILL be new highs. Also, he says China is a bubble and is not growing as fast. But then at the end he says he is planning to buy Chinese equities? .. I have been 100% long on Chinese equities and will remain so for quite some time. We'll see who is right in couple of years.

Main S&P 500 Trends

Short Term Trend = Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish 

Short and Long Term Trades

Market Update

The market put in lower lows as I expected last week but at the same time that level I first mentioned as important couple of weeks ago (1623-1626) held and the market was able to rally and invalidate the 5 wave count I was tracking that targeted 1590-1600 by going over 1640.05. So chances are what we saw was a zig zag with a potential for a double zz or even the beginning of a bullish leg. I want to see how the market reacts around the 1654-1662 area and if it's able regain the TA, so we'll just have to see how bullish is this leg before adding labels to it.  The alternative to the corrective picture is a bearish triple nested 1-2 but given the fact the market rebounded and invalidated the 5 wave count, I give it small probability.

I ended up closing my VXX position at the bearish 5 wave count invalidation. I made good money but nothing near what I would have made if the market would have cooperated a little! I will probably load back up on VXX at resistance and unload or keep depending on the drop. Choppy markets are risky when holding volatility, so better be safe by staying on the sidelines and trading the higher reward/risk set ups.

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

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