1676 to be challenged

The market gapped up again today in what seemed like it was going to be a bullish W3 but as soon as it hit the rounded top trendline the wave reversed again overlapping the previous impulse wave and closing the day in red. And now that we have all these waves in place, I am labeling them a double zig zag to form a B wave and we should see a bearish C wave coming as soon as tomorrow to test 1676. However, if we go by the wave I have labeled as W1 from 1698 to 85, then the 5 count  projects to around 1660-65 which happens to in the area of 1.618 of A wave. Also, the 50 day ma is at 1646 and rising a few points per day so that might ultimately be a target as well. 

I ended up holding to my VXX but did not add so the plan now is to sell at a profit (hopefully since one never knows with this thing!) at the completion of the 5 waves and load back up with SPY. And from now on I will be trading VXX only at 5th wave completions, it is crazy to see the VIX shoot up while this thing goes down with a mind of its own.

Main S&P 500 Trends*

Short Term Trend = Neautral Leaning Bearish

Medium Term Trend = Bullish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

Market Update

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The market seemed like it was on its way to break out of its range early morning but the bullish wave got stopped at the IHS neckline trend and reversed to test the low from yesterday and managed to put in a slightly higher low. Which technically still keeps a 5 wave count alive on the SP500, however the DOW made a lower low so it will be interesting to see how these two counts will end up reconciling. The market could be putting in a triangle or just getting ready for stronger wave down but I think it all comes down to the 1676-1682 level holding. If this level holds, the market should make an all time high soon. With that said, the daily MACD is about to roll over on the daily so any new high will likely be reversed. Lastly, today is the second day the marker closed under the Trend Average so the Short Term trend will go negative should a stronger bearish wave appear.

I ended up buying back VXX at a much better price at the break of the micro 5 wave count (1687) and sold the longs I bought yesterday for a minor profit. And the plan is to buy longs again at the test of support again or just buy the other 50% of my short position if a break out wave appears. A bigger correction is coming sooner rather than later.

Main S&P 500 Trends*

Short Term Trend = Bullish trend being challenged

Medium Term Trend = Bullish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

Inverse Head and Shoulders targets 1706

The market corrected and put in the low of the day in the 1680-82 range I mentioned on my post on Friday and now we have an Inverse Head and Shoulders set up targeting 1706. Obviously there are other options available which includes the bounce wave being part of the final leg of a B with a C to come to test the 1676 low or a bearish nested 1-2 set up. But I usually tend to favor and trade one count so I am going with the IHS set up until it is proven otherwise. The great majority of IHS patterns this year have been completed (I can only think of a couple of times where it did not) so maybe this one will too.

I ended up selling the VXX position to position trade as planned, so I will be buying back the position on (hopefully) the completion of a 5th leg. Also I went long at the low of the day and this time I bought SPY which tracks the index directly unlike that crazy VXX. Btw the reason I buy VXX sometimes it's because I want more "bang for the buck" and the fact that my account does not let me buy triple or double leveraged ETFs on margin. My core capital is 100% invested in long positions since last year and those are rarely traded. The trades announced here are done with the margin offered on one of my accounts. And apparently, one can buy volatility (which is as dangerous as the double and triple ETFs) but one can not buy anything that is further leveraged. So that gives me the options of SPY, SH or volatility. In the end, more than making money on the margin account, I am real time testing all these trade combinations to see which one yields the highest return on capital being risked. If I can get a consistent 10% + annualized on capital risked I'll be very happy, 20%+ I'll be ecstatic.. Warren Buffet, who is without a doubt (in my mind) the best investor that has ever lived has an average return of 20% on his holdings. So one side of me tells me maybe we can beat this 20% using these TA tools and wave analysis together but at the same time I am well aware it is a very long shot given the fact that few Wall Street professionals even come close (never mind people who use traditional TA tools or Elliott Wave). But one never knows without trying, so maybe all this real time testing and effort on deciphering the markets will yield a clear advantage. I guess we'll find out in a few years where I will have enough data to compare to other methods.

Main S&P 500 Trends*

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

Market Update

The market put in another lower low today before putting in a bullish reversal and I adjusted the wave count to reflect this move. I overlooked the fact that 5 waves yesterday to the 1680 low were part of the W3 and not the entire count so now that we have the new labels we can speculate on what's coming next. Basically, I see the bearish potential in that there is an Head and Shoulders targeting 1655 and the rounded top trendline (technically speaking the rounded top already took place when the correction started earlier this week), which would imply the correction is a W2 of LT Int 5 of LT W3. At the same time, the market has kept up with the Trend Average by re-capturing it and closing above it and leaving the potential for an Inverted Head and Shoulders at the test of 1680-82 (assuming we see a retrace of today's wave on Monday or Tuesday). Which implies W4 of W1 of LT Int 5 is done and we are in the early stages of W5 of W1 of LT Int 5 and if this is the case and the first wave topped today at 1691, I project a target area of about 1715 for this final wave of W1 of LT In W5.

My VXX position is performing poorly despite the market correcting but I will position traded it hopefully at the test of 1680-82. I am also planning to add longs at 80-82 in case we are getting an IHS with a stop at 76. Last but not least, thank you for voting on the sentiment poll (Trending Waves Sentiment Poll). Once the week is over, I will add a recap of the wave to the post and this way we can compare what sentiment is like during each particular wave. I think this poll is more valuable than the usual sentiment polls in the sense that most people voting have TA and EW knowledge so we'll see how this evolves during the next few months. Maybe certain waves will have particular sentiment characteristics?

Have a Great Weekend!

Main S&P 500 Trends*

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

Market Update

The market put in a lower low at 1680 (which was the main projection from couple of days ago) to complete a 5 wave structure from 1698 and now we have to see if that was the A leg of an ongoing correction or a complete Minor W4 correction. We've seen these relatively fast corrections this year so the possibility is there that a new bullish wave is already taking place for a final 5th Minor wave. So for now, I am watching that rounded trendline to confirm a deeper correction or a breakout that will confirm a 5th wave.  I position traded VXX today as planned but still keeping it in case we are going to see a bigger sell off and maintaining all my long positions intact.

Also, I wanted to announce this new forum I created to better track market forecasts and share trading ideas. There is currently a poll I created to get an idea of general sentiment. I want to see if there is any correlation between sentiment and a particular wave so we can take it into account in the future. So please take a minute to register and vote.

Trending Waves Sentiment Poll

Main S&P 500 Trends*

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

Trend Average Challenge

The market came really close to invalidating the 1-2 count I speculated on yesterday by putting a high of 1698.38 but by early morning the market started to sell off confirming some sort of top yesterday by coming down to test the Trend Average as I had been expecting. The main question now is the degree of the top as we could label the move today to 1682 as an ABC or an 1-2-3 with more downside to come tomorrow. For that I am looking at the Trend Average which rose today to 1686 and the market closed just below the TA. The first close below the TA in almost a month so we'll have to see if the market can recapture the TA tomorrow, if it doesn't then it means the correction will continue. Last but not least, keep an eye on the rounded top trendline as any bounce should be held below it for a continued correction.

I am holding VXX which is underwater despite being "right" in buying it at 1690. But I will position trade if the market starts trading above the TA again. This ETN is a tricky trade as sometimes it doesn't correlate well to the market or the VIX for the matter but at the same time it can be very rewarding if one is patient.

Main S&P 500 Trends*

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

Possible Top

The market made a marginal new all time high today and there is a chance this could have been a top. Looking at the micro count I see an impulse down and a corrective wave, so a possible 1-2 which targets 1680 more or less. Obviously, this count will be invalidated should the market make it past 1698.78 so we'll see if we get a bearish impulse in the next couple of sessions. The Trend Average has risen to 1684 and it will be interesting to see how that holds. If the market is able to stay above the TA, then 1700+ will almost be a given. Who would have thought the day the market hit 1560 that this thing would shoot straight up on technically no news (with the exception of Bernanke comments last week), just like the market reversed in May at 1687 on nothing as well.

Main S&P 500 Trends*

Short Term Trend = Bullish

Medium Term Trend = Bullish

Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.