Bullish Engulfing Pattern

I was expecting a bullish wave yesterday that was going to test the 50 DMA but we got a lot more than that today. The wave from yesterday was a W1 and the 1685 target was reached just on its W3 so I won't be surprised if we see more upside before seeing reversal. And given the strength of this wave and the potential resolution to the stalemate in Washington, odds favor we are seeing a continuation of W3 of LT Int W5. The candlestick pattern was a Bullish Engulfing Pattern which has been very reliable every time we've seen it in the last year and we might see an Inverse Head and Shoulders formation with 1670 as the ideal right shoulder. However, we might just get a very shallow correction to the 50 DMA/TA or even less before a very strong bullish wave that will take out the all time high. If this is the start of a 5 count then expect 1760 more or less, assuming we see a reversal without taking out the 1695 resistance (which makes W1 around 45-50 points).

I ended up selling my short term longs as planned for a decent profit when the 1685 target was met. And I am hoping we will get an IHS set up to buy back at a cheaper price and then enjoy the ride. And obviously should the market be able to reverse all its gains then I will consider a bearish alternative but things are looking up for now and the trends should go back to green as long as the TA and the 50 DMA hold.

Short Term Trend = Neutral Leaning Bullish

Medium Term Trend = Neutral Leaning 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. 

50 DMA Target?

The market was not finished with the entire structure yesterday as we saw a clear 5th leg that reached the original 1650 target. But now that we have what appears to be the entire 5 wave structure (unless we get an extension), I am looking for the bounce to the 1670-74 I mentioned yesterday but given the counter rally wave from this morning, if I were to label that as a bullish W1 then we would get 1685. So there's a very good chance the market wants to test the 50 DMA or the TA on this bounce. The counter rally can be counted as a completed 5 wave or a complete 3 wave (the inverse of yesterday) and obviously it remains to be seen if this counter rally is just a bounce or the start of the resumption of this year's market rally.

I will sell hopefully tomorrow if we get a good bounce to lock in some profit get back on the sidelines.. assuming the market doesn't close over the 50 DMA.

Short Term Trend = Bearish

Medium Term Trend = Bullish Trend being challenged

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. 

Intermediate trend change?

The market went for the bearish 5 wave micro count and it got close to the 1650 target, so the entire 5wave count could be done or it could just the micro 3 ending. Whatever the case, I expect a counter rally to the 1670-74 resistance area and what happens there will probably give us an idea of what will happen the rest of the month. The TA has been red for more than a week and unless the market is able to re-capture the 50 dma then I expect lower lows to follow as the Intermediate Trend will probably lost as well. The market has a great excuse to sell off and so far there is no solution in sight to the whole government shut down and the debt ceiling debate. Unless resolved, the rally will come to an end.

I ended up going long on GXC when I first woke up because of a successful test of 1670 but by the time I woke up again and the market had broken support and had dragged down my stock. So I am officially holding a bag now but it's not too bad and I am sure I will get out of it in green, perhaps on the coming bounce.

Short Term Trend = Bearish

Medium Term Trend = Bullish Trend being challenged

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 lost the 50 dma again and I think the market is starting to price in potential risks from the ongoing Washington drama. Every single counter rally attempt since the Trend Average has turned red has stopped short of the TA and now that the market could lose the 50 dma, the odds for a more pronounced downturn increases. If the political situation does not improve and the government defaults on its obligations, we should see interest rates spike and most likely go into a recession. With that said, there are still some days left and I'd like to believe the Tea Party Republicans are able to see the huge damage that this causes to the country despite their good intentions. Also, on the charts I see a potential bearish count targeting 1650 based on the bearish wave today. If the market fails to make a lower low then an Inverse Head and Shoulders is in play targeting 1716. If the short term trend was bullish I would give the IHS a good chance but given the red TA and the current deadlock I think the market will continue to sell off or get stuck in this range until we get some clarity.

I didn't get a chance to trade today but I will go long for a short term trade if the market starts hesitating with a lower low tomorrow. A strong gap down would mean the market is on the way to 1650 where I will then pick up some shares.

Short Term Trend = Bearish

Medium Term Trend = Bullish Trend being challenged

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. 

50 DMA recaptured

The expanding flat count I posted Thursday seems to be evolving as projected. Going by the micro count, the C leg of this expanding flat is playing out and once over it should get interesting. The market should either go down in a C or bearish W3 leg or resume the bullish leg that started at 1628. With the ongoing political drama in Washington, I don't really see a big rally before the main issues are resolved. But then again, I didn't think the market would hold up this well considering the government has shut down for almost a week. Also, small caps reached an all time high this week and the NASDAQ is also at a post internet bubble high which are signs that investors and traders have a "risk on" attitude.

So given the different potential scenarios (which are as good as flipping a coin), I am trading with the trend. I am fully invested on my long term portfolio as usual but I am all cash on my short term portfolio. I sold my GXC at a good profit on Friday and again will take positions only at key levels, which are now support at 1670 or above the TA. I've been realizing lately that I am much more comfortable being long on a stock I have confidence in than being speculatively short, when I am holding something like VXX I just don't sleep as well, even if it's a minor position. Whereas holding a stock like Google is completely ok since I actually own a piece of a company which business model I understand. So from now on, I think I will start doing only or mostly long positions on my short term trades.

Short Term Trend = 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. 

Expanded Flat?

The market seems like it completed its impulse down by putting a low of 1670, just a bit short of the Head and Shoulders projection but in the target range of the bearish 5 wave micro count I pointed out yesterday. At one point it looked like there would be more downside to come but the bounce went a few points into micro W1 territory and invalidating a bigger 5 wave count, so technically we should see a counter rally as soon as tomorrow. So far it looks like the 1696 top was an A and the low today was a B of an expanded flat. Also, the 50 dma finally broke so bulls better recapture it soon or risk further downside.

I ended up buying GXC, also a China ETF that has more tech in it. I was also thinking of buying RSX (Russia) but I'll wait and see how this correction evolves.

Short Term Trend = 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

The market gapped down at the opening to test the 50 day moving average again after the micro 5 wave count I was tracking yesterday completed in after hours. So the chart shows a truncated 5th and the gap down is possibly part of a micro B wave or maybe even a bearish W1. I think we will find out what the market really intends to do in the next couple of sessions. There is a Head and Shoulder's formation that targets 1664 and if the gap down today was a bearish W1, I have 65-70 as the target for completion. But first we'll see if the bears are able to break the 50 day ma, which I had been expecting the market to test when the correction started almost two weeks ago:

"There is a good chance the market will test the 50 day ma at some point during this correction so we'll see how this count evolves"

So this correction is technically going as planned so far. The one thing that I have to change is the assumption that 1729 was a peak of W3>W1>W3>LT INT 5, it looks better as a nested 1-2 as you can see in the Long Term Chart so the market should be working on a W2>W3>LT INT 5. There is also the possibility of a rising wedge so we'll keep an eye on that. For now I am trading according to the Trend Average, which has done a good job in keeping me on the right side of the trade.

Today I ended up buying Goggle at the 50 dma test and sold it back at the same price as yesterday for a quick buck. And I am back to cash waiting for either the bearish scenario to play out and load up for the bounce or just go back long at the successful break of resistance. If the Tea Party Republicans in Congress keeps fighting Obama, they could successfully derail the market for the rest of the year and even send the economy into a recession if the same thing happens with the debt ceiling. I wonder if these people who shut down the government actually get paid during this period.

Short Term Trend = 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.