Market Update

The jobs report moved the markets as I had been expecting but I was wrong on getting a good report based on the ISM. The numbers came way below expectations but the markets rallied as if the report had actually surprised to the upside. It goes to show the market does what it wants to do at times and news have nothing to do with it. The close was very bullish and I see a 5 count complete from 1737 based on my original "normal wave" projections. However, one could argue the top today was just the W3 with more upside to come after a correction that will likely challenge the 50 DMA at 1809.  Also, the market could be setting up an Inverse Head and Shoulders or a Cup and Handle (take your pick) that targets an all time high at 1858. So early next week we have to watch how the market corrects, if the market hesitates with downside and finds support before 1768-72 then we will have a very bullish pattern and mostly likely the Int Trend will reverse to the bullish side. As it is the Trend Average turned neutral today and will go positive if the market fails to close under it in the next session or two. With that said, the Int Trend remains firmly negative and in the ideal world this completed wave is just the X wave and we will get another ABC to test the 200 DMA. Also, from the "look" perspective, the LT Int W4 should go on for a few months not just a few weeks as all the bullishness needs to be worked out to have a good solid base to rally from.

I ended up buying VXX at resistance so I am hoping for a decent correction starting Monday or Tuesday but I'll be ready to jump ship at a moment's notice as this thing could drop 10% in a blink of an eye (just as it did in the last 3 days).

Have a great weekend!

Short Term Trend = Neutral leaning bullish
Medium Term Trend = Bearish

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. 

5 count or abc?

The market rallied as I had been expecting and spent most of the day battling the resistance level I mentioned last night. But at EOD the Trend Average was tested and the index was able to pull slightly out of resistance range and close over the Trend Average, so there is a slight advantage towards the bulls. However, the bounce from 1737 can still just be an ABC and not a bullish 5 wave count so tomorrow we will find out. I am assuming the jobs reports tomorrow will be the excuse to move the markets and if the ISM report is of any indication, probabilities are we will get a good report. If this is a bullish 5 count we should see 1780+ tomorrow, at the same time if 1755 gets breached the count is invalidated and I will assume the 1737 level will be tested.

I ended up selling XIV (15/17) at resistance as I didn't to risk my profit and I will be looking at upper resistance at 1786-93 to buy VXX or support at 1755-58 to buy back XIV.

Short Term Trend = Bearish
Medium Term Trend = Bearish

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 as expected and we could have the bearish 5th wave completed at 1737. Which is a bit short of the target I posted yesterday (1732) and still somewhat far from the 200 DMA level at 1709. The ISM report came in stronger than expected so there isn't really much of an excuse to sell,  I think we'll know for sure in the next couple of session if we have a temporary bottom. Assuming the low today is the end of the bearish 5 wave count, the market should be working on a counter rally and an important area to keep an eye on is 1768-1772 which is about a 50% fib retracement and where the Trend Average currently is. However, the micro count on the wave from 1737 to 1755 could be part of a 5 count and if that's the case, I have 1785 as the target. I ended up buying XIV (a lot lower than what I sold it just 2 days ago) and I will have my stop on this trade at 1737. I'll probably get VXX at resistance but it all depends on how the market handles these levels.

Fundamentally speaking, the market has what it needs to mount a strong rally as the data today reinforces the underlying strength of the economy. But I am sure there will be another excuse to sell eventually. 

Short Term Trend = Bearish
Medium Term Trend = Bearish

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 targets for correction

The market bounced as expected in what I am labeling a W4 and I think we will see a lower low after it completes. If we were to go by wave proportions, assuming today's high was the peak for W4 then we would have 1732 as a target for W5. So the market will need to extend its 5th wave or perhaps put in another W4 and reach the 1710 level. Also, I was looking at the Long Term chart I posted last night and using the same set of calculations I used when I first projected targets in May 2013. I see the ideal target LT W4 at 1680 as the end of the correction. However, I prefer 1600-40 if this turns out to be a double ZZ (confirmation if 200 DMA is lost) or 1700-20 if a simple ZZ. My prediction is SP 1950-2050 by the time P3 completes

Here are the originally projected targets vs actual levels 

LT Int W3 Target 1650 - Actual 1687
LT Int W4 Target 1580 - Actual 1565
LT Int W5 Target 1790 - Actual 1850

We'll see if I am right on this in the next few weeks. If the market does find a bottom around that level, it will mean we will see a last multi-month rally before a much bigger correction. 

Short Term Trend = Bearish
Medium Term Trend = Bearish

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. 

200 DMA target?

If there was any doubt the market had entered into a bigger correction in the past few weeks it was made clear today. The market basically plummeted once key support was lost as many traders had been focusing on it and now it looks like the next stop might be the 200 Day Moving Average. If the market does a Zig Zag where C=A, then we're looking at 1718 as the ideal target area but given the fact the 200 DMA is at 1707 and rising, I would say there is a good chance buyers won't step in until that trendline is tested. What happens from there is obviously too early to tell but going by my Long Term count from last year (I am posting the version originally posted on May 2013), a double ZZ would be perfect in correcting the market and creating enough of a base for a rally to SP2000. The area I like for this correction to end would be in the 1575-1640 level, with the latter being my stronger preference given several support layers in that zone. But before we get ahead of ourselves, we have to see how the 200 DMA holds as we can only plan for lower levels once the 200 DMA is lost.

Unfortunately I couldn't get out of my XIV position on a bounce but I got out as soon as support was lost, so now I'm 14/16 for the year and still ahead but not as much as I was a few days ago. I was really hoping for the market to test upper resistance to short but that doesn't look too probable right now. So I will consider trading the bounce only if we see the 200 DMA or short on Trend Average test, until then I am just going to be an spectator.

Short Term Trend = Bearish
Medium Term Trend = Bearish

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 is Confirmed Bearish

The market did not cooperate with the count I had posted yesterday and retraced almost all its gains from the previous session and with today's close we officially have an Intermediate Trend change to the bearish side. The last time we had an Int trend change was in August when the market had an 80 point correction and I think it is likely that we will see the 200 DMA tested on what is likely to be the LT Int W4 that I was originally looking for in November. How we get to that level remains to be seen but given the current environment, my guess is that it will be some form of Zig Zag as I really don't think the reasons for the correction are all that strong to begin with. The whole emerging market 'crisis" started with a misreading (yes a misreading as manufacturing continues to grow despite a below 50 reading) and now the thinking is if China slows down then it will drag the world down.. One thing that most media outlets fail to mention is that the Chinese economy has grown 600% in US dollar terms since 2000 and stands at $9 trillion+. If the Chinese economy did not slowdown its growth rate and adjust, the Chinese economy would be larger than the US and Western Europe or the G-7 put together by 2028. So the expectation for fast growth is outdated and economically naive for China, most people just don't know the numbers to begin with. Secondly, the whole PMI "contraction" situation is better explained here:

http://www.smh.com.au/business/comment-and-analysis/its-not-a-contraction-getting-it-right-on-china-data-20140130-31p7u.html

So as you can see, the sky is not exactly falling.. we just have people selling/taking profits.

I traded FXCM profitably (14/15) but got caught holding the bag with XIV, but I position traded it since support did not break and hopefully I'll get out of it early next week with a small loss or a small profit if lucky. Once I am out of XIV, I will stay on the sidelines or trade mostly short as the trend is flashing red.

Have a Great Weekend!

Short Term Trend = Bearish
Medium Term Trend = Bearish

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 test?

The market bounced as I was expecting and it looks like it might have one more bullish leg (W5) left that might test the Trend Average before possibly coming back down again. The levels I am watching are 1807-1813, which is basically the most recent top (after hours cash equivalent) and the 50 Day Moving Average. On the support side, I am looking at 1782.92 as the level the market can not retrace into as that would eliminate the W5 possibility. If the market makes it to the resistance levels and can not overcome the 50 DMA, we will have a good a nice Head and Shoulder's set up so the next two sessions are very important.

I ended up selling XIV (13/14) in the morning but perhaps a bit too early as the market went higher but profit is profit and I am not complaining at all. By the EOD the price for XIV had plummeted back to below yesterday's buy price so I ended up buying back the shares again in after hours. I am also experimenting with short term wave trade set ups on some individual stocks and I bought some FXCM as a test so we'll see how that goes. Hopefully we get a good gap up tomorrow and I will close a good trading month.

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.