Market Update

The bounce today was stronger than I had expected but I am still leaning bearish since resistance is still holding and the TA has not turned yet. The market could be setting up a flat, which implies another leg down to 1850 at least or it could be setting up a bearish 5 wave count. If the market manages to go above 1874 then a challenge to the all time high will be likely and a new high invalidates all bearish set ups. I am holding on to my VXX position  but will be ready to exit if the IHS becomes obvious. There are plenty of excuses to sell at the moment but apparently some bulls remain unfazed.

Short Term Trend = Bearish 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.

Close under the Trend Average

I think the market has enough momentum to hit the ideal right shoulder of 1867-74 of the Head and Shoulders I speculated about last week. 

And the market hit the exact top of that range by putting the high today at 1874 before selling off to 1850 and then bouncing back to test the Trend Average but closing back under the TA. I was looking for a 5 wave count on micro waves but I only saw 3 waves to 1850, so I am assuming the bounce is an X wave and the sell off will continue after that is done. Once the market is firmly under the TA, I'll be looking at key support levels to take profits but as it stands it looks likely that 1839 will be tested and as I said yesterday if the H&S completes we are looking at 1793 as a target. The bullish scenario I am keeping in mind but not really considering until the market trades back above the TA is the Inverse Head and Shoulders formed today that targets 1909. A break of 1839 invalidates that pattern. So far the H&S speculation from last week has been on the $$ so hope that continues..

The fundamental excuse for the sell off was the speech by Yellen which I mentioned yesterday (I get the feeling the market was going to sell off regardless thus my title post "now the sell off" last night). The announcement that rates might rise sooner than expected is a negative for equities and this might continue to be the excuse to sell in the next few days. Also, as I have been saying, it is clear to me now the Feds believe the economy is strong enough to be on its own. So the bull market we have had will now depend on the economic performance of the economy (as it should be!)  and not liquidity. Good economic numbers will support further rallies, bad numbers will cause corrections. The days where bad news was still good news are probably gone.

I am holding on to my VXX position until I see a g$$d reason to sell :)

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.

Now the sell off?

I posted the following exactly one week ago:

One possible bearish scenario I am keeping in mind is a sell off that will test 1834 and then bounce for a H&S formation, so a sell off to that level should create a good counter trend trade opportunity.

And today the market reached the ideal level for the right shoulder of the H&S after testing the equivalent of 1834 on Sunday's pre-market. The question now is whether the market will follow through on the sell off. The last time we had a similar H&S the pattern failed and the market kept going up until the it got invalidated. But with some of the negative news in the background and the Trend Average still technically bearish, there's a decent chance the market will go down to the H&S target of 1793. Maybe what the Fed says will be the excuse?

I ended buying the other half of my VXX position and I will be holding unless the H&S pattern gets invalidated on anything above 1883.55

Short Term Trend = Bearish 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.

Head and Shoulders Forming

The market tested the 1828-1834 level when pre-market opened on Sunday but then it reversed overnight and broke out of the wedge as I had been expecting last week. Obviously, this rally is just a bounce until it can recapture the Trend Average which is now down to 1864. I think the market has enough momentum to hit the ideal right shoulder of 1867-74 of the Head and Shoulders I speculated about last week. As it is there is already an H&S targeting 1790's but it would look even better if the market stopped at the shoulder's resistance levels, that plus it would allow me to get a better price on VXX :)

I sold my ST longs for a nice profit again (23/26) and I bought half my usual VXX position. Given the fact the ST trend is negative and the issue with Ukraine is far from clear, I'd expect the market to find it challenging getting past through resistance. With that said, if the west comes with light sanctions against Russia it might give the markets a reason to rally as the economic background in the US supports further upside. To me this is not about QE or taper anymore, it's about the fundamental economic picture of the US and the world for that matter.

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 made a slightly lower low today and the market is wedging so perhaps the bounce will come early next week to the levels I mentioned yesterday. The big question is how the markets will react to the referendum in Crimea over the weekend as it could serve as an excuse to rally or continue the sell off. My guess is that the EU and the US will give Russia a slap on the wrist and move on as they're risking a lot for something that in imo is not that big of a deal in the grand scheme of things.

I didn't do any trades today as I am waiting for upside to sell my ST longs or further continued downside to buy XIV. Hopefully we'll get opportunities early next week.

Have a great weekend!

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.

Short Term Trend Confirmed Bearish

I was wrong in my assumption the market wanted to rally today as instead we got a clear bearish wave that is either an C or a W3. The low today is close enough to the 1834 level I mentioned a few days ago to call it a neckline for an Head and Shoulders that targets 1793. Obviously, if this is an ABC count then the market will rally from here on but if this is the potential H&S then the market should test the TA and then sell off in 5 waves to that level. Alternatively, the market could still put in a bit more downside before a bounce and those levels are between the 50 Day Moving Average at 1828 to 1834 support. The reasons for the sell off has been uncertainty with Ukraine and China and with the Crimea referendum taking place this weekend, the political situation has the potential to escalate substantially on Monday. China on the other hand is really not a big deal, if things were so bad the Chinese market would not be at the same level it was before all the "bad" news came out. My retirement depends on that market so I know that economy well.

Since I was wrong, I went ahead and went long with the pharma stock I sold yesterday at support. So hopefully we'll get a good bounce so I can sell that stock and buy back VXX as close to the Trend Average as possible.

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.

New highs still possible

The answer to my question was answered today as the market sold off and made a new significant lower low. However, despite the correction, the gap from March 4th remains and the market rallied enough to close around the Trend Average. So I lean towards a stronger bounce here given the fact that all the bearish waves have made little downside progress in almost a week of selling and despite all the seemingly bad news. I will move to the bearish side once the trend changes, until then I see a potential micro 5 wave count to 1889 more or less so new highs are still possible if not probable.

I sold my pharma long from yesterday for a good profit and made some lunch money with VXX by day trading it (22/25). But given the fact the TA is being challenged, I am on the sidelines waiting for clearer set up. If we get that higher high, I will be loading up on VXX. If I am wrong on the high, then I will be go long on the pharma stock if I get it back at a good price.


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.