Thursday, June 30, 2011

1370 High to be challenged

The market cleared the 1310 resistance and the 50 day moving average and it is obvious now that bulls are back in control. It's not clear to me if the correction for this wave will come tomorrow or early next week and it remains to be seen if the correction will be a W4 of the nested 1-2 I posted last week or a W2 of W3. Whatever it is, my game plan is to re-load longs on margin at the first TA test which I am assuming will be around the 1300 area (it will take couple of days for the TA to get there). I sold the rest of my margin longs at the 50 day ma and keeping my core long position.

Also, today I posted a chart of the overall picture. Note the divergences in the MACD and RSI and the low/highs for the markets in the last 6 months. It is clear that every pullback we've had have been corrections and the market looks like is headed for new highs in the next few weeks.

Wednesday, June 29, 2011

Minor Correction Coming

The market continued to rally today, following the bullish count posted from last week. And it seems like this W3 ended today (or tomorrow) and we should start a correction that will probably be mild before finalizing with a W5 for another high for this particular wave. Where W5 will end is anyone's guess but there are some key resistance points where the market will start a deeper correction. I am holding the long margin portion until I see completion of the 5 wave pattern or at the TA, which is now higher than my cost.

Tuesday, June 28, 2011

Break Out

The market rallied as I speculated on yesterday's post and we might have some more room to go before retracing this wave, which I think will probably test the TA before breaking out of the current range (clear break above 1310). Perhaps the Greece situation will give the market an excuse to rally. But technically speaking, the market is due for a big rally after 2 months of selling. I sold half of my long margin position at the close and will sell the other half at the end of this wave and keeping my core long position. All trends are now positive, so unless there is some drastic reversal soon, the path of least resistance is up.

Monday, June 27, 2011

Rally tomorrow?

So far the market continues the nested 1-2 count, which implies a strong rally tomorrow or Wednesday. Also, the market re-captured the trend average and that is must for a real rally to take place. If there is a rally, we should see the 1298 high taken out to solidify the uptrend. While a breach of the 1258 level reverses any bullish progress made in the last week or so. I now have a portion on margin with the the TA as my stop limit.

Friday, June 24, 2011

Nested 1-2 or bearish set up?

The market should give us a clue on a big rally wave or a sell off early next week. There is a nested 1-2 on the charts that point to a rally on Monday just like there is a set up where the wave we saw today is actually the start of a bearish W3. Whatever the case, the short term is a negative because it closed under the Trend Average and the intermediate has swung back to neutral at this point. But as I was saying earlier this week, the fact that almost 2 months of selling has done a relative low damage to prices points to a correction within a larger bull market until all trends turn down.

Have a great weekend!

Thursday, June 23, 2011

Now 1300+??

The market not only tested the Trend Average today but it went all the way down to the 200 day MA again only to bounce back to above the TA and in turn maintain a bullish stance. And now that the Greek issue will probably subside, there is one less hurdle for the market to go higher. I am assuming the markets will rally in the next couple of days so we'll see.. this is going to be an interesting summer.

Wednesday, June 22, 2011

Retrace to 1275 area

The market seems to be retracing to the 1275 area as I was expecting but it's not sure if this is a W4 correction or a W2 (implying there were 5 completed waves from the low on a W1). So we will see how the market handles the Trend Average. If it results in a test, then we'll see a big bullish wave. If the market fails at the TA then it will effectively reverse Monday and Tuesday's bullish action. But as of now, the trend is positive and the weekly chart has turned up.

Tuesday, June 21, 2011

Bullish Trend Confirmed

The action today was exactly what I was referring to on my post yesterday, a big up day with strong internals. Looking at the wave structure it seems like there is still room to go, so maybe this 1st bullish wave will end up in the 1305-1310 area? then we should see a test of the TA, wherever that will be and another excellent point to get in the long side. Summers are usually quiet and bearish but maybe this year will be different. This might be the beginning of a multi-week rally. As long as there are no surprises, the market favors another high for the year.

Monday, June 20, 2011

Close Above TA

The market did not gap up as I was expecting but it did put in a bullish day that closed above the Trend Average and somewhat following the chart I posted on Friday. Several indicators point to cross over to the bullish side but a confirmation needs to take place in form of a high volume, strong up day. So I guess we'll see in the next couple of sessions if this correction is finally over. I jumped the gun today and added longs because of the close over the TA. The market might very well have another bearish reversal but I am using the 200 day MA as my stop (which stands at 1259), so the risk-reward favors a bullish stance at this point. I wouldn't be surprised if we get a strong rally that will take us over 1300 in the next few sessions.

Saturday, June 18, 2011

Monday Gap Up

By looking at the chart pattern, the market set itself up for a Monday Gap Up that would finally start a bullish rally. The market tested the TA today and closed right underneath it and like I said yesterday, usually when the market comes close to the TA a big move happens either way. And obviously I don't want to sound like a broken record but this market is ripe for a rally after all this selling and extreme bearishness. People who wanted to sell have probably already sold by now and it takes just a single catalyst to be the excuse of a multi-week rally. At the same time, it is risky to try to guess the bottom so until the TA starts turning up again, I will be on the sidelines on my margin buying. Should Monday start with a Gap, I will probably get in at the retrace.

Have a Great Weekend!

Thursday, June 16, 2011

Long Term trend tested today

The market put in another lower low today and it tested the 200 moving day average at 1258, which is the long term trend indicator for the S&P. Buyers defended this support and I wouldn't be surprised to see a rally tomorrow as buyers tend to buy when this level is tested. If this level does not hold then we will probably see a sell off since many institutions start selling when this level fails to hold. So the next few sessions will be interesting. The TA is at 1278 so technically we are reaching a point where the market will either rally hard or sell off. But as you know, given the oversold conditions, 6 weeks of continuous selling and extreme bearishness. I favor a rally at this point. And I will step in on margin once the trends confirm.

Wednesday, June 15, 2011

3rd Reversal

The market managed to do yet an unlikely bearish reversal by making a new low and closing below the TA. Therefore, the buy signal was negated as support levels did not hold per my post yesterday. The selling today was just as impulsive as the rally on Monday, the difference however was volume. Today's selling came in stronger volume so it indicates sellers are still in control. I was tempted to play the coming bounce but I figured I'd wait for more clarity. I think the bounce will be telling of how much more downside (if any) there is to come. I am watching for total points gained from bullish crossover to the bearish crossover, if the bearish cross over comes at the Fib retracement level then we probably will see the 1166-1245 area I posted about few days ago. However, if the cross over happens above the TA, the bullish side still has a chance. I am watching for a broadening bottom or an ABC count, the market either rally hard tomorrow or limp back to the 1275-80 area (if the cross over happens tomorrow).

Tuesday, June 14, 2011


The market rallied and closed above the TA today which indicates a change of trend should the market keep closing over the TA. I am expecting the market to correct to the 1275-1280 area before resuming the rally in a strong bullish wave. If Fib support does not hold then this rally will be no more than a test of the TA and on to resume its downtrend. However, if the market goes to the corrective area and gets back up above the TA then it will be an excellent spot to go long and use the TA as a stop. After 6 weeks of selling, the odds favor the bull side.

Monday, June 13, 2011

SP 1250 to be tested?

Market seems like it is nearing the end of the correction as support levels seem to be holding. Also, an indicator I like to use, the % of stocks below the 20 day MA indicates an extreme not seen since the last bottom in March so I think we at or close to the bottom. Obviously, I am not committing positions until the trend confirms the bottom but I am definitely on the look out for a turn around. I am assuming we are so close to 1250 that it will be tested, the 38% of the wave from 1040 is at 1245 so I think there will be at least a strong counter rally if these levels are tested. If the market does get there, I will go long there with the TA as target for profit taking.

Friday, June 10, 2011

Market closes lower for the 6th straight week

All rallies proven to be counter rallies so far. The last two attempts did not even get to a proper Fib retrace or to the TA, so the overall picture continues to be bearish. I posted the short term trend change the day it reversed on 06/02 when the TA was at 1335 and the market has not been able to gain any significant bullish traction. However, volume is low, pessimism is at a high, the market is oversold, and 6 consecutive weeks of lower closes only serves as a recipe for a rally. So while we didn't see any meaningful rallies this week, I think we will see it next week. Also, it's worth pointing out that 6 weeks this bearish wave has yet to actually done a Fib retrace of the wave from 1040. Technically speaking, this wave should do a Fib retrace at some point and the area that would satisfy this retrace is 1166-1245. I am inclined to think we will see one more high before this retrace happens but we could well be on our way to that area right now. Until then, I am staying long with my long term portfolio and not taking any other new positions until the trend gives us a green signal.

Have a Great Weekend!

Thursday, June 9, 2011

Counter rally or beginning of real rally?

The market finally finally spanner its losing 6 day losing streak and now we should be headed for the TA, which is in the Fib retrace area. It remains to be seen if it gets there in a Zig Zag move or in a 5 wave move. For the market to really turn bullish the index needs to capture and close over the TA, ideally in a 5 wave move. Today's counter rally was in low volume, so there isn't much conviction just yet on the buying side. But I think we either start a rally soon to a new high or we keep correcting to a proper Fib retrace of the wave from 1040, which has yet to correct.

I day traded on margin on the long side on an intraday basis only and remain long on the market.

Wednesday, June 8, 2011

Still waiting for counter rally

The market continued its decline today and it hit the first support at 1277 before bouncing a bit. With this close, the market has now closed down 6 consecutive sessions, which it hasn't done since last summer. There is not much news in regards to technical indicators as they are all oversold at this point and would support a counter rally at any moment. When it comes to waves, the market looks like it is completing a triangle that should limit the downside to a few more points before bouncing to the 1340 area. I am expecting a bounce that will at least test the Trend Average this week.

Tuesday, June 7, 2011

Counter Rally

It seems like the market started a counter rally today but it's still too early to tell by looking at the wave. Technically speaking, the bottom could have been put in yesterday and what we are seeing is part of an Expanded Flat or an ABC move that possibly could reach support and then bounce back. Alternatively, we could see further selling until we reach significant support at 1250. The close under the TA is a clear negative but there is built in pessimism in an oversold market so we should see a rally to the TA sooner rather than later.

Monday, June 6, 2011

Approaching Major Support

The market continued its sell off today and now the intermediate term has turned confirmed bearish as well. Usually whenever the market is 30 points below or above the TA, there is a counter rally. So I am still waiting for the TA to be tested and the trend to turn bullish again. But obviously, technically speaking taking a bullish view right now is against the trend as the short term trend turned last week and now the intermediate term. My reasoning in maintaining a bullish posture is purely based on the fact that we are trading above the 200 day MA and chart patterns. If the market continues its way down, support will be at 1278 and 1272. But major support, the one that could truly signal a significant correction would be a breach of 1250.. we'll see.

Friday, June 3, 2011

A Rally is coming

The market continued its sell off today and it looks like it's about to be done with this particular leg as it is getting oversold at this point. So I am inclined to think we will see a strong rally starting early next week and we will see if the market can finally resume a bullish posture by turning the trend bullish again. The market is concerned about economic growth and that has been the selling excuse. But just like we hit a "soft patch" last summer and the Feds intervened, any more perceived weakness is certain to bring more Quantitive Easing and therefore more upside. I am staying put with my long positions.

Have a great weekend.

Thursday, June 2, 2011

Bearish Trend Reinforced BUT...

The market made another lower low today and in turn confirming the bearish trend. However, I think we will now see a rally to the TA tomorrow or the next session. And given the fact there is a lot of bearishness now, I am inclined to think we are closer to the bottom. Also, the market patterns so far indicate this is a correction and not a sell off. In fact, the entire month of May looks like a double zig zag to me that is completed or about to be completed. Obviously, it's harder to predict a bullish wave when the market is under the TA so we'll just let the market speak for itself once it reached the TA which is at 1324.

Wednesday, June 1, 2011

Bearish Reversal

This is the second bearish reversal in the last couple of weeks and the selling was pronounced and in heavy volume. However, the low from May 25th has not been breached and it must hold for the the intermediate bullish wave to continue. It the 1312 support is broken then the trend will officially turn back down. If that happens, after a new intermediate low is set, the market will re-visit the TA again at which point it will be a re-test or a real rally. The market does comfortably trade above the 200 day MA and despite all the news recently, the market has actually held up. So I expect a real rally to resume sooner rather than later.