Wednesday, August 31, 2011


The market made a surprising (at least to me) new high and it was about to close in the negative until the last few minutes of trading where it was able to reverse what was going to be a bearish reversal day. Whether the market top for this wave is in at 1230 or make one more push before breaking out of the wedge, odds favor prices turning lower now. The overbought conditions and other indicators point to a top in place. Below are the daily McClellan Oscillatory and another indicator I like using which is the percentage of stocks over the 20 day MA, they are usually very reliable at extremes and they point to conditions ripe for a reversal. I sold my positions from 1180 and went short on my trapped long position at 1226 (I was previously hedged).

Tuesday, August 30, 2011

Rising Wedge

The market has a Rising Wedge pattern and a correction should start in the next couple of sessions, most likely tomorrow. I am assuming a correction will test the TA, if it doesn't then probably we will see more upside before an actual test of the trend. But the bottom line is that the market is aiming for the 50 day MA and any pullback will be an opportunity to buy. However, the market has a long way to go in order to be in a position to challenge this year's high.

Monday, August 29, 2011

Weekly trend is now bullish

The market broke 1208 and in turn the weekly trend has now turned bullish. So the trade is to buy on the next test of the TA or Fib retracement. I think the market's ultimate goal is to challenge the 50 day MA currently in the 1250's or even the 200 day MA in the 1280's. Whatever it is, the market is signaling further advances. Market internals were very strong today and it seems like the market is pricing in more QE by the Feds. I kept my hedge and will be most likely go margin long on the pullback. I think the more I do this, the more I am convinced that the Trend Average method of trading is the best by far. It's very hard to predict the market just based on EW alone and other traditional tools, but using the TA alone mechanically would have put me way ahead had I used it strictly on it's own.. and in case you haven't noticed, I am keeping track of the gains using this system on the right so the results are clear for everyone to see.

Sunday, August 28, 2011

Short Term Confirmed Bullish but..

The short term trend turned bullish on Friday by closing again over the Trend Average. The only issue I have is the triangle pattern in place and the possibility of this triangle being a W4 of the bearish wave that started on July 28th. I'd be more confident of this buy signal if prices break out of the pattern or 1208. Fundamentally speaking, the lack of action by the Feds and the announce of slowing GDP growth limits the upside to the market.. but we'll see tomorrow what are the market's plan. I kept my hedge over the weekend.

Thursday, August 25, 2011

Bearish Reversal

The market failed to hold on to early gains in the morning and ended up reversing into negative territory and closing under the Trend Average, which is bearish. So we'll see how the market behaves tomorrow and most importantly Monday after digesting the speech from Bernanke. I get the feeling the market will turn down and test the 1101 or 1118 again but that's just a hunch at this point. Had the market managed to hold on to gains, it would have been positioned itself to break 1208 and turn the weekly trend up. But at 50 points away at this point and the VIX at 40, I am not so sure the market just yet. I hedged at the TA today so I'm using that as my stop.

Wednesday, August 24, 2011

Trend turning bullish

The market closed about the TA today and it just needs confirmation to solidify a short term bullish trend. I was tempted to go in long at the TA today (I would have been 12 points ahead at the close) but decided to wait for the pullback first. Also, the whole Fed speech tomorrow will cause a lot of volatility and I get the feeling the market will need the weekend to digest what comes out of there. However, Gold has been selling off hard and that might signal a shift to riskier assets so there is a positive bias to the market as of now. But where the real test will come will be at 1208, if the market breaks that then it will have a chance to trade higher.

Tuesday, August 23, 2011

Start of a Rally?

The market broke up of the Descending Triangle to the upside and the market almost reached the TA today. I had been waiting for this rally since late last week and how the pullback behaves should give us a clear idea if the bottom was put in at 1101. Also, there is the possibility of an "Adam and Eve" bottom which could potentially see the market rally all the way up to 1300. So we'll see if the pullback turns out to be a set up for a bullish W3 or a strong W3 of a bearish W5 as the most bearish views call for. Personally, I've unloaded all gold and now I'm long on emerging market equities (China ETFs primarily) but I am watching how the US market behaves when it tests the 200 day ma which is far away at this point. I continued to day trade today and was able to better my position by just a few points so hopefully I'll catch up to the 200 ma sometime in the next couple of weeks.

Monday, August 22, 2011

Descending Triangle Targets 1101

The market rallied again hard at the open only to be reversed the rest of the day. Also, there is now a Descending Triangle targeting 1101 and we should see that play out as soon as tomorrow morning. However, there are times (about 36%) where these DT break out to the upside, so tomorrow should be a good day for day traders either way. There should be yet another rally coming soon that will actually make it to the Fib retracement territory and meet the TA starting this week. Big question of course is where is the low for this particular wave and like I said last week 1101 better hold otherwise we are heading lower.

I sold my position taken on Friday and day traded couple of times today. I was able to improve my trapped position about 16 points so a bit over 1%. I am cash on that portion and hoping to replicate some of the profits today tomorrow, my current goal is to bring my cost average on that to the 200 day ma which should be tested at some point in Sept.

Friday, August 19, 2011

Rally early next week

The day started as I had hope yesterday with a test of the lows and then reversing in a bullish wave to 1150. However, gains were not able to hold and the market deteriorated into further selling. The early rally was probably caused by shorts covering and in the process leaving a long "shadow" in today's candlestick, which is an inverted hammer. That increases the chances of an reversal coming early next week to either retrace this bearish wave to a Fib area and test the TA in the process or launch into a very bullish wave to 1200. I tend to favor a strong bullish wave because of the oversold conditions and the current bearishness and nervousness in the market, which lends itself to violent waves. But since the market is clearly trending down and the market is below the TA, one has to be careful with being long. I personally took the plunge at the end of the day betting on the bullish wave, so we'll see if I can catch a favorable wave this time.. last two times I missed two big waves (both long and short) by a hair so maybe this third time is the charm. I think the what Germany decides on the bailouts and what comes out of the Fed will drive the markets next week.

Have a good weekend!

Thursday, August 18, 2011

Correction target met

On Monday I speculated we would see a correction to the 1150's and up until yesterday the market didn't seem like it wanted to give up gains. But the market more than made up for lack of bearish progress today by going right through the TA and the 1150 area in a very bearish day. So what remains to be seen at this time is how the next bullish wave will behave which could come as soon as tomorrow or Monday. I am expecting the market to get back over the TA in a strong bullish wave as long as 1118 or the 1101 low is respected. Some people expect the market to test the 1101 low and perhaps break it but it's too early to tell imo. This bearish wave was expected after all but it must not breach support if we are to see 1200+. To my luck I covered my hedge yesterday so now I'm trying to catch the wave to the upside and I managed a small profit today to better my position. Ideally, we should see today's low tested tomorrow and then reverse.. we'll see.

Wednesday, August 17, 2011

Sideways Correction?

The market technically started correcting on Tuesday but so far we have not seen significant downside while overbought indicators are resetting themselves for another bullish run. Another way to view this would be to assume the intermediate top was put in today at 1208 but I am not betting on it at this point. In fact, I got out of my hedge at break even so if I don't catch it to the downside, I'll just catch it on the upside. We are after all just looking for the B or W2 corrective wave before seeing a bullish wave that should take us to 1250 more or less (assuming the market stays above the TA).

Tuesday, August 16, 2011


The correction started today as expected and I am looking for the Fib retracement levels as targets. I did see a count that calls for more upside before dropping to the Fib areas but I think the markets have started rolling over. I went hedged at 1196 (on my trapped 1321 position) hoping to improve my cost average on my trading portfolio. Technically speaking I should be obeying the TA which is at 1174 but I am testing the TA system at the minute level, so we'll see what happens tomorrow.

Monday, August 15, 2011

Now a Correction..

The market continued to rally as I was expecting last week but it's now time for a correction. At a minimum we should test the TA which is now at 1181 but more realistically I'd say we should see half of the rally corrected, so the 1150's. And at this point I think it's a good idea to use the TA as a stop as the market could resume another strong bearish wave. However, as long as the market can stay trade above the TA we will the rally continue to perhaps 1250 or even the 200 day MA. Hard to see if these 5 waves that just completed is an A or a W1. If an A then the rally will stall in the 1250-1280 area. But if it's a 5 wave structure then we're easily headed back to the 1300's. I was originally planning to buy this morning if we opened with a gap over 1186 (which it did at 1187) and use the TA as a stop. But I unfortunately overslept.. oh well. Still, the Chinese stocks I bought Friday went up 4% so it's all good.

Friday, August 12, 2011

TA Tested Today

The market finally tested the TA today but failed to close above it. The last time the market traded above the TA was at 1328 or 142 points ago and the TA might turn positive next week so it remains to be seen how the rest of the current wave plays out and how it gets corrected. I was originally inclined to label the waves an ABC move after the 1101 low but in looking at the structure it seems to me like 5 waves so this could be an A or a W1. I think we should be able to tell on the coming bearish waves and if divergences develop. I am ready to jump in again should the market start trading above the TA and as a matter of fact I did today but I got stopped out at break even again. I've lost count how many break even trades I've had this week, must have been at least half a dozen.

Also, I executed my Gold plan today and sold every ounce of Gold I had in my portfolio. I made good money on it considering I only held for 6 months and I put all that money in Chinese stocks. And just as I had finished posting yesterday, I saw this article on CNBC;

Which coincidentally highlights China as a potential investment hot spot. And while I am well aware of the potential issues of investing there, I am convinced that market will outperform all other markets for the next 10 years regardless of what happens to the rest of the world. They have so much cash to deploy, they can stimulate out of any recession easily. I think my portfolio is now almost 3/4 in China ETFs and I am hoping for a rally in the next few months.

Have a Great Weekend!

Thursday, August 11, 2011

Diamond Bottom, Gold, and Chinese Equities

The market broke out of the Diamond bottom area in a big rally as I was speculating yesterday. However, tomorrow we should get confirmation on the rally and if confirmed then we should be looking at 1240 as the initial target. It's hard to tell if the low for the year is in but the upcoming rally should give us an idea if we're in for range trading or we're just correcting only to visit 1101 again. Too bad I got stopped out last minute yesterday (at 1120 in the last minute of trading) only to see this rally today.. But I will go back in on margin at confirmation and will be hedging any trades under the TA which today is at 1198 so the we're getting close.

I haven't sold my Gold yet but should the market confirm a rally tomorrow, I will sell all my Gold position and go into FXI or another Chinese ETF. I think Chinese equities are cheap fundamentally and the fact they are allowing their currency to strengthen will translate into higher $US dollar profits and in turn higher prices. This is a position in my portfolio for investments and not trading so not using any particular trade signals other than the RSI. When Chinese stocks become "in" again, they will fly.

Wednesday, August 10, 2011

1101 to be tested?

There was no follow through buying today after a very bullish close yesterday so the which way the market is going next is a guess at this point. Pattern-wise, there is a potential Diamond bottom which would call for a rally tomorrow. Using EW, the market could be in a flat (a test of 1101 would confirm that) or an expanded flat (1088, 1096?) or alternatively in the middle of a bearish W3 again. So tomorrow should give us a clue as to whether we are close to the bottom. After so much selling, I would assume we are close to the bottom but it's not good to trade on guesses. My position got stopped out last minute (literally) at break even so I'm looking to see how the market trades before committing again. I originally was going to sell using the TA at the minute level but the gap down was so pronounced, I decided to hold and see if a rebound would come. Tomorrow, I hope for 1101 to get tested to get back in but either way is fine with me. Lastly, I am really inclined to sell my gold position taken earlier this year now that we are close to $1800. The TA on that tells me to keep holding but it's very tempting to lock in profits now as that market is as overbought as the stock market is oversold.. maybe I'll sell half my position first.

Tuesday, August 9, 2011

Counter Rally

The counter rally is here and it just needs to be confirmed tomorrow with follow through buying. Today's volume was high and it broke through resistance easily in the last 15 minutes. So we'll probably see aggressive buying that should take us to the TA at the very least. Today the TA dropped to 1232 (and will drop some more tomorrow) so maybe we'll see them meet at some point in the next couple of days. Alternatively, if there is no follow through buying tomorrow then we will most likely re-visit 1100 again before any meaningful rally. I took my chances today by going margin long at 1120 and my stop is now raised to break even. I used the TA system at the minute level and it worked well so I might be using just that to take profit. On the EW side, we are either at the A of W4 or the 5 Waves are finished and now we're seeing an the start of an multi-week ABC move. Whatever the count, the bounce is here and I am hoping we'll see 1230 this week.

Monday, August 8, 2011

1018 target?

Markets continued its panic selling today and it ended horribly in a solid red candle day with high volume. At this point the market is in complete panic mode and it's technically impossible to predict when the madness will end. Fundamentally speaking, traders are trying to discount a possible recession but at the end of the day, it comes down to how much companies will make going forward so guessing what the right level for the S&P becomes a wild guess at best. However, market panics create opportunities and there will be one once a bottom is found. The price channel is very steep so a counter rally will most likely be very sharp and retrace maybe 50% of this bearish wave. So I am looking to see if I get lucky.. I entered the market at 200% long at 1168 but got stopped out at break even. Then towards the end of the day I entered at 1125 and then got stopped out at break even again. So tomorrow I am hoping for capitulation but I will be using the same method of going long at key levels and raising stops to break even as soon as the market starts trading above my break even price. I am hoping to basically compensate for the loss of my 1321 position on the counter rally, so if I come out even I will be lucky. It is still my belief that the market will target the 200 day ma on the coming bounce. The TA at this point is at 1246 and this is the first time I've seen it so far away from a market close (126 points.. usually it rarely goes beyond 40, that's how unusual this sell off is). Also, it's worth noting the 13/34 system is officially negative today so that calls for selling or staying in cash until it turns positive again.

Lastly, the target for August that I had was met today and then some at 1150. And the next target is 1018 after the bounce (or perhaps even tomorrow) should the market keep trading below the TA. 1018 is 50% of the rally from 666 to 1370.

Watch for Double Bottom Reversal

A great trade set with a good risk/reward is betting on a double bottom tomorrow. In looking at the E-Minis the market has held at 1163, so tomorrow the market might test the 1168 low from Friday and if that holds we will probably see a counter rally from there. I am planning to buy as close as possible to 1168 and use the previous bottom - 2 points as the stop.

Friday, August 5, 2011


The market continued to sell off as expected and it almost reached my August target this morning. Who would have guessed the sell off was going to be this steep.. in a way it reminds me of the flash crash from May 2010 in that a lot of the selling was computer generated. So early next week we should see a counter rally and like I said yesterday the target will be the 200 day MA. The bearish channel is so steep now that it could reverse violently to the upside, what we got to look for is the high of the next wave to get a general idea of the trading range. I couldn't help myself this morning when I saw the market at 100 points below the TA, so I bought a few shares when the market was pushing 1160. Problem is by the time they executed, the market was around 1180 so no big deal. I'll sell this lot early next week hopefully.

Thursday, August 4, 2011

Not done yet.. more selling coming

Today was yet another ugly day for the markets in price, volume, and form. The index is now 85 points below the TA (which in itself dropped 15 points), which I have never seen ever since starting tracking it. But one thing for sure now is that the 200 day ma will be the target for bulls once the selling it's done. And for now the safe way to play this is staying in cash or shorting at the next test of the TA which could come as soon as early next week. I am holding a trapped long position from 1321 primarily because of the wave count and my disregard for the 50 day and 200 day MA. So the lesson in all of this, sell when that TA flashes red as that indicator has not failed once in tracking major trend changes. It might get whipsawed at times but any points lost there are worth the gains and the costs of holding against the trend. As of now, I am looking to exit long positions whenever the market decides to test some of the major trends.

Wednesday, August 3, 2011

Counter Rally

Selling got ugly today in the morning and 1249 was not much of a support as it broke easily. But as expected, the bottom for this wave seemed like it was put in at 1234 and now we are seeing the counter rally. I favor a counter rally to the Fib area (perhaps test the 200 ma or even the TA) and then finish the selling on another W5. Technically speaking, the wave from 1040 was finally retraced to it's minimum Fib target area. I've talked about this for months but I thought this correction was going to come after making a new high and not now. Whatever the case, we'll see if the market is able to capture the 200 day ma and the TA by the end of the week. If it does, the market still has a chance to go higher but closes below these levels just confirms more selling.

Tuesday, August 2, 2011

Bear Market Coming

The market is now giving us a better picture of what is to come and it looks very bearish at this point. It closed well before the 200 day MA and that was the last major support a market breaks before heading into a substantial correction. The market is clearly oversold so we will see a bounce that will most likely fail to make a new high and which many will be selling into. So the next step will be to see where this wave bottoms and then we can calculate the bounce target area. The TA is at 1311 and dropping fast and I think the market will test it before heading down again. I was hoping to break even on my last trade but I might have to take a loss on it unfortunately. My plan for the bear market (if confirmed) will be to stay in cash or short when appropriate. For now, the impulse wave we are seeing is most likely a W3 and should be bouncing soon for a W4 before heading to the lowest point of the year.

Who would have thought people were going to see as soon as the debt ceiling deal passed.. this goes to show how unpredictable investing behavior can be at times.

Monday, August 1, 2011

Expanded Flat

I was way off today in assuming the rally today was real. I had been right on every wave since mid June but I did not see the one coming today at all, so I am now wondering what structure is the market in. Technically speaking, it is still a correction in all the sense of the word because 1258 has not been breached after months of selling. But the fact the market finds itself under the TA, the 50 day MA and the 200 day failing as support is bearish and perhaps might signal a significant correction ahead. I am watching carefully how the market bounces and how it reacts when it reaches the 50 day MA or the TA (whichever comes first), if it can not be re-captured, chances are we will see lower lows ahead. Also, now that I've been testing and trading with the TA for almost a year now, I think it might work best mechanically. Meaning, sell when under, buy when above this level. Sometimes it gets whipsawed but whatever points might be lost there, it's more than made up by being right on the trend. Had I sold all my longs at the time the market went underneath it at 1328, I would have saved myself 4% at least.. anyway, tomorrow it's debt ceiling day so we'll see how that rally behaves.