Friday, September 30, 2011

1114 or 1101?

The market broke out of the trendlines I drew on the chart today and it also managed to break the 1136-1139 support, so the next levels to watch are 1122 and 1114. If those levels do not hold then this wave will go for 1101 and essentially meet my speculative target when the TA was originally tested earlier in the week. Looking at the chart I see an obvious bearish H&S but if the market reverses hard on Monday it will be setting up a potential inverse bullish H&S so we'll see what the market wants to do Monday. Currently, the market is getting oversold and sentiment is very bearish so it has the ingredients for another yet violent rally. So should the market gap down Monday, it will be a buy near the resistance levels I posted and they can be used as stops. If there is capitulation for this wave on Monday, I expect the next bullish wave to meet the TA again earlier next week. The TA is currently at 1157..

Also, per my post last week the TA system is up +21.4% since July 28th vs -14.8% for the SP500. I am adding indicators to watch to better the system.. as it is, the results speak for themselves.

Thursday, September 29, 2011


The market seems to be triangulating and it it setting itself up for a substantial move to either the upside or downside. The TA is at 1165 so the market is still bearish so I'll be watching how the market behaves when it hits the upper trendline. If we get a big rally breaking the trendline then the market will go for the 50 day MA currently at 1200. Commodities are at a low and I think many of them will see a rally along with equities fairly soon.

Wednesday, September 28, 2011

Undecided Market - Gold Bottom

The market has now retraced to the target Fib area and I think we will find out soon if this is a correction or if the lows are going to be tested yet again. Looking at the waves, I could make the case if this leg being an "A" leg just like I could make it a W1 so it's impossible to tell at this point. The one thing that is clear is that there haven't been any closes over the TA, which clearly indicated the trend continues to be down. I unfortunately got stopped at the morning gap so I am missing out my short position but it's ok, I'll catch it on the uptrend. If I was able to stay up all morning looking at the computer I would take advantages of lots of more trading opportunities but it's hard for me to be awake and in front of the monitor for hours.. maybe the day I make $10k per trade I will start doing Lastly, I should add that if we are going to sell off in the next couple of sessions I will be going margin long around 1090.

And btw Gold is finding a bottom around these levels so I might go in on the long side again, it's getting very oversold and it's due for a big bounce.

Tuesday, September 27, 2011

Beginning of a Correction or Sell Off?

The market met the TA today as I had been expecting and it sold off in the last hour due to bad news, closing under the TA and setting itself up for a bearish reversal. Throughout much of the day I thought the market was going for the 50 day ma but this is a volatile market and anything can happen. Fortunately, I sold my long position at 1182 and went short at 1175 (missed the TA break due to a nap) and using the TA as a stop. I am not sure if the next bearish wave will be just a correction or another sell off that will test the lows but the trend is currently down so I will go with it.. actually, it'd be great if we test the 1101 so I can cover and go long on margin again.

Monday, September 26, 2011

More Upside?

The market rallied as I had been expecting last week and I am looking at the TA as the spot to take profits or remain long. The test of the TA (currently at 1179) might come as soon as tomorrow or Wednesday and then a new bearish wave might take the market down to 1101. However, if the market can hold the TA then it will rally to 1200+ to test the 50 day MA. Fundamentally speaking, if a TARP like program is announced in Europe then it will serve as an great excuse to rally to the 50 day MA which is currently at 1210... and I hope they do since I am long on margin from the lows last week.

Thursday, September 22, 2011

Retrace to TA

What couple of days! I am in Europe but I still get to see what's happening.. I went hedged when the TA broke and yesterday I went long at 1125 with the expectation that we retrace to the TA/Fib area, which I am guessing it will be around the 1170 area more or less. The sell off is somewhat panicky but the low for the year has not been tested yet, so maybe after a retracement we'll see a wave that will challenge 1101. But for now, I am long for the bounce and short at the test of the TA.

Tuesday, September 20, 2011

Correction Over?

The market corrected today as I had been expecting and managed to retrace into the minimum Fib area and test the Trend Average at 1188. And unfortunately I was having internet problems in the morning so I wasn't able to play the bounce. But I bought some BAC I had sold last week, so at least I was able to get in on that. Technically, tomorrow could see the markets continue the rally as the TA was successfully tested as I was expecting. However, there is still the possibility this correction is not done, so my plan is get long on any TA test, go short on trades under the TA (and hedge my BAC position).

I am also going to the UK for business for a few days, so I won't be updating as much in the next few days.

Friday, September 16, 2011

Waiting for Correction

The market technically started its correction on couple of technical indicators I follow but the price action doesn't really reflect it just yet. And while we might see even more upside on Monday, I think the correction to the TA should start early next week. And maybe that wave will finally give us a clear idea of what the market intends to do for the rest of the month. I don't think the European issue is anywhere near from being resolved and fundamentally this should be considered a counter rally. But I am not going to argue with the trend, I am just going to trade it. I am going to start tracking % performance of this system on a weekly basis and since July 28th trading the system mechanically would have yielded +17.2% while the S&P 500 is -8.4%. I think my biggest losses have come from trying to analyse the market, so it's better to leave it to numbers primarily.. I'm actually surprised how well this system is performing.

Have a good weekend!

Thursday, September 15, 2011

Correction tomorrow?

The correction I was expecting yesterday has not materialized but I am assuming it will come tomorrow. The bottom line is that the market turned bullish the minute it crossed the Trend Average and today's close just confirms the signal. The market should pullback to the TA and might test it successfully this time, if the market goes below it and doesn't recover then it means we're still stuck in a trading range and 1140 will be re-visited. Either way, I am starting to trade mechanically using the TA. As it stands, the system is up more than 15% since the end of July when I started posting real time trades and I changed the title of my blog to reflect what I am doing. Elliott Wave can serve a guide short term but it's secondary to all the other tools I've been using, so technically speaking the blog is no longer about EW.

Wednesday, September 14, 2011

Test of the Trend Average Expected

The market managed to reach the TA and shoot right through it and it has the potential to turn the trend confirmed bullish by testing it successfully and closing above. So tomorrow I expect the market to test the TA again and perhaps find support around the 1160's area and then set itself up to recapture the TA in a strong bullish wave. If for some reason the market fails to hold support, such as in the case of a very bad jobs report, then we go back down to 1140's and the battle of the bulls and bears will continue. The main issue is that there is lack of clarity in Europe and it will keep everyone guessing for as long as there is lack of concrete steps to solve their problems.

I am all cash and waiting to get back in long.

Tuesday, September 13, 2011

More Upside

The counter rally has been on the weaker side so far so upside might be limited. the TA sits at 1182 and the high today was 1176, so it looks like the bounce is going to be over soon. Also, the pattern the in market looks like an Descending Wedge so I will be looking at the trendlines for clues of future direction. Weak bounces usually lead to further downside so we'll see how the market looks at the end of this week.

Monday, September 12, 2011

Counter Rally Targets TA

The markets sold off as I was expecting last night and the market stopped short of triggering my stop loss, so at the end of the day it was a good profitable day. I think this wave is now done and remains to be seen if this new bullish wave will take us back to 1200 or just be a corrective wave, whatever it is, I am expecting it to test the TA which today sits at 1184 and probably will drop couple of points tomorrow. Once the market reaches the TA, the market will either stall and continue to sell off and possibly go for the 1101 low or will rally from there to 1200+ and maybe even the 50 day MA which is going to be tested sooner or later. So I'm looking at the TA as a level to hedge or add longs, there is a lot of uncertainty and the market has plenty of room for it to be oversold or overbought at this point.

Sunday, September 11, 2011

1139 to be tested in cash market?

Futures are testing 1136, which is the equivalent of 1139 in the cash market. If these levels hold overnight and the market opens around this level it will be a good spot to go long with 1135 as a stop. The upside might be substantial so it is an low risk/high reward set up if we open close to these levels.

Friday, September 9, 2011

Nested 1-2 or bearish set up?

I was way off on thinking the market would climb over 1200 again and instead it sold off, this just reinforces the idea of following the TA mechanically and give little weight to everything else during periods where extremes are absent. And as bearish as this wave was, it needs to break previous lows for another bigger bearish wave to resume. If a higher low is maintained, the odds will favor higher intermediate highs. Going by EW it looks like we are due for a bounce only to sell off again, so we'll see how the market bounces early next week. I will be patiently waiting for a good spot to go hedge, short, or go long..

Have a good weekend!

Thursday, September 8, 2011

Market Reaction to Stimulus

The market used today's government announcements to go into a mild correction, one which I suspect is a W4 and which should be ending perhaps as soon as tomorrow Friday before going into rally mode again. The markets should find the positives in Obama's stimulus plan and Bernanke commitment to help the economy, technically it should be enough to get the market to at least 1210. What remains to be see is whether the market has enough fuel to challenge 1230 and then the 50 day MA. However, I should point out the bullish signal by the TA is non-confirmed as it closed under it so the market has to get back over it or else is going way down.

Wednesday, September 7, 2011

Target 1210 then 1230?

The market rallied as I expected when the previous correction started and now I am looking at how the market behaves around these levels. I mentioned it was very important how the market got to 1200 last week and so far it is looking like the market is aiming for 1230 and quite possibly the 50 day MA at 1248. With the VIX at 33, I can see the market going to 1250 in couple of days if we get a violent rally. With that said, the next level of resistance is 1210 which if it holds, will set the market for a Head and Shoulders formation that would target 1040 so it will be an interesting next few sessions. I am long and planning to hedge depending on how tomorrow develops. The TA was crossed today and the short term trend will be confirmed bullish should the TA level hold.

Tuesday, September 6, 2011

Now the Rally

Bears tried to break the 1136 level today but it did not happen and in turn the market managed a bullish reversal (even if it finished red). And in looking at candlesticks today's action looks like it could be a bottom. However, it needs to be confirmed with further upside in an impulsive manner. My guess is that the market is going for the TA in the next couple of sessions and how the news from Thursday get digested will probably set the tone for the rest of the month. At this point, I see no extremes so the market could start rallying hard from here or correct the bearish wave to the TA and then continue selling off. I will margin on the long side only at a bearish extreme (which I would prefer) or at the re-capture of the TA.

Friday, September 2, 2011

Correction Target Met

The correction I had been calling for since early this week has now met the target by retracing into Fib territory and meeting the Trend Average. And as I speculated yesterday the markets used the jobs number as an excuse, what remains to be seen now is how the market gets back up to the 1200 area. The reason for this is because of the impulsive nature of the selling today, a correction would have looked better if there were Zig Zags in them. If the market intends to rally to the 50 or 200 day MA, I'd like to see a strong rally starting early next week. I should point out that August 1101 level could be re-visited on a 5th leg of that intermediate wave as it seems like it is missing but odds don't favor that scenario at this point unless 1136 gets taken out (That would reverse the 1208 breach from Monday). I covered my short position and re-entered my long position (the trapped one) and I was able to bring down my cost average to right under the 200 day MA, so my next target is the 50 day MA. Also, I bought back what I sold at 1226 on my investment portfolio and should the market go into some sort of extreme sell off I will apply margin on the long side.

Have a good holiday weekend!

Thursday, September 1, 2011

Test of the Trend Average approaching

The market started its correction today as I had been expecting and it remains to be seen what type of a correction this will be. I am assuming the market will test the TA at the very least and how it reacts there should give us an idea of what will come next. But given the fact that the intermediate trend is bullish now, anything short of a sell off will be just a correction and an opportunity to load up on longs. Tomorrow's job report will be a great excuse for more selling so we'll see if the Fib retracement area comes tomorrow. I am short and will start covering once the targets are met.