Wave 2 or C?

The market corrected today and technically it could be seen as a W2 of the wave that started from 1249 or the beginning of the C wave to finish an ABC correction that started earlier this week. So the wave details are not all that clear. However, with today's close we should see the Golden Cross but the market has to follow through next week.

Have a Happy and safe New Year!

5th Wave in Progress?

The market bounced as I expected on my post yesterday and I am inclined to think this is the beginning of the 5th Wave, although this has to be confirmed with a strong lift off wave and break the 200 day MA area for good. Until then, there is still less likely possibility of this being a B wave of a correction. Some posters asked me to clarify the ABC wave form so I am posting the basic wave counting structures. Corrections usually happen at the end of 5 waves within an impulse wave and more often than not they have an ABC or an Complex form look to them.



Today's close puts the market again above the 200 day MA and the Trend Average is at 1245 which are both bullish, so we'll see if the market can follow through tomorrow to the upside.

Correction

The market started its correction as I had predicted yesterday but it holds the potential for a deeper correction as today's bearish leg could be considered the A leg. However, the market will bounce as soon as tomorrow and we should see if it is a B leg or the start of the W5 to 1300. The market just needs a minor excuse to rally again since all the overbought conditions have been somewhat worked out today. I guess we'll see what headlines the market will grab on to..

Time for minor correction

The W3 of C or W3 should now be finished (or about to finish) and we should go into a minor correction. I assume this correction will be sideways but one never knows, whatever its form it should complete a W4 before launching higher on a W5 later this week/early next week. The 13:34 cross should happen next week so that will give the bulls a good platform to start 2012.

Close Above 200 day MA - Imminent 13:34 Cross

I first speculated about the possible market turns in early November and it seems like the market has done exactly what I had envisioned. The close today is the first one above the 200 day MA since the end of A or Wave 1, so I am expecting this wave to go on for a while. Also, there is an imminent 13:34 cross coming as soon as next week, a likely golden cross and an inverted Head and Shoulders on the DOW that targets 13200. So unless there is something cataclysmic on the horizon, the path of least resistance is way up. I could get into the tech analysis tools that support a bigger rise coming but I think keeping it simple works best. The market is well above the TA and like I said couple of months ago there is a possibility of seeing 1370 challenged on this leg so we'll see what next week looks like. I'm staying margin long until I see any signs of reversal.. for now hope everyone that is long is enjoying this ride.

Have a great weekend and Merry Christmas!

200 Day MA

I mentioned yesterday that the market was going for the 200 day MA and we got somewhat close at 1255. I am still not sure if the wave labeling is correct but I am inclined to favor a W2 correction now before seeing a big rally breaking the 200 day MA. It we get a big gap up tomorrow, then I'll revert to labeling the current wave as W3, but for now I am assuming W1 has ended or about to end.

Short Term Confirmed Bullish

Prices closed above the TA again and now the short term trend has turned bullish.
The market tested the TA today as I indicated on yesterday's post but I am not 100% sure if the low was a W2 or a W4 of W1. Ideally, I'd like to see W2 correct to the Fib retracement area so we should know in the next couple of sessions. Whatever the wave label, the bottom line is that the market is going to challenge the 200 day MA next at 1259. Once that breaks AND holds, it will most likely be a bullfest.

Beginning of a Big Rally?

So we got the rally I was talking about yesterday and now I really wonder how is this stuff even possible. Technically speaking no one knows the future and I still can't accept the idea of waves being able tell the future either. So that leaves the media picking up on stories to create rallies or corrections.. still, this stuff borders on the weird. But I think the market is indeed somewhat predictable and anyone who has been a reader of this blog would know.

Anyhow, I see the bullish impulsive wave today was a W1 of either a C or W3. We'll probably see a retrace to the TA or 50 day MA and then we should see another big rally that will challenge and most likely break the 200 day MA. So it seems like Santa has indeed arrived :)

Ready to Rally

The market put in another bearish leg almost following the red line I drew on Friday and now I think the market will start to rally. Perhaps we'll see 1199-1200 tested first but I am going with the Santa Rally. Obviously, this is completely against the TA system which call to stay in cash or short at 1249 and the fact that we are trading under the 50 day MA. However, it's been an 11 days of corrective waves and we have yet to retrace 61.8% of the rally from 1158. So any hint of positive news can spark a violent rally. I will go margin long again once the TA gives the signal, as of today the TA has fallen to 1229.

Rally is coming

The market continued its correction today and I think it is over or should be over early next week. The TA is at 1235 so we would need to see trades above that level to change the short term trend to bullish. If there is a Santa Rally, it will start next week so nothing else to do but wait..

Have a good weekend!

Correction Continued

The correction continues and I am inclined to think there will be one more leg down until the correction ends. Whatever the market decides to do, so far all these waves from 1267 look like corrective waves so we should see a chance of mood to the positive side sooner rather than later. In a way, this type of market is great for swing traders as the European issue will be used over and over for sell offs and for rallies. It really depends on the current social mood. Hope we'll get more clarity tomorrow or Monday.

1200 to be tested?

The 50 day support broke today and went to the 50% retracement level of the rally from 1158. The next level of support is 1200 and we might just test that before seeing if we have a rally from there or just a bounce. The way I see it the next bullish wave has to start with a strong impulsive wave, weak waves would imply lack of conviction, especially if there are no closes over the 200 day MA. With this said, I still see this as a correction and a rally should start sooner than later so the market needs to re-capture the 50 day MA asap or risk a sell off.

50 Day MA

I talked about the market targeting the 50 day MA last week and today the market finally tested it (1224). I was almost sure the wave from this morning was going to be the beginning of an impulse wave but all it did was test the TA and now there is a possibility the market will test the next important level which is 1215. Also, the market is now in a confirmed bearish trend since it closed again under the TA so I closed my margin longs at break even and I'm trying to see if the 50 day MA will hold in the next few days. For a rally to take place this level must be mantained so we'll see how the market handles these next few days.

Correction Over?

The market corrected in a strong C wave as I predicted last week but it did not quite make it to the 50 day MA which was at 1222 today. However, it did retrace into the Fib territory and in turn confirming the correction from the wave from 1158-1267. So I am now leaning towards seeing a big market rally from here. Obviously we could correct some more but if the 50 day MA holds then we might see 1300+ fairly soon on an Intermediate C wave or 3rd Wave. The TA is at 1249 so this can potentially turn into a bearish trend but I think the market will recapture it tomorrow or the next couple of sessions. What is interesting is what the market will do after we get to 1300. If it's a W3 then we will rally into January and possibly see 1400 but if it turns out to be a C wave, watch out below!

I closed my shorts towards the end of the day and went margin long and using the 50 day MA as the pivot for this trade.

200 day ma again?

The market bounced today as I was expecting but it was stronger than I had imagined. Should the C wave come Monday or Tuesday, it would have to be an equally strong bearish wave that should take us to the Fib retracement area. And like I said yesterday, the ideal level to start the new rally (the Santa Rally) would be the 50 day ma so we'll see if it happens early next week. I ended up shorting to hedge my longs at 1256 and I will be setting my stop to break even as soon as it moves to the 1250 area in case the market plans to start the rally without the retracement.

Have a good weekend!

More Downside

So finally we get a clearer picture of where the market is going. And now I can put some labels on the waves and predict the next move with more certainty. So far I was right on a lower low in the upper 1100's, on where the market would bottom and where the top would be likely so let's see if I can keep the streak going. The odds of me guessing all these moves are minuscule (1/1000's) so I might be very wrong on my next guess but we shall see :) I think the market is doing a double ziz zag from the top of Wave 1 or A and we should see some sort of bounce or sideways trading before going into a proper Fib retracement area. The level I think will provide the bottom will be the 50 day ma which will probably be around 1220 and this level holding is a must for the rest of the rally to continue. Today the TA is at 1237 so the market closed below it and another close tomorrow signals a change of trend. So the plan is to stay put and load up on margin long at the 50 day ma.. once we test that level, I think we will see a rally to 1300+, perhaps even 1400.

Sideways Correction Continued

The longer the market keeps trading sideways the higher the chance we're going to see a rally to break out of this range. But anything is possible at this moment since the market is waiting for the outcome from the EU meeting. By looking at the market I'd say there is money on the sidelines ready to jump in as soon as good news come out of the summit while those with positions are in a wait and see mode. So we'll just have to wait for couple of more sessions to see what happens next. So far the 200 day ma has served as an area of resistance and should the market break convincingly above this level, we might see 1300 next.

I am staying put with my longs until I see a good selling spot or until the market breaks the TA which is currently at 1229 and rising.

Sideways Correction?

The market challenged yesterday's high again today and unless it drops hard from here, this is starting to look more like a sideways correction/consolidation before another hard push up. That would change the labeling of the wave structure and the estimated downside on the correction so I am watching how the next wave unfolds. I said couple of days ago that if the market made another push up I would probably sell all my longs so we'll see how far up it goes IF it happens. As a general rule, if the market were to go up 90 points above the TA I will sell everything automatically and wait for the TA test to re-enter.

200 Day MA Reached

So the market finally did make it to the 200 day MA as I had been predicting last Wednesday and I am again assuming the waves are now complete or near completion and we will see the TA tested along with a proper Fib retracement. Obviously the market could put in one or two more bullish legs but odds favor a break imo. I took more profit today at 1265 and should the market put in another bullish leg I will sell all my longs, two more bullish legs and I am going short as it will be a no brainer. We just need an excuse to start selling and it will happen tomorrow or the next few days.

Correction

The market attempted to make a run towards the 200 day ma at 1265 and it almost got there in the W5 I was posted about yesterday. So I see now a 5 wave structure complete and the correction has started. Ideally, the corrective wave would take the market down to the 1197-1221 area before launching another rally to 1300+. Alternatively, the market could trade sideways to consolidate and then go to the 1300's. Whatever the case, December should a good month for stocks. I used the early morning rally to take profit on all margin positions and will be buying everything back at the test of the TA hopefully next week? I am hoping to see a big rally, sell all positions and end the year in cash. We shall see..

Also, today I updated the TA signal which should have been updated couple of days ago. The return of this signal since July is 31% without leverage, an amazing return if you think about it..

Have a great weekend!

More Upside

The market has been consolidating and it seems like we will see a bullish wave starting tomorrow or Monday to challenge the 200 day ma at 1265. That's assuming this is a normal W5 and not an extended one. However, bulls are free to take this all the way up to 1275 or even 1292 before going into a real correction down to the 1220-1230 area? so I'm looking to take profit on the next bullish wave and reload at the test of the TA on the correction. The TA is currently at 1200, so once the correction starts it should take a while to get there.