Wednesday, February 29, 2012

Target for rally met

The market finally to the 1376 level and it has not satisfied the 1.618 projection I originally posted about in December. In fact, I mentioned today's top on this post. And I have no idea why but these Fib numbers causes the market to react and today it did just that. With this Fib target met we now need to see confirmation of a change of trend. Today the market managed to once again test the TA successfully so we'll see how much longer it can keep above it. A good sell off would definitely break the TA and finally put the top in. So we might even get a gap down tomorrow.. we'll see.

I sold my SH positions at break even and exchanged them for more VIX. So now I am loaded on these things. If I am right on this being the top or near the top, I should be able to profit without trading as much as I did last month (22 trades). Trades were logged as follows:


Tuesday, February 28, 2012

Almost there?

The market continued its march towards 1376 and we might even get there tomorrow. The market seems to be losing strength so it'll be interesting when the time comes. There has been some debate on where the next corrective leg will take us and I personally favor a proper Fib retracement to the 1270-1310 area. Ideally, we would test the 200 day MA but that seems almost far fetched at this point. However, on December 23rd at the start of this rally I posted how the new rally could test 1370 and pointed out the 13200 target for the DOW (It closed for the first time over 13000 in almost 4 years today). So unlikely targets sometimes become reality in a blink of an eye, that's what makes the stock market interesting and challenging.

Today I made some trades and they were logged as follows.


Monday, February 27, 2012


For a few minutes this morning I thought the market was finally going to start a correction but instead it tested the trend again and bounced right off. So the top is definitely not in and it seems like we will see 1376 after all. I've run out of wave counts and can only track the minute counts, also the megaphone top is out. This rally has been a good example of technical analysis oscillators and wave counts failing to predict an intermediate top and goes to show the limitations of all these tools. However, the one indicator that has been solid is the Trend Average and that's the one that has been saving me from bad trades. Considering I've been mostly making bearish bets on a strong bullish wave since January, having a 89% winning rate out of 20 trades is pretty damn good. Today I sold my other half of the VIX and closed shorts when it was clear to me the trend average was going to be recaptured. And should we continue with this bullish gaps/runs, I will continue to short them as sooner or later the trend will break. It's just a matter of time.. and patience.

Today's trades were logged as follows:


Friday, February 24, 2012

Is the top in?

The market turned bullish today as I was expecting but not bullish enough to break thru resistance. Also, today's high came in low volume so while there is still a chance we see 1370+, the odds are much lower. The market is ridiculously overbought and overdue for a correction, everyone knows that at this point and it's just a matter of a little bit of bad news to set off a selling stampede. And by that I don't mean a crash but the start of a healthy correction, something more than a 1% red day (which we haven't had this year at all). So perhaps the top is in finally and I am looking for closes under the Trend Average to confirm this. I predicted correctly we would have a Santa Rally back in November but I never thought would see a wave like this one.

And if the top is in, I managed to short at the very top at 1368 so we'll see how that works out. I basically bought back the SH shares I sold couple of days ago. I also went on margin to buy the VIX and that was one excellent trade as it went up 5% from the time I bought it. So I cashed out on half and retaining half hoping we will see a sell off next week. If everything goes well, I am going to close out the month strong.

Today's trades were logged as follows:


Have a great weekend!

Thursday, February 23, 2012

Going for 1376?

The market looked as if it was going to go down early morning but instead it it tested the Trend Average successfully and it reversed and now the 1370+ area looks very possible. As I said yesterday, the lack on impulsive bearish waves in this correction raised the possibility of another leg up, so we might just get a gap up tomorrow morning to the target area. I am not 100% of how to label these waves just yet until I see what the next bullish wave looks like. If we get a strong one tomorrow, we might just see 1400.. yes if we assume Wave 1 was from 1340 to 1367 and the wave 2 bottom was at 1351. Also, considering retail investors are probably about to jump in the market now, it would make a lot of sense since retail usually are the worst timers.

Is the Smart Money Heading for the Sidelines?

However, as I've been saying for a while, the risk is to the downside so better to play defense at this point. I am all cash but I bought and sold VIX today as I saw a good set up. This trade was not as short as the one a few days ago but it was still only 45 minutes.. you can see the trade at my twitter account.

Today's trades were logged as follows:


Inverted Head and Shoulders on the 10min

Intraday observation.. I did my trade for the day already and although is very tempting to buy the VIX again, if this pattern plays out then VIX will go down even more.

Wednesday, February 22, 2012

Going for 1376

I usually expect higher degree corrections to have some impulsive waves in them and so far the waves I've seen look more like consolidating waves, which signals the potential base for another launch. Also, I noticed this minor correction so far has found support at the Fib retracement levels so this would favor more upside. And while the megaphone top is still very viable, I am leaning to see at least a test of the 1370 level put in pre-market on Monday. This is a market that just refuses to go down hard, so one just has to be patient for trading opportunities. So today I closed my short at a loss but minimized the loss with some VIX trades. It is my first "willing" loss (meaning not stopped out) in almost a month of trading but it is technically more of a position trade as I will be buying back those shares if the market goes higher.

I am all cash on my portfolio and the trades today were logged as follows:


Tuesday, February 21, 2012

1337 or 1376?

So Greece got its bailout and European markets sold on the news. However, the US market battled hard to stay above 1360 and technically speaking it got to 1370 (in the cash market equivalent). And now it's time to see if the much anticipated correction is coming finally or we are just correcting a little to launch on a final wave to the 1376. Looking at the chart I see the market running into strong resistance at 1370 in a very overbought condition, so odds favor a sell off from these levels. But as I said last week, overbought can get more overbought and no matter what tools or wave labels I use, if the market wants to continue higher it will. But this run up will be limited, of that I am sure. And the best thing one can do as a trader is to play defense at this time. I am maintaining my 1355 short and early morning I executed the same plan as Friday, I bought volatility and then cashed out. And should we get more gaps up, I will continue to do the exact same thing. So today I made a good trade (could have made more had I not fallen asleep) and the portfolio is looking as follows:


Lastly, I wanted to add that on the bearish wave that started today should give us a clue on the next wave. If the wave fails to make a new low or stay above 1337, higher prices or test of the 1370 top is very likely.

Monday, February 20, 2012

E-mini SP500 Update

I see a 5 wave move in progress in the e-mini sp500 so I am assuming the fifth leg will be put in overnight or early morning. So my plan is to buy volatility or short on margin at the open unless this wave truncates. The 1370 has technically been reached but it would be ideal to see this in the cash market, actually the perfect top would be 1376.

Friday, February 17, 2012

Megaphone Top

The market made it to the 1360's and it looks like it really wants to go for 1376 (1.618 of W1 or A). And although I am not surprised at the level we are in, the lack of normal corrections is what makes this leg unique. But as I have been saying, the odds favor a substantial correction so I am looking for this leg to start the correction in the next week or two. Also, there is a clear megaphone top or broadening top pattern in place. In fact, it's almost textbook so we'll see if the market topped today or wants to make that 1376 number and then go down. I executed my trade as planned and I bought the VIX at the open and sold it within 20 minutes, so that was the quickest 1% profit I've made in a while. And I remain short over the weekend. My thinking is if we go down Tuesday then it's good, if we gap up then I'll do the same exact thing I've been doing during all these morning rallies which have been working out pretty good considering the amount of successful trades vs negative ones as shown on the portfolio:


Also, somebody asked me to post my trades real time on twitter and I get lazy with that. However, I'll post the intraday trades as they happen on Twitter so everything is time stamped. The reason I write for this blog every day is to force myself to be on top of the market more than anything else, to tweet my trades on the other hand doesn't really have a return on my "investment" so I'm much less motivated there. If anything, it just shows that technical analysis and wave counting does indeed work. If technical analysis had no value, my trades would probably 50% successful and 50% negative (the odds of flipping a coin). But as of today, my "batting average" if you will, is about 92% which is not that bad considering I've been mostly shorting a persistent rally and wrong on anticipating the top since I started trading this year.

Last but not least, compare the chart I posted to the textbook megaphone pattern below. Sooner rather than later, the market will sell off.

Have a great weekend!

Thursday, February 16, 2012

Still in an uptrend

The market did not close under the TA so the uptrend continues. All the recent volatility could be considered a correction and while the market is overbought, it can get even more overbought but chances for a big correction remains. Which brings me to my next subject, somebody posted on the comment section the fact that I have been wrong in the last few weeks in calling a top. And he is right, I thought we would be in a deeper correction at this point. However, no one can consistently call tops and bottoms, if I was able to do that my name would be God. What I do try to achieve is being mostly right, as in more than 50% right so I can make money in the markets. I can read technical indicators, count waves, and provide information on where the trend is and based on that enter favorable trades. As a trader, it is my responsibility (to my hard earned money) to have the equivalent of "situational awareness". I need to know where the trend is going and what are my odds should I enter a trade based on technical indicators. So while I've been calling for a top in the past 3-4 weeks, the market has been bullish per my Trend Average indicator to the left which clearly tells me this trend has been in force since 12/21/2011. I could have followed the trend and not trade against it but it is my belief that when odds favor a reversal one has to be alert and try to pre-empt the reversal. So using the tools I have and the skill I've developed over years of constantly looking at this stuff, I entered trades with a bearish bias. And the results are posted right here:


Most of the money I've made this year (excluding the Santa Rally) has been ironically against the bullish trend by betting bearish. And the point I am trying to make is that it is up to the individual to make money. The tools needed to make money are freely available but you have to have some skills or at least pay very close attention to do well. One can't expect me or anybody else to hand over the tops and the bottoms, the stock market just doesn't work that way. If it was that easy 90% of retail traders would be making money instead of losing it. I took time to write about this today because I think newer investors/traders need to be aware of the odds and whether they are willing to take the risk. And the person who posted just reminded me of how frustrating it can be when things don't go your way.

Anyhow, I cashed out on my VIX position early morning for a nice profit and raised stops to break even on my shorts which eventually got stopped out at 1353. However, I re-shorted at 1355 and should we gap up tomorrow I will be buying back my VIX position at a much lower price than I paid couple of days ago. All trades are on the portfolio page.

Wednesday, February 15, 2012

Close under the Trend Average

The market rallied (mostly in after hours and pre-market) and it almost got to 1360 in the cash equivalent. However, the market was already fading a bit when it opened and as I expected, the market reversed. So now we have to see if this close under the TA is the beginning of a lot more selling to come or just part of a sideways consolidation before a push higher. I obviously lean towards the market going to sub 1300, so I did as I said yesterday and went short and loaded on some VXX at 1353 which is a bit better than what I stopped out yesterday. However, I already sold half my VXX position to lock in a healthy gain in case we are just consolidating. Whatever the market's intentions are short term, my plan is to only play it on the short side. And it's worth noting that most of my portfolio gains since I started trading this year have been playing short on this uptrend so I've been fortunate in not getting trapped.

Below are the changes to the portfolio:


Tuesday, February 14, 2012

The wait continues..

The market seemed like it was ready to go down today but instead it tested the TA successfully and closed well above it again. Therefore I'll have to assume this was a "flat" ABC count with another impulsive 5 waves in the works. And I wouldn't be surprised if we get a gap up tomorrow to the high 1350's-1360 area that will eventually be reversed, so my shorts were stopped out at 1350 as it is my rule to get out of shorts after successful TA tests and I am looking for higher prices tomorrow to re-enter the position. The Trend Average has risen to 1345 and it is getting harder and harder for the market to keep its distance from it, so the wait continues for the rollover process. I just want to make sure I take advantage of the coming volatility and correction.

These have been the changes to the Portfolio in the last couple of days:


Monday, February 13, 2012

Sell Off is Coming

I've been writing about a correction for a while now and the market continues the process of rolling over, so one just have to wait it out. I looked at some possible retracements for this long Santa rally and a proper Fib retracement would be in the 1260-1296 area, with the 200 day MA as the most probably target. The market is overbought and basically we're running out of events (or excuses) to rally, that and the fact that the same problems from last year are still unresolved. So the "sell off" the media was talking about last week when the DOW drop 100 points, is just the beginning for a volatile period that is coming as soon as this week.

I stopped out of the short position at a minor loss but an overall gain when adding the profits from Friday and I bought back the position I sold Friday. So 100% short at the moment and going margin short should we see more upside tomorrow.

Friday, February 10, 2012

Market Drop

The market has started rolling over as I had been expecting and now we just need to see what pattern the top will look like. There is the possibility of the market rising to test the lower rising trend of the wedge, so we might even see one more high but that is part of the rolling over process. I sold half my shorts today at the Trend Average (which the market tested successfully) and raised my stops to break even on the rest. The media is voicing concern on the rally and usually that leads to the type of fear that will lead to the correction I am looking for.. they are always a step behind to our advantage.

Here is what the portfolio is looking like after yesterday and today's trades.


Have a great weekend.

Thursday, February 9, 2012

Rising Wedge

The market made a marginal new high today but like I said yesterday the market is ready to drop. The rising wedge pattern confirms we are likely at a top so it's just a matter of waiting for the correction to begin. I used today's mini-rally to add shorts on margin so now I am leveraged short at 1345 and 1353. I will update the portfolio tomorrow as I am running short on time today.. on a side note, had I stuck with my VXX position I would be $2000+ ahead today (I'll remember that next time).

Wednesday, February 8, 2012

Ready to Drop

The market made it to 1350 as I predicted yesterday and now it is ready to drop. But unlike the past few corrections of lesser degrees, I am expecting a bigger decline this time. The one question in my mind is whether the coming correction is going to correct the entire wave from 1203 or just the most recent wave from 1302, how impulsive the corrective waves end up being should give us clarity of where the market wants to go. And at this point, I will rely more on the Trend Average to dictate market direction than waves as the end of this wave opens the possibility of multiple scenarios.

Today I closed my long FXI position from couple of days ago and my VXX position. I also went short at 1345 using SH and the portfolio is looking like this so far:


I wanted to add that I just started trading volatility recently and I see a big potential in it. I just need to get used to it and see how it reacts to different waves as that what seems to be the key.

Tuesday, February 7, 2012


The market made a new high as I expected yesterday and it came pretty close to 1350 at 1349. So technically, we could call this wave done. But it seems like it has a little bit more left by looking at some technicals. So the wait continues, I am hedged and waiting for some "surprisingly" negative news that will cause a correction. And whether this is just W1 of 5 waves to come it's still early to tell. But the longer in time this goes on, the more likelihood we will see a correction to 50 or 200 day MA area.

Monday, February 6, 2012

W5 still in Progress?

A correction started today as I had been expecting, however it looks to me like it is a W4 correction of the 5th wave so it looks like we are going to see a new high for this wave perhaps 1350+? And given the pattern, I re-entered my FXI position (at a lower price) to hedge my VXX position. And speaking of VXX, in an ideal world this volatility ETF would track the on the spot VIX price but it doesn't. Instead, it tracks futures so while the VIX was up 5% today, VXX fell about 1%. So we'll see how VXX does when we get the coming higher degree correction and make no mistake, it is coming.

Friday, February 3, 2012

Now the correction..

The market put in the 5th leg rally as I had been expecting and now we will see a correction starting as soon as Monday. Technically speaking these 5 waves are enough to complete the 5th leg but like I said yesterday, this might just correct to the Trend Average or 1320's in a W2 before going into another big rally. Whatever it is, the market is going to pullback so I took profits as planned but I added VIX positions. And here is what the portfolio looks like with today's sale:


Have a great weekend!

Thursday, February 2, 2012

One more rally?

The market has put in 4 waves from the 1300 low and we should see a final wave for this leg in pre-market or tomorrow. Once this wave is finished, the market could start correcting to the 200 day ma. However, these 5 waves might just be the W1 of the W5 and if that is the case, a small correction would serve as a launching base for a big bullish wave to the 1350's more or less. So the coming correction is important to avoid getting trapped in a position. I will probably take profit if we see the 5th leg tomorrow and stay in cash. Ideally, I'd like to see about 30-40 points above the Trend Average to short (like I did a few days ago). So I'll play it safe and enjoy what I have at this point.

Also, I wanted to point out that there is a Portfolio page on the blog that can be accessed through the header menu. Some people have missed it apparently but here is what the year is looking like for my trading portfolio (not including the Santa rally profits).

Last but not least, the TA has turned bullish again. It got whipsawed on its last signal which tends to happen usually on W4 corrections.

Wednesday, February 1, 2012

Wave 5 in progress

I was wrong in my assessment last night in assuming a complex correction and now I see impulsive bullish waves with today's bullish momentum. The TA is technically bearish as per my rule of two consecutive closes below the the TA but the count is a better guide at this particular point. So I covered my shorts at a profit at the opening and now I am long FXI (China ETF), I will update the portfolio page a bit later.

For those that follow Elliott Wave, there is a bearish camp that think this is the last leg of the retracement and that we're headed for a sell off after that. I on the other hand believe we will see a correction to the 200 day average and a rally from there based on the trends. So whatever it is, the next few weeks should be interesting and the key will be to make money in up or down markets.

Short Term Confirmed Bearish

I am late today on the blog because I was moving all day. This was my 5th move is 5 years and it's a pain in the ass every single time. However, I don't foresee moving much more for a while since I finally bought a house. For many years I believed we were in a bubble (since early 2000's) and I am glad I waited. I guess all that moving was worth it after all..

Anyway, the market couldn't trade much higher than 1320 and it reversed and this in turns confirms a bearish short term trend, which was expected. Also, it seems like the likely wave count is a complex W4 correction so I we might see some more of the same for a while before consolidating for a bull run. There is also the possibility that the market will gap up in a W3 tomorrow by looking at the waves but given the negative trend, I will go with the complex correction and expect some more downside. I am still short but I will start adding long positions soon given the fact that this is likely a short bearish correcting within a larger bull trend.