Monday, April 30, 2012

New High in May?

The market finally corrected a little today and it seems like there might be some more room to correct to the Trend Average which currently stands at 1386. After this correction, if the TA holds then the 1422 level will likely be tested (if not broken) in the next few sessions. It remains to be seen how the rest of the bearish wave evolves but so far it looks like an ABC correction and should a W3 come after that, then we're looking at high 1400's or even 1510 as the end of the impulse. So if you're short, watch that TA as it will save you $ and frustration.

On a side note, I wanted to point out that I place trends before any counts (since I had a person upset at how the trend changed?). Waves are highly subjective but averages are mathematical equations. There is no point in arguing with numbers, especially if the trend goes against you.. so to those who like to stick to their gut feeling, just look at the left hand side for reference on the trend changes and its returns.

Friday, April 27, 2012

Intermediate Trend Confirmed Bullish

The market managed to bring the trend average up to 1385 and in turn closing over the 50 day MA. Looking at this particular cross in the last 4 years, it has only been whipsawed 15% of the time. So we have in our hands what seems like a bullish reversal and in order to profit, the plan is to go long at a successful test of the TA which I suspect it's going to end up being in the 1387-1392 area by the time the market retraces. Some people prefer the "bearish count" but there is no use in making bearish bets unless one is brave enough to challenge the trend. The plan for me is clear, so hopefully Monday (or maybe Tuesday) will allow me to re-load on longs.

Have a great weekend.

Thursday, April 26, 2012

Short term trend confirmed bullish

Seems like the bulls have managed to reverse the trend by putting in a solid 5 wave move from what now seems like a double bottom. And unless there is something really negative for the markets, I think we are seeing a new impulse to new highs after this period of consolidation. My call for 1297 seems wrong at this moment so I'll just assume the market bottomed at 1357 for a W4 minor. It would have been nice to get a deeper pullback but this is how the market is, it does whatever it wants. However, rest assured that we will see the wave that started at 1157 get a proper Fib retracement by the time minor 5th is put in. So for trades, I am hedging my VIX positions at the test of the trend average and also will be taking profits from my short initiated at 1401 today. I'll log the trade when I lock in profits, hopefully tomorrow or Monday?

Wednesday, April 25, 2012

ABC or beginning of an impulse?

I posted yesterday that the market was ready to challenge 1387 and the market did just that today, in fact in even closed above it. So the bullish wave comes as no surprise at all, what we have to figure out as traders is whether this is part of a correction or the beginning of a bullish wave. Since I am all about trends and averages, I will point out that the Trend Average continues to trade below the 50 day MA which is bearish and point to a correction. The Trend Average itself sits at 1377, so the coming bearish wave should be telling. In order for this to be an ABC correction, we need to see not a test of the TA but a strong bearish wave breaking decisively. If the market manages to find support at the TA then I'll expect a bullish wave 35-40 points above the TA and thus breaking the 1387-1393 resistance level. But at the moment, aside from the bearish trend, there is also the bear flag which is intact so odds favor the downside as long as the market reverses its gains in the next session or two.

Tuesday, April 24, 2012

C wave tomorrow?

The market tested the TA today at 1376 and then it seemed to consolidate in what seems to me like a B wave. Assuming that is the case, we should see a C wave coming as soon as tomorrow to test the 1387 level, so this will likely be a deep retracement if the count I posted is correct. The trend average and the moving averages continues to favor the downside but it's not until we see a strong W3 breaking support where the picture will be come clear. Should the market start trading above the TA, I will go long to hedge.

Monday, April 23, 2012

Close under TA

The market tested the 1358 level again today and it held well. However, it doesn't mean it will hold on the next wave down. I can't tell if the bounce was a W4 with another bearish 5th to come or the entire 5 waves are complete and now working on a Fib retracement. So we'll have to see if the rebound is able to overcome the trend average at 1377 and obviously the 50 day MA. Currently the TA continues to trade under the 50 day so odds continue to point to lower prices unless the market can over come these levels.

Friday, April 20, 2012

Bearish consolidation

The market had a bullish morning again only to be fade towards the end of the day. The market action is within the bearish flag I posted yesterday and it might have more up and down action within the channel next week as well. These are the types of markets that are the hardest to trade as they technically stop trending short term and positions get constantly whipsawed. However, the intermediate trend is clearly down and like I said yesterday, unless we see upper resistance break chances are we are going to the Fib retracement area in a swift bearish wave. Perhaps the market really wants to wait until May for that? One of the clues can probably be seen in AAPL. It is currently in a C or bearish W3 wave after an euphoric run up and when market leaders start tanking, so does the market.

Have a great weekend!

Thursday, April 19, 2012

Bear Flag to 1288-1327?

The 5th wave I was looking for was clearly put in pre-market earlier today as futures were higher by more than 10 points but by the opening all gains had been reversed. So What we probably saw today in the cash marker was either an ABC (with C still in progress) or a W1-2-3 so we'll see if we sell off tomorrow or the market manages to find support. Whatever the case, the market closed right on the Trend Average at 1376 (note that the bearish confirmation was given at 1408 and how the market has been slowly falling). Most importantly, today's close brings the TA below the 50 day MA which makes the intermediate trend bearish and in turn implying further downside ahead. Lastly, I posted what now looks like a bearish flag on the market which would target 1-1.618 of A or W1 which would indicate a target of 1288-1327 or right around the Fib retracement area. I also posted the bearish flag we had a few days ago so you can compare the similarities. That bear flag was about 1 of A and preceding that there was a bullish flag that almost went to 1.618 of A so these patterns have worked out well so far. And unless we have some bullish turn ASAP, odds now favor the completion of the pattern.

Today I unhedged at the break of the trend average, so we'll see how that works out.

Wednesday, April 18, 2012

One more push up?

The market seemed to be in consolidation mode, which goes well with the W4 option for this particular wave. So the structure favors a push higher tomorrow before turning down again. As of now it's hard to tell if the this wave is part of an impulse or a corrective wave but the coming next bearish wave should give us direction for the rest of the month. The trend average fell again today and it is at 1379 while the 50 day MA is at 1378, if the market manages to test these levels and bounce from there then we see a higher high for April. However, if support doesn't hold then the intermediate trend will turn bearish and will essentially increase the odds of the beginning of a bearish period.

I traded SSO today but got stopped out as the pattern I was looking did not hold. But looking for a higher high to unhedge my VIX positions.


Tuesday, April 17, 2012

Bearish trend being challenged

The market decided to rally today and this time there wasn't much selling into it (at least not yet) and in turn invalidating the count I had been following. I try to stick to one count for clarity and I follow the short term trend and it was very bearish until today. The market closed well above the trend average at 1380 and the 50 day ma, so the next test will be the bearish leg after this bullish wave is finished. The market could be putting in a double zig zag or a sideways corrections for minor 4 so we'll just have to see how the next few days unfold.

I hedged and unhedged several times today after the TA breach and I am expecting another push up to 1400? to unhedge again with the expectation of seeing the TA tested.

I'll post trades later today..

Monday, April 16, 2012

1158 to be challenged tomorrow?

The market gapped up this morning in yet another sucker's rally. Notice that prior to the trend change dips were being bought into but now we are having rallies that are being sold into. This shows lack of confidence by traders and it supports the case for lower prices for equities. The trend average has dropped to 1383 and unless there is a surge in optimism, the TA will dip below the 50 day MA and that will change the intermediate trend. So I expect a sell off as soon as tomorrow to test/break support and continue the bear trend for the market.

I also wanted to do a follow up on the bear flag. Like bull flags, usually targets for 1 to 1.618 of the "pole" and despite today's early morning gap, the bear flag target was actually met when the market put in the 1365 low. Interesting how this worked out..

Last but not least, I did a SDS trade which should buy my starbucks coffee for the next 2/3 months.


Friday, April 13, 2012

Bearish Flag to new low

Earlier in the week I posted about a rally coming that would turn out to be most likely a sucker's rally to test the Trend Average. And yesterday the market got pretty close to the TA and had the "optimistic" crowd cheering for a new leg to new highs after re-capturing the 50 day ma but the market action today changed the picture. The market closed under the 50 day and the market put in a bearish flag, the difference this time however is that there are 3 legs down as opposed to an ABC Bull Flag I posted couple of days ago, so it is highly likely the 1358 low will be taken out early next week.

I am assuming this leg down will be about the same as the C leg so 64 points. And if we subtract 64 from 1388 we get 1324 and my 1297 target for the correction would be well within reach. So let's see if I can keep my lucky guessing streak today I didn't make any trades, I am just holding my VIX positions and not planning to sell them until the trend average changes.

Have a great weekend!

Thursday, April 12, 2012

Bull Flag target met

The bull flag target I posted yesterday was met and it looks like the ABC move is complete or nearly complete. Today's market seemed to have "surprised" some "experts" but for all intent and purposes, there was a clear pattern in place with a clear price target. Goes to show how emotional people get as the ones that were running scared earlier this week came out buying today. And as bullish as the market seemed today, the real test as I have been saying for days is the Trend Average which today dropped to 1392. If this is truly the beginning of a sustainable rally, the market must trade and close above the TA until then the trend is down and it is that simple. The market ended extremely overbought and should start the sell off/pull back tomorrow, if the market continues its run then this wave will turn into a bullish W3. But the TA at this point serves as a good stop, so the plan is clear. I am personally hedging on any trades above it, playing the short side on trades below it.

And today I executed my plan which was to sell my longs and my hedge. Trades were logged as follows:


Wednesday, April 11, 2012

Bull Flag to Fib Retracement

So the rally I posted about yesterday showed up this morning and left a bull flag by the end of the day. Technically speaking this should be considered an ABC move so the "flagpole" is A and the "flag" is the B and should the pattern be successful the upside should be 1 or 1.618 of the A, so the target is 1383-1392 or just about the area where the Trend Average should be. So I am hoping the pattern will continue so I can re-sell my longs there and get back to unhedged on the VIX. And like I said yesterday, should the market be able to overcome the TA then it will open the possibility of changing the bearish trend that has been in place since last Thursday. Lastly, there is a smaller possibility of today's action being a W4 with a bearish W5 to come tomorrow but odds don't favor it at this point. We need optimists to get excited and buy the idea that the 50 day MA is going to hold.

Today I sold my longs and my hedge and then bought them again at a better price.


Tuesday, April 10, 2012

Rally is coming

The market not only tested the 50 day MA as I speculated yesterday, it went through it like it didn't exist. Which makes me wonder where are all those optimists who just a week or two ago were buying like no tomorrow. Anyhow, the market is extremely short term oversold and I expect a sucker's rally at the very least. The test will be at the Trend Average which today dropped to 1398, if the market is able to overcome it then we can call this a minor W4. Until then, I am hoping we'll get to 1297 first before the market resumes its minor W5 advance to new highs for the year.

Today I re-hedged again and went long with FXI as the Trend Average-VIX*2=1358 (which so happens to be today's low and which calls for an automatic long in my system).


Monday, April 9, 2012

50 Day MA Test?

Today's price action should leave no doubt in anyone's mind that the bullish trend is broken, technically speaking it broke last Thursday per my trend change post and now the question in everyone's mind is where is this going to bottom. Per my count, which I've had since I had the 1420 target we're in a C leg of an expanded flat. This C leg stopped today at the 1378 level (a level I've mentioned before) and just short of 1.618 of the A leg. However, in looking at the waves I can see more downside so we'll see if this will materialize in the cash market. The ideal bottom for this leg would be 1366 but it could well stop at the 50 day MA at 1371 and from there we'll see the "X" leg before another 5 waves down. Technically speaking we are in a W4 correction at this point and I am not expecting a strong sell off. However, I would assume the market will zig zag ideally to the area around 1297 and start a bullish 5th that should take the market to 1500+.

So for tomorrow, if we get a gap down or bearish action in the morning it will be most likely reversed. Personally I'd like to see a gap down and take profit/long the market. One of the indicators I follow calls for loading on longs now but especially if we get lower prices tomorrow. I entered the weekend hedged and I am position trading my hedge, doesn't look very good on paper but it should work out in the end.


Thursday, April 5, 2012

Bearish Trend Confirmation

The market technically put in an expanded flat and changed the weekly trend to the downside when considering the pre-market action. However, on the cash market the 1391 level held and we have what appears to be a truncated 5th or a W4 in progress. But for all intent and purposes, I see 5 waves down (counting pre-market) and the start of a bounce (X wave). So while the top can not be confirmed just yet, odds are increasingly favoring the start of a higher degree correction. The bulls would have to come in force Monday and reverse all the price damage that has been done. And considering we have a holiday weekend there is still a good chance for a substantial bounce but the test will be overcoming the trend average at 1408, which I expect the market to test. If the market can't manage closes above it, we're doing down in a 17-34 point move after the test.

Today I made some hedging trades they were logged as follows:


Have a great holiday weekend!

Wednesday, April 4, 2012

Close under Trend Average

The market decided for the red option posted yesterday but so far 1391 has held, so optimists need to come out buying tomorrow or else the trend will start to turn. From the wave perspective I only see 3 waves down so we would get a better guidance if we saw a 5th wave materialize tomorrow and take out today's low and perhaps 1391 along with it. We now have clear catalysts to initiate a substantial correction (end of Fed help, Spain bonds) so maybe we'll finally see a true sell off. In a way the bull argument is getting difficult at this point, if we get good economic numbers then it reinforces the notion that the Feds will no longer intervene and start raising rates. On the other hand, if we get bad numbers then the possibility of an economic slowdown will hit the market especially since Europe and China are slowing down. My most optimistic prediction from early December 2011 is now a reality and I think it's time we get back down to 1300 or perhaps the 200 day MA?

Today I traded some XIV and trades were logged as follows:


Tuesday, April 3, 2012

Ending Diagonal, Ascending Triangle, Expanded Flat

The market started the correction today and tested the TA as I expected on my post yesterday. However, the direction is not yet clear as we need more waves to get a better idea. Basically, I see three options in from of us that I drew on the chart:

Red: This would be an expanded flat with the 1391 breaking as confirmation. This is the option I've been following since 1419 broke but the next options have an equal chance.

Green: This would allow for a bounce tomorrow to barely break or match the 1422 high and then turn back down and stay in the triangle. I think it's debatable on whether to treat this as a rising wedge (Ending Diagonal Triangle) or an Ascending Triangle (I include this option mainly because of the NYSE Composite). If we get the ED then 5th is almost ending. If we get the AT then we will see a 5th wave breaking out.

Blue: This would mean we gap up, break resistance and go to 1440.

Tomorrow we should get an answer.. and today I probably did my worst trading for the year. I set my stops on SDS too tight and got stopped out at break even. Then, not sure what I was thinking but I ended hedging with XIV based on a pattern. Which is a rule breaking trade for me as I don't trade on patterns alone and that error cost me not only the 2% profit I would have made with SDS but $1,050 out of pocket. Fortunately, I came to my senses after I was fully awake so the damage was not too bad. Trades logged as follows;


Monday, April 2, 2012

Coming Pullback

Last week I ended up saying we would get a 15-30 point move from the TA and we got it today after the TA was tested at 1405. Unfortunately (for me) it was to the upside, so now the break of 1419 leaves the possibility of a run towards 1440. However, there is no way of telling which way the market is likely to go without looking at the next bearish wave as there are numerous possibilities. The H&S pattern is out, however this can be an expanded flat with the wave topping today or sometime tomorrow in the 1420's and then followed by a strong bearish C wave. The market could also triangulate or put in a W2 for today's wave and then shoot up from there, so if we don't get a sell off (as in -1% plus) after this wave is done then odds favor more upside. I do expect the pullback to at least test the Trend Average so we'll see what happens at that point.

I bought some SDS today. Trades logged as follows;